10-K 1 if15.txt CNL INCOME FUND XV, LTD. 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 0-26216 CNL INCOME FUND XV, LTD. (Exact name of registrant as specified in its charter) Florida 59-3198888 (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 4,000,000 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 PART I Item 1. Business CNL Income Fund XV, 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 February 23, 1994, the Partnership offered for sale up to $40,000,000 of limited partnership interests (the "Units") (4,000,000 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 September 1, 1994, at which date the maximum offering proceeds of $40,000,000 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 $35,200,000 and were used to acquire 45 Properties, including 15 Properties consisting of only land and two Properties owned by a joint venture in which the Partnership is a co-venturer, to pay acquisition fees totaling $2,200,000 to an affiliate of the General Partners and to establish a working capital reserve for Partnership purposes. During the year ended December 31, 1995, the tenant of two Checkers Properties in Knoxville, Tennessee, and one Checkers Property in Leavenworth, Kansas, which consisted of land only, exercised its option in accordance with the lease agreements to substitute other Properties for these three Properties. The Partnership sold the two Properties in Knoxville, Tennessee, and the Property in Leavenworth, Kansas, and used the net sales proceeds to acquire two Checkers Properties, consisting of land only, located in Orlando and Bradenton, Florida. During the year ended December 31, 1996, the Partnership acquired a Property in Clinton, North Carolina, with affiliates of the General Partners as tenants-in-common. In addition, during the year ended December 31, 1996, Wood-Ridge Real Estate Joint Venture, a joint venture in which the Partnership is a co-venturer with an affiliate of the General Partners, sold its two Properties to the tenant. The joint venture reinvested the net sales proceeds in four Boston Market Properties (one of which consisted of only land) and one Golden Corral Property during 1996 and a Taco Bell Property in Anniston, Alabama during 1997. In addition, during 1998, the Partnership acquired a Property in Fort Myers, Florida, with an affiliate of the General Partners, as tenants-in-common. During the year ended December 31, 1999, the Partnership sold a Property in Gastonia, North Carolina and used a portion of the net sales proceeds to invest in a joint venture arrangement, Duluth Joint Venture, with affiliates of the General Partners, to construct and hold one Property. During the year ended December 31, 2000, the Partnership sold its interest in Duluth Joint Venture to an affiliate of the General Partners. In addition, during 2000, the Partnership sold a Property in Lexington, North Carolina and used the net sales proceeds to invest in a joint venture arrangement, TGIF Pittsburgh Joint Venture, with affiliates of the General Partners, to purchase and hold one Property. During the year ended December 31, 2001, the Partnership sold its Property in Greer, South Carolina and accepted a promissory note in the principal sum of $467,000 which the Partnership collected in its entirety during 2001. In addition, during 2001, the Partnership sold its Properties in Woodland Hills and Altadena, California. The Partnership used the net sales proceeds from the sales of these Properties, a portion of the net sales from the sale of the Property in Greer, South Carolina, and a portion of the amount received from the promissory note, to invest in a Property in Blue Springs, Missouri with CNL Income Fund XIII, Ltd., an affiliate of the General Partners as tenants-in-common and to invest in a Property in Houston, Texas. In addition, during 2001, Wood-Ridge Real Estate Joint Venture, in which the Partnership owns a 50% interest, sold its Property in Paris, Texas. The Partnership and the other joint venture partner each received $400,000 representing a return of capital from the net sales proceeds and used the proceeds to invest in a joint venture arrangement, CNL VII, XV Columbus Joint Venture, with an affiliate of the General Partners to construct and hold one Property. As a result of the above transactions, as of December 31, 2001, the Partnership owned 48 Properties. The Partnership owned 38 Properties directly which include 14 wholly owned Properties consisting of only land, and held interests in seven Properties owned by joint ventures in which the Partnership is a co-venturer and three Properties owned with affiliates as tenants-in-common. The lessee of the 14 wholly owned Properties consisting of only land owns the buildings currently on the land and has the right, if not in default under the leases, to remove the buildings from the land at the end of the lease terms. In February 2002, the Partnership sold its Property in Redlands, California to an unrelated third party. Generally, the Properties are generally leased 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 CNL American Properties Fund, Inc. ("APF") announced that they had mutually agreed to terminate the Agreement and Plan of Merger entered into in March 1999. 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 joint ventures, in which the Partnership is a co-venturer and the Properties owned with affiliates as tenants-in-common, provide for initial terms ranging from 10 to 20 years (the average being 18 years) and expire between 2009 and 2022. Generally, the leases are 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 $26,900 to $296,600. 