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, 2003

                                       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]

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

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

                      DOCUMENTS INCORPORATED BY REFERENCE:
                                      None


<PAGE>


                                     PART I


Item 1.  Business

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

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

          As of December 31, 2000, the Partnership owned 39 Properties  directly
and four  Properties  indirectly  through  joint  venture  or  tenancy in common
arrangements.  During  2001,  the  Partnership  sold its  Properties  in Marana,
Arizona, St. Cloud, Minnesota, and Las Vegas, Nevada and reinvested the majority
of the net sales proceeds in a Property in San Antonio,  Texas and a Property in
Walker,   Louisiana,  with  CNL  Income  Fund  VIII,  Ltd.,  a  Florida  limited
partnership  and an affiliate  of the General  Partners,  as  tenants-in-common.
During 2002, the Partnership sold its Properties in Rancho Cordova,  California,
Mesquite,  Texas,  and Bucyrus,  Ohio. The Partnership  reinvested the net sales
proceeds from the sales of the  Properties in Rancho  Cordova,  California,  and
Mesquite,  Texas in a Property in Austin,  Texas and in Arlington  Joint Venture
with CNL Income Fund VII, Ltd., a Florida  limited  partnership and an affiliate
of the General  Partners.  During 2003 the  Partnership  sold its  Properties in
Salina,  Kansas and  Independence,  Missouri.  In  addition,  during  2003,  the
Partnership  reinvested  a  portion  of the  proceeds  from the 2002 sale of the
Property in Mesquite,  Texas, the proceeds from the 2002 sale of the Property in
Bucyrus,  Ohio and the proceeds from the 2003 sales of the Properties in Salina,
Kansas  and  Independence,  Missouri  in  two  additional  Properties,  each  as
tenants-in-common  with affiliates of the General  Partners.  As of December 31,
2003,  the  Partnership  owned  33  Properties  directly  and  eight  Properties
indirectly  through  joint  venture or tenancy  in common  arrangements.  The 41
Properties include six Properties consisting of land only. The lessee of the six
Properties  consisting of only land owns the buildings currently on the land and
has the right,  if not in default under the lease,  to remove the buildings from
the land at the end of the lease terms. In general,  the Partnership  leases the
Properties on a triple-net  basis with the lessees  responsible  for all repairs
and maintenance, property taxes, insurance and utilities.

          The  Partnership  holds  its  Properties  until the  General  Partners
determine that the sale or other  disposition of the Properties is  advantageous
in view of the Partnership's investment objectives.  In deciding whether to sell
Properties,  the General  Partners  consider  factors such as potential  capital
appreciation,  net cash flow and federal income taxes. Certain lessees also have
been granted  options to purchase  Properties,  generally at the Property's then
fair market value after a specified  portion of the lease term has elapsed.  The
Partnership  has no  obligation  to sell all or any portion of a Property at any
particular  time,  except as may be required  under  property  purchase  options
granted to certain lessees.

Leases

          Although there are variations in the specific terms of the leases, the
following  is  a  summarized   description  of  the  general  structure  of  the
Partnership's leases. The leases of the Properties owned by the Partnership, the
Properties owned by joint ventures in which the Partnership is a co-venturer and
Properties  owned as  tenants-in-common  with affiliates of the General Partners
provide for  initial  terms  ranging  from 9 to 20 years (the  average  being 18
years)  and  expire  between  2008 and  2023.  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  $24,200 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
successive five-year renewal options subject to the same terms and conditions as
the initial lease.  Lessees of 27 of the  Partnership's  41 Properties also have
been granted  options to purchase  Properties at the Property's then fair market
value after a specified portion of the lease term has elapsed. Fair market value
will be determined through an appraisal by an independent  appraisal firm. Under
the  terms  of  certain  leases,   the  option  purchase  price  may  equal  the
Partnership's  original  cost to purchase  the Property  (including  acquisition
costs),  plus a specified  percentage  from the date of the lease or a specified
percentage of the  Partnership's  purchase price, if that amount is greater than
the Property's fair market value at the time the purchase option is exercised.

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

          In  August  1999,  the  leases  relating  to the  Long  John  Silver's
Properties in Silver City and Clovis,  New Mexico and Copperas Cove,  Texas were
amended to provide rent deferrals.  All other lease terms remained unchanged. As
of March 12, 2004, the  Partnership  has continued to receive the reduced rental
payments  relating  to these  Properties  and has  collected  a  portion  of the
deferrals,  in accordance with the 1999 agreement.  The General  Partners do not
believe  that the rent  deferrals  will have a  material  adverse  effect on the
results of operations of the Partnership.

          In January 2001, the leases relating to the Properties in Idaho Falls,
Idaho and Moab,  Utah were assigned to another tenant and amended to provide for
a reduction in rents for a two-year period.  In December 2002, these leases were
amended to provide for a reduction in rents for an additional  six-month period.
All other lease terms remained unchanged. The General Partners do not anticipate
that any  decrease in rental  income  relating to these  amendments  will have a
material adverse affect on the  Partnership's  financial  position or results of
operations.

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

          During 2003, the Partnership reinvested a portion of the proceeds from
the 2002 sale of the Property in  Mesquite,  Texas,  the proceeds  from the 2002
sale of the Property in Bucyrus,  Ohio and the  proceeds  from the 2003 sales of
the Properties in Salina,  Kansas and  Independence,  Missouri in two additional
Properties,  each as tenants-in-common  with affiliates of the General Partners.
The  lease  terms  for  these  Properties  are  substantially  the  same  as the
Partnership's other leases.

Major Tenants

          During  2003,  two  lessees  of the  Partnership,  (i)  Golden  Corral
Corporation and (ii) Jack in the Box Inc. and Jack in the Box Eastern  Division,
LP.  (affiliated  under  common  control of Jack in the Box Inc.,  herein  after
referred to as "Jack in the Box Inc."),  each  contributed more than ten percent
of total rental  revenues  (including  the  Partnership's  share of total rental
revenues from  Properties  owned by joint  ventures and the  Properties  held as
tenants-in-common  with  affiliates).  As of December  31, 2003,  Golden  Corral
Corporation  and Jack in the Box Inc. each was the lessee under leases  relating
to five restaurants. It is anticipated that based on the minimum rental payments
required by the leases these two lessees will each continue to  contribute  more
than ten  percent  of the  Partnership's  total  rental  revenues  in  2004.  In
addition,  three  Restaurant  Chains,  Golden Corral  Buffet and Grill  ("Golden
Corral"), Jack in the Box, and Denny's, each accounted for more than ten percent
of total rental  revenues  (including  the  Partnership's  share of total rental
revenues from  Properties  owned by joint  ventures and the  Properties  held as
tenants-in-common  with  affiliates).  In 2004, it is  anticipated  that each of
these  Restaurant  Chains will continue to  contribute  more than ten percent of
total rental  revenues to which the  Partnership  is entitled under the terms of
the leases.  Any failure of these lessees or Restaurant  Chains will  materially
affect the  Partnership's  operating  results if the  Partnership is not able to
re-lease the Properties in a timely  manner.  As of December 31, 2003, no tenant
or group of affiliated  tenants  leased  Properties  with an aggregate  carrying
value in excess of 20% of the total assets of the Partnership.

Joint Venture and Tenancy in Common Arrangements

          The  Partnership  has entered  into the  following  joint  venture and
tenancy in common arrangements as of December 31, 2003:

<TABLE>


                Entity Name             Year      Ownership               Partners                   Property

<S>     <C>    <C>    <C>    <C>    <C>    <C>


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

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

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


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

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

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


       CNL Income Fund VI, Ltd., CNL    2003       20.00%      CNL Income Fund VI, Ltd.         Dalton, Georgia
            Income Fund XI, Ltd.,                              CNL Income Fund XI, Ltd.
            CNL Income Fund XV,                                CNL Income Fund XV, Ltd.
            Ltd., and CNL Income
            Fund XVI, Ltd. Tenants
            in Common

       CNL Income Fund XI, Ltd. and     2003       74.00%      CNL Income Fund XI, Ltd.         Hoover, Alabama
            CNL Income Fund XVI,
            Ltd. Tenants in Common

</TABLE>


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

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

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

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

         During 2003, the Partnership  reinvested a portion of the proceeds from
the 2002 sale of the Property in  Mesquite,  Texas,  the proceeds  from the 2002
sale of the Property in Bucyrus,  Ohio and the  proceeds  from the 2003 sales of
the Properties in Salina,  Kansas and  Independence,  Missouri in two additional
Properties, each as tenants-in-common with affiliates of the General Partners.

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

Certain Management Services

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

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

         During 2003,  CNL Capital  Management,  Inc.,  ("CCM"),  a wholly owned
subsidiary of CNL Financial  Group,  Inc.,  began  providing  certain  strategic
advisory  services  to  the  General  Partners  relative  to  the  Partnership's
business. CCM is not reimbursed for these services by the Partnership.  CCM also
began  providing  some  accounting  and  portfolio  management  services  to the
Partnership during 2003, through a subcontract with the Advisor.



<PAGE>


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,  the officers  and  employees of CNL  Restaurant  Properties,  Inc.
(formerly  CNL  American  Properties  Fund,  Inc.),  the  parent  company of the
Advisor,  and the officers and employees of CCM 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, 2003, the Partnership owned 41 Properties. Of the 41
Properties,  33 are  owned by the  Partnership  in fee  simple,  three are owned
through joint venture  arrangements and five 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.

Description of Properties

         Land. The Partnership's  Property sites range from approximately 16,300
to 104,800  square  feet  depending  upon  building  size and local  demographic
factors.  Sites  purchased  by  the  Partnership  are  in  locations  zoned  for
commercial use which have been reviewed for traffic patterns and volume.

         The  following  table lists the  Properties  owned by the  Partnership,
either  directly  or  indirectly  through  joint  venture  or  tenancy in common
arrangements, as of December 31, 2003 by state.

                                                       Number of Properties
                     State

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

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

         Buildings.  Each of the Properties 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, 2003,  the  Partnership  had  committed to fund
additional  construction costs to the Property in Hoover,  Alabama, in which the
Partnership  owns a 74% interest as  tenants-in-common  with CNL Income Fund XI,
Ltd.  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, 2003, 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  $29,573,053  and
$11,292,586, respectively.

         The  following  table lists the  Properties  owned by the  Partnership,
either  directly  or  indirectly  through  joint  venture  or  tenancy in common
arrangements, as of December 31, 2003 by Restaurant Chain.


                      Restaurant Chain            Number of Properties

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

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

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

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

         Leases.   The  Partnership   leases  the  Properties  to  operators  of
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.

         The following is a schedule of the average rent and occupancy rate per
Property for each of the years ended December 31:


<PAGE>

<TABLE>


                                       2003              2002              2001             2000              1999
                                   --------------    -------------     -------------    -------------     -------------

<S>     <C>    <C>    <C>    <C>    <C>    <C>


Rental Revenues (1)(2)               $ 3,817,730      $ 3,953,069       $ 3,398,196      $ 3,730,031       $ 4,033,287
Properties (2)                                40               40                39               42                43
Average Rent per Property              $  95,443        $  98,827         $  87,133        $  88,810         $  93,797
Occupancy Rate                              100%              98%               93%              98%               95%

</TABLE>


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

(2)     Excludes  Properties that were vacant or under  construction 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, 2003 for the next ten years and thereafter.

<TABLE>

                                                                                    Percentage of
             Expiration Year          Number             Annual Rental               Gross Annual
                                     of Leases              Revenues                 Rental Income
             -----------------    ----------------    ---------------------    --------------------------

<S>     <C>    <C>    <C>    <C>    <C>    <C>

              2004                             --                       --                      --
              2005                             --                       --                      --
              2006                             --                       --                      --
              2007                             --                       --                      --
              2008                              1              $    25,014                   0.68%
              2009                              1                   62,519                   1.69%
              2010                              4                  498,615                  13.48%
              2011                              3                  339,320                   9.17%
              2012                              2                  251,950                   6.81%
              2013                              1                  100,923                   2.73%
              Thereafter                       28                2,421,054                  65.44%
                                        ----------       ------------------           -------------
              Total (1)                        40             $  3,699,395                 100.00%
                                        ==========       ==================           =============

</TABLE>


(1)      Excludes  one  Property  which was under  construction  at December 31,
         2003.

