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, 2001

                                       OR

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

                        For the transition period from to

                         Commission file number 0-26218

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

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

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

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

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

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

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

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

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

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

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

         During the year ended December 31, 1996, the Partnership sold a
Property in Appleton, Wisconsin, and used the net sales proceeds to acquire a
Boston Market Property located in Fayetteville, North Carolina, with an
affiliate of the General Partners as tenants-in-common. During the year ended
December 31, 1997, the Partnership sold a Property in Oviedo, Florida, and
during 1998 the Partnership reinvested the net sales proceeds from the sale of
this Property in a Property in Memphis, Tennessee, as tenants-in-common, with
affiliates of the General Partners. In addition, during 1998, the Partnership
received a reimbursement from the developer of the Property in Farmington, New
Mexico upon final reconciliation of total construction costs. In August 1998,
the Partnership used these proceeds to enter into a joint venture arrangement,
Columbus Joint Venture, with affiliates of the General Partners, to construct
and hold one restaurant Property. During 1999, the Partnership sold a Property
in Lawrence, Kansas. During 2000, the Partnership reinvested the majority of
these net sales proceeds in TGIF Pittsburgh Joint Venture, with affiliates of
the General Partners, to purchase and hold one restaurant Property. In addition,
during 2000, the Partnership sold its Property in Columbia Heights, Minnesota.
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.

         As a result of the above transactions, as of December 31, 2001, the
Partnership owned 42 Properties. The 42 Properties include six Properties
consisting of land only, interests in two Properties owned through joint
ventures in which the Partnership is a co-venturer and three Properties owned
with affiliates of the General Partners as tenants-in-common. The lessee of the
six Properties consisting of only land owns the buildings currently on the land
and has the right, if not in default under the lease, to remove the buildings
from the land at the end of the lease terms. In general, the Partnership leases
the Properties on a triple-net basis with the lessees responsible for all
repairs and maintenance, property taxes, insurance and utilities.

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

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

Leases

         Although there are variations in the specific terms of the leases, the
following is a summarized description of the general structure of the
Partnership's leases. The leases of the Properties owned by the Partnership, the
Properties owned by joint ventures in which the Partnership is a co-venturer and
Properties owned as tenants-in-common with affiliates of the General Partners
provide for initial terms ranging from 4 to 20 years (the average being 18
years) and expire between 2003 and 2020. The leases are generally on a
triple-net basis, with the lessees responsible for all repairs and maintenance,
property taxes, insurance and utilities. The leases of the Properties provide
for minimum base annual rental payments (payable in monthly installments)
ranging from approximately $24,000 to $259,900. The majority of the leases
provide for percentage rent, based on sales in excess of a specified amount. In
addition, the majority of the leases provide that, commencing in specified lease
years (generally the sixth lease year), the annual base rent required under the
terms of the lease will increase.

         Generally, the leases of the Properties provide for two to five
five-year renewal options subject to the same terms and conditions as the
initial lease. Lessees of 33 of the Partnership's 42 Properties also have been
granted options to purchase Properties at the Property's then fair market value
after a specified portion of the lease term has elapsed. Fair market value will
be determined through an appraisal by an independent appraisal firm. Under the
terms of certain leases, the option purchase price may equal the Partnership's
original cost to purchase the Property (including acquisition costs), plus a
specified percentage from the date of the lease or a specified percentage of the
Partnership's purchase price, if that amount is greater than the Property's fair
market value at the time the purchase option is exercised.

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

         In August 1999, the lease 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
15, 2002, the Partnership has continued to receive the reduced rental payments
relating to these Properties. 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. 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.

         In addition, the tenant of the Property in Celina, Ohio exercised its
option to extend the lease for an additional two years beginning in March 2001.
All other lease terms remained unchanged and are substantially the same as the
Partnership's other leases as described above.

         In October 2001, Phoenix Restaurant Group, Inc. and its Subsidiaries
(collectively referred to as "PRG") a tenant of the Partnership, filed for
Chapter 11 bankruptcy protection, and rejected the leases relating to two of the
four properties it leased from the Partnership. While PRG has not rejected or
affirmed the remaining two leases, there can be no assurance that one or both of
these leases will not be rejected in the future. The Partnership has received
rental payments relating to the two Properties not rejected by the tenant from
the bankruptcy date through March 15, 2002. The lost revenues resulting from the
rejection of the two leases and the possible rejection of the two other leases
could have an adverse effect on the results of operations of the Partnership if
the Partnership is unable to re-lease the Properties in a timely manner. The
Partnership will not recognize any rental and earned income from the two vacant
properties until new tenants for the properties are located, or until the
properties are sold and the proceeds from such sales are reinvested in
additional properties.

Major Tenants

         During 2001, two lessees of the Partnership, (i) Golden Corral
Corporation and (ii) Jack in the Box Inc. and Jack in the Box Eastern Division,
LP. (affiliated under common control of Jack in the Box Inc., herein after
referred to as "Jack in the Box Inc."), each contributed more than ten percent
of the Partnership's total rental and earned income. As of December 31, 2001,
Golden Corral Corporation was the lessee under leases relating to six
restaurants and Jack in the Box Inc. was the lessee under leases relating to six
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 and earned income in 2002. In
addition, three Restaurant Chains, Golden Corral Family Steakhouse Restaurants
("Golden Corral"), Jack in the Box, and Denny's, each accounted for more than
ten percent of the Partnership's total rental and earned income during 2001. In
2002, it is anticipated that each of these Restaurant Chains will continue to
contribute more than ten percent of the Partnership's rental income to which the
Partnership is entitled under the terms of the leases. Any failure of these
lessees or Restaurant Chains could materially affect the Partnership's income if
the Partnership is not able to re-lease the Properties in a timely manner. As of
December 31, 2001, no single 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 two joint venture arrangements,
Columbus Joint Venture, with CNL Income Fund XII, Ltd. and CNL Income Fund
XVIII, Ltd., and TGIF Pittsburgh Joint Venture, with CNL Income Fund VII, Ltd.,
CNL Income Fund XV, Ltd., and CNL Income Fund XVIII, Ltd. Each joint venture 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 joint venture arrangements provide for the Partnership and its
joint venture partners to share in all costs and benefits associated in the
joint venture in proportion to each partner's percentage interest in the joint
venture. The Partnership has a 32.35% interest in Columbus Joint Venture and a
19.72% interest in TGIF Pittsburgh Joint Venture. The Partnership and its joint
venture partners are also jointly and severally liable for all debts,
obligations and other liabilities of the joint venture.

         Each joint venture 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.

         The Partnership shares management control equally with affiliates of
the General Partners for Columbus Joint Venture and TGIF Pittsburgh Joint
Venture. The joint venture agreements restrict each venturer's ability to sell,
transfer to assign its joint venture interest without first offering it for sale
to its joint venture partner, either upon such terms and conditions as to which
the venturers may agree or, in the event the venturers cannot agree, on the same
terms and conditions as any offer from a third party to purchase such joint
venture interest.

         Net cash flow from operations of Columbus Joint Venture and TGIF
Pittsburgh Joint Venture is distributed 32.35% and 19.72%, respectively, to the
Partnership and the balance is distributed to each of the other joint venture
partners in accordance with its respective percentage interest in 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.

         In addition to the above joint venture arrangements, the Partnership
has entered into an agreement to hold a Boston Market Property in Fayetteville,
North Carolina, as tenants-in-common, with CNL Income Fund XVII, Ltd., an
affiliate of the General Partners, and an IHOP Property in Memphis, Tennessee,
as tenants-in-common, with CNL Income Fund II, Ltd. and CNL Income Fund VI,
Ltd., each of which is an affiliate of the General Partners. The agreement
provides for the Partnership and the affiliate to share in the profits and
losses of the Property and net cash flow from the Properties, in proportion to
each party's percentage interest. The Partnership owns an 80.44% and a 40.42%
interest in the Property in Fayetteville, North Carolina and the Property in
Memphis, Tennessee, respectively.

         In June 2001, the Partnership entered into an agreement to hold a Jack
in the Box Property, as tenants-in-common, with CNL Income Fund VIII, Ltd., an
affiliate of the General Partners. The agreement provides for the Partnership
and the affiliates to share in the profits and losses of the Property and net
cash flow from the Property, in proportion to each party's percentage interest.
The Partnership owns an 83% interest in this Property.

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

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

Certain Management Services

         CNL APF Partners, LP, an affiliate of the General Partners, provides
certain services relating to management of the Partnership and its Properties
pursuant to a management agreement with the Partnership. Under this agreement,
CNL APF Partners, LP (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.

         During, 2000, CNL Fund Advisors, Inc. assigned its rights in, and its
obligations under, the management agreement with the Partnership to CNL APF
Partners, LP. All of the terms and conditions of the management agreement,
including the payment of fees, as described above, remain unchanged.

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

Competition

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

Employees

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


Item 2.  Properties

         As of December 31, 2001, the Partnership owned 42 Properties. Of the 42
Properties, 37 are owned by the Partnership in fee simple, two are owned through
joint venture arrangements and three are owned through tenancy in common
arrangements. See Item 1. Business - Joint Venture and Tenancy in Common
Arrangements. The Partnership is not permitted to encumber its Properties under
the terms of its partnership agreement. Reference is made to the Schedule of
Real Estate and Accumulated Depreciation for a listing of the Properties and
their respective costs, including acquisition fees and certain acquisition
expenses.

Description of Properties

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

         The following table lists the Properties owned by the Partnership as of
December 31, 2001 by state. More detailed information regarding the location of
the Properties is contained in the Schedule of Real Estate and Accumulated
Depreciation.


                     State                          Number of Properties
                     -----                          --------------------

                     California                               2
                     Colorado                                 1
                     Washington, D.C.                         1
                     Florida                                  5
                     Georgia                                  1
                     Idaho                                    1
                     Indiana                                  2
                     Kansas                                   1
                     Louisiana                                1
                     Missouri                                 4
                     New Mexico                               3
                     North Carolina                           3
                     Ohio                                     4
                     Pennsylvania                             1
                     Tennessee                                1
                     Texas                                    10
                     Utah                                     1
                                                       -----------------

                     TOTAL PROPERTIES                         42
                                                       =================

         Buildings. Each of the Properties owned by the Partnership includes a
building that is one of a Restaurant Chain's approved designs. However, the
buildings located on the six Checkers Properties are owned by the tenant while
the land parcels are owned by the Partnership. The buildings generally are
rectangular and are constructed from various combinations of stucco, steel,
wood, brick and tile. The sizes of the buildings owned by the Partnership range
from approximately 2,000 to 11,100 square feet. All buildings on Properties are
freestanding and surrounded by paved parking areas. Buildings are suitable for
conversion to various uses, although modifications may be required prior to use
for other than restaurant operations. As of December 31, 2001, the Partnership
had no plans for renovation of the Properties. Depreciation expense is computed
for buildings and improvements using the straight line method using a
depreciable life of 40 years for federal income tax purposes.

         As of December 31, 2001, 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 $34,095,784 and
$7,275,243, respectively.