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 or ninth 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 41 of the Partnership's 48 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. In addition, in August 1999, the lease relating to the Long John Silver's Property in Albuquerque, New Mexico was amended to provide rent deferrals. The rent deferrals were payable by the tenant beginning in August 2001. In April 2001, the Partnership invested a portion of the net sales proceeds from the sale of the Property in Greer, South Carolina and the net sales proceeds from the sale of the Property in Woodland Hills, California in a Property in Blue Springs, Missouri, as tenants-in-common with CNL Income Fund XIII, Ltd., to purchase and hold one restaurant Property. In August 2001, the Partnership invested in a joint venture arrangement, CNL VII, XV Columbus Joint Venture with CNL Income Fund VII, Ltd. to construct and hold one restaurant Property. Each of the CNL Income Funds is a Florida limited partnership and an affiliate of the General Partners. In December 2001, the Partnership invested a portion of the net sales proceeds from the sale of the Property in Greer, South Carolina and the proceeds from the sale of the Property in Altadena, California in a Property in Houston, Texas. The lease terms for these Properties are substantially the same as the Partnerships other leases, as described above. Major Tenants During 2001, three lessees of the Partnership, Flagstar Enterprises, Inc., Checkers Drive-In Restaurants, Inc., and Golden Corral Corporation, each contributed more than 10% of the Partnership's total rental, earned and mortgage interest income (including the Partnership's share of rental and earned income from Properties owned by joint ventures and Properties owned with affiliates as tenants-in-common). As of December 31, 2001, Flagstar Enterprises, Inc. was the lessee under leases relating to seven restaurants, Checkers Drive-In Restaurants, Inc. was the lessee under leases relating to 14 restaurants and Golden Corral Corporation was the lessee under leases relating to five restaurants. It is anticipated that, based on the minimum rental payments required by the leases, these three lessees each will continue to contribute more than 10% of the Partnership's total rental income in 2002. In addition, four Restaurant Chains, Hardee's, Checker's, Long John Silver's, and Golden Corral, each accounted for more than 10% of the Partnership's total rental income during 2001 (including the Partnership's share of rental income from Properties owned by joint ventures and Properties owned with affiliates as tenants-in-common). In 2002, it is anticipated that these four Restaurant chains each will continue to account for more than 10% of the total rental income to which the Partnership is entitled under the terms of the leases. Any failure of these lessees or Restaurant Chains could materially affect the Partnership's income if the Partnership is not able to re-lease the Properties in a timely manner. No single tenant or group of affiliated tenants lease Properties with an aggregate carrying value in excess of 20% of the total assets of the Partnership. Joint Venture and Tenancy in Common Arrangements In August 1994, the Partnership entered into a joint venture arrangement, Wood-Ridge Real Estate Joint Venture with CNL Income Fund XIV, Ltd., to purchase and hold two Properties. In September 1996, Wood-Ridge Real Estate Joint Venture sold its two Properties to the tenant and as of December 31, 1997, had reinvested the majority of the net sales proceeds in six replacement Properties. The joint venture distributed the remaining net sales proceeds to the Partnership and its co-venture partner on a pro rata basis during 1997. In addition, in December 1999, the Partnership entered into a joint venture arrangement, Duluth Joint Venture, with CNL Income Fund V, Ltd., CNL Income Fund VII, Ltd., and CNL Income Fund XIV, Ltd., to construct and hold one restaurant Property. In October 2000, the Partnership sold its 33% interest in Duluth Joint Venture, to CNL Income Fund VII, Ltd. In June 2000, the Partnership entered into a joint venture arrangement, TGIF Pittsburgh Joint Venture, with CNL Income Fund VII, Ltd., CNL Income Fund XVI, Ltd. and CNL Income Fund XVIII, Ltd. to purchase and hold one restaurant Property. In August 2001, the Partnership entered into a joint venture arrangement, CNL VII, XV Columbus Joint Venture, with CNL Income Fund VII, Ltd. Each of the CNL Income Funds 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 with the joint venture in accordance with their respective percentage interests in the joint venture. The Partnership holds a 50%, a 23.62% and a 31.25%interest in the profits and losses of Wood-Ridge Real Estate Joint Venture, TGIF Pittsburgh Joint Venture and CNL VII, XV Columbus Joint Venture, respectively. The Partnership and its joint venture partners are also jointly and severally liable for all debts, obligations and other liabilities of the joint ventures. Wood-Ridge Real Estate Joint Venture, TGIF Pittsburgh Joint Venture and CNL VII, XV Columbus Joint Venture each have an initial term of 30 years. After the expiration of the initial terms, each joint venture continues in existence from year to year unless terminated at the option of any of the joint venturers or 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, unless by mutual agreement of the Partnership and its joint venture partners to reinvest the sales proceeds in replacement Properties, and by mutual agreement of the Partnership and its joint venture partners to dissolve the joint venture. The Partnership shares management control equally with affiliates of the General Partners for Wood-Ridge Real Estate Joint Venture, TGIF Pittsburgh Joint Venture and CNL VII, XV Columbus Joint Venture. The joint venture agreements restrict each venturer's ability to sell, transfer or 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 the joint ventures is distributed to the partners in accordance with their respective percentage interests. 