         Leases  with Major  Tenants.  The terms of each of the leases  with the
Partnership's  major  tenants as of December  31,  2003 (see Item 1.  Business -
Major  Tenants),  are  substantially  the  same as  those  described  in Item 1.
Business - Leases.

         Golden Corral  Corporation leases five Golden Corral  restaurants.  The
initial term of each lease is 15 years (expiring  between 2010 and 2015) and the
average  minimum  base  annual  rent is  approximately  $148,000  (ranging  from
approximately $113,300 to $175,800).

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

Item 3.  Legal Proceedings

         Neither the Partnership, nor its General Partners, nor any affiliate of
the Partnership,  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 12, 2004,  there were 3,018 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 2003,  Limited  Partners who
wished to sell their Units may have  offered the Units for sale  pursuant to the
Partnership's  distribution reinvestment plan (the "Plan"), and Limited Partners
who wished to have their  distributions used to acquire additional Units (to the
extent  Units were  available  for  purchase)  may have done so pursuant to such
Plan. The General Partners have the right to prohibit  transfers of Units.  From
inception  through  December 31, 2003,  the price paid for any Unit  transferred
pursuant to the Plan ranged from $8.62 to $9.50 per Unit. The price paid for any
Unit  transferred  other than pursuant to the Plan was subject to negotiation by
the purchaser and the selling Limited  Partner.  The Partnership will not redeem
or repurchase Units.

         The following table reflects,  for each calendar quarter, the high, low
and average  sales prices for transfers of Units during 2003 and 2002 other than
pursuant to the Plan, net of commissions.

<TABLE>

                                              2003 (1)                                 2002 (1)
                                 ------------------------------------    -------------------------------------
                                   High         Low        Average         High          Low        Average
                                 ---------    --------    -----------    ---------     --------    -----------

<S>     <C>    <C>    <C>    <C>    <C>    <C>


         First Quarter              $8.05      $ 6.00        $  7.28        $7.21       $ 6.00        $  6.29
         Second Quarter              9.55        6.76           7.81         6.75         6.68           6.72
         Third Quarter               9.50        6.98           8.66         7.33         6.00           6.39
         Fourth Quarter              8.14        6.53           7.58         7.25         6.00           6.39

</TABLE>

(1)      A total of 30,121 and 39,922 Units were transferred other than pursuant
to the Plan for the years ended December 31, 2003 and 2002, respectively.

         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, 2003 and 2002, 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, 2003 and
2002, 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


Item 6.  Selected Financial Data

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




<PAGE>

<TABLE>

                                               2003          2002            2001           2000           1999
                                           ------------- --------------  -------------- -------------- -------------
<S>     <C>    <C>    <C>    <C>    <C>    <C>

Year ended December 31:

Continuing Operations (5):
    Revenues                                 $3,098,420    $ 3,627,699     $ 2,631,323     $3,016,288    $3,145,931
    Equity in earnings of unconsolidated
joint ventures                                  326,150        312,454         250,885        180,084       158,580
    Income from continuing
      operations (1) (2)                      2,668,161      3,191,883       1,048,515      1,455,559     2,176,923

Discontinued Operations (5):
    Revenues                                    342,106        407,325         443,510        689,867       755,299
    Income (loss) from and gain on
      disposal of discontinued
         operations (3) (4)                     631,994        105,445        (908,647 )      490,253       638,085

Net income                                    3,300,155      3,297,328         139,868      1,945,812     2,815,008

Income (loss) per Unit:
    Continuing operations                      $   0.59      $    0.71       $    0.23       $   0.32      $   0.49
    Discontinued operations                        0.14           0.02           (0.20 )         0.11          0.14
                                           ------------- --------------  -------------- -------------- -------------
      Total                                    $   0.73      $    0.73       $    0.03       $   0.43      $   0.63
                                           ============= ==============  ============== ============== =============

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

At December 31:
    Total assets                            $33,875,474   $ 34,019,581    $ 34,305,402    $37,936,084  $39,710,973
    Total partners' capital                  32,690,095     32,989,940      33,292,612     36,752,744    38,406,932

</TABLE>

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

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

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

    (4)  Income  (loss)  from and gain on disposal  of  discontinued  operations
         includes $348,023 and $396,382 in gains on sale of assets for the years
         ended December 31, 2003 and 2002.

    (5)  Certain items in the prior years' financial data have been reclassified
         to  conform  to the 2003  presentation.  This  reclassification  had no
         effect on net income. The results of operations  relating to properties
         that  were  identified  for  sale as of  December  31,  2001  but  sold
         subsequently  are  reported as  continuing  operations.  The results of
         operations  relating to properties that were either identified for sale
         and disposed of  subsequent  to January 1, 2002 or were  classified  as
         held for sale as of  December  31, 2003 are  reported  as  discontinued
         operations for all periods presented.

         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 Restaurant Chains. The leases are generally triple-net leases, with
the lessees  generally  responsible  for all repairs and  maintenance,  property
taxes,  insurance  and  utilities.  The leases  provide for minimum  base annual
rental  amounts  (payable in monthly  installments)  ranging from  approximately
$24,200 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.  As of December 31, 2001, the Partnership owned 37 Properties directly
and five  Properties  indirectly  through  joint  venture  or  tenancy in common
arrangements.  As of December  31, 2002,  the  Partnership  owned 35  Properties
directly  and six  Properties  indirectly  through  joint  venture or tenancy in
common  arrangements.  As  of  December  31,  2003,  the  Partnership  owned  33
Properties  directly and eight  Properties  indirectly  through joint venture or
tenancy in common arrangements.

Capital Resources

         Cash  from  operating  activities  was  $3,550,856,   $3,878,671,   and
$2,723,368, for the years ended December 31, 2003, 2002, and 2001, respectively.
The decrease in cash from  operating  activities  during the year ended December
31, 2003, as compared to the previous year, was primarily a result of changes in
the Partnership's  working capital,  such as the timing of transactions relating
to the  collection of  receivables  and the payment of expenses,  and changes in
income and expenses, such as changes in rental revenues and changes in operating
and Property related  expenses.  The increase in cash from operating  activities
during the year ended  December 31, 2002, as compared to the previous  year, was
primarily a result of changes in income and expenses,  such as changes in rental
revenues and changes in operating and Property related expenses..

         Other sources and uses of cash included the following  during the years
ended December 31, 2003, 2002, and 2001.

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

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

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

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

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

         During 2003, the Partnership sold its Properties in Salina,  Kansas and
Independence, Missouri, each to a third party and received net sales proceeds of
approximately  $2,102,400,  resulting  in a gain  on  disposal  of  discontinued
operations of approximately  $348,000.  The Partnership had recorded  provisions
for  write-down of assets in previous  years relating to the Property in Salina,
Kansas.  During 2003, the Partnership  reinvested a portion of the proceeds from
the 2002 sale of the Property in Mesquite,  Texas, the 2002 sale of the Property
in  Bucyrus,  Ohio and the 2003 sales of the  Properties  in Salina,  Kansas and
Independence, Missouri in a Property in Dalton, Georgia with CNL Income Fund VI,
Ltd.,  CNL Income Fund XI, Ltd., and CNL Income Fund XV, Ltd., and a Property in
Hoover,  Alabama with CNL Income Fund XI, Ltd., each as  tenants-in-common.  The
Partnership contributed approximately $380,000 and $926,900 to the Properties in
Dalton, Georgia and Hoover,  Alabama,  respectively and has committed to fund up
to an additional  $701,100 for  additional  construction  costs  relating to the
Property in Hoover,  Alabama.  The Partnership  owns a 20% and a 74% interest in
the Properties in Dalton, Georgia and Hoover, Alabama, respectively.

         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.

         At December 31, 2003, the  Partnership  had $2,090,183 in cash and cash
equivalents,  as compared to  $1,343,836  at December 31, 2002.  At December 31,
2003, these funds were held in demand deposit accounts at commercial  banks. The
increase  in cash  was  primarily  a result  of the  Partnership  holding  sales
proceeds at December 31, 2003,  pending the funding of  additional  construction
costs relating to the Property in Hoover,  Alabama,  as described  above.  As of
December  31,  2003,  the  average  interest  rate  earned on the rental  income
deposited  in demand  deposit  accounts  at  commercial  banks was less than one
percent annually. The funds remaining at December 31, 2003, after the payment of
distributions and other liabilities will be used to fund additional construction
costs and to meet the Partnership's working capital needs.

Short-Term Liquidity

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

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

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

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

         The Partnership  generally  distributes cash from operations  remaining
after the payment of the operating  expenses of the  Partnership,  to the extent
that  the  General  Partners   determine  that  such  funds  are  available  for
distribution.  Based on current and anticipated future cash from operations, and
for the year ended December 31, 2001, a loan from the corporate General Partner,
the Partnership  declared  distributions  to the Limited Partners of $3,600,000,
for each of the years ended December 31, 2003,  2002, and 2001.  This represents
distributions  of $0.80 per Unit for each of the years ended  December 31, 2003,
2002, and 2001. No  distributions  were made to the General  Partners during the
years ended  December 31, 2003,  2002,  and 2001. No amounts  distributed to the
Limited  Partners for the years ended  December 31, 2003,  2002,  and 2001,  are
required to be or have been  treated by the  Partnership  as a return of capital
for  purposes of  calculating  the Limited  Partners'  return on their  adjusted
capital contributions. The Partnership intends to continue to make distributions
of cash available for distribution to Limited Partners on a quarterly basis.

         During 2000, the General  Partners waived their right to receive future
distributions  from the Partnership,  including both  distributions of operating
cash flow and  distributions  of  liquidation  proceeds,  to the extent that the
cumulative amount of such distributions  would exceed the balance in the General
Partners'  capital  account as of December  31, 1999.  Accordingly,  the General
Partners were not  allocated any net income during the years ended  December 31,
2003, 2002, and 2001.

         As of December 31, 2003 and 2002,  the  Partnership  owed  $166,003 and
$18,292,  respectively,  to related  parties for accounting  and  administrative
services,  management  fees  and  other  amounts.  As of  March  12,  2004,  the
Partnership  had  reimbursed the affiliates  these amounts.  Other  liabilities,
including  distributions  payable,  were  $1,019,376  at December 31,  2003,  as
compared to $1,011,349 at December 31, 2002. The General  Partners  believe that
the  Partnership has sufficient cash on hand to meet its current working capital
needs.

         In December  2003, the  Partnership  entered into an agreement with the
tenant  to sell  the  Property  in Fort  Collins,  Colorado.  As a  result,  the
Partnership  reclassified  the assets  relating to this  Property to real estate
held for sale. As of March 12, 2004, the sale had not occurred.

Off-Balance Sheet Transactions

         The Partnership holds interests in various unconsolidated joint venture
and  tenancy  in common  arrangements  that are  accounted  for using the equity
method.  The  General  Partners  do not  believe  that any such  interest  would
constitute an off-balance sheet arrangement requiring any additional disclosures
under the provisions of the Sarbanes-Oxley Act of 2002.

Contractual Obligations, Contingent Liabilities, and Commitments

         In December 2003, the Partnership entered into an agreement to sell the
Property  in Fort  Collins,  Colorado.  As of March 12,  2004,  the sale had not
occurred.

         In December  2003,  the  Partnership  and CNL Income Fund XVI, Ltd., as
tenants-in-common,  purchased a Property  in Hoover,  Alabama.  The  Partnership
contributed approximately $325,700 to acquire the land and has committed to fund
up to an additional  $246,300 for construction  costs relating to this Property.
The  Partnership  owns a 26% interest in this Property.  The  Partnership has no
contingent liabilities.