         The following table lists the Properties owned by the Partnership as of
December 31, 2001 by Restaurant Chain.

            Restaurant Chain                            Number of Properties
            ----------------                            --------------------

            Arby's                                               2
            Boston Market                                        2
            Checkers                                             6
            Denny's                                              8
            Golden Corral                                        6
            IHOP                                                 2
            Jack in the Box                                      6
            Japan Express                                        1
            KFC                                                  1
            Long John Silver's                                   4
            T.G.I. Friday's                                      1
            Taco Cabana                                          1
            Wendy's                                              1
            Other                                                1
                                                        ---------------------

            TOTAL PROPERTIES                                     42
                                                        =====================

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

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

         Leases. The Partnership leases the Properties to operators of selected
national and regional fast-food restaurant chains. The leases are generally on a
long-term "triple net" basis, meaning that the tenant is responsible for
repairs, maintenance, property taxes, utilities and insurance. Generally, a
lessee is required, under the terms of its lease agreement, to make such capital
expenditures as may be reasonably necessary to refurbish buildings, premises,
signs and equipment so as to comply with the lessee's obligations, if
applicable, under the franchise agreement to reflect the current commercial
image of its Restaurant Chain. These capital expenditures are required to be
paid by the lessee during the term of the lease. The terms of the leases of the
Properties owned by the Partnership are described in Item 1. Business - Leases.

         At December 31, 2001, 2000, 1999, 1998 and 1997, the properties were
93%, 98%, 95%, 89%, and 100%, occupied, respectively. The following is a
schedule of the average rent per property for each of the years ended December
31:
<TABLE>
<CAPTION>

 <c>
                                       2001              2000              1999             1998              1997
                                   --------------    -------------     -------------    -------------     -------------

Rental Revenues (1)(2)               $ 3,398,196      $ 3,730,031       $ 4,033,287      $ 4,244,356       $ 4,392,092
Properties (2)                                39               42                43               44                42
Average Rent per Property              $  87,133        $  88,810         $  93,797        $  96,463         $ 104,574
</TABLE>

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

(2)      Excludes Properties that were vacant at December 31, and did not
         generate rental revenues during the year ended December 31.
(3)
         The following is a schedule of lease expirations for leases in place as
of December 31, 2001 for the next ten years and thereafter.

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

   2002                        --               $   --                --
   2003                         1               23,722             0.62%
   2004                        --                   --                --
   2005                        --                   --                --
   2006                        --                   --                --
   2007                        --                   --                --
   2008                        --                   --                --
   2009                         3              441,319            11.61%
   2010                         4              498,615            13.11%
   2011                         5              524,537            13.79%
   Thereafter                  26            2,314,270            60.87%
                        ----------        -------------     -------------
   Total (1)                   39          $ 3,802,463           100.00%
                        ==========        =============     =============

(1)      Excludes three Properties that were vacant at December 31, 2001.

         Leases with Major Tenants. The terms of each of the leases with the
Partnership's major tenants as of December 31, 2001 (see Item 1. Business -
Major Tenants), are substantially the same as those described in Item 1.
Business - Leases.

         Golden Corral Corporation leases six Golden Corral restaurants. The
initial term of each lease is 15 years (expiring between 2009 and 2011) and the
average minimum base annual rent is approximately $155,400 (ranging from
approximately $113,300 to $192,900).

         Jack in the Box Inc. leases six Jack in the Box restaurants. The
initial term of each lease is 18 years (expiring between 2011 and 2019) and the
average minimum base annual rent is approximately $111,400 (ranging from
approximately $96,300 to $136,500).


Item 3.  Legal Proceedings

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


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

         Not applicable.




<PAGE>


                                     PART II


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

(a) As of March 15, 2002, there were 3,025 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 2001, 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, 2001, 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 2001 and 2000 other than
pursuant to the Plan, net of commissions.
<TABLE>
<CAPTION>

 <c>
                                2001 (1)                                 2000 (1)
                   ------------------------------------    -------------------------------------
                     High         Low        Average         High          Low        Average
                   ---------    --------    -----------    ---------     --------    -----------

 First Quarter        $9.51      $ 5.97        $  7.81          (2)          (2)            (2)
 Second Quarter        6.78        6.20           6.43        $9.30       $ 6.47         $ 8.12
 Third Quarter         6.70        6.70           6.70         7.51         5.55           7.22
 Fourth Quarter        6.88        5.60           6.54         7.16         5.55           6.84
</TABLE>

(1)      A total of 31,096 and 41,725 Units were transferred other than pursuant
         to the Plan for the years ended December 31, 2001 and 2000.

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

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

         For each of the years ended December 31, 2001 and 2000, 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, 2001 and
2000, are required to be or have been treated by the Partnership as a return of
capital for purposes of calculating the Limited Partners' return on their
adjusted capital contributions. No distributions have been made to the General
Partners to date. Distributions of $900,000 were declared at the close of each
of the Partnership's calendar quarters. This amount includes monthly
distributions made in arrears for the Limited Partners electing to receive such
distributions on this basis.

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

(b)      Not applicable




<PAGE>


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

 <c>

                                       2001               2000              1999              1998               1997
                                   --------------    ---------------   ---------------    --------------    ---------------
Year ended December 31:
    Revenues (1)                      $3,325,718         $3,886,239        $4,059,810        $4,278,124         $4,455,994
    Net income (2)                       139,868          1,945,812         2,815,008         2,976,998          3,660,327
    Cash distributions
      declared (3)                     3,600,000          3,600,000         3,600,000         3,690,000          3,600,000
    Net income per Unit (2)                 0.03               0.43              0.62              0.65               0.81
    Cash distributions
      declared per Unit (3)                 0.80               0.80              0.80              0.82               0.80

At December 31:
    Total assets                     $34,305,402        $37,936,084       $39,710,973       $40,188,641        $40,938,320
    Partners' capital                 33,292,612         36,752,744        38,406,932        39,191,924         39,904,926
</TABLE>

(1)      Revenues include equity in earnings of joint ventures.

(2)      Net income for the years ended December 31, 2001 and 2000, includes
         $383,637 and $88,661, respectively, from gain on sale of assets. Net
         income for the years ended December 31, 2001, 2000 and 1998 includes
         $2,290,553, $962,971 and $450,625, respectively, for provision for
         write-down of assets. Net income for the year ended December 31, 1999,
         includes $84,478 from loss on sale of assets.

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

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


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

         The Partnership was organized on September 2, 1993, to acquire for
cash, either directly or through joint venture arrangements, both newly
constructed and existing restaurant Properties, as well as land upon which
restaurant Properties were to be constructed, to be leased primarily to
operators of selected national and regional fast-food and family-style
Restaurant Chains. The leases are generally triple-net leases, with the lessees
generally responsible for all repairs and maintenance, property taxes, insurance
and utilities. As of December 31, 2001, the Partnership owned 42 Properties,
either directly or indirectly through joint venture or tenancy in common
arrangements.

Capital Resources

         Currently, the Partnership's primary source of capital is cash from
operations (which includes cash received from tenants, distributions from the
joint venture and interest received, less cash paid for expenses). Cash from
operations was $2,723,368, $3,165,697, and $3,151,231, for the years ended
December 31, 2001, 2000, and 1999, respectively. The decrease in cash from
operations during 2001, as compared to 2000, and the increase in cash from
operations during 2000, as compared to 1999, was primarily a result of changes
in the Partnership's working capital and changes in income and expenses as
described in "Results of Operations," below.

         Other sources and uses of capital included the following during the
years ended December 31, 2001, 2000 and 1999.

         During the year ended December 31, 1999, the Partnership accepted a
promissory note from the former tenant of the Shoney's Property in Las Vegas,
Nevada, in the amount of $52,191, representing past due rental and other
amounts. The note represents receivables for which the Partnership had
established an allowance for doubtful accounts, and real estate taxes previously
recorded as an expense by the Partnership. Payments are due in 60 monthly
installments of $1,220 including interest at a rate of ten percent per annum,
which were scheduled to commence on March 1, 2000, at which time the accrued and
unpaid interest of $5,219 was capitalized into the principal balance of the
note. Due to the uncertainty of the collectibility of the note, the Partnership
established an allowance for doubtful accounts and is recognizing income as
collected. As of December 31, 2001 and 2000, the balance in the allowance for
doubtful accounts relating to this promissory note was $63,954 and $62,751,
respectively, including accrued interest of $6,117 and $4,914, respectively. The
Partnership has ceased collection efforts on the remaining past due receivables
not converted into the promissory note.

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

         In November 1999, the Partnership sold its Property in Lawrence,
Kansas, to a third party for $690,000 and received net sales proceeds of
$667,311. As a result of this transaction, the Partnership recognized a loss of
$84,478. In June 2000, the Partnership used the majority of these net sales
proceeds to invest in a joint venture arrangement, TGIF Pittsburgh Joint
Venture, with CNL Income Fund VII, Ltd., CNL Income Fund XV, Ltd., and CNL
Income Fund XVIII, Ltd., each a Florida limited partnership and an affiliate of
the General Partners, to purchase and hold one restaurant Property. As of
December 31, 2001, the Partnership owned a 19.72% interest in the profits and
losses of the joint venture.

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

         In March 2001, the Partnership sold its Property in Marana, Arizona, to
an unrelated third party for a total of approximately $1,151,000 and received
net sales proceeds totaling approximately $1,145,000, resulting in a gain of
approximately $281,100. In June 2001, the Partnership reinvested the net sales
proceeds in an additional 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. As of December 31, 2001, the Partnership had
contributed approximately $1,134,100 for an 83% interest in the profits and
losses of the Property. The General Partners believe that this transaction, or a
portion thereof, relating to the sale of this Property and the reinvestment of
the net sales proceeds will qualify as a like-kind transaction for federal
income tax purposes. However, the Partnership will distribute amounts sufficient
to enable the Limited Partners to pay federal and state income taxes, if any (at
a level reasonably assumed by the General Partners), resulting from the sale.

         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.

         In November 2001, the Partnership sold its Property in St. Cloud,
Minnesota to an unrelated third party for approximately $664,500 and received
net sales proceeds of approximately $647,400, resulting in a gain on sale of
assets of $100,672. The Partnership will distribute amounts sufficient to enable
the Limited Partners to pay federal and state income taxes, if any (at a level
reasonably assumed by the General Partners), resulting from the sale.

         In December 2001, the Partnership sold its Property in Las Vegas,
Nevada to an unrelated third party for approximately $1,094,000 and received net
sales proceeds of approximately $1,059,300, resulting in a gain on sale of
assets of $1,902. In December 2001, the Partnership reinvested these net sales
proceeds in a property in San Antonio, Texas at an approximate cost of
$1,147,900. The Partnership acquired this property 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 Property in
order to facilitate the acquisition of the Property by the Partnership. The
purchase price paid by the Partnership represented the costs incurred by CNL
Funding 2001-A, LP to acquire and carry the Property, including closing costs.