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 May 2001, Wood-Ridge Real Estate Joint Venture in which the Partnership owns a 50% interest, sold one of its Properties to the tenant in accordance with the purchase option under the lease agreement and distributed the net sales proceeds to each co-venturer as a return of capital. In addition to the above joint venture agreements, the Partnership entered into an agreement to hold a Golden Corral Property in Clinton, North Carolina, as tenants-in-common, with CNL Income Fund IV, Ltd., CNL Income Fund VI, Ltd., and CNL Income Fund X, Ltd., affiliates of the General Partners. In addition, the Partnership entered into an additional agreement to hold a Bennigan's Property in Fort Myers, Florida, as tenants-in-common, with CNL Income Fund VI, Ltd., an affiliate of the General Partners. The agreements provide for the Partnership and the affiliates to share in the profits and losses of the Property in proportion to each party's percentage interest. The Partnership owns a 16% and a 15% interest, respectively, in these Properties. In April 2001, the Partnership entered into an agreement to hold a Golden Corral Property in Blue Springs, Missouri, as tenants-in-common with CNL Income Fund XIII, Ltd., an affiliate of the General Partners. The agreement provides for the Partnership and the affiliate to share in the profits and losses of the Property in proportion to each co-tenants's percentage interest. The Partnership owns a 59% 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 party. The use of joint venture and tenancy in common arrangements allows the Partnership to fully invest its available funds at times at which it would not have sufficient funds to purchase an additional Property, or at times when a suitable opportunity to purchase an additional Property is not available. The use of joint venture and tenancy in common arrangements also provides the Partnership with increased diversification of its portfolio among a greater number of properties. In addition, tenancy in common arrangements may allow the Partnership to defer the gain for federal income tax purposes upon the sale of a 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 48 Properties. Of the 48 Properties, 38 are owned by the Partnership in fee simple, seven are owned through three 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 15,600 to 137,700 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 for the year ended December 31, 2001. State Number of Properties ----- -------------------- Alabama 1 California 1 Florida 10 Georgia 4 Kentucky 1 Minnesota 1 Mississippi 1 Missouri 2 New Jersey 1 New Mexico 1 North Carolina 4 Ohio 2 Oklahoma 2 Pennsylvania 3 South Carolina 4 Tennessee 4 Texas 4 Virginia 2 ------- TOTAL PROPERTIES 48 ======= 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 14 Checkers Properties owned by the Partnership are owned by the tenants. 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 2,100 to 11,000 square feet. All buildings on the 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. Depreciation expense is computed for buildings and improvements using the straight-line method using depreciable lives 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 the Properties owned through tenancy in common arrangements) for federal income tax purposes was $45,122,373 and $12,142,818, respectively. The following table lists the Properties owned by the Partnership as of December 31, 2001 by Restaurant Chain. Restaurant Chain Number of Properties ---------------- -------------------- Bennigan's 2 Boston Market 2 Checkers 14 Denny's 2 Golden Corral 5 Hardee's 7 Jack in the Box 2 Japan Express 1 Long John Silver's 6 Sonny's Bar-B-Q 1 TGI Fridays 1 Taco Bell 1 Taco Cabana 1 Wendy's 1 Other 2 ------- TOTAL PROPERTIES 48 ======= 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, and 1998, the Properties were 98%, 92%, 98% and 88% occupied, respectively. At December 31, 1997, all of the Properties were occupied. The following is a schedule of the average rent per Property for the years ended December 31:

(1) Rental income includes the Partnership's share of rental income from the Properties owned through a joint venture arrangement and the Properties owned through tenancy in common arrangements. Rental revenues have been adjusted, as applicable, for any amounts for which the Partnership has established an allowance for doubtful accounts. (2) Excludes Properties which were vacant and generated no rental income. 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 -- -- -- 2004 -- -- -- 2005 -- -- -- 2006 -- -- -- 2007 -- -- -- 2008 -- -- -- 2009 5 569,231 15.84% 2010 -- -- -- 2011 4 170,611 4.75% Thereafter 37 2,853,588 79.41% ------------ ---------------- ---------------- Total (1) 46 $ 3,593,430 100.00% ============ ================ ================ (1) Excludes one Property which was vacant at December 31, 2001 and one Property which was sold in February 2002. 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. Flagstar Enterprises, Inc. leases seven Hardee's restaurants. The initial term of each lease is 20 years (expiring in 2014) and the average minimum base annual rent is approximately $81,102 (ranging from approximately $62,900 to $99,514). Checkers Drive-In Restaurants, Inc. leases 14 Checkers Drive-In Restaurants ("Checkers"). The initial term of each of its leases is 20 years (expiring between 2014 and 2015) and the average minimum base annual rent is approximately $51,200 (ranging from approximately $26,900 to $75,400). The leases for the 14 Checkers Properties consist of only land. The tenant 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 term. Golden Corral Corporation leases five Golden Corral restaurants. The initial term of each lease is 15 years (expiring between 2009 and 2015) and the average minimum base annual rent is approximately $161,060 (ranging from approximately $88,000 to $228,500). Item 3. Legal Proceedings Neither the Partnership, nor 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. PART II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters (a) As of March 15, 2002 there were 2,703 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 $8.29 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.