Long-Term Liquidity

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

Critical Accounting Policies

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

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

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

         Effective  January  1,  2002,  the  Partnership  adopted  Statement  of
Financial  Accounting  Standards  No.  144  "Accounting  for the  Impairment  or
Disposal of Long-Lived  Assets."  Accordingly,  when the  Partnership  makes the
decision  to sell or commits to a plan to sell a Property  within one year,  its
operating results are reported as discontinued operations.

Results of Operations

Comparison of year ended December 31, 2003 to year ended December 31, 2002

         Rental revenues from continuing  operations were $3,055,686  during the
year ended  December 31, 2003, as compared to $3,517,609  during the same period
of 2002. Rental revenues from continuing  operations were higher during the year
ended December 31, 2002, as compared to the same period of 2003,  because during
2002, the Partnership  received  payment and recognized as income past due rents
of approximately $522,800 relating to two Properties, which were formerly leased
by Phoenix  Restaurant  Group,  Inc.  ("PRG").  In October  2001,  PRG filed for
bankruptcy and the Partnership  stopped  recording  rental revenues  relating to
these two Properties.  During 2002, the bankruptcy court assigned the two leases
relating  to these two  Properties  to new  tenants  and all other  lease  terms
remained the same. One of the new tenants, CherryDen, LLC, is a Delaware limited
liability  company and an  affiliate of the General  Partners.  The decrease was
partially  offset by the fact that during 2003,  the  Partnership  earned rental
revenues as a result of the reinvestment of sales proceeds from the 2002 sale of
the Property in Rancho  Cordova,  California  in a Property in Austin,  Texas in
June 2002.

         The Partnership  earned $40,730 in contingent  rental income during the
year ended  December 31, 2003, as compared to $49,977  during the same period of
2002. The decrease in contingent rental income during 2003 was due to a decrease
in reported gross sales of the restaurants  with leases that require the payment
of contingent rental income.

         The Partnership  earned  $326,150  attributable to net income earned by
unconsolidated  joint  ventures  during the year ended  December  31,  2003,  as
compared to $312,454  during the same period of 2002. Net income earned by joint
ventures was higher during the year ended  December 31, 2003, as compared to the
same period of 2002, because in June 2002, the Partnership  reinvested a portion
of the net sales proceeds from the 2002 sale of the Property in Mesquite,  Texas
in a joint venture  arrangement,  Arlington Joint Venture,  with CNL Income Fund
VII,  Ltd.,  and in November  2003,  the  Partnership  reinvested  the remaining
proceeds from the sale of the Property in Mesquite,  Texas and the proceeds from
the 2003 sale of the Property in Bucyrus, Ohio in a Property in Dalton, Georgia,
with CNL Income Fund VI, Ltd., CNL Income Fund XI, Ltd., and CNL Income Fund XV,
Ltd., as  tenants-in-common.  Each of the CNL Income Funds is a Florida  limited
partnership and an affiliate of the General Partners.

         During 2003, two lessees of the Partnership,  Golden Corral Corporation
and Jack in the Box Inc., each contributed more than ten percent of total rental
revenues  (including  the  Partnership's  share of total  rental  revenues  from
Properties owned by joint ventures and the Properties held as  tenants-in-common
with affiliates). As of December 31, 2003, Golden Corral Corporation and Jack in
the Box Inc. each was the lessee under leases relating to five  restaurants.  It
is anticipated that based on the minimum rental payments  required by the leases
these two  lessees  will each  continue to  contribute  more than ten percent of
total rental  revenues in 2004. In addition,  three  Restaurant  Chains,  Golden
Corral,  Jack in the Box, and Denny's,  each accounted for more than ten percent
of total rental  revenues  (including  the  Partnership's  share of total rental
revenues from  Properties  owned by joint  ventures and the  Properties  held as
tenants-in-common  with  affiliates).  In 2004, it is  anticipated  that each of
these Restaurant Chains will continue to contribute more than ten percent of the
total rental  revenues to which the  Partnership  is entitled under the terms of
the leases.  Any failure of these lessees or Restaurant  Chains will  materially
affect the  Partnership's  operating  results if the  Partnership is not able to
re-lease the Properties in a timely manner.

         The  Partnership  earned $2,004 in interest and other income during the
year ended  December 31, 2003, as compared to $60,113  during the same period of
2002.   During  2002,  the  Partnership   received   reimbursement  of  property
expenditures that were incurred in previous years relating to vacant Properties.

         Operating expenses,  including  depreciation and amortization  expenses
were $756,409  during the year ended  December 31, 2003, as compared to $748,270
during the same period of 2002.  Operating  expenses were higher during 2003 due
to an  increase in state tax  expense  relating  to several  states in which the
Partnership  conducts business and an increase in depreciation expense resulting
from the 2002  acquisition  of the  Property in Austin,  Texas.  The increase in
operating  expenses  was  partially  offset by a decrease  in  Property  related
expenses because the Partnership did not incur Property expenses relating to the
two former PRG Properties after they were assigned to new tenants,  as described
above.

         During 2002, the  Partnership  identified for sale four Properties that
were  classified  as  Discontinued  Operations  in  the  accompanying  financial
statements.  The Partnership sold three of these Properties during 2002 and sold
the fourth Property in February 2003.  During 2003, the  Partnership  identified
for sale two additional Properties,  located in Independence,  Missouri and Fort
Collins,  Colorado,  that were also classified as Discontinued Operations in the
accompanying  financial  statements.   The  Partnership  sold  the  Property  in
Independence,  Missouri in November 2003. The Partnership reclassified the asset
relating to the Property in Fort Collins,  Colorado from real estate  properties
with operating leases to real estate held for sale. The  reclassified  asset was
recorded at the lower of its carrying  amount or fair value,  less cost to sell.
As of March 12, 2004, the sale had not occurred.  The  Partnership  recognized a
net rental loss  (Property  related  expenses and  provisions  for write-down of
assets in excess of rental  revenues) of $290,937 during the year ended December
31,  2002,  relating  to these  Properties.  The net rental loss during 2002 was
primarily the result of the Partnership  recording  provisions for write-down of
assets of  approximately  $556,900  relating to the vacant PRG  Properties.  The
provisions represented the difference between each Property's net carrying value
and it  estimated  fair value.  The  Partnership  sold the Property in Mesquite,
Texas in March  2002.  Because  the  Partnership  had  recorded  provisions  for
write-down of assets in previous years, no gain or loss was recorded during 2002
relating to the sale of this Property.  In June 2002, the  Partnership  sold the
Property  in Rancho  Cordova,  California  and  recorded a gain on  disposal  of
discontinued  operations of  approximately  $402,600.  The Partnership  sold the
Property in Bucyrus,  Ohio in August  2002,  and  recorded a loss on disposal of
discontinued  operations of approximately  $6,300.  The Partnership had recorded
provisions for write-down of assets in previous periods, including approximately
$20,300  during 2002.  The  provision  represented  the  difference  between the
Property's  net carrying  value and its estimated  fair value.  The  Partnership
recognized  net rental  income of  $283,971  during the year  December  31, 2003
relating to the Properties in Salina, Kansas,  Independence,  Missouri, and Fort
Collins,  Colorado.  In February  2003,  the  Partnership  sold the  Property in
Salina,  Kansas and recorded a gain on disposal of  discontinued  operations  of
approximately  $1,000. The Partnership had recorded provisions for write-down of
assets in previous  years  relating to this  Property.  In  November  2003,  the
Partnership sold the Property in  Independence,  Missouri and recorded a gain on
disposal of discontinued operations of approximately $347,000.

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

         Rental revenues from continuing  operations were $3,517,609  during the
year ended  December 31, 2002, as compared to $2,509,353  during the same period
of 2001.  Rental revenues from continuing  operations were lower during the year
ended December 31, 2001 as compared to the same period of 2002, because in March
2001, the Partnership  stopped  recording rental revenues when the tenant,  PRG,
experienced  financial  difficulties and ceased rental payments  relating to two
Denny's Properties. In October 2001, PRG filed for bankruptcy.  During 2002, the
Partnership  received  payment  of past  due  rents  of  approximately  $522,800
relating to these two  Properties,  which were not rejected by PRG, and recorded
the rental revenues. During 2002, the bankruptcy court assigned these two leases
to new  tenants  and all other lease  terms  remained  the same.  One of the new
tenants,  CherryDen,  LLC,  is a  Delaware  limited  liability  company  and  an
affiliate of the General Partners.

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

         The Partnership also earned $49,977 in contingent  rental income during
the year ended  December 31, 2002, as compared to $81,334 during the same period
of 2001.  Contingent  rental income was higher during 2001 due to an increase in
reported gross sales of the restaurants  with leases that require the payment of
contingent rental income.

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

         The Partnership  earned $60,113 in interest and other income during the
year ended  December 31, 2002, as compared to $40,636  during the same period of
2001.  Interest and other income was higher during 2002, because the Partnership
received  reimbursement of property  expenditures that were incurred in previous
years relating to vacant Properties.

         Operating expenses,  including  depreciation and amortization  expenses
and  provision  for  write-down  of assets were  $748,270  during the year ended
December 31,  2002,  as compared to  $2,217,330  during the same period of 2001.
Operating expenses were higher during 2001 because the Partnership established a
provision for write-down of assets of approximately  $1,132,400  relating to the
vacant  Properties  in Las  Vegas,  Nevada  and  St.  Cloud,  Minnesota  and two
Properties leased by PRG. The provisions represented the difference between each
Property's  net carrying  value and its estimated  fair value.  During 2001, the
Partnership  sold the two vacant  Properties  in 2002 and assigned the leases of
the other two Properties to new tenants, as described above.

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

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

         As a result of the 2001 sales of the Properties in Marana, Arizona, Las
Vegas,  Nevada,  and St. Cloud,  Minnesota,  the  Partnership  recognized  gains
totaling approximately $383,600 during the year ended December 31, 2001. Because
these   Properties   were   identified  for  sale  prior  to  the  January  2002
implementation   of  Statement  of  Financial   Accounting   Standards  No.  144
"Accounting for the Impairment or Disposal of Long-Lived Assets," the results of
operations  relating to these Properties were included as Income from Continuing
Operations in the accompanying financial statements.

         The Partnership identified for sale six Properties that were classified
as  Discontinued  Operations  in  the  accompanying  financial  statements,   as
described above. The Partnership  recognized a net rental loss (Property related
expenses and provisions  for write-down of assets in excess of rental  revenues)
of $290,937  and  $908,647  during the years ended  December  31, 2002 and 2001,
relating  to these  Properties.  The net rental  loss during 2002 and 2001 was a
result of the  Partnership  recording  provisions  for  write-down  of assets of
approximately $556,900 and $1,158,200,  respectively, relating to the Properties
formerly  leased by PRG, as described  above.  The  provisions  represented  the
difference  between each  Property's  net carrying  value and it estimated  fair
value.

         The General Partners continuously  evaluate strategic  alternatives for
the  Partnership,  including  alternatives  to provide  liquidity to the Limited
Partners.

         The  Partnership's  leases  as of  December  31,  2003,  are  generally
triple-net  leases and  contain  provisions  that the General  Partners  believe
mitigate  the adverse  effect of  inflation.  Such  provisions  include  clauses
requiring the payment of percentage rent based on certain restaurant sales above
a specified  level and/or  automatic  increases in base rent at specified  times
during the term of the lease.  Inflation,  overall,  has had a minimal effect of
the results of  operations  of the  Partnership.  Continued  inflation may cause
capital  appreciation of the  Partnership's  Properties.  Inflation and changing
prices, however, also may have an adverse impact on the sales of the restaurants
and on potential capital appreciation of the Properties.