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

         Currently, rental income from the Partnership's Properties and net
sales proceeds from the sale of Properties are invested in money market accounts
or other short-term, highly liquid investments such as demand deposit accounts
at commercial banks, money market accounts and certificates of deposit with less
than a 90-day maturity date, pending the Partnership's use of such funds to
reinvest in additional Properties, to pay Partnership expenses, or to make
distributions to partners. At December 31, 2001, the Partnership had $774,673
invested in such short-term investments as compared to $1,081,650 at December
31, 2000. As of December 31, 2001, the average interest rate earned on the
rental income deposited in demand deposit accounts at commercial banks was
approximately 2.5% annually. The funds remaining at December 31, 2001, will be
used toward the payment of distributions and other liabilities.

Short-Term Liquidity

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

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

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

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

         The Partnership generally distributes cash from operations remaining
after the payment of the operating expenses of the Partnership, to the extent
that the General Partners determine that such funds are available for
distribution. Based on current and anticipated future cash from operations, and
for the year ended December 31, 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, 2001, 2000, and 1999. This represents
distributions of $0.80 per Unit for each of the years ended December 31, 2001,
2000, and 1999. No distributions were made to the General Partners during the
years ended December 31, 2001, 2000, and 1999. No amounts distributed to the
Limited Partners for the years ended December 31, 2001, 2000, and 1999, are
required to be or have been treated by the Partnership as a return of capital
for purposes of calculating the Limited Partners' return on their adjusted
capital contributions. The Partnership intends to continue to make distributions
of cash available for distribution to Limited Partners on a quarterly basis.

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

         As of December 31, 2001 and 2000, the Partnership owed $17,331 and
$152,957, respectively, to related parties for such amounts as accounting and
administrative services and management fees. As of March 15, 2002, the
Partnership had reimbursed the affiliates all such amounts. Other liabilities,
including distributions payable, decreased to $995,459 at December 31, 2001,
from $1,030,383 at December 31, 2000. Liabilities at December 31, 2001, to the
extent they exceed cash and cash equivalents at December 31, 2001, will be paid
from anticipated future cash from operations.

Long-Term Liquidity

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

Critical Accounting Policies

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

         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 it Properties and investments in unconsolidated
entities periodically (no less than once per year) for impairment whenever
events or changes in circumstances indicate that the carrying amount of the
assets may not be recoverable through operations. Management determines whether
impairment in value has occurred by comparing the estimated future undiscounted
cash flows, including the residual value of the Property, with the carrying cost
of the individual Property. If an impairment is indicated, the assets are
adjusted to their fair value.

Results of Operations

         During 1999, the Partnership owned and leased 41 wholly owned
Properties (including one Property which was sold in November 1999), during
2000, the Partnership owned and leased 40 wholly owned Properties (including one
Property which was sold in September 2000) and during 2001, the Partnership
owned and leased 40 wholly owned Properties (including three Properties which
were sold during 2001). In addition, during 1999, the Partnership was a
co-venturer in a joint venture arrangement that owned and leased one Property,
and during 2001, and 2000, the Partnership was a co-venturer in an additional
joint venture arrangement that owned and leased one Property. In addition,
during 2001, 2000, and 1999, the Partnership owned and leased two Properties
with affiliates of the General Partners, as tenants-in-common. In addition,
during 2001, the Partnership owned and leased one additional Property with an
affiliate, as tenants-in-common. As of December 31, 2001, the Partnership owned,
either directly, as tenants-in-common or through a joint venture arrangement, 42
Properties which are generally subject to long-term, triple-net leases that
provide for minimum base annual rental amounts (payable in monthly installments)
ranging from approximately $24,000 to $259,900. The majority of the leases
provide for percentage rent based on sales in excess of a specified amount. In
addition, the majority of the leases provide that, commencing in specified lease
years (generally the sixth lease year), the annual base rent required under the
terms of the lease will increase. For a further description of the Partnership's
leases and Properties, see Item 1. Business - Leases and Item 2. Properties,
respectively.

         During the years ended December 31, 2001, 2000, and 1999, the
Partnership earned $2,999,582, $3,654,260, and $3,839,624, respectively, in
rental income from operating leases, earned income from direct financing leases
and contingent rental income from Properties wholly owned by the Partnership.
Rental and earned income remained at reduced amounts during 2001 and 2000, due
to the fact that PRG, the tenant of five of the Partnership's Properties,
experienced financial difficulties during 2000. In January 2001, PRG terminated
the lease relating to the Bucyrus, Ohio Property. As a result, at December 31,
2000, the Partnership reclassified the asset from net investment in direct
financing leases to land and buildings on operating leases. In accordance with
Statement of Financial Accounting Standards No. 13, "Accounting for Leases," the
Partnership recorded the reclassified asset at the lower of original cost,
present fair value, or present carrying amount, which resulted in a loss on
termination of direct financing lease of $31,215 during the year ended December
31, 2000. In October 2001, PRG filed for bankruptcy and rejected two of the
remaining four leases it had with the Partnership. As a result, the Partnership
stopped recording rental revenue relating to these two Properties. The
Partnership will not recognize any rental and earned income from these vacant
Properties until the Properties are re-leased or the Properties are sold and the
proceeds are reinvested in additional Properties. While PRG has not rejected or
affirmed the remaining two leases, there can be no assurance that one or both of
these leases will not be rejected in the future. The Partnership has received
rental payments relating to the two Properties not rejected by the tenant from
the bankruptcy date through March 15, 2002. The lost revenues resulting from the
rejection of the two leases and the possible rejection of the two other leases
could have an adverse effect on the results of operations of the Partnership if
the Partnership is unable to re-lease the Properties in a timely manner. The
General Partners are currently seeking replacement tenants or purchasers for the
two vacant Properties.

         In addition, rental and earned income decreased during 2001, as
compared to 2000, due to the fact that in March 2001, the tenant of the Property
in Las Vegas, Nevada vacated the Property and ceased restaurant operations. As a
result, during 2001, the Partnership stopped recording rental revenue relating
to this Property. In December 2001, the Partnership sold this Property and
reinvested the majority of the net sales proceeds in an additional Property in
San Antonio, Texas, as described above in "Capital Resources."

         In addition, rental and earned income decreased during 2001, as
compared to 2000, as a result of the sale of the Partnership's Property in
Marana, Arizona, as described in "Capital Resources." Rental and earned income
are expected to remain at reduced amounts while equity in earnings of joint
ventures is expected to increase due to the fact that the Partnership reinvested
these net sales proceeds in a Property with an affiliate of the General
Partners, as tenants-in-common, as described above in "Capital Resources."

         The decrease in rental and earned income during 2001, was partially
offset by an increase of approximately $81,500 during 2001 in contingent rental
income as a result of an increase in the gross sales of certain restaurant
properties, the leases of which require the payment of contingent rental income.

         The decrease in rental and earned rental income in 2001 and 2000, each
as compared to the previous year, is partially attributable to the fact that in
1998 three tenants filed for bankruptcy and between 1998 and 2000 rejected the
leases relating to a total of five of the seven Properties leased by these
tenants. As a result, these tenants ceased making rental payments on the five
rejected leases. The Partnership has continued receiving rental payments
relating to the two leases not rejected by the tenants. In March 1999, the
Partnership entered into a new lease with a new tenant for another one of the
vacant Properties; rental payments commenced in April 1999. In November 1999,
the Partnership entered into a new lease with a new tenant for one of the vacant
Properties; rental payments commenced in the first quarter of 2000, thereby
partially offsetting the decrease in rental and earned income. In addition,
between November 1999 and November 2001, the Partnership sold three of the
vacant Properties. In June 2000, the Partnership reinvested the majority of the
net sales proceeds from the 1999 sale in TGIF Pittsburgh Joint Venture, as
described in "Capital Resources." Rental and earned income were higher during
2000, as compared to 2001, due to the fact that during 2000, the Partnership
collected and recognized as income past due rental amounts received from Long
John Silver's, Inc., which filed for bankruptcy during 1998 and rejected the
leases relating to two of the three Properties it leased. No such amounts were
collected in 2001 or 1999. In August 1999 and June 2000, Long John Silver's,
Inc. and Boston Chicken, Inc. each assumed and affirmed its one remaining lease,
and the Partnership has continued receiving rental payments relating to these
leases.

         In addition, for the years ended December 31, 2001, 2000, and 1999, the
Partnership earned $250,885, $180,084, and $158,580, respectively, attributable
to net income earned by joint ventures. The increase in net income earned by
joint ventures during 2001, as compared to 2000, was partially attributable to
the fact that in June 2001, the Partnership reinvested the net sales proceeds
from the sale of the Property in Marana, Arizona in an additional Property in
Walker, Louisiana, with an affiliate of the General Partners, as described in
"Capital Resources." In addition, the increase in net income earned by joint
ventures during 2001 and 2000, each as compared to the previous year, was
primarily attributable to the fact that in June 2000, the Partnership reinvested
the net sales proceeds it received from the 1999 sale of the Property in
Lawrence, Kansas in TGIF Pittsburgh Joint Venture with affiliates of the General
Partners as described in "Capital Resources."

         During 2001, two lessees of the Partnership, Golden Corral Corporation
and Jack in the Box Inc., each contributed more than ten percent of the
Partnership's total rental and earned income. As of December 31, 2001, Golden
Corral Corporation was the lessee under leases relating to six restaurants and
Jack in the Box Inc. was the lessee under leases relating to six restaurants. It
is anticipated that based on the minimum rental payments required by the leases
that these two tenants will each continue to contribute more than ten percent of
the Partnership's total rental and earned income in 2002. In addition, three
Restaurant Chains, Golden Corral, Jack in the Box, and Denny's, each accounted
for more than ten percent of the Partnership's total rental and earned income
during 2001. In 2002, it is anticipated that each of these Restaurant Chains
will continue to contribute more than ten percent of the Partnership's rental
income to which the Partnership is entitled under the terms of the leases. Any
failure of these lessees or Restaurant Chains could materially affect the
Partnership's income if the Partnership is not able to re-lease the Properties
in a timely manner.

         Operating expenses, including depreciation and amortization expense and
provision for write-down of assets were $3,569,487, $2,029,088, and $1,160,324,
for the years ended December 31, 2001, 2000, and 1999, respectively. The
increase in operating expenses during 2001 and 2000, each as compared to the
previous year, was partially due to the fact that the Partnership recorded a
provision for write-down of assets of $2,290,553 and $962,971 during 2001 and
2000, respectively, relating to the vacant Properties, as described above. The
provisions represented the difference between each Property's carrying value,
including the accumulated accrued rental income balance, and the General
Partners' estimated net realizable value for the Property. As of December 31,
2001, the Partnership has five remaining vacant Properties and is seeking
replacement tenants or purchasers for these Properties.