(1) A total of 29,170 and 24,533 Units were transferred other than pursuant to the Plan for the years ended December 31, 2001 and 2000, respectively. The capital contribution per Unit was $10. All cash available for distribution will be distributed to the partners pursuant to the provisions of the Partnership Agreement. For each of the years ended December 31, 2001 and 2000, the Partnership declared cash distributions of $3,200,000 to the Limited Partners. Distributions of $800,000 were declared to the Limited Partners at the close of each of the Partnership's calendar quarters during 2001 and 2000. These amounts include monthly distributions made in arrears for the Limited Partners electing to receive such distributions on this basis. 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. The Partnership intends to continue to make distributions of cash available for distribution to the Limited Partners on a quarterly basis, although some Limited Partners, in accordance with their election, receive monthly distributions, for an annual fee. (b) Not applicable. Item 6. Selected Financial Data

(1) Revenues include equity in earnings of joint ventures. In addition, revenues for the year ended December 31, 1999, also includes lease termination income of $450,000 recognized by the Partnership in connection with consideration the Partnership received for releasing a former tenant from its obligation under the terms of its lease. (2) Net income for the years ended December 31, 2001 and 2000, includes $418,754 and $38,003, respectively, from gain on sale of assets. Net income for the year ended December 31, 1999, includes $165,503 from loss on sale of assets. Net income for the years ended December 31, 2001, 2000, 1999 and 1998 includes $512,523, $446,975, $258,995 and $531,538, respectively, from provision for write-down of assets. (3) Distributions for the year ended December 31, 1998, include a special distribution to the Limited Partners of $200,000 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 responsible for all repairs and maintenance, property taxes, insurance and utilities. As of December 31, 2001, the Partnership owned 38 Properties directly and held interests in ten Properties either through joint venture or tenancy in common arrangements. Capital Resources The Partnership's primary source of capital is cash from operations (which includes cash received from tenants, distributions from joint ventures and interest received, less cash paid for expenses). Cash from operations was $3,097,228, $3,325,920, and $2,943,295, 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 during 2000 as compared to 1999, was primarily a result of changes in income and expenses as described in "Results of Operations" below and changes in the Partnership's working capital. Other sources and uses of capital included the following during the years ended December 31, 2001, 2000 and 1999. In November 1999, the Partnership sold its Property in Gastonia, North Carolina to an unrelated third party for $672,630 and received net sales proceeds of $631,304, resulting in a loss of $165,503. 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 December 1999, the Partnership reinvested a portion of the net sales proceeds from the sale in a joint venture arrangement, Duluth Joint Venture, with CNL Income Fund V, Ltd., CNL Income Fund VII, Ltd., and CNL Income Fund XIV, Ltd., each of which is a Florida limited partnership and an affiliate of the General Partners, to construct and hold one restaurant Property. During 2000 and 1999, the Partnership contributed $252,591 and $357,441, respectively, to Duluth Joint Venture to pay for construction costs. In October 2000, the Partnership sold its 33% interest in Duluth Joint Venture, to CNL Income Fund VII, Ltd. for $610,032. The proceeds from the sale exceeded the basis of the interest in this joint venture resulting in a gain of $38,003, as described below in "Results of Operations." The Partnership distributed amounts sufficient to enable the Limited Partners to pay federal and state income taxes at a level reasonably assumed by the General Partners, resulting from the sale. In December 1999, the Partnership entered into a new lease with a new tenant for its Property in Mentor, Ohio, to operate the Property as a Bennigan's restaurant. In connection therewith, the Partnership committed to fund up to $749,500 for renovation costs, all of which had been incurred and paid as of December 31, 2000. The Partnership received $450,000 in consideration of the Partnership releasing the former tenant from its obligation under the terms of its lease. In January 2000, the Partnership sold its Property in Lexington, North Carolina, for $599,500 