         In January 2003,  the Financial  Accounting  Standards  Board  ("FASB")
issued  FASB  Interpretation  No.  46 ("FIN  46"),  "Consolidation  of  Variable
Interest Entities" to expand upon and strengthen  existing  accounting  guidance
that  addresses  when a company  should  include  the  assets,  liabilities  and
activities of another entity in its financial  statements.  To improve financial
reporting by companies involved with variable interest entities, FIN 46 requires
that a variable  interest entity be consolidated by a company if that company is
subject  to a  majority  risk  of  loss  from  the  variable  interest  entity's
activities or entitled to receive a majority of the entity's residual returns or
both.  Prior to FIN 46, a  company  generally  included  another  entity  in its
consolidated  financial  statements  only if it  controlled  the entity  through
voting interests.  In December 2003, the FASB issued FASB Interpretation No. 46R
("FIN 46R"), to clarify some of the provisions of FIN 46. Under FIN 46R, special
effective date provisions apply to entities that have fully or partially applied
FIN 46  prior  to  issuance  of FIN 46R.  Otherwise,  application  of FIN 46R is
required in  financial  statements  of public  entities  that have  interests in
structures that are commonly referred to as special-purpose entities for periods
ending after December 15, 2003. Application by public entities, other than small
business issuers,  for all other types of variable interest entities is required
in financial statements for periods ending after March 15, 2004. The Partnership
did not fully or partially  apply FIN 46 prior to the issuance of FIN 46R. Also,
the Partnership  does not have interests in structures  commonly  referred to as
special-purpose entities.  Therefore,  application of FIN 46R is required in the
Partnership's  financial statements for periods ending after March 15, 2004. The
General  Partners  believe  adoption  of this  standard  may  result  in  either
consolidation  or  additional  disclosure   requirements  of  the  Partnership's
unconsolidated  joint  ventures,  which are  currently  accounted  for under the
equity method.  However,  such  consolidation  is not expected to  significantly
impact the Partnership's results of operations.


Item 7A. Quantitative and Qualitative Disclosures About Market Risk

         Not applicable.

Item 8.  Financial Statements and Supplementary Data


<PAGE>


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

                                    CONTENTS








                                                                  Page

Report of Independent Certified Public Accountants                 18

Financial Statements:

     Balance Sheets                                                19

     Statements of Income                                          20

     Statements of Partners' Capital                               21

     Statements of Cash Flows                                   22-23

     Notes to Financial Statements                              24-36










<PAGE>








               Report of Independent Certified Public Accountants



To the Partners
CNL Income Fund XVI, Ltd.



In our opinion,  the accompanying  balance sheets and the related  statements of
income,  of partners'  capital and of cash flows present fairly, in all material
respects, the financial position of CNL Income Fund XVI, Ltd. (a Florida limited
partnership)  at December 31, 2003 and 2002,  and the results of its  operations
and its cash flows for each of the three years in the period ended  December 31,
2003 in conformity with accounting  principles  generally accepted in the United
States  of  America.  In  addition,  in our  opinion,  the  financial  statement
schedules listed in the index appearing under item 15(a)(2)  present fairly,  in
all  material  respects,   the  information  set  forth  therein  when  read  in
conjunction with the related financial  statements.  These financial  statements
and financial  statement  schedules are the  responsibility of the Partnership's
management;  our  responsibility  is to express  an  opinion on these  financial
statements and financial  statement  schedules based on our audits. We conducted
our audits of these statements in accordance with auditing  standards  generally
accepted in the United States of America, which require that we plan and perform
the audit to obtain reasonable  assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence  supporting the amounts and  disclosures  in the financial  statements,
assessing the  accounting  principles  used and  significant  estimates  made by
management,  and evaluating the overall  financial  statement  presentation.  We
believe that our audits provide a reasonable basis for our opinion.

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



/s/ PricewaterhouseCoopers LLP

Orlando, Florida
March 24, 2004






<PAGE>



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

                                 BALANCE SHEETS

<TABLE>

                                                                                      December 31,
                                                                              2003                    2002
                                                                       -------------------     -------------------

<S>     <C>    <C>    <C>    <C>    <C>    <C>

                         ASSETS

Real estate properties with operating leases, net                           $  21,322,602           $  21,742,253
Net investment in direct financing leases                                       2,580,395               2,662,948
Real estate held for sale                                                       1,363,218               3,174,200
Investment in joint ventures                                                    4,722,017               3,446,648
Cash and cash equivalents                                                       2,090,183               1,343,836
Receivables, less allowance for doubtful accounts
     of  $75,006 and $63,752, respectively                                         36,470                  49,577
Due from related parties                                                            6,135                  18,966
Accrued rental income, less allowance for
     doubtful accounts of $12,753 in 2003 and 2002                              1,719,305               1,549,115
Other assets                                                                       35,149                  32,038
                                                                       -------------------     -------------------

                                                                            $  33,875,474           $  34,019,581
                                                                       ===================     ===================

            LIABILITIES AND PARTNERS' CAPITAL

Accounts payable and accrued expenses                                         $     9,031             $     3,505
Real estate taxes payable                                                           5,312                  10,502
Distributions payable                                                             900,000                 900,000
Due to related parties                                                            166,003                  18,292
Rents paid in advance and deposits                                                105,033                  97,342
                                                                       -------------------     -------------------
         Total liabilities                                                      1,185,379               1,029,641

Commitment (Note 12)

Partners' capital                                                              32,690,095              32,989,940
                                                                       -------------------     -------------------

                                                                            $  33,875,474           $  34,019,581
                                                                       ===================     ===================
</TABLE>

                See accompanying notes to financial statements.


<PAGE>


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

                              STATEMENTS OF INCOME

<TABLE>

                                                                                 Year Ended December 31,
                                                                        2003               2002               2001
                                                                   ----------------   ----------------   ---------------
<S>     <C>    <C>    <C>    <C>    <C>    <C>


Revenues:
     Rental income from operating leases                              $  2,788,621       $  3,206,654      $  2,205,123
     Earned income from direct financing leases                            267,065            310,955           304,230
     Contingent rental income                                               40,730             49,977            81,334
     Interest and other income                                               2,004             60,113            40,636
                                                                   ----------------   ----------------   ---------------
                                                                         3,098,420          3,627,699         2,631,323
                                                                   ----------------   ----------------   ---------------
Expenses:
     General operating and administrative                                  256,829            258,345           379,613
     Property related                                                       12,144             17,453           129,863
     Provision for doubtful accounts                                            --                 --            90,074
     Management fees to related parties                                     37,158             41,568            30,726
     State and other taxes                                                  27,761             20,288            30,716
     Depreciation and amortization                                         422,517            410,616           423,944
     Provision for write-down of assets                                         --                 --         1,132,394
                                                                   ----------------   ----------------   ---------------
                                                                           756,409            748,270         2,217,330
                                                                   ----------------   ----------------   ---------------

Income before gain on sale of assets and equity in
     earnings of unconsolidated joint ventures                           2,342,011          2,879,429           413,993

Gain on sale of assets                                                          --                 --           383,637

Equity in earnings of unconsolidated joint ventures                        326,150            312,454           250,885
                                                                   ----------------   ----------------   ---------------

Income from continuing operations                                        2,668,161          3,191,883         1,048,515
                                                                   ----------------   ----------------   ---------------

Discontinued operations
     Income (loss) from discontinued operations                            283,971           (290,937  )       (908,647 )
     Gain on disposal of discontinued operations                           348,023            396,382                --
                                                                   ----------------   ----------------   ---------------
                                                                           631,994            105,445          (908,647  )
                                                                   ----------------   ----------------   ---------------

Net income                                                            $  3,300,155       $  3,297,328       $   139,868
                                                                   ================   ================   ===============

Income (loss) per limited partner unit
     Continuing operations                                              $     0.59         $     0.71        $     0.23
     Discontinued operations                                                  0.14               0.02             (0.20  )
                                                                   ----------------   ----------------   ---------------

                                                                        $     0.73         $     0.73        $     0.03
                                                                   ================   ================   ===============

Weighted average number of
     limited partner units outstanding                                   4,500,000          4,500,000         4,500,000
                                                                   ================   ================   ===============
</TABLE>

                See accompanying notes to financial statements.

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

                         STATEMENTS OF PARTNERS' CAPITAL

                  Years Ended December 31, 2003, 2002, and 2001
<TABLE>
<CAPTION>

 <c>
                                          General Partners                                           Limited Partners
                                --------------------------------------    ---------------------------------------------------------
                                                       Accumulated                                               Accumulated
                                  Contributions         Earnings         Contributions       Distributions         Earnings
                                ------------------   ----------------   -----------------   ----------------   -----------------

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

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

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

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

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

    Distributions to limited
       partners ($0.80 per
       limited partner unit)                   --                 --                  --         (3,600,000 )                --
    Net income                                 --                 --                  --                 --           3,300,155
                                ------------------   ----------------   -----------------   ----------------   -----------------

Balance, December 31, 2003            $     1,000        $   159,017       $  45,000,000      $ (31,423,017 )     $  24,343,095
                                ==================   ================   =================   ================   =================

</TABLE>
                 See accompanying notes to financial statements.

<PAGE>

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

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



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

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



           --       (3,600,000 )
           --        3,297,328
--------------   --------------

   (5,390,000 )     32,989,940



           --       (3,600,000 )
           --        3,300,155
--------------   --------------

 $ (5,390,000 )    $32,690,095
==============   ==============



                 See accompanying notes to financial statements.


<PAGE>

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

                            STATEMENTS OF CASH FLOWS

<TABLE>

                                                                               Year Ended December 31,
                                                                      2003               2002              2001
                                                                 ---------------    ---------------    --------------
<S>     <C>    <C>    <C>    <C>    <C>    <C>


Cash flows from operating activities
      Net income                                                   $  3,300,155       $  3,297,328       $   139,868
                                                                 ---------------    ---------------    --------------
      Adjustments to reconcile net income to net cash
         provided by operating activities:
             Depreciation                                               476,266            504,712           549,520
             Amortization of investment in direct
                financing leases                                         82,553             51,016            52,904
             Amortization                                                 2,865              2,912             3,097
             Equity in earnings of unconsolidated
                joint ventures, net of distributions
             Gain on sale of assets                                    (348,023 )         (396,382 )        (383,637 )
             Provision for write-down of assets                              --            556,884         2,290,553
             Provision for doubtful accounts                                 --                 --            90,074
             Decrease (increase) in receivables                          13,107             (8,993 )         289,153
             Decrease in due from related parties                        12,831                 --                --
             Increase in accrued rental income                         (170,190 )         (166,534 )        (165,285 )
             Increase in other assets                                    (5,976 )           (2,852 )            (801 )
             Increase (decrease) in accounts payable
                and accrued expenses and real estate
                taxes payable                                               336            (31,413 )           1,632
             Increase (decrease) in due to related
                parties                                                 147,711                961          (135,626 )
             Increase (decrease) in rents paid in
                advance and deposits                                      7,691             47,303           (36,556 )
                                                                 ---------------    ---------------    --------------
                  Total adjustments                                     250,701            581,343         2,583,500
                                                                 ---------------    ---------------    --------------

Net cash provided by operating activities                             3,550,856          3,878,671         2,723,368
                                                                 ---------------    ---------------    --------------
Cash Flows from Investing Activities:
      Proceeds from sale of assets                                    2,102,390          1,918,641         2,851,675
      Additions to real estate properties with
         operating leases                                                    --         (1,406,745 )      (1,147,903 )
      Investment in joint ventures                                   (1,306,899 )         (221,404 )      (1,134,117 )
                                                                 ---------------    ---------------    --------------
         Net cash provided by investing activities                      795,491            290,492           569,655
                                                                 ---------------    ---------------    --------------
Cash Flows from Financing Activities:
      Proceeds from loan from corporate
         general partner                                                     --                 --           300,000
      Repayment of loan from corporate general
         partner                                                             --                 --          (300,000 )
      Distributions to limited partners                              (3,600,000 )       (3,600,000 )      (3,600,000 )
                                                                 ---------------    ---------------    --------------
         Net cash used in financing activities                       (3,600,000 )       (3,600,000 )      (3,600,000 )
                                                                 ---------------    ---------------    --------------

Net increase (decrease) in cash and cash equivalents                    746,347            569,163          (306,977 )

Cash and cash equivalents at beginning of year                        1,343,836            774,673         1,081,650
                                                                 ---------------    ---------------    --------------

Cash and cash equivalents at end of year                           $  2,090,183       $  1,343,836       $   774,673
                                                                 ===============    ===============    ==============

</TABLE>


                See accompanying notes to financial statements.