         The increase in operating expenses during 2001 and 2000, each as
compared to the previous year, was also partially due to the fact that the
Partnership incurred certain expenses, such as legal fees, real estate taxes,
insurance, and maintenance relating to the Properties leased by PRG, a Shoney's
Property, two Boston Market Properties and two Long John Silver's Properties
which became vacant during 1998, due to financial difficulties or bankruptcies,
as described above. The Partnership entered into new leases with new tenants for
the Shoney's Property in Las Vegas, Nevada and the Long John Silver's Properties
in Celina, Ohio and Charlotte, North Carolina in February, March and November
1999, respectively. The new tenants are responsible for real estate taxes,
insurance, and maintenance relating to these three Properties. In March 2001,
the tenant of the Property in Las Vegas, Nevada vacated the Property and ceased
restaurant operations. In December 2001, the Partnership sold this Property, as
described above in "Capital Resources." In addition, in November 1999, September
2000, and November 2001, the Partnership sold the Boston Market Properties in
Lawrence, Kansas, Columbia Heights, Minnesota, and St. Cloud, Minnesota,
respectively. The General Partners do not anticipate that the Partnership will
incur these expenses in the future for the two Properties that have been
re-leased to new tenants or the four Properties that have been sold. The General
Partners anticipate that the Partnership will continue to incur these expenses
related to the five remaining vacant Properties until such time as the
Partnership executes new leases for these Properties or until the Partnership
sells the Properties and the sales proceeds are reinvested in additional
Properties. The General Partners are currently seeking either new tenants or
purchasers for these vacant Properties.

         The increase in operating expenses during 2001, as compared to 2000,
was partially attributable to the fact that during 2001, the Partnership
recorded a provision for doubtful accounts of $90,074 relating to the Properties
leased to PRG, which filed for bankruptcy, as described above. The General
Partners will continue to pursue collection of these past due amounts relating
to these Properties. During 2000, the Partnership recorded a provision for
doubtful accounts of $33,532 relating to the Property in Las Vegas, Nevada, in
accordance with the Partnership's policy. In March 2001, the tenant vacated the
Property and in December 2001, the Partnership sold the Property, as described
above. The increase in operating expenses during 2001 was also partially
attributable to an increase in the costs incurred for administrative expenses
for servicing the Partnership and its Properties, as permitted by the
Partnership agreement.

         The increase in operating expenses during 2001 and 2000, each as
compared to the previous year, was partially offset by the fact that during 2000
and 1999, the Partnership incurred $32,580 and $212,093, respectively, in
transaction costs relating to the General Partners retaining financial and legal
advisors to assist them in evaluating and negotiating the proposed merger with
APF. On March 1, 2000, the General Partners and APF mutually agreed to terminate
the merger. No such expenses were incurred during 2001. The increase in
operating expenses during 2001 was partially offset by a decrease in
depreciation expense as a result of the sale of four Properties during 2000 and
2001, as described above in "Capital Resources." In January 2001, the tenant of
the Property in Bucyrus, Ohio terminated its lease due to financial difficulties
the tenant was experiencing. As a result, at December 31, 2000, the Partnership
reclassified the asset from net investment in direct financing leases to land
and buildings on operating leases. In accordance with Statement of Financial
Accounting Standards No. 13, "Accounting for Leases," the Partnership recorded
the reclassified asset at the lower of original cost, present fair value, or
present carrying amount, which resulted in a loss on termination of direct
financing lease of $31,215 during the year ended December 31, 2000. No such loss
was recorded in 2001 or 1999.

         As a result of the 2001 sales of the Properties in Marana, Arizona, Las
Vegas, Nevada, and St. Cloud, Minnesota, and the 2000 sale of the Property in
Columbia Heights, Minnesota, as described above in "Capital Resources," the
Partnership recognized gains totaling of $383,637 and $88,661, during 2001 and
2000, respectively. As a result of the sale of the Property in Lawrence, Kansas,
as described above in "Capital Resources," the Partnership recognized a loss of
$84,478 during the year ended December 31, 1999.

         The restaurant industry, as a whole, has been one of the many
industries affected by the general slowdown in the economy. While the
Partnership has experienced some losses due to the financial difficulties of a
limited number of restaurant operators, the General Partners remain confident in
the overall performance of the fast-food and family style restaurants, the
concepts that comprise the majority of the Partnership's portfolio. Industry
data shows that these restaurant concepts continue to outperform and remain more
stable than higher-end restaurants, which have been more adversely affected by
the slowing economy.

         The Partnership's leases as of December 31, 2001, 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 December 1999, the Securities and Exchange Commission released SAB
101, which provides the staff's view in applying generally accepted accounting
principles to selected revenue recognition issues. SAB 101 requires the
Partnership to defer recognition of certain percentage rental income until
certain defined thresholds are met. The Partnership adopted SAB 101 beginning
January 1, 2000. Implementation of SAB 101 did not have a material impact on the
Partnership's results of operations.

         In July 2001, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 141 "Business Combinations" (FAS 141) and
Statement of Financial Accounting Standards No. 142 "Goodwill and Other
Intangible Assets" (FAS 142). The Partnership has reviewed both statements and
has determined that both FAS 141 and FAS 142 do not apply to the Partnership as
of December 31, 2001.

         In October 2001, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 144 "Accounting for the
Impairment or Disposal of Long-Lived Assets" (FAS 144). 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 adoption of FAS 144 did not have any
effect on the partnership's recording of impairment losses as this Statement
retained the fundamental provisions of FAS No. 121 "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of".

Termination of Merger

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


Item 7A.  Quantitative and Qualitative Disclosures About Market Risk

         Not applicable.


Item 8.  Financial Statements and Supplementary Data




<PAGE>


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

                                    CONTENTS








                                                                         Page
                                                                         ----

Report of Independent Certified Public Accountants                        18

Financial Statements:

     Balance Sheets                                                       19

     Statements of Income                                                 20

     Statements of Partners' Capital                                      21

     Statements of Cash Flows                                          22-24

     Notes to Financial Statements                                     25-41










<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, 2001 and 2000, and the results of its operations
and its cash flows for each of the three years in the period ended December 31,
2000 in conformity with accounting principles generally accepted in the United
States of America. In addition, in our opinion, the financial statement
schedules listed in the index appearing under item 14(a)(2) present fairly, in
all material respects, the information set forth therein when read in
conjunction with the related financial statements. These financial statements
and financial statement schedules are the responsibility of the Partnership's
management; our responsibility is to express an opinion on these financial
statements and financial statement schedules based on our audits. We conducted
our audits of these statements in accordance with auditing standards generally
accepted in the United States of America, which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.




/s/ PricewaterhouseCoopers LLP

Orlando, Florida
February 8, 2002



<PAGE>


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

                                 BALANCE SHEETS

<TABLE>
<CAPTION>

 <c>
                                                                           December 31,
                                                                   2001                    2000
                                                            -------------------     -------------------

                         ASSETS

Land and buildings on operating leases, net                        $26,023,831             $28,488,803
Net investment in direct financing leases                            2,713,964               3,887,824
Investment in joint ventures                                         3,248,973               2,143,328
Cash and cash equivalents                                              774,673               1,081,650
Receivables, less allowance for doubtful
     accounts of $755,431 and $429,262,
     respectively                                                       61,512                 440,739
Accrued rental income, less allowance for
     doubtful accounts of $48,919 in 2001 and
     2000                                                            1,450,352               1,859,347
Other assets                                                            32,097                  34,393
                                                            -------------------     -------------------

                                                                   $34,305,402            $ 37,936,084
                                                            ===================     ===================

            LIABILITIES AND PARTNERS' CAPITAL

Accounts payable                                                     $   9,022              $   30,429
Accrued and escrowed real estate taxes
     payable                                                            36,398                  13,359
Distributions payable                                                  900,000                 900,000
Due to related parties                                                  17,331                 152,957
Rents paid in advance and deposits                                      50,039                  86,595
                                                            -------------------
                                                                                    -------------------
         Total liabilities                                           1,012,790               1,183,340

Partners' capital                                                   33,292,612              36,752,744
                                                            -------------------     -------------------

                                                                   $34,305,402             $37,936,084
                                                            ===================     ===================


                See accompanying notes to financial statements.
<PAGE>


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

                              STATEMENTS OF INCOME


                                                                                 Year Ended December 31,
                                                                        2001               2000               1999
                                                                   ----------------   ----------------   ---------------

Revenues:
     Rental income from operating leases                               $ 2,733,412        $ 3,171,534       $ 3,281,281
     Earned income from direct financing leases                            266,170            482,726           558,343
     Interest income                                                        34,797             45,310            49,008
     Other income                                                           40,454              6,585            12,598
                                                                   ----------------   ----------------   ---------------
                                                                         3,074,833          3,706,155         3,901,230
                                                                   ----------------   ----------------   ---------------
Expenses:
     General operating and administrative                                  340,748            187,861           183,150
     Provision for doubtful accounts                                        90,074             33,532                --
     Professional services                                                 110,378             80,343            53,282
     Management fees to related parties                                     30,726             36,605            37,385
     Real estate taxes                                                     123,675             50,966            59,895
     State and other taxes                                                  30,716             27,356            25,599
     Loss on termination of direct financing lease                              --             31,215                --
     Depreciation and amortization                                         552,617            585,659           588,920
     Provision for write-down of assets                                  2,290,553            962,971                --
     Transaction costs                                                          --             32,580           212,093
                                                                   ----------------   ----------------   ---------------
                                                                         3,569,487          2,029,088         1,160,324
                                                                   ----------------   ----------------   ---------------
Income (Loss) Before Gain (Loss) on Sale of Assets and
     Equity in Earnings of Joint Ventures                                 (494,654  )       1,677,067         2,740,906

Gain (Loss) on Sale of Assets                                              383,637             88,661           (84,478  )

Equity in Earnings of Joint Ventures                                       250,885            180,084           158,580
                                                                   ----------------   ----------------   ---------------

Net Income                                                              $  139,868        $ 1,945,812       $ 2,815,008
                                                                   ================   ================   ===============

Allocation of Net Income
     General partners                                                      $    --            $    --        $   28,717
     Limited partners                                                      139,868          1,945,812         2,786,291
                                                                   ----------------   ----------------   ---------------
                                                                           139,868        $ 1,945,812       $ 2,815,008
                                                                   ================   ================   ===============

Net Income Per Limited Partner Unit                                      $    0.03          $    0.43         $    0.62
                                                                   ================   ================   ===============

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



                 See accompanying notes to financial statements.
<PAGE>





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

                         STATEMENTS OF PARTNERS' CAPITAL

                  Years Ended December 31, 2001, 2000, and 1999

                                         General Partners                                           Limited Partners
                               --------------------------------------   ---------------------------------------------------------
                                                       Accumulated                                               Accumulated
                                  Contributions         Earnings         Contributions       Distributions         Earnings
                                ------------------   ----------------   -----------------   ----------------   -----------------

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

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

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

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

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

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

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

 Limited Partners
  ---------------
   Syndication
      Costs            Total
  --------------   --------------

   $ (5,390,000 )    $39,191,924



             --       (3,600,000 )
             --        2,815,008
  --------------   --------------

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



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

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



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

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



  See accompanying notes to financial statements.
<PAGE>




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

                            STATEMENTS OF CASH FLOWS


                                                                               Year Ended December 31,
                                                                      2001                2000              1999
                                                                 ----------------    ---------------    --------------

Increase (Decrease) in Cash and Cash Equivalents:

      Cash Flows from Operating Activities:
         Cash received from tenants                                  $ 3,185,370         $3,366,743        $3,341,862
         Distributions from joint venture                                279,357            187,637           170,697
         Cash paid for expenses                                         (776,156 )         (428,209 )        (410,336 )
         Interest received                                                34,797             39,526            49,008
                                                                 ----------------    ---------------    --------------
             Net cash provided by operating activities
                                                                       2,723,368          3,165,697         3,151,231
                                                                 ----------------    ---------------    --------------

      Cash Flows from Investing Activities:
         Proceeds from sale of assets                                  2,851,675            575,778           667,311
         Additions to land and buildings on operating
           leases                                                     (1,147,903 )         (183,500 )              --
         Investment in direct financing leases                                --                 --                --
         Investment in joint ventures                                 (1,134,117 )         (500,021 )        (158,512 )
         Payment of lease costs                                               --            (14,057 )         (25,866 )
                                                                 ----------------    ---------------    --------------
             Net cash provided by (used in)
                investing activities                                     569,655           (121,800 )         482,933
                                                                 ----------------    ---------------    --------------

      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
                                                                        (306,977 )         (556,103 )          34,164

Cash and Cash Equivalents at Beginning of Year                         1,081,650          1,637,753         1,603,589
                                                                 ----------------    ---------------    --------------

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

                See accompanying notes to financial statements.