and received net sales proceeds of $562,130, resulting in a loss of $88,869, which the Partnership recorded at December 31, 1999, as described below in "Results of Operations." In June 2000, the Partnership used the net sales proceeds received from the sale of this Property to enter into a joint venture arrangement, TGIF Pittsburgh Joint Venture, with CNL Income Fund VII, Ltd., CNL Income Fund XVI, 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 in Homestead, Pennsylvania. As of December 31, 2001, the Partnership owned a 23.62% interest in the profits and losses of the joint venture. In April 2001, the Partnership sold its Property in Greer, South Carolina and received net sales proceeds of $700,000 (consisting of $233,000 in cash and $467,000 in the form of a promissory note) resulting in a loss of $288,684, which the Partnership had recorded as a provision for write-down of assets at March 31, 2001. The promissory note, collateralized by a mortgage on the Property, bore interest at a rate of 10% per annum. The Partnership collected the outstanding principal and interest during 2001. The Partnership used a portion of the net sales proceeds to acquire an interest in a Property in Blue Springs, Missouri, as described below. In addition, in April 2001, the Partnership sold its Property in Woodland Hills, California to an unrelated third party for approximately $1,292,200 and received net sales proceeds of approximately $1,253,700 resulting in a gain of approximately $246,700. The Partnership used the net sales proceeds to acquire an interest in a Property in Blue Springs, Missouri, as described below. In April 2001, the Partnership reinvested the net sales proceeds from the sale of the two Properties described above in a Property in Blue Springs, Missouri, as tenants-in-common with CNL Income Fund XIII, Ltd., ("CNL XIII") a Florida limited partnership and an affiliate of the General Partners. The Partnership and CNL XIII, as tenants-in-common, acquired this Property from CNL BB Corp., an affiliate of the General Partners. The affiliate had purchased and temporarily held title to the Property in order to facilitate the acquisition of the Property by the Partnership and CNL XIII, as tenants-in-common. The purchase price paid by the Partnership and CNL XIII, as tenants-in-common, represented the costs incurred by the affiliate to acquire the Property, including closing costs. As of December 31, 2001, the Partnership had contributed approximately $1,269,700 and owned a 59% interest in the profits and losses of the Property. The transaction relating to the sale of the Property in Woodland Hills, California and the reinvestment of the net sales proceeds was structured to qualify as a like-kind exchange transaction for federal income tax purposes. However, 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 May 2001, Wood-Ridge Real Estate Joint Venture, in which the Partnership owns a 50% interest, sold its Property in Paris, Texas to the tenant for $800,000, in accordance with the purchase option under the lease agreement. The sale resulted in a loss to the joint venture of approximately $84,500. In connection with the sale, the joint venture received $200,000 in lease termination income in consideration for the joint venture releasing the tenant from its obligations under the lease. As of December 31, 2001, the Partnership and the other joint venture partner had each received approximately $400,000 representing a return of capital from the net sales proceeds. In August 2001, the Partnership used a portion of the amounts received as a return of capital, as described above, to enter into a joint venture arrangement, CNL VII, XV Columbus Joint Venture, with CNL Income Fund VII, Ltd., a Florida limited partnership and affiliate of the General Partners, to construct one restaurant Property in Columbus, Georgia. As of December 31, 2001, the Partnership had contributed approximately $466,100 to purchase land and pay for its share of construction costs relating to the joint venture and has agreed to contribute additional amounts during 2002 for additional construction costs. As of December 31, 2001, the Partnership owned a 31.25% interest in the profits and losses of the joint venture. In October 2001, the Partnership sold its Property in Altadena, California for $976,200 and received sales proceeds of approximately $937,300 resulting in a gain of approximately $172,100. In December 2001, the Partnership reinvested the net sales proceeds received from the sale in a Property in Houston, Texas. The Partnership acquired this Property from CNL Funding 2001-A, LP, an affiliate of the General Partners. The transaction, or a portion thereof, relating to the sale of the