<PAGE>


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

                      STATEMENTS OF CASH FLOWS - CONTINUED


<TABLE>

                                                                               Year Ended December 31,
                                                                      2003               2002              2001
                                                                 ---------------    ---------------    --------------

<S>     <C>    <C>    <C>    <C>    <C>    <C>

Supplemental Schedule of Non-Cash Financing
    Activities:

      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, 2003, 2002, and 2001


1.       Significant Accounting Policies

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

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

         Real Estate and Lease Accounting - The Partnership records acquisitions
         of real estate properties at cost, including closing costs. Real estate
         properties are leased to third parties on a triple-net  basis,  whereby
         the tenant is generally responsible for all operating expenses relating
         to the property,  including property taxes, insurance,  maintenance and
         repairs.  During the years ended  December  31, 2003,  2002,  and 2001,
         tenants  paid,  or are expected to pay,  directly to real estate taxing
         authorities    approximately   $464,100,    $456,800,   and   $435,000,
         respectively,  in estimated  real estate taxes in  accordance  with the
         terms of their leases.

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

              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.

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

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

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


<PAGE>


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

                          NOTES TO FINANCIAL STATEMENTS

                  Years Ended December 31, 2003, 2002, and 2001


1.       Significant Accounting Policies - Continued

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

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

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

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

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

         Lease Costs - Other  assets  include  brokerage  fees  associated  with
         negotiating  leases  and are  amortized  over the term of the new lease
         using the straight-line  method.  When a property is sold or a lease is
         terminated   the  related  lease  cost,  if  any,  net  of  accumulated
         amortization is removed from the accounts and charged against income.

         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 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

                  Years Ended December 31, 2003, 2002, and 2001


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  years'  financial
         statements  have been  reclassified  to conform  to 2003  presentation.
         These  reclassifications had no effect on partners' capital, net income
         or cash flows.

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

         FASB Interpretation No. 46 - In January 2003, the Financial  Accounting
         Standards Board ("FASB") issued FASB  Interpretation No. 46 ("FIN 46"),
         "Consolidation  of  Variable  Interest  Entities"  to  expand  upon and
         strengthen  existing  accounting guidance that addresses when a company
         should include the assets, liabilities and activities of another entity
         in  its  financial  statements.   To  improve  financial  reporting  by
         companies  involved with variable  interest  entities,  FIN 46 requires
         that a variable  interest  entity be  consolidated by a company if that
         company  is  subject  to a  majority  risk of loss  from  the  variable
         interest  entity's  activities or entitled to receive a majority of the
         entity's residual returns or both. Prior to FIN 46, a company generally
         included another entity in its consolidated  financial  statements only
         if it controlled the entity through voting interests. In December 2003,
         the FASB issued FASB  Interpretation  No. 46R ("FIN  46R"),  to clarify
         some of the provisions of FIN 46. Under FIN 46R, special effective date
         provisions  apply to entities that have fully or partially  applied FIN
         46 prior to issuance of FIN 46R.  Otherwise,  application of FIN 46R is
         required in financial statements of public entities that have interests
         in structures that are commonly referred to as special-purpose entities
         for periods  ending  after  December 15,  2003.  Application  by public
         entities,  other than small  business  issuers,  for all other types of
         variable  interest  entities is required in  financial  statements  for
         periods ending after March 15, 2004. The  Partnership  did not fully or
         partially  apply FIN 46 prior to the  issuance  of FIN 46R.  Also,  the
         Partnership does not have interests in structures  commonly referred to
         as  special-purpose  entities.  Therefore,  application  of FIN  46R is
         required in the Partnership's  financial  statements for periods ending
         after March 15, 2004.  The general  partners  believe  adoption of this
         standard may result in either  consolidation  or additional  disclosure
         requirements of the Partnership's  unconsolidated joint ventures, which
         are currently  accounted  for under the equity  method.  However,  such
         consolidation is not expected to significantly impact the Partnership's
         results of operations.


<PAGE>


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

                          NOTES TO FINANCIAL STATEMENTS

                  Years Ended December 31, 2003, 2002, and 2001


2.       Real Estate Properties with Operating Leases

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

<TABLE>
                                                                    2003                   2002
                                                             --------------------   --------------------

<S>     <C>    <C>    <C>    <C>    <C>    <C>


                 Land                                             $   11,974,352         $   11,974,352
                 Buildings                                            12,657,778             12,657,778
                                                             --------------------   --------------------
                                                                      24,632,130             24,632,130
                 Less accumulated depreciation                        (3,309,528 )           (2,889,877 )
                                                             --------------------   --------------------

                                                                  $   21,322,602         $   21,742,253
                                                             ====================   ====================

</TABLE>



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

         The following is a schedule of the future  minimum lease payments to be
         received on noncancellable operating leases at December 31, 2003:

                         2004                          $   2,847,520
                         2005                              2,988,673
                         2006                              3,024,383
                         2007                              3,026,095
                         2008                              3,021,453
                         Thereafter                       16,729,648
                                                   ------------------

                                                       $  31,637,772
                                                   ==================

3.       Net Investment in Direct Financing Leases

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

<TABLE>

                                                                          2003                   2002
                                                                    ------------------     -----------------
<S>     <C>    <C>    <C>    <C>    <C>    <C>


                 Minimum lease payments
                      receivable                                        $   4,083,345          $  4,448,402
                 Estimated residual values                                    957,216               957,216
                 Less unearned income                                      (2,460,166 )          (2,742,670 )
                                                                    ------------------     -----------------
                 Net investment in direct
                      financing leases                                  $   2,580,395          $  2,662,948
                                                                    ==================     =================
</TABLE>




<PAGE>


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

                          NOTES TO FINANCIAL STATEMENTS

                  Years Ended December 31, 2003, 2002, and 2001


3.       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, 2003:

                                2004                     $  355,478
                                2005                        356,140
                                2006                        356,808
                                2007                        357,483
                                2008                        358,165
                                Thereafter                2,299,271
                                                      --------------

                                                        $ 4,083,345
                                                      ==============

4.       Investment in Joint Ventures

         The  Partnership  has a 32.35% and a 19.72% interest in the profits and
         losses of Columbus  Joint Venture and TGIF  Pittsburgh  Joint  Venture,
         respectively. In addition, the Partnership has an 80.44%, a 40.42%, and
         an 83%  interest  in a property  in  Fayetteville,  North  Carolina,  a
         property in Memphis,  Tennessee,  and a property in Walker,  Louisiana,
         respectively,  each of which is held as  tenants-in-common.  The  other
         interests in the joint ventures and the  properties  held as tenants in
         common are held by  affiliates of the  Partnership  which have the same
         general partners.

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

         In November  2003,  the  Partnership  and CNL Income Fund VI, Ltd,  CNL
         Income   Fund  XI,   Ltd.,   and  CNL   Income   Fund  XV,   Ltd.,   as
         tenants-in-common,  invested  in a  property  in Dalton,  Georgia.  The
         Partnership contributed $380,000 for a 20% interest in the property. In
         addition,  in December  2003,  the  Partnership  and CNL XI,  Ltd.,  as
         tenants-in-common,  invested  in a  property  in Hoover,  Alabama.  The
         Partnership contributed  approximately $926,900 to pay for construction
         costs and owns a 74%  interest in the  property.  The  Partnership  and
         affiliates  entered into agreements whereby each co-venturer will share
         in the profits and losses of the  respective  property in proportion to
         its applicable percentage interest.  Each of the CNL Income Funds is an
         affiliate of the general partners.

         As of December 31, 2003, Columbus Joint Venture,  TGIF Pittsburgh Joint
         Venture,  and  Arlington  Joint  Venture  each owned one  property.  In
         addition, the Partnership and affiliates, in five separate tenancies in
         common  arrangements,  each owned one property.  The following presents
         the combined,  condensed  financial  information for the joint ventures
         at:





<PAGE>


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

                          NOTES TO FINANCIAL STATEMENTS

                  Years Ended December 31, 2003, 2002, and 2001


4.       Investment in Joint Ventures - Continued

<TABLE>

                                                                                 December 31,
                                                                        2003                        2002
                                                                 --------------------         -----------------
<S>     <C>    <C>    <C>    <C>    <C>    <C>

              Land and buildings on operating leases, net             $   10,564,455             $   7,783,964
              Construction in process                                         26,861                        --
              Cash                                                            60,545                    27,252
              Receivables                                                    153,552                        --
              Accrued rental income                                          423,778                   340,550
              Other assets                                                        --                       188
              Liabilities                                                     47,780                    30,893
              Partners' capital                                           11,181,411                 8,121,061


                                                                          Years ended December 31,
                                                                 2003            2002              2001
                                                             -------------   --------------   ---------------

              Revenues                                          $ 952,108       $  877,210       $   747,735
              Expenses                                           (170,240 )       (157,120 )        (134,476 )
                                                             -------------   --------------   ---------------
                  Net income                                    $ 781,868       $  720,090       $   613,259
                                                             =============   ==============   ===============

</TABLE>

         The Partnership  recognized  income totaling  $326,150,  $312,454,  and
         $250,885,  for the years  ended  December  31,  2003,  2002,  and 2001,
         respectively,  from  the  joint  ventures  and the  properties  held as
         tenants-in-common with affiliates of the general partners.

5.       Receivables

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



<PAGE>


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

                          NOTES TO FINANCIAL STATEMENTS

                  Years Ended December 31, 2003, 2002, and 2001


6.       Discontinued Operations

         During 2002, the  Partnership  identified for sale four properties that
         were  classified  as  Discontinued   Operations  in  the   accompanying
         financial statements.  During 2002, the Partnership sold three of these
         properties  each to a third party,  and received net sales  proceeds of
         approximately  $1,918,700,  resulting  in a net  gain  on  disposal  of
         discontinued  operations of approximately  $396,400.  In February 2003,
         the Partnership  sold the fourth property to a third party and received
         net sales proceeds of  approximately  $154,500,  resulting in a gain on
         disposal  of  discontinued  operations  of  approximately  $1,000.  The
         Partnership  had  recorded  provisions  for  write-down  of  assets  of
         approximately  $556,900 and $1,158,200  during the years ended December
         31,  2002 and 2001,  respectively,  relating to these  properties.  The
         provision  represented  the  difference  between  each  property's  net
         carrying  value  and  its  estimated  fair  value.   During  2003,  the
         Partnership  identified  for  sale  two  additional   properties.   The
         Partnership  sold one of these  two  properties  in  November  2003 and
         received net sales proceeds of approximately $1,947,900, resulting in a
         gain on disposal of discontinued  operations of approximately $347,000.
         The  Partnership  reclassified  the  asset  relating  to the  remaining
         property not sold from real estate  properties with operating leases to
         real estate held for sale. The  reclassified  asset was recorded at the
         lower of its  carrying  amount or  estimated  fair value,  less cost to
         sell.  The financial  results for these six properties are reflected as
         Discontinued Operations in the accompanying financial statements.