<PAGE>


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

                      STATEMENTS OF CASH FLOWS - CONTINUED


                                                                               Year Ended December 31,
                                                                      2001               2000              1999
                                                                 ---------------    ---------------    --------------

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

      Net Income                                                      $ 139,868         $1,945,812        $2,815,008
                                                                 ---------------    ---------------    --------------
      Adjustments to reconcile net income to net cash
         provided by operating activities:
             Depreciation                                               549,520            572,650           586,122
             Amortization                                                 3,097             13,009             2,798
             Provision for doubtful accounts                             90,074             33,532                --
             Loss on termination of direct
                financing lease                                              --             31,215                --
             Equity in earnings of joint ventures,
                net of distributions                                     28,472              7,553            12,117
             Loss (gain) on sale of assets                             (383,637 )          (88,661 )          84,478
             Provision for write-down of assets                       2,290,553            962,971                --
             Decrease (increase) in receivables                         289,153           (186,514 )        (220,782 )
             Decrease in net investment in direct
                financing leases                                         52,904             52,973            41,327
             Decrease (increase) in accrued rental
                income                                                 (165,285 )         (212,436 )        (327,785 )
             Increase in other assets                                      (801 )            4,294               624
             Increase (decrease) in accounts
                payable and accrued and escrowed
                real estate taxes payable                                 1,632            (93,185 )         127,994
             Increase (decrease) in due to related
                parties                                                (135,626 )           79,104            47,377
             Increase (decrease) in rents paid in
                advance and deposits                                    (36,556 )           43,380           (18,047 )
                                                                 ---------------    ---------------    --------------
                  Total adjustments                                   2,583,500          1,219,885           336,223
                                                                 ---------------    ---------------    --------------

Net Cash Provided by Operating Activities                            $2,723,368         $3,165,697        $3,151,231
                                                                 ===============    ===============    ==============




                See accompanying notes to financial statements.
<PAGE>


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

                      STATEMENTS OF CASH FLOWS - CONTINUED


                                                                      Years Ended December 31,
                                                              2001               2000              1999
                                                         ---------------    ---------------    --------------

Supplemental Schedule of Non-Cash Financing
    Activities:

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


</TABLE>


<PAGE>


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

                          NOTES TO FINANCIAL STATEMENTS

                  Years Ended December 31, 2001, 2000, and 1999


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

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

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





<PAGE>


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

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

                  Years Ended December 31, 2001, 2000, and 1999


1.       Significant Accounting Policies - Continued:

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

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

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

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



<PAGE>


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

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

                  Years Ended December 31, 2001, 2000, and 1999


1.       Significant Accounting Policies - Continued:

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

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

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

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

         Additionally, for tax purposes, syndication costs are included in
         Partnership equity and in the basis of each partner's investment. For
         financial reporting purposes, syndication costs are netted against
         partners' capital and represent a reduction of Partnership equity and a
         reduction in the basis of each partner's investment. See "Income Taxes"
         footnote for a reconciliation of net income for financial reporting
         purposes to net income for federal income tax purposes.

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

         Reclassifications - Certain items in the prior year's financial
         statements have been reclassified to conform to 2001 presentation.
         These reclassifications had no effect on partners' capital or net
         income.


<PAGE>


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

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

                  Years Ended December 31, 2001, 2000, and 1999


1.       Significant Accounting Policies - Continued:

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

         Statement of  Financial  Accounting  Standards  No. 141 ("FAS 141") and
         Statement of Financial  Accounting  Standards  No. 142 ("FAS 142") - In
         July 2001, the Financial Accounting Standards Board issued Statement of
         Financial  Accounting  Standards No. 141 "Business  Combinations"  (FAS
         141) and Statement of Financial  Accounting Standards No. 142 "Goodwill
         and Other  Intangible  Assets" (FAS 142). The  Partnership has reviewed
         both statements and has determined that both FAS 141 and FAS 142 do not
         apply to the Partnership as of December 31, 2001.

         Statement of Financial Accounting Standards No. 144 ("FAS 144") - In
         October 2001, the Financial Accounting Standards Board issued 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 adoption of FAS 144 did not have any
         effect on the partnership's recording of impairment losses as this
         Statement retained the fundamental provisions of FAS No. 121
         "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
         Assets to be Disposed of".




<PAGE>


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

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

                  Years Ended December 31, 2001, 2000, and 1999


2.       Leases:
         ------

         The Partnership leases its land or land and buildings primarily to
         operators of national and regional fast-food and family-style
         restaurants. The leases are accounted for under the provisions of
         Statement of Financial Accounting Standards No. 13, "Accounting for
         Leases." Some of the leases are classified as operating leases and some
         of the leases have been classified as direct financing leases. For the
         leases classified as direct financing leases, the building portions of
         the property leases are accounted for as direct financing leases while
         the land portion of some of the leases are operating leases. The
         majority of the leases are for 15 to 20 years and provide for minimum
         and contingent rentals. In addition, generally the tenant pays all
         property taxes and assessments, fully maintains the interior and
         exterior of the building and carries insurance coverage for public
         liability, property damage, fire and extended coverage. The lease
         options generally allow tenants to renew the leases for two to five
         successive five-year periods subject to the same terms and conditions
         as the initial lease. Most leases also allow the tenant to purchase the
         property at fair market value after a specified portion of the lease
         has elapsed.

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

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

                                                2001             2000
                                           ---------------   --------------

         Land                                $ 13,669,798     $ 14,676,445
         Buildings                             15,651,741       16,773,771
                                           ---------------   --------------
                                               29,321,539       31,450,216
         Less accumulated depreciation         (3,297,708 )     (2,961,413 )
                                           ---------------   --------------

                                             $ 26,023,831     $ 28,488,803
                                           ===============   ==============

         During the year ended December 31, 2000, the Partnership established a
         provision for write-down of assets of $456,824 relating to a Boston
         Market property located in St. Cloud, Minnesota. The tenant for this
         property filed for bankruptcy and discontinued the payment of rents.
         The provision represented the difference between the net carrying value
         of the property at December 31, 2000 and the general partners'
         estimated net realizable value for the property. During 2001, the
         Partnership increased the provision by $25,305. In November 2001, the
         Partnership sold this property to an unrelated third

<PAGE>



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

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

                  Years Ended December 31, 2001, 2000, and 1999


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

         party for approximately $664,500 and received net sales proceeds of
         approximately $647,400, resulting in a gain on sale of assets of
         $100,672.

         During 2000, the Partnership established a provision for write-down of
         assets of $400,492 relating to its Boston Market property in Columbia
         Heights, Minnesota. The tenant of this property filed for bankruptcy
         and discontinued the payment of rents. In September 2000, the
         Partnership sold its property in Columbia Heights, Minnesota, to a
         third party for $584,000 and received net sales proceeds of
         approximately $575,800, resulting in a gain of approximately $88,700.

         In March 2001, the Partnership sold its property in Marana, Arizona for
         approximately $1,151,000 and received net sales proceeds of
         approximately $1,145,000, resulting in a total gain of approximately
         $281,100 (see Note 4).

         During the year ended December 31, 2001, the Partnership established a
         provision for write-down of assets of $382,366 relating to its property
         in Bucyrus, Ohio. The tenant of this property vacated the property and
         ceased restaurant operations. The provision represented the difference
         between the net carrying value of the property and the general
         partners' estimated net realizable value of the property.

         During 2001, the Partnership established a provision for write-down of
         assets of $248,802 relating to a Big Boy property in Las Vegas, Nevada.
         The tenant of this property experienced financial difficulties, ceased
         restaurant operations and vacated the property. The provision
         represented the difference between the carrying value of the property,
         including the accumulated accrued rental income balance and the general
         partners' estimate of net realizable value for the property. In
         December 2001, the Partnership sold this property to an unrelated third
         party for approximately $1,094,000 and received net sales proceeds of
         approximately $1,059,300, resulting in a gain on sale of assets of
         $1,902. In December 2001, the Partnership reinvested these net sales
         proceeds in a property in San Antonio, Texas at an approximate cost of
         $1,147,900. The Partnership acquired this property from CNL Funding
         2001-A, LP, an affiliate of the general partners (see Note 9).



<PAGE>


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

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

                  Years Ended December 31, 2001, 2000, and 1999


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

         In addition, during 2001, the Partnership established a provision for
         write-down of assets of $1,469,778. The provision represented the
         difference between the carrying value of each property, including the
         accumulated accrued rental income balance and the general partners'
         estimate of net realizable value for each respective property. The
         tenant of these properties, Phoenix Restaurant Group, Inc. and its
         subsidiaries (collectively referred to as "PRG"), experienced financial
         difficulties and in October 2001, filed for Chapter 11 bankruptcy
         protection and rejected the leases relating to the Properties in
         Salina, Kansas and Mesquite, Texas.

         The following is a schedule of the future minimum lease payments to be
         received on noncancellable operating leases at December 31, 2001:

                         2002                                  $ 2,917,934
                         2003                                    2,942,387
                         2004                                    2,978,828
                         2005                                    3,119,980
                         2006                                    3,155,690
                         Thereafter                             22,209,320
                                                         ------------------

                                                              $ 37,324,139
                                                         ==================

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


<PAGE>


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

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

                  Years Ended December 31, 2001, 2000, and 1999


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

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

                                                  2001             2000
                                              -------------     ------------

               Minimum lease payments
                    receivable                 $ 4,799,563      $ 7,496,712
               Estimated residual values           957,216        1,261,543
               Less unearned income             (3,042,815 )     (4,870,431 )
                                              -------------
                                                                ------------
               Net investment in direct
                    financing leases           $ 2,713,964      $ 3,887,824
                                              =============     ============

         The following is a schedule of future minimum lease payments to be
         received on direct financing leases at December 31, 2001:

                     2002                                  $ 351,161
                     2003                                    355,644
                     2004                                    356,299
                     2005                                    356,961
                     2006                                    357,629
                     Thereafter                            3,021,869
                                                     ----------------

                                                          $4,799,563
                                                     ================

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

         During the year ended December 31, 2000, the tenant of the Denny's
         property in Bucyrus, Ohio terminated its lease due to financial
         difficulties. As a result, the Partnership reclassified the asset from
         net investment in direct financing leases to land and buildings on
         operating leases. In accordance with Statement of Financial Accounting
         Standards No. 13, "Accounting for Leases," the Partnership recorded the
         reclassified asset at the lower of original cost, present fair value,
         or present carrying amount. A loss on termination of direct financing
         lease of $31,215 was recorded.


<PAGE>


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

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

                  Years Ended December 31, 2001, 2000, and 1999


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

         In March 2001, the Partnership sold its property in Marana, Arizona,
         for which the building portion had been classified as a direct
         financing lease. In connection therewith, the gross investment (minimum
         lease payments receivable and the estimated residual value) and
         unearned income relating to the building were removed from the accounts
         and the gain from the sale of the property was reflected in income (see
         Note 3).

         During 2001, the Partnership established a provision for loss in the
         carrying value of $164,302 relating to a Denny's property in Salina,
         Kansas. The provision represented the difference between the carrying
         value of the property and the general partners' estimate of net
         realizable value for the property. The tenant of this property, PRG,
         experienced financial difficulties and rejected the lease relating to
         this property (see Note 3). As a result, during 2001, the Partnership
         reclassified the building portion of the property from a net investment
         in direct financing lease to an operating lease. In accordance with
         Statement of Financial Accounting Standards No. 13, "Accounting for
         Leases" the Partnership recorded the reclassified asset at the lower of
         original cost, present fair value, or present carrying value. No loss
         on termination of direct financing leases was recorded.

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

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

         In June 2000, the Partnership used the majority of the net sales
         proceeds received from the 1999 sale of the property in Lawrence,
         Kansas, to invest in a joint venture arrangement, TGIF Pittsburgh Joint
         Venture, with CNL Income Fund VII, Ltd., CNL Income Fund XV, Ltd., and
         CNL Income Fund XVIII, Ltd., each a Florida limited partnership and an
         affiliate of the general partners, to purchase and hold one restaurant
         property. As of December 31, 2001, the Partnership owned a 19.72%
         interest in the profits and losses of the joint venture.



<PAGE>


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

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

                  Years Ended December 31, 2001, 2000, and 1999


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

         In June 2001, the Partnership reinvested the sales proceeds it received
         from the sale of property in Marana, Arizona, in an additional property
         in Walker, Louisiana, as tenants-in-common, with CNL Income Fund VIII,
         Ltd., a Florida limited partnership and affiliate of the general
         partners. As of December 31, 2001, the Partnership had contributed
         approximately $1,134,100 for an 83% interest in the profit and losses
         of the property.

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

                                                   2001             2000
                                               -------------    -------------
             Land and buildings on operating
                 leases, net                    $ 6,921,194      $ 5,682,834
             Cash                                    11,544           50,478
             Accrued rental income                  246,192          160,331
             Other assets                             1,160              413
             Liabilities                             23,698           21,173
             Partners' capital                    7,156,392        5,872,883
             Revenues                               747,735          530,177
             Net income                             613,259          432,495

         The Partnership recognized income totaling $250,885, $180,084, and
         $158,580, for the years ended December 31, 2001, 2000, and 1999,
         respectively, from the joint ventures and the properties held as
         tenants-in-common with affiliates of the general partners.

6.       Receivables:
         -----------

         During the year ended December 31, 1999, the Partnership accepted a
         promissory note from the former tenant of the Shoney's property in Las
         Vegas, Nevada, in the amount of $52,191 representing real estate taxes
         previously recorded as an expense by the Partnership and past due
         rental and other amounts, which had been included in receivables for
         financial statement purposes and for which the Partnership had
         established an allowance for doubtful accounts. Payments are due in 60
         monthly installments of $1,220 including interest at a rate of ten
         percent per annum, commencing

<PAGE>



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

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

                  Years Ended December 31, 2001, 2000, and 1999


6.       Receivables:
         -----------

         on March 1, 2000, at which time, all accrued and unpaid interest
         amounts were capitalized into the principal balance of the note. Due to
         the uncertainty of collection of the note, the Partnership established
         an allowance for doubtful accounts. As of December 31, 2001 and 2000,
         the balance in the allowance for doubtful accounts relating to this
         promissory note was $63,954 and $62,751, respectively including accrued
         interest of $6,117 and $4,914, respectively.

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; provided, however, that the
         one percent of net cash flow to be distributed to the general partners
         shall be subordinated to receipt by the limited partners of an
         aggregate, eight percent, cumulative, noncompounded annual return on
         their invested capital contributions (the "Limited Partners' 8%
         Return").

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

<PAGE>



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

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

                  Years Ended December 31, 2001, 2000, and 1999


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

         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 and did not receive any distributions during the years
         ended December 31, 2001 and 2000.

         During each of the years ended December 31, 2001, 2000, and 1999 the
         Partnership declared distributions to the limited partners of
         $3,600,000. No distributions have been made to the general partners to
         date.


<PAGE>


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

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

                  Years Ended December 31, 2001, 2000, and 1999


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

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

 <c>
                                                                   2001             2000              1999
                                                               --------------   --------------   ---------------

             Net income for financial reporting purposes          $  139,868      $ 1,945,812       $ 2,815,008

             Depreciation for financial reporting purposes
                  in excess of depreciation for tax
                  reporting purposes                                  40,740           38,747            38,885

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

               Direct financing leases recorded as operating
                  leases for tax reporting purposes                   52,904           52,973            41,327

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

             Equity in earnings of joint ventures for financial
                  reporting purposes in excess of equity in
                  earnings of joint ventures for tax reporting
                  purposes                                           (15,881 )         (7,155 )          (9,081 )

             Gain on sale of assets for financial reporting
                  purposes in excess of gain for tax reporting
                  purposes                                          (993,358 )       (430,205 )         (17,919 )

             Allowance for doubtful accounts                         326,169          338,368             1,072

             Accrued rental income                                  (165,285 )       (212,436 )        (327,785 )

             Rents paid in advance                                   (22,056 )         43,380           (20,042 )

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

             Net income for federal income tax purposes          $ 1,653,654      $ 2,526,925       $ 2,733,558
                                                               ==============   ==============   ===============

</TABLE>



<PAGE>


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

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

                  Years Ended December 31, 2001, 2000, and 1999


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 (the "Advisor") is a wholly owned subsidiary
         of CNL American Properties Fund, Inc. ("APF"). CNL Fund Advisors, Inc.,
         a majority  owned  subsidiary of CNL  Financial  Group,  Inc.  until it
         merged with and into APF  effective  September  1, 1999,  served as the
         Partnership's  advisor until it assigned its rights in and  obligations
         under a  management  agreement  with  the  Partnership  to the  Advisor
         effective   July  1,  2000.  The   individual   general   partners  are
         stockholders and directors of APF.

         The Advisor provides certain services relating to management of the
         Partnership and its properties pursuant to a management agreement with
         the Partnership. In connection therewith, the Partnership has agreed to
         pay the 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.
         The management fee, which will not exceed fees which are competitive
         for similar services in the same geographic area, may or may not be
         taken, in whole or in part as to any year, in the sole discretion of
         the Affiliates. All or any portion of the management fee not taken as
         to any fiscal year shall be deferred without interest and may be taken
         in such other fiscal year as the Affiliates shall determine. The
         Partnership incurred management fees of $30,726, $36,605, and $37,385,
         for the years ended December 31, 2001, 2000, and 1999, respectively.

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


<PAGE>


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

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

                  Years Ended December 31, 2001, 2000, and 1999


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

         During the years ended December 31, 2001, 2000, and 1999, the
         Partnership's advisor and its affiliates provided accounting and
         administrative services to the Partnership on a day-to-day basis,
         including services during 2000 and 1999 relating to the proposed and
         terminated merger. The Partnership incurred $243,206, $109,898, and
         $138,583, for the years ended December 31, 2001, 2000, and 1999,
         respectively, for such services.

         In December 2001, the Partnership acquired a property located in San
         Antonio, Texas from CNL Funding 2001-A, LP, for a purchase price of
         approximately $1,147,900 (see Note 3). CNL Funding 2001-A, LP is a
         Delaware limited partnership and an affiliate of the general partners.
         CNL Funding 2001-A, LP had purchased and temporarily held title to the
         property in order to facilitate the acquisition of the property by the
         Partnership. The purchase price paid by the Partnership represented the
         costs incurred by CNL Funding 2001-A, LP to acquire and carry the
         property, including closing costs.

         The amount due to related parties at December 31, 2001 and 2000 totaled
         $17,331 and $152,957, respectively.

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

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

 <c>
                                                              2001                  2000                 1999
                                                        -----------------     -----------------    -----------------

          Golden Corral Corporation                           $1,023,304             $ 931,631            $ 968,456
          Jack in the Box Inc.
                (formerly known as Foodmaker, Inc.)
                                                                 621,879               556,365              556,610
</TABLE>



<PAGE>


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

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

                  Years Ended December 31, 2001, 2000, and 1999


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

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

                                         2001              2000         1999
                                      ------------     -----------   ----------

         Golden Corral Family
             Steakhouse Restaurants   $ 1,023,304       $ 931,631    $ 968,456
         Jack in the Box                  621,879         556,365      556,610
         Denny's                          402,615         946,399    1,143,192

         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.

         On October 31, 2001, PRG a tenant of the Partnership, filed for Chapter
         11 bankruptcy protection, and rejected the leases relating to two of
         the four properties it leased from the Partnership. The Partnership
         will not recognize any rental and earned income from the two vacant
         properties until new tenants for the properties are located, or until
         the properties are sold and the proceeds from such sales are reinvested
         in additional properties.




<PAGE>


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

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

                  Years Ended December 31, 2001, 2000, and 1999


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

         The following table presents selected unaudited quarterly financial
         data for each full quarter during the years ended December 31, 2001 and
         2000:
<TABLE>
<CAPTION>

 <c>
             2001 Quarter               First             Second             Third             Fourth              Year
        -----------------------    ----------------   ---------------    ---------------   ----------------   ---------------

        Revenues (1)                    $  879,556        $  806,754         $  803,022         $  836,386       $ 3,325,718
        Net income (loss)                  554,592          (103,155 )       (1,059,971 )          748,402           139,868
        Net income (loss)
            per limited
            partner unit                      0.12             (0.02 )            (0.23 )             0.16              0.03

             2000 Quarter               First             Second             Third             Fourth              Year
        -----------------------    ----------------   ---------------    ---------------   ----------------   ---------------

        Revenues (1)                    $  947,390       $ 1,038,220         $  842,921        $ 1,057,708       $ 3,886,239
        Net income                         236,047           169,575            671,811            868,379         1,945,812
        Net income per
            limited partner
            unit                              0.05              0.04               0.15               0.19              0.43
</TABLE>

         (1)      Revenues include equity in earnings of the joint ventures.