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

<TABLE>

                                                                         Year Ended December 31,
                                                                 2003           2002               2001
                                                             -------------  --------------     --------------
<S>     <C>    <C>    <C>    <C>    <C>    <C>

               Rental revenues                                  $ 342,106      $  407,325         $  409,531
               Termination fee income                                  --              --             33,979
               Expenses                                           (58,135 )      (141,378 )         (193,998 )
               Provision for write-down of assets                      --        (556,884 )       (1,158,159 )
                                                             -------------  --------------     --------------
                     Income (loss) from discontinued
                        operations                              $ 283,971      $ (290,937 )       $ (908,647 )
                                                             =============  ==============     ==============

</TABLE>




<PAGE>


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

                          NOTES TO FINANCIAL STATEMENTS

                  Years Ended December 31, 2003, 2002, and 2001


7.       Allocations and Distributions

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

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

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

         Effective  January 1, 2000, the general  partners waived their right to
         receive  future  distributions  from the  Partnership,  including  both
         distributions  of operating cash flow and  distributions of liquidation
         proceeds,   to  the  extent   that  the   cumulative   amount  of  such
         distributions would exceed the balance in the general partners' capital
         account as of December  31,  1999.  Accordingly,  for years  commencing
         January  1,  2000 and  after,  the  Partnership's  net  income  will be
         allocated entirely among the limited partners.  However,  if losses are
         allocated to the general  partners in a year, an amount of income equal
         to the sum of such losses may be allocated  to the general  partners in
         succeeding years. Accordingly,  the general partners were not allocated
         any net income  during the years ended  December  31, 2003,  2002,  and
         2001.

         During each of the years ended  December 31, 2003,  2002,  and 2001 the
         Partnership   declared   distributions   to  the  limited  partners  of
         $3,600,000.  No distributions have been made to the general partners to
         date.



<PAGE>


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

                          NOTES TO FINANCIAL STATEMENTS

                  Years Ended December 31, 2003, 2002, and 2001


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>

                                                                       2003             2002              2001
                                                                   --------------   --------------   ---------------

<S>     <C>    <C>    <C>    <C>    <C>    <C>

             Net income for financial reporting purposes            $ 3,300,155     $  3,297,328        $  139,868

             Effect of timing differences relating to
                depreciation                                             34,053           35,244            40,740

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

             Direct financing leases recorded as operating
                leases for tax reporting purposes                        82,553           51,016            52,904

             Effect of timing differences relating to equity
                in earnings of unconsolidated joint ventures             (2,185 )         (7,210 )         (15,881 )

             Effect of timing differences relating to
                gains/losses on sale of assets                         (735,303 )     (1,243,058 )        (993,358 )

             Effect of timing differences relating to
                allowance for doubtful accounts                          10,365         (691,679 )         326,169

             Accrued rental income                                     (170,190 )       (166,534 )        (165,285 )

             Rents paid in advance and deposits                           7,691           47,303           (22,056 )

             Other                                                         (499 )             --                --
                                                                   --------------   --------------   ---------------

             Net income for federal income tax purposes             $ 2,526,640     $  1,879,294       $ 1,653,654
                                                                  ==============   ==============   ===============
</TABLE>




<PAGE>


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

                          NOTES TO FINANCIAL STATEMENTS

                  Years Ended December 31, 2003, 2002, and 2001


9.       Related Party Transactions

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

         The Advisor provides services  pursuant to a management  agreement with
         the Partnership. In connection therewith, the Partnership has agreed to
         pay the Advisor an annual  management  fee of one percent of the sum of
         gross revenues from properties  wholly owned by the Partnership and the
         Partnership's  allocable  share of gross revenues from joint  ventures.
         Any  portion  of the  management  fee  not  paid  is  deferred  without
         interest. The Partnership incurred management fees of $37,158, $41,568,
         and $30,726,  for the years ended  December 31, 2003,  2002,  and 2001,
         respectively.

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

         During  the  years  ended  December  31,  2003,  2002,  and  2001,  the
         Partnership's   affiliates   provided   accounting  and  administrative
         services.  The Partnership incurred $149,450,  $179,207,  and $243,206,
         for the years ended December 31, 2003,  2002,  and 2001,  respectively,
         for such services.

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

         During  2001,   Phoenix   Restaurant  Group,  Inc.  ("PRG")  filed  for
         bankruptcy  and  rejected  two of the  four  leases  it  had  with  the
         Partnership.  In May and June 2002, the  bankruptcy  court assigned the
         two leases not rejected by PRG relating to the  properties  in Branson,
         Missouri  and  Temple,   Texas  to  CherryDen,   LLC  and  Seana,  LLC,
         respectively.  CherryDen,  LLC is an affiliate of the general partners.
         All other lease terms  remained the same. In connection  with the lease
         to  CherryDen,  LLC,  the  Partnership  recognized  rental  revenues of
         approximately  $277,700  and  $265,900  relating  to  the  property  in
         Branson, Missouri during the years ended December 31, 2003 and 2002.


<PAGE>


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

                          NOTES TO FINANCIAL STATEMENTS

                  Years Ended December 31, 2003, 2002, and 2001


9.       Related Party Transactions - Continued

         The amount due to related parties at December 31, 2003 and 2002 totaled
         $166,003 and $18,292, respectively.

10.      Concentration of Credit Risk

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

                                                              2003                  2002                 2001
                                                        -----------------     -----------------    -----------------
<S>     <C>    <C>    <C>    <C>    <C>    <C>


          Golden Corral Corporation                          $   959,872           $   989,368         $  1,023,304
          Jack in the Box Inc.                                   583,384               624,944              621,879
</TABLE>

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

<TABLE>
                                                              2003                  2002                 2001
                                                        -----------------     -----------------    ------------------
<S>     <C>    <C>    <C>    <C>    <C>    <C>

              Golden Corral Buffet and Grill                 $   959,872           $   989,368          $  1,023,304
              Denny's                                            731,315               729,186               402,615
              Jack in the Box                                    583,384               624,944               621,879
</TABLE>


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



<PAGE>


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

                          NOTES TO FINANCIAL STATEMENTS

                  Years Ended December 31, 2003, 2002, and 2001


11.      Selected Quarterly Financial Data

         The following table presents  selected  unaudited  quarterly  financial
         data for each full quarter during the years ended December 31, 2003 and
         2002.

<TABLE>


                      2003 Quarter                  First        Second        Third        Fourth         Year
         ---------------------------------------- ----------- ------------- ------------- ------------  ------------
<S>     <C>    <C>    <C>    <C>    <C>    <C>


         Continuing Operations (1):
              Revenues                             $ 769,561     $ 771,531     $ 778,443    $ 778,885    $3,098,420
              Equity in earnings of
                unconsolidated joint ventures         81,134        80,656        80,438       83,922       326,150
              Income from continuing
                operations                           631,234       674,282       674,576      688,069     2,668,161
         Discontinued Operations (1):
              Revenues                                90,749        90,749        90,749       69,859       342,106
              Income from and gain on disposal
                of discontinued operations (3)        71,802        71,832        77,633      410,727       631,994

         Net income                                  703,036       746,114       752,209    1,098,796     3,300,155

         Income per limited partner unit

              Continuing operations                  $  0.14      $   0.15      $   0.15     $   0.15      $   0.59
              Discontinued operations                   0.02          0.02          0.02         0.08          0.14
                                                  ----------- ------------- ------------- ------------  ------------
                                                     $  0.16      $   0.17      $   0.17     $   0.23      $   0.73
                                                  =========== ============= ============= ============  ============
</TABLE>




<PAGE>


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

                          NOTES TO FINANCIAL STATEMENTS

                  Years Ended December 31, 2003, 2002, and 2001


11.      Selected Quarterly Financial Data - Continued
<TABLE>

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


         Continuing Operations (1):
              Revenues                              $737,434    $1,328,366      $794,181     $767,718    $3,627,699
              Equity in earnings of
                 unconsolidated joint ventures        75,155        75,646        81,698       79,955       312,454
              Income from continuing
                 operations                          609,065     1,180,423       694,701      707,694     3,191,883
         Discontinued Operations (1):
              Revenues                               117,470       108,355        90,749       90,751       407,325
              Income (loss) from and gain
                 on disposal of discontinued
         operations (2)                               75,192       446,961        52,923     (469,631 )     105,445

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

         Income (loss) per limited partner
             unit

              Continuing operations                  $  0.14      $   0.26      $   0.15     $   0.16      $   0.71
              Discontinued operations                   0.02          0.10          0.01        (0.11 )        0.02
                                                  ----------- ------------- ------------- ------------  ------------
                                                     $  0.16      $   0.36      $   0.16     $   0.05      $   0.73
                                                  =========== ============= ============= ============  ============
</TABLE>



       (1)  Certain items in the quarterly financial data have been reclassified
            to conform to the 2003 presentation.  This  reclassification  had no
            effect  on  net  income.  The  results  of  operations  relating  to
            properties that were identified for sale as of December 31, 2001 but
            sold subsequently are reported as continuing operations. The results
            of operations relating to properties that were either identified for
            sale  and  disposed  of  subsequent  to  January  1,  2002  or  were
            classified  as held for sale as of December 31, 2003 are reported as
            discontinued operations for all periods presented.

       (2)  In December 2002, the  Partnership  entered into an agreement with a
            third party to sell the property in Salina,  Kansas.  In  connection
            with the anticipated sale of the property,  the Partnership recorded
            a  provision  for  write-down  of assets of  approximately  $536,600
            during the fourth  quarter of 2002.  During 2001, the tenant of this
            property experienced financial  difficulties,  filed for bankruptcy,
            and  rejected  the lease  relating to the  property.  The  provision
            represented  the  difference  between the net carrying  value of the
            property  and its  estimated  fair  value.  In  February  2003,  the
            Partnership  sold this  property  and recorded a gain on disposal of
            discontinued operations of approximately $1,000.

       (3)  In November 2003, the Partnership sold its property in Independence,
            Missouri  to a  third  party  and  recorded  a gain on  disposal  of
            discontinued operations of approximately $347,000.

12.      Commitment

         In December  2003,  the  Partnership  entered into an agreement  with a
         third party to sell the property in Fort Collins, Colorado.


<PAGE>


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

         None.


Item 9A. Controls and Procedures

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

         There was no change in internal  control over financial  reporting that
occurred during the most recent fiscal quarter that has materially affected,  or
is  reasonably  likely to materially  affect,  internal  control over  financial
reporting.

                                    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-RP,  CCM, CNL Financial  Group,  Inc. and their
affiliates, all of which are affiliates of the General Partners.

         James M. Seneff, Jr., age 57. 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-RP, a public,  unlisted real
estate investment trust since 1994. Mr. Seneff served as Chief Executive Officer
of CNL-RP from 1994 through August 1999 and as Co-Chief  Executive  Officer from
December 2000 through September 2003. Mr. Seneff served as Chairman of the Board
and  Chief  Executive  Officer  of  CNL  Fund  Advisors,   Inc.,   formerly  the
Partnership's  advisor,  from  its  inception  in 1990  until it  merged  with a
wholly-owned  subsidiary  of CNL-RP in  September  1999,  and in June 2000,  was
re-elected  to those  positions of CNL Fund  Advisors,  Inc. CNL Fund  Advisors,
Inc.,  formerly CNL  Institutional  Advisors,  Inc., is a registered  investment
advisor. Mr. Seneff is a principal stockholder of CNL Holdings, Inc., the parent
company of CNL Financial 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 1973. CNL Financial Group, Inc. is and is the parent
company, either directly or indirectly through subsidiaries,  of CNL Real Estate
Services,  Inc.,  CNL Capital  Markets,  Inc.,  CNL  Investment  Company and CNL
Securities  Corp.,  all of which are  engaged  in the  business  of real  estate
finance.  Mr.  Seneff also serves as a Director and Chairman of the Board of CNL
Hospitality  Properties,  Inc., a public, unlisted real estate investment trust;
and served as Chief Executive Officer of CNL Hospitality  Properties,  Inc. from
its inception in 1997 until 2003 and served as Co-Chief  Executive  Officer from
February 2003 until May 1, 2003.  Mr. Seneff has served as Chairman of the Board
of CNL Hospitality Corp., the advisor to CNL Hospitality Properties, Inc., since
its inception in 1997.  Mr. Seneff also served as Chief  Executive  Officer from
its inception in 1997 through  February 2003,  and currently  serves as Co-Chief
Executive Officer of CNL Hospitality Corp. Mr. Seneff has served as Director and
Chairman  of the Board of CNL  Retirement  Corp.  since 1997 and served as Chief
Executive Officer of CNL Retirement Corp. from 1997 through 2003. CNL Retirement
Corp. is the advisor to CNL Retirement Properties, Inc., a public, unlisted real
estate  investment trust. Mr. Seneff has also served as Director and Chairman of
the Board of Commercial Net Lease Realty,  Inc., a public real estate investment
trust  that is listed on the New York Stock  Exchange,  since 1992 and served as
Chief Executive  Officer of Commercial Net Lease Realty,  Inc. from 1992 through
February 2004. Mr. Seneff has served as a Director,  Chairman of the Board,  and
Chief Executive Officer of CNL Securities Corp. since its formation in 1979; CNL
Investment  Company  since  1990;  and  CNL  Institutional  Advisors,   Inc.,  a
registered  investment  advisor for pension  plans,  since 1990.  Mr. Seneff has
served as Chairman of the Board and Chief  Executive  Officer of CNL  Commercial
Finance,  Inc.  since 2000.  Mr.  Seneff also serves as Chairman of the Board of
CNLBank, an independent,  state-chartered commercial bank. Mr. Seneff previously
served on the Florida State Commission on Ethics and is a former member and past
Chairman of the State of Florida Investment  Advisory Council,  which recommends
to the Florida Board of Administration  investments for various Florida employee
retirement  funds.  The Florida  Board of  Administration,  Florida's  principal
investment advisory and money management agency,  oversees the investment of the
Florida  state  retirement  plan.  Mr.  Seneff  received  his degree in Business
Administration from Florida State University in 1968.

         Robert A.  Bourne,  age 56. 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 has
served as a Director and Vice  Chairman of the Board of CNL-RP  since 1994.  Mr.
Bourne also served as President of CNL-RP from 1994  through  February  1999 and
served as Treasurer  from  February  1999 through  August 1999 and from May 1994
through December 1994. Mr. Bourne served in various executive positions with CNL
Fund Advisors, Inc. prior to its merger with a wholly-owned subsidiary of CNL-RP
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. Mr. Bourne serves as Director,  Vice Chairman of the Board
and  Treasurer  and from  1997  until  June  2002  served  as  President  of CNL
Hospitality  Properties,  Inc. and as Director,  President  and Treasurer of CNL
Hospitality  Corp.  Mr.  Bourne  also serves as Director  and  Treasurer  of CNL
Retirement  Properties,  Inc.  and as Director and  Treasurer of CNL  Retirement
Corp. Mr. Bourne serves as a Director of CNLBank.  Mr. Bourne has also 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. Mr. Bourne 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. 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 48. Mr. McWilliams has served as President of
CNL-RP since May 2001 and as Chief  Executive  Officer of CNL-RP since September
2003.  Mr.  McWilliams  served as  Co-Chief  Executive  Officer  of CNL-RP  from
December 2000 through  September 2003 and served as Chief Executive Officer from
September 1999 through  December 2000. Mr.  McWilliams  also served as President
and Chief  Executive  Officer of CNL  Franchise  Network  Corp.,  a wholly owned
subsidiary  of CNL-RP  since  August 2002 and served as President of CNL-RP from
February 1999 until  September  1999 and as Executive  Vice  President of CNL-RP
from 1997 through  February  1999.  Mr.  McWilliams  served as an Executive Vice
President of CNL  Financial  Group,  Inc. from the time he joined the company in
April 1997 until September 1999. Mr.  McWilliams served as President of CNL Fund
Advisors,  Inc. and CNL Financial  Services,  Inc., a corporation engaged in the
business of real estate financing, from April 1997 until the acquisition of such
entities  by  wholly  owned  subsidiaries  of  CNL-RP in  September  1999.  From
September 1983 through March 1997, Mr.  McWilliams was employed by Merrill Lynch
& Co. The  majority of his career at Merrill  Lynch & Co. was in the  Investment
Banking division where he served as a Managing Director. Mr. McWilliams received
a B.S.E. in Chemical  Engineering from Princeton University in 1977 and a Master
of Business  Administration  degree  with a  concentration  in finance  from the
University of Chicago in 1983.

         Steven  D.  Shackelford,  age  40.  Mr.  Shackelford  was  promoted  to
Executive  Vice  President  and Chief  Operating  Officer of CNL-RP in September
2003. Mr.  Shackelford has also served as Chief Financial  Officer since January
1997.  He served as Senior Vice  President  of CNL-RP from  January 1997 through
July 2000, when he was promoted to Executive Vice President. Mr. Shackelford has
also served as Secretary and Treasurer of CNL-RP since  September  1999. He also
served as Chief Financial Officer of CNL Fund Advisors, Inc. from September 1996
to September  1999.  From March 1995 to July 1996, Mr.  Shackelford was a senior
manager in the national office of Price  Waterhouse LLP where he was responsible
for advising  foreign  clients  seeking to raise capital and a public listing in
the United  States.  From  August  1992 to March  1995,  he was a manager in the
Paris,  France  office  of  Price  Waterhouse,  serving  several  multi-national
clients.  Mr. Shackelford was an audit staff and senior from 1986 to 1992 in the
Orlando, Florida office of Price Waterhouse. Mr. Shackelford received a Bachelor
of  Arts  degree  in  Accounting,   with  honors,   and  a  Master  of  Business
Administration  degree from Florida State  University and is a certified  public
accountant.

         Thomas Arasi, age 46. Mr. Arasi has served as President of CCM since it
was formed in July 2003 to provide  strategic  advisory  services to the General
Partners. He has served in various consulting capacities to CNL Hospitality Corp
and other CNL affiliates  since January 2003. Since November 2001 he has been an
independent  consultant  working  for a  variety  of  operating  and  investment
companies  in the  hospitality  industry.  Until  October  2001,  Mr.  Arasi was
President & Chief Executive  Officer,  and a member of the Board of Directors of
Lodgian,  Inc., a New York Stock  Exchange  traded  company,  one of the largest
independent hotel  owner/operators in North America, with hotel properties under
most brand names  including  Marriott,  Courtyard by Marriott,  Fairfield Inn by
Marriott,  Crowne  Plaza,  Holiday Inn,  Hilton,  and  Radisson.  From June 1997
through  November 2000,  Mr. Arasi was a member of the Management  Committee and
held  several top  operating  positions  with Bass Hotels & Resorts,  one of the
leading international owners, operators and franchisors of hotels, most recently
serving as President, Bass Hotels & Resort--The Americas. Mr. Arasi was formerly
President of Tishman  Hotel  Corporation,  Vice  President of Salomon  Brothers,
Inc.,  in New York,  Tokyo and Los Angeles  and held  positions  with  Sheraton,
Westin and HVS  International.  Mr. Arasi  graduated from Cornell  University in
January  1981,  where he received a  Bachelor's  degree in Hotel and  Restaurant
Administration.

Section 16(a) Beneficial Ownership Reporting Compliance

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

         Based  solely on the  General  Partners'  review of the  copies of such
forms the  Partnership  has  received and written  representations  from certain
Reporting  Persons  that they  were not  required  to file  Forms 5 for the last
fiscal year, the General  Partners  believe that all Reporting  Persons complied
with all filing  requirements  applicable  to them with respect to  transactions
during fiscal 2003.

Code of Business Conduct

         The  Partnership  does not have  employees  and,  accordingly,  has not
adopted a code of business  conduct  applicable  exclusively to the Partnership.
However,  employees of the General Partners or their  affiliates,  including the
individual  General Partners,  are bound by the Code of Business Conduct adopted
November 11, 2003 by CNL Holdings, Inc. Separately, the employees of the Advisor
are bound by the similar  Code of  Business  Conduct  adopted by CNL  Restaurant
Properties,  Inc. Each of these codes of business conduct will be made available
to any person who writes the Partnership requesting a copy.

Audit Committee Financial Expert

         Due to its organization as a limited partnership,  the Partnership does
not  have  an  audit   committee  that  is  responsible   for   supervising  the
Partnership's  relationship with its independent auditors.  For the Partnership,
this role is performed by the General Partners. Based on his previous service as
the principal  financial officer of companies with businesses similar to that of
the  Partnership,  Robert  A.  Bourne,  one of the  General  Partners,  has  the
requisite  experience to be considered an "audit committee  financial expert" as
defined  in  the  rules  under  the  Securities  Exchange  Act of  1934,  if the
Partnership  had an audit  committee.  As a General  Partner,  Mr. Bourne is not
independent of the Partnership.


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 and
         Related Stockholder Matters

         As of March 12,  2004,  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 12, 2004,  the beneficial
ownership interests of the General Partners in the Registrant.

<TABLE>

                    Title of Class                      Name of Partner              Percent of Class

<S>     <C>    <C>    <C>    <C>    <C>    <C>

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

</TABLE>


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

         The Partnership does not have any equity compensation plans.


<PAGE>


Item 13. Certain Relationships and Related Transactions

         The  table  below   summarizes  the  types,   recipients,   methods  of
computation and amounts of compensation,  fees and distributions paid or payable
by the  Partnership  to the General  Partners and their  affiliates for the year
ended  December 31, 2003,  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>

                                                                                          Amount Incurred
      Type of Compensation                                                                 For the Year
         and Recipient                         Method of Computation                  Ended December 31, 2003
---------------------------------      --------------------------------------      ------------------------------
<S>     <C>    <C>    <C>    <C>    <C>    <C>


Reimbursement  to affiliates for       Operating  expenses are reimbursed at       Accounting and
operating expenses                     the  lower  of  cost  or  90%  of the       admini-strative services: $149,450
                                       prevailing  rate at which  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       $37,158
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>

                                                                                          Amount Incurred
      Type of Compensation                                                                 For the Year
         and Recipient                         Method of Computation                  Ended December 31, 2003
---------------------------------      --------------------------------------      ------------------------------
<S>     <C>    <C>    <C>    <C>    <C>    <C>


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

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

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


</TABLE>


<PAGE>

<TABLE>


                                                                                          Amount Incurred
      Type of Compensation                                                                 For the Year
         and Recipient                         Method of Computation                  Ended December 31, 2003
---------------------------------      --------------------------------------      ------------------------------
<S>     <C>    <C>    <C>    <C>    <C>    <C>


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

During 2001,  Phoenix  Restaurant  Group,  Inc. ("PRG") filed for bankruptcy and
rejected  two of the four  leases it had with the  Partnership.  In May and June
2002, the bankruptcy  court assigned the two leases not rejected by PRG relating
to the Properties in Branson,  Missouri and Temple, Texas to CherryDen,  LLC and
Seana,  LLC,  respectively.  CherryDen,  LLC  is an  affiliate  of  the  General
Partners.  All other lease terms remained the same. In connection with the lease
with CherryDen,  LLC the Partnership recognized rental revenues of approximately
$277,700 and $265,900  relating to the Property in Branson,  Missouri during the
years ended December 31, 2003 and 2002.


Item 14.  Principal Accountant Fees and Services

         The  following  table  outlines  the only fees paid or  accrued  by the
Partnership  for the audit  and other  services  provided  by the  Partnership's
independent  certified public accountants,  PricewaterhouseCoopers  LLP, for the
years ended December 31:

<TABLE>
                                                    2003                              2002
                                            ---------------------            -----------------------
<S>     <C>    <C>    <C>    <C>    <C>    <C>


Audit Fees (1)                                  $      17,632                      $      15,000
Tax Fees (2)                                            6,980                              6,868
                                            ---------------------            -----------------------
  Total                                         $      24,612                      $      21,868
                                            =====================            =======================
</TABLE>


  (1)  Audit services of PricewaterhouseCoopers  LLP for 2003 and 2002 consisted
       of the  examination of the financial  statements of the  Partnership  and
       quarterly review of financial statements.

  (2)  Tax Fees relates to tax consulting and compliance services.

         Each of the  non-audit  services  described  above was  approved by the
General  Partners.  Due  to  its  organization  as a  limited  partnership,  the
Partnership does not have an audit committee.