         (2)      Revenues have been adjusted to reclassify any reversals of
                  accrued rental income to provision for write-down of assets.
                  This reclassification had no effect on total net income.






<PAGE>


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

         None.
                                    PART III


Item 10.  Directors and Executive Officers of the Registrant

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

         James M. Seneff, Jr., age 55. Since 1971, Mr. Seneff has been active in
the  acquisition,  development,  and  management  of real estate  projects  and,
directly or through an  affiliated  entity,  has served as a general  partner or
co-venturer in over 100 real estate  ventures.  These ventures have involved the
financing,  acquisition,   construction,  and  leasing  of  restaurants,  office
buildings,  apartment  complexes,  hotels, and other real estate. Mr. Seneff has
served as Director and Chairman of the Board of CNL  American  Properties  Fund,
Inc. ("APF"),  a public,  unlisted real estate investment trust, since 1994. Mr.
Seneff served as Chief  Executive  Officer of APF from 1994 through August 1999,
and has served as Co-Chief  Executive  Officer of APF since  December  2000. Mr.
Seneff served as Chairman of the Board and Chief  Executive  Officer of CNL Fund
Advisors,  Inc.,  formerly  the  Partnership's  advisor,  until it merged with a
wholly-owned  subsidiary  of APF  in  September  1999,  and in  June  2000,  was
re-elected  to those  positions  of CNL Fund  Advisors,  Inc.  Mr.  Seneff  is a
principal stockholder of CNL Holdings, Inc., the parent company of CNL Financial
Group,  Inc., a diversified  real estate company,  and has served as a Director,
Chairman of the Board and Chief Executive  Officer of CNL Financial Group,  Inc.
since its formation in 1980. CNL Financial  Group,  Inc. is the parent  company,
either directly or indirectly through subsidiaries, of CNL Real Estate Services,
Inc., CNL Capital Markets, Inc., CNL Investment Company and CNL Securities Corp.
Mr. Seneff also serves as a Director,  Chairman of the Board and Chief Executive
Officer of CNL  Hospitality  Properties,  Inc., a public,  unlisted  real estate
investment trust, as well as, CNL Hospitality  Corp., its advisor.  In addition,
he serves as a Director,  Chairman of the Board and Chief  Executive  Officer of
CNL Retirement Properties, Inc., a public, unlisted real estate investment trust
and its advisor,  CNL Retirement Corp. Since 1992, Mr. Seneff has also served as
a Director,  Chairman of the Board and Chief Executive Officer of Commercial Net
Lease Realty,  Inc., a public real estate investment trust that is listed on the
New York Stock Exchange.  Mr. Seneff has also served as a Director,  Chairman of
the Board and Chief Executive  Officer of CNL Securities  Corp.  since 1979; CNL
Investment  Company  since  1990;  and  CNL  Institutional  Advisors,   Inc.,  a
registered investment advisor for pension plans, since 1990. Mr. Seneff formerly
served  as a  Director  of First  Union  National  Bank of  Florida,  N.A.,  and
currently serves as the Chairman of the Board of CNL Bank. Mr. Seneff previously
served on the Florida State Commission on Ethics and is a former member and past
Chairman of the State of Florida Investment  Advisory Council,  which recommends
to the Florida Board of Administration  investments for various Florida employee
retirement  funds.  The Florida  Board of  Administration,  Florida's  principal
investment advisory and money management agency, oversees the investment of more
than $60 billion of retirement funds. Mr. Seneff received his degree in Business
Administration from Florida State University in 1968.

         Robert A.  Bourne,  age 54. Mr.  Bourne has  participated  as a general
partner  or  co-venturer  in over  100  real  estate  ventures  involved  in the
financing,  acquisition,   construction,  and  leasing  of  restaurants,  office
buildings,  apartment  complexes,  hotels,  and other real estate. Mr. Bourne is
Director of the Board of Directors of APF. Mr. Bourne served as President of APF
from 1994 through  February 1999. He also served as Treasurer from February 1999
through  August 1999 and from May 1994 through  December 1994. He also served in
various  executive  positions with CNL Fund  Advisors,  Inc. prior to its merger
with a  wholly-owned  subsidiary of APF  including,  President from 1994 through
September 1997, and Director from 1994 through August 1999. Mr. Bourne serves as
President and Treasurer of CNL Financial Group, Inc.; Director, Vice Chairman of
the Board,  President  and  Treasurer  of CNL  Hospitality  Properties,  Inc., a
public,  unlisted  real estate  investment  trust;  as well as,  Director,  Vice
Chairman of the Board,  President and Treasurer of CNL  Hospitality  Corp.,  its
advisor. In addition, Mr. Bourne serves as Director, Vice Chairman of the Board,
President and Treasurer of CNL Retirement Properties,  Inc., a public,  unlisted
real  estate  investment  trust;  as well as, a Director,  Vice  Chairman of the
Board,  President and Treasurer of its advisor,  CNL Retirement Corp. Mr. Bourne
also serves as a Director of CNL Bank.  He has served as a Director  since 1992,
Vice Chairman of the Board since  February  1996,  Secretary and Treasurer  from
February 1996 through 1997, and President from July 1992 through  February 1996,
of Commercial  Net Lease  Realty,  Inc., a public real estate  investment  trust
listed on the New York Stock  Exchange.  Mr.  Bourne  also  serves as  Director,
President  and Treasurer for various  affiliates  of CNL Financial  Group,  Inc.
including,  CNL Investment  Company,  CNL Securities Corp. and CNL Institutional
Advisors,  Inc., a registered  investment  advisor for pension plans. Mr. Bourne
began his career as a certified public accountant employed by Coopers & Lybrand,
Certified  Public  Accountants,  from 1971 through  1978,  where he attained the
position  of Tax  Manager in 1975.  Mr.  Bourne  graduated  from  Florida  State
University in 1970 where he received a B.A. in Accounting, with honors.

         Curtis B.  McWilliams,  age 46. Mr.  McWilliams  has served as Co-Chief
Executive  Officer of APF since  December  2000 and  previously  served as Chief
Executive  Officer from  September  1999  through  December  2000.  Prior to the
acquisition of CNL Fund Advisors,  Inc., Mr.  McWilliams  served as President of
APF from  February  1999 until  September  1999.  From February 1998 to February
1999, he served as Executive  Vice President of APF. Mr.  McWilliams  joined CNL
Financial  Group,  Inc. in April 1997 and served as an Executive  Vice President
from October 1997 until September 1999. In addition,  Mr.  McWilliams  served as
President of CNL Fund Advisors, Inc. and CNL Financial Services, Inc. from April
1997 until the acquisition of such entities by wholly-owned  subsidiaries of APF
in September  1999.  From September 1983 through March 1997, Mr.  McWilliams was
employed by Merrill  Lynch & Co. The  majority of his career at Merrill  Lynch &
Co.  was in the  Investment  Banking  division  where he  served  as a  Managing
Director.  Mr.  McWilliams  received  a  B.S.E.  in  Chemical  Engineering  from
Princeton University in 1977 and a Master of Business Administration degree with
a concentration in finance from the University of Chicago in 1983.

         Steven D. Shackelford, age 38. Mr. Shackelford was promoted to
Executive Vice President of APF in June 2000. He served as Senior Vice President
from September 1999 until his promotion in June 2000. Mr. Shackelford has served
as Chief Financial Officer since January 1997 and has served as Secretary and
Treasurer of APF since September 1999. He also served as Chief Financial Officer
of CNL Fund Advisors, Inc. from September 1996 to September 1999. From March
1995 to July 1996, Mr. Shackelford was a senior manager in the national office
of Price Waterhouse LLP where he was responsible for advising foreign clients
seeking to raise capital and a public listing in the United States. From August
1992 to March 1995, he was a manager in the Paris, France office of Price
Waterhouse, serving several multi-national clients. Mr. Shackelford was an audit
staff and senior from 1986 to 1992 in the Orlando, Florida office of Price
Waterhouse. Mr. Shackelford received a Bachelor of Arts degree in Accounting,
with honors, and a Master of Business Administration degree from Florida State
University and is a certified public accountant.


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.




<PAGE>


Item 12.  Security Ownership of Certain Beneficial Owners and Management

         As of March 15, 2002, no person was known to the Registrant to be a
beneficial owner of more than five percent of the Units.

         The following table sets forth, as of March 15, 2002, the beneficial
ownership interests of the General Partners in the Registrant.

       Title of Class               Name of Partner            Percent of Class
       --------------               ---------------            ----------------

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

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







<PAGE>



Item 13.  Certain Relationships and Related Transactions

         The table below summarizes the types, recipients, methods of
computation and amounts of compensation, fees and distributions paid or payable
by the Partnership to the General Partners and their affiliates for the year
ended December 31, 2001, exclusive of any distributions to which the General
Partners or their affiliates may be entitled by reason of their purchase and
ownership of Units.
<TABLE>
<CAPTION>

 <c>
                                                                                          Amount Incurred
      Type of Compensation                                                                 For the Year
         and Recipient                         Method of Computation                  Ended December 31, 2001
---------------------------------      --------------------------------------      ------------------------------

Reimbursement  to affiliates for       Operating  expenses are reimbursed at       Accounting  and
operating expenses                     the  lower  of  cost  or  90%  of the       admini-strative  services:
                                       prevailing  rate at which  comparable       $243,206
                                       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                  $30,726
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.


<PAGE>



                                                                                          Amount Incurred
      Type of Compensation                                                                 For the Year
         and Recipient                         Method of Computation                  Ended December 31, 2001
---------------------------------      --------------------------------------      ------------------------------

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


<PAGE>



                                                                                          Amount Incurred
      Type of Compensation                                                                 For the Year
         and Recipient                         Method of Computation                  Ended December 31, 2001
---------------------------------      --------------------------------------      ------------------------------

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>

In addition, during 2001 the Partnership acquired a Property from CNL Funding
2001-A, LP, which is an affiliate of the General Partners. The aggregate
purchase price paid for this Property was approximately $1,147,900. CNL Funding
2001-A, LP is a Delaware limited partnership and an affiliate of the general
partners. CNL Funding 2001-A, LP had purchased and temporarily held title to the
property in order to facilitate the acquisition of the property by the
Partnership. The purchase price paid by the Partnership represented the costs
incurred by CNL Funding 2001-A, LP to acquire and carry the property, including
closing costs.




<PAGE>




                                     PART IV

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

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

         1.  Financial Statements

                  Report of Independent Certified Public Accountants

                  Balance Sheets at December 31, 2001 and 2000

                  Statements of Income for the years ended December 31, 2001,
                    2000, and 1999

                  Statements of Partners' Capital for the years ended December
                    31, 2001, 2000, and 1999

                  Statements of Cash Flows for the years ended December 31,
                    2001, 2000, and 1999

                  Notes to Financial Statements

         2.  Financial Statement Schedules

                  Schedule II - Valuation and Qualifying Accounts for the years
                  ended December 31, 2001, 2000, and 1999

                  Schedule III - Real Estate and Accumulated Depreciation at
                    December 31, 2001

                  Notes to Schedule III - Real Estate and Accumulated
                    Depreciation at December 31, 2001

                  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).

         (b)      The Registrant  filed no reports on Form 8-K during the period
                  October 1, 2001 through  December 31, 2001.


<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 25th day of
March, 2002.


                                  CNL INCOME FUND XVI, LTD.

                                  By:      CNL REALTY CORPORATION
                                           General Partner

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


                                  By:      ROBERT A. BOURNE
                                           General Partner

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


                                  By:      JAMES M. SENEFF, JR.
                                           General Partner

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




<PAGE>



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

 <c>
               Signature                                  Title                                  Date
               ---------                                  -----                                  ----



/s/ Robert A. Bourne                     President,   Treasurer   and   Director            March 25, 2002
------------------------------------     (Principal   Financial  and  Accounting
Robert A. Bourne                         Officer)


/s/ James M. Seneff, Jr.                 Chief  Executive  Officer and  Director            March 25, 2002
------------------------------------     (Principal Executive Officer)
James M. Seneff, Jr.

</TABLE>


<PAGE>


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

                 SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS

                  Years Ended December 31, 2001, 2000, and 1999
<TABLE>
<CAPTION>

 <c>

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

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

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

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

</TABLE>

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

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

  (c)  Amounts written off as uncollectible.




<PAGE>
                                  CNL INCOME FUND XVI, LTD.
                               (A Florida Limited Partnership)
                    SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
                                       December 31, 2001
<TABLE>
<CAPTION>


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

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

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

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

    Denny's Restaurants:
      Idaho Falls, Idaho       -             552,186           -       692,274        -
      Branson, Missouri (o)    -           1,160,979           -     1,010,688        -
      Bucyrus, Ohio (p)        -             139,003     429,052             -        -
      Dover, Ohio              -             266,829           -             -        -
      Salina, Kansas (i)       -             261,154           -       450,724        -
      Moab, Utah               -             435,927           -             -        -
      Mesquite, Texas (r)      -             403,548     650,659             -        -
      Temple, Texas (q)        -             306,866     677,659             -        -

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

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

    Jack in the Box Restaurants:
      Brownsville, Texas       -             553,671           -       658,282        -
      Grand Prairie, Texas     -             439,950           -       636,524        -
      Rancho Cordova, Californi- (h)         401,302     595,722             -        -
      Temple City, California (-)            744,493     225,404             -        -
      Texas City, Texas (h)    -             403,476     568,053             -        -

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

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

    Taco Cabana Restaurant:
      San Antonio, Texas                     442,285     705,618             -        -

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

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


                                          $14,191,185 $5,749,261   $10,808,763        -
                                          =========== ===========  ============  =======

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

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

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

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


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

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

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

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

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

         Jack in the Box Restaurant:
           Walker, Louisiana   -            $505,160    $861,245             -        -
                                          =========== ===========  ============  =======
                                                                                   -
Properties the Partnership has
    Invested in Under Direct
    Financing Leases:

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

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

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

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

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




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






   $315,276     $591,993     $907,269   $125,711    1978   08/95          (c)


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


    552,186      692,274    1,244,460    150,437    1995   01/95          (c)
    951,757      801,464    1,753,221    201,759    1995   03/95          (c)
     62,530      123,159      185,689     11,978    1973   03/95          (n)
    266,829           (d)     266,829         (e)   1971   03/95          (e)
    261,154      450,724      711,878      4,662    1995   04/95          (e)
    435,927           (d)     435,927         (e)   1995   06/95          (e)
    167,856      414,967      582,823    134,147    1995   08/95          (c)
    306,866      522,185      829,051    140,931    1975   08/95          (c)



    566,943    1,122,500    1,689,443    254,510    1995   10/94          (c)
    761,108    1,001,893    1,763,001    233,867    1994   11/94          (c)
    781,761    1,147,538    1,929,299    267,864    1994   11/94          (c)
    446,240      971,766    1,418,006    218,333    1995   01/95          (c)
    320,133      804,428    1,124,561    172,352    1995   05/95          (c)
    523,584      870,136    1,393,720    168,132    1996   01/96          (c)


    364,634      554,302      918,936    107,608    1994   03/96          (c)


    553,671      658,282    1,211,953    152,923    1995   10/94          (c)
    439,950      636,524    1,076,474    143,857    1995   10/94          (c)
    401,302      595,722      997,024    142,375    1985   10/94          (c)
    744,493      225,404      969,897     53,871    1984   10/94          (c)
    403,476      568,053      971,529    135,762    1991   10/94          (c)


    188,759      434,369      623,128     88,897    1995   09/95          (c)


    162,000           (d)     162,000         (e)   1994   12/94          (e)
    370,204      433,058      803,262     97,913    1995   12/94          (c)
    116,767      183,174      299,941     37,053    1982   12/95          (c)


    442,285      705,618    1,147,903      1,960    1995   12/01          (c)




    393,963      567,625      961,588    133,275    1983   12/94          (c)


    109,130      158,888      268,018     24,807    1995   10/94          (k)
    313,200      415,695      728,895     92,724    1995   12/94          (c)
------------  -----------  ----------- ----------


$13,669,798   $15,651,741  $29,321,539 $3,297,708
============  ===========  =========== ==========








   $377,800     $587,700     $965,500   $102,718    1996   10/96          (c)
============  ===========  =========== ==========







   $678,890     $825,076   $1,503,966   $109,151    1997   01/98          (c)
============  ===========  =========== ==========








   $406,976     $498,804     $905,780    $50,561    1999   08/98          (c)
============  ===========  =========== ==========







 $1,036,297   $1,499,295   $2,535,592    $79,267    2000   06/00          (c)
============  ===========  =========== ==========







   $505,160     $861,245   $1,366,405    $14,352    2001   06/01          (c)
============  ===========  =========== ==========






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


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


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




</TABLE>


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

        NOTES TO SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION

                                December 31, 2001


(a)      Transactions in real estate and accumulated  depreciation  during 2001,
         2000, and 1999, are summarized as follows:
<TABLE>
<CAPTION>

 <c>
                                                                                         Accumulated
                                                                         Cost            Depreciation
                                                                    ----------------   -----------------
            Properties the Partnership has Invested
              in Under Operating Leases:

                 Balance, December 31, 1998                            $ 32,157,741        $  1,942,192
                 Reclassified from direct financing leases                  780,454                  --
                 Acquisitions                                               150,000                  --
                 Dispositions                                              (779,180 )           (23,630 )
                 Depreciation expense                                            --             586,122
                                                                    ----------------   -----------------

                 Balance, December 31, 1999                              32,309,015           2,504,684
                 Reclassified from direct financing leases                  568,055                  --
                 Acquisitions                                                33,500                  --
                 Dispositions                                              (603,038 )                --
                 Provision for write-down of assets                        (857,316 )          (115,921 )
                 Depreciation expense                                            --             572,650
                                                                    ----------------   -----------------

                 Balance, December 31, 2000                              31,450,216           2,961,413
                 Reclassified from direct financing leases                  450,724                  --
                 Acquisitions                                             1,147,903                  --
                 Dispositions                                            (2,035,632 )          (213,225 )
                 Provision for write-down of assets                      (1,686,521 )                --
                 Depreciation expense                                            --             549,520
                                                                    ----------------   -----------------

                 Balance, December 31, 2001                            $ 29,326,690        $  3,297,708
                                                                    ================   =================


<PAGE>


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

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

                                December 31, 2001

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

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

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

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

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

                 Balance, December 31, 2001                                   $   965,500         $   102,718
                                                                          ================    ================

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

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

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

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

                 Balance, December 31, 2001                                  $  1,503,966         $   109,151
                                                                          ================    ================




<PAGE>


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

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

                                December 31, 2001


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

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

                 Balance, December 31, 1998                                   $   875,701            $     --
                 Acquisition                                                       30,079                  --
                 Depreciation expense (m)                                              --              17,315
                                                                          ----------------    ----------------

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

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

                 Balance, December 31, 2001                                   $   905,780         $    50,561
                                                                          ================    ================

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

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

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

                 Balance, December 31, 2001                                  $  2,535,592         $    79,267
                                                                          ================    ================

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

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

                 Balance, December 31, 2001                                  $  1,366,405         $    14,352
                                                                          ================    ================
</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.


<PAGE>


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

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

                                December 31, 2001


(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, 2001, the aggregate cost of the Properties owned by
         the Partnership and the joint venture for federal income tax purposes
         was $34,095,784 and $7,275,243, respectively. All of the leases are
         treated as operating leases for federal income tax purposes.

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

(i)      Effective October 2001, the lease for this Property was terminated,
         resulting in the reclassification of the building portion of the lease
         to an operating lease. The building was recorded at net book value as
         of October 18, 2001, and depreciated over its remaining estimated life
         of approximately 24 years.

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

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

(l)      The undepreciated cost of the Property in Celina, Ohio was written down
         to net realizable value due to an anticipated impairment in value. The
         Partnership recognized an impairment by recording a provision for
         write-down of assets in the amount of $266,257 at December 31, 1998.
         The tenant of this Property experienced financial difficulties and
         ceased payments of rents under the terms of its lease agreement. The
         impairment represented the difference between the Property's carrying
         value and the estimated net realizable value of the Property. The cost
         of the Property presented on this schedule is the net amount at which
         the Property was carried at December 31, 2001, including the provision
         for write-down of assets.

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

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


<PAGE>


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

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

                                December 31, 2001



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

(p)      The undepreciated cost of the Property in Bucyrus, Ohio, was written
         down to net realizable value due to an impairment in value. The
         Partnership recognized the impairment by recording a provision for
         write-down of assets in the amount of $382,366 for the year ended
         December 31, 2001. The impairment at December 31, 2001, represented the
         difference between the Property's carrying value and the estimated of
         the net realizable value of the Property. The cost of the Property
         presented on this schedule is the net amount at which the Property was
         carried at December 31, 2001, including the provision for write-down of
         assets.

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

(r)      The undepreciated cost of the Property in Mesquite, Texas, was written
         down to net realizable value due to an impairment in value. The
         Partnership recognized the impairment by recording a provision for
         write-down of assets in the amount of $466,233 for the year ended
         December 31, 2001. The impairment at December 31, 2001, represented the
         difference between the Property's carrying value and the estimated of
         the net realizable value of the Property. The cost of the Property
         presented on this schedule is the net amount at which the Property was
         carried at December 31, 2001, including the provision for write-down of
         assets.

(s)      During 2001 the Partnership acquired a Property from CNL Funding
         2001-A, LP, which is an affiliate of the General Partners. The
         aggregate purchase price paid for this Property was approximately
         $1,147,900.