<PAGE>


                                     PART IV


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

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

          1.  Financial Statements

                  Report of Independent Certified Public Accountants

                  Balance Sheets at December 31, 2003 and 2002

                  Statements  of Income for the years ended  December  31, 2003,
                    2002, and 2001

                  Statements of Partners'  Capital for the years ended  December
                    31, 2003, 2002, and 2001

                  Statements  of Cash  Flows for the years  ended  December  31,
                    2003, 2002, and 2001

                  Notes to Financial Statements

         2.   Financial Statement Schedules

                  Schedule II - Valuation and Qualifying  Accounts for the years
                    ended December 31, 2003, 2002, and 2001

                  Schedule  III - Real Estate and  Accumulated  Depreciation  at
                    December 31, 2003

                  Notes  to  Schedule   III  -  Real   Estate  and   Accumulated
                    Depreciation at December 31, 2003

                  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.)

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

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

                  31.1     Certification of Chief Executive Officer of Corporate
                           General  Partner  Pursuant  to Rule 13a-14 as Adopted
                           Pursuant to Section 302 of the  Sarbanes-Oxley Act of
                           2002. (Filed herewith.)

                  31.2     Certification of Chief Financial Officer of Corporate
                           General  Partner  Pursuant  to Rule 13a-14 as Adopted
                           Pursuant to Section 302 of the  Sarbanes-Oxley Act of
                           2002. (Filed herewith.)

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

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

       (b)   The  Registrant  filed no  reports  on Form 8-K  during  the period
             October 1, 2003 through December 31, 2003.




<PAGE>




                                   SIGNATURES


         Pursuant to the  requirements  of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the  undersigned,  thereunto duly  authorized,  on the 23rd day of
March, 2004.


                                        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>

               Signature                                  Title                                  Date

<S>     <C>    <C>    <C>    <C>    <C>    <C>


/s/ Robert A. Bourne                     President,   Treasurer   and   Director            March 23, 2004
----------------------------
Robert A. Bourne                         (Principal   Financial  and  Accounting
                                         Officer)

/s/ James M. Seneff, Jr.                 Chief  Executive  Officer and  Director            March 23, 2004
----------------------------
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, 2003, 2002, and 2001


<TABLE>

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

<S>     <C>    <C>    <C>    <C>    <C>    <C>

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

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

  2003        Allowance for
                  doubtful
                  accounts (a)        $  76,505       $   17,482           $    -- (b)       $   -- (c)     $  6,228      $ 87,759
                                  ==============  ===============  ================    =============     ============  ============


             (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.

</TABLE>



<PAGE>

                            CNL INCOME FUND XVI, LTD.
                         (A Florida Limited Partnership)
             SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
                                December 31, 2003

<TABLE>

                                                              Costs Capitalized
                                                                Subsequent To                          Net Cost Basis at Which
                                             Initial Cost        Acquisition                       Carried at Close of Period (g)
                                           ----------------  ----------------------            ------------------------------------
                                  Encum-                  Buildings and  Improve-    Carrying               Buildings and
                                 brances       Land        Improvements   ments       Costs       Land      Improvements    Total
                              -----------  ------------  -----------  ------------- --------  -----------  -----------  ------------
<S>     <C>    <C>    <C>    <C>    <C>    <C>

Properties the Partnership
  has Invested in Under
  Operating Leases:

    Arby's Restaurant:
      Indianapolis, Indiana         -        $315,276     $591,993              -        -     $315,276     $591,993      $907,269

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

    Denny's Restaurants:
      Idaho Falls, Idaho            -         552,186            -        692,274        -      552,186      692,274     1,244,460
      Branson, Missouri (k)         -       1,160,979            -      1,010,688        -      951,757      801,464     1,753,221
      Dover, Ohio                   -         266,829            -              -        -      266,829           (d)      266,829
      Moab, Utah                    -         435,927            -              -        -      435,927           (d)      435,927
      Temple, Texas (l)             -         306,866      677,659              -        -      306,866      522,185       829,051

    Golden Corral Buffet and
      Grill Restaurants:
          Hickory, North Carolina   -         761,108            -      1,001,893        -      761,108    1,001,893     1,763,001
          Baytown, Texas            -         446,240            -        971,766        -      446,240      971,766     1,418,006
          Rosenburg, Texas          -         320,133            -        804,428        -      320,133      804,428     1,124,561
          Farmington, New Mexico    -         523,584            -        870,136        -      523,584      870,136     1,393,720

     IHOP Restaurant:
      Ft. Worth, Texas              -         364,634      554,302              -        -      364,634      554,302       918,936

    Jack in the Box Restaurants:
      Brownsville, Texas            -         553,671            -        658,282        -      553,671      658,282     1,211,953
      Grand Prairie, Texas          -         439,950            -        636,524        -      439,950      636,524     1,076,474
      Temple City, California       -         744,493      225,404              -        -      744,493      225,404       969,897
      Texas City, Texas             -         403,476      568,053              -        -      403,476      568,053       971,529

    KFC Restaurant:
      Concordia, Missouri           -         188,759            -        434,369        -      188,759      434,369       623,128

    Long John Silver's Restaurants:
      Copperas Cove, Texas          -         162,000            -              -        -      162,000           (d)      162,000
      Kansas City, Missouri         -         370,204            -        433,058        -      370,204      433,058       803,262
      Silver City, New Mexico       -         116,767      183,174              -        -      116,767      183,174       299,941

    Taco Cabana Restaurants:
      San Antonio, Texas (m)        -         442,286      705,618              -        -      442,286      705,618     1,147,904
      Austin, Texas (n)             -         546,099      860,648              -        -      546,098      860,647     1,406,745

    Wendy's Old Fashioned
      Hamburgers Restaurant:
         Washington, District of
            Columbia                -         393,963      567,625              -        -      393,963      567,625       961,588

    Other:
      Celina, Ohio (j)              -         109,130            -        158,888        -      109,130      158,888       268,018
      Charlotte, North Carolina     -         313,201            -        415,695        -      313,201      415,695       728,896
                                          ------------  -----------  ------------- --------  -----------  -----------  ------------

                                          $12,183,575   $4,934,476     $8,088,001        -   $11,974,352  $12,657,778  $24,632,130
                                          ===========  ===========  =============  ========  ===========  ===========  ============


Properties the Partnership has
    Invested in Under Direct
    Financing Leases:

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

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

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

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

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

</TABLE>

<PAGE>


                                  Life on Which
                                  Depreciation in
               Date               Latest Income
Accumulated   of Con-  Date       Statement is
Depreciation  structioAcquired      Computed
------------  ------- --------    ------------


   $165,172    1978    08/95          (c)


         (b)    -      12/94          (b)
         (b)    -      12/94          (b)
         (b)    -      12/94          (b)
         (b)    -      12/94          (b)
         (b)    -      12/94          (b)
         (b)    -      12/94          (b)


    196,589    1995    01/95          (c)
    252,217    1995    03/95          (c)
         (e)   1971    03/95          (e)
         (e)   1995    06/95          (e)
    173,100    1975    08/95          (c)



    300,659    1994    11/94          (c)
    283,113    1995    01/95          (c)
    225,986    1995    05/95          (c)
    226,141    1996    01/96          (c)


    144,565    1994    03/96          (c)


    196,814    1995    10/94          (c)
    186,291    1995    10/94          (c)
     68,896    1984    10/94          (c)
    173,633    1991    10/94          (c)


    117,860    1995    09/95          (c)


         (e)   1994    12/94          (e)
    126,784    1995    12/94          (c)
     49,267    1982    12/95          (c)


     49,001    1995    12/01          (c)
     45,427    1980    06/02          (c)




    171,120    1983    12/94          (c)


     36,453    1995    10/94          (i)
    120,440    1995    12/94          (c)
------------

 $3,309,528
============







         (f)   1995    05/95          (f)


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


         (f)   1976    12/94          (f)
         (e)   1994    12/94          (e)
<PAGE>


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

        NOTES TO SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION

                                December 31, 2003


(a)      Transactions in real estate and accumulated depreciation are summarized
         below.  The  balances  in 2003,  2002,  and 2001 have been  adjusted to
         reflect  the   reclassification   of   properties   accounted   for  as
         discontinued operations:

<TABLE>

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


            Properties the Partnership has Invested
              in Under Operating Leases:

                 Balance, December 31, 2000                                 $ 24,259,947        $  2,274,546
                 Acquisitions                                                  1,147,903                  --
                 Dispositions                                                 (1,369,847 )          (213,220 )
                 Provision for write-down of assets                             (812,619 )                --
                 Depreciation expense                                                 --             420,847
                                                                         ----------------   -----------------

                 Balance, December 31, 2001                                   23,225,384           2,482,173
                 Acquisitions                                                  1,406,746                  --
                 Depreciation expense                                                 --             407,704
                                                                         ----------------   -----------------

                 Balance, December 31, 2002                                   24,632,130           2,889,877
                 Depreciation expense                                                 --             419,651
                                                                         ----------------   -----------------

                 Balance, December 31, 2003                                 $ 24,632,130        $  3,309,528
                                                                         ================   =================
</TABLE>


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

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

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

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

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

(g)      As of December 31, 2003, the aggregate cost of the Partnership's wholly
         owned  Properties was $29,573,053 for federal income tax purposes.  All
         of the leases are treated as  operating  leases for federal  income tax
         purposes.

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



<PAGE>


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

        NOTES TO SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION

                                December 31, 2003


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

(j)      The undepreciated cost of the Property in Celina, Ohio was written down
         to net realizable value due to an anticipated  impairment in value. The
         Partnership  recognized  an  impairment  by  recording a provision  for
         write-down  of assets of  approximately  $266,300 at December 31, 1998.
         The tenant of this  Property  experienced  financial  difficulties  and
         ceased  payments of rents under the terms of its lease  agreement.  The
         provision   represented  the  difference  between  the  Property's  net
         carrying value and its estimated  fair value.  The cost of the Property
         presented on this  schedule is the net amount at which the Property was
         carried at December 31, 2003, including the provision for write-down of
         assets.

(k)      The  undepreciated  cost of the  Property  in  Branson,  Missouri,  was
         written down to net realizable value due to an impairment in value. The
         Partnership  recognized  the  impairment  by recording a provision  for
         write-down  of assets of  approximately  $418,400 at December 31, 2001.
         The provision  represented  the  difference  between the Property's net
         carrying value and its estimated  fair value.  The cost of the Property
         presented on this  schedule is the net amount at which the Property was
         carried at December 31, 2003, including the provision for write-down of
         assets.

(l)      The  undepreciated  cost of the Property in Temple,  Texas, was written
         down  to net  realizable  value  due to an  impairment  in  value.  The
         Partnership  recognized  the  impairment  by recording a provision  for
         write-down  of assets of  approximately  $155,500 at December 31, 2001.
         The provision  represented  the  difference  between the Property's net
         carrying value and its estimated  fair value.  The cost of the Property
         presented on this  schedule is the net amount at which the Property was
         carried at December 31, 2003, including the provision for write-down of
         assets.

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

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





<PAGE>



                                  EXHIBIT INDEX


Exhibit Number

     (a)      Exhibits

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

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

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

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

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

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

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

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

                 31.1       Certification   of  Chief   Executive   Officer   of
                            Corporate General Partner Pursuant to Rule 13a-14 as
                            Adopted    Pursuant    to   Section   302   of   the
                            Sarbanes-Oxley Act of 2002. (Filed herewith.)

                 31.2       Certification   of  Chief   Financial   Officer   of
                            Corporate General Partner Pursuant to Rule 13a-14 as
                            Adopted    Pursuant    to   Section   302   of   the
                            Sarbanes-Oxley Act of 2002. (Filed herewith.)

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

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




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                                 EXHIBIT 31.1


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                                  EXHIBIT 31.2


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                                  EXHIBIT 32.1



<PAGE>
                                  EXHIBIT 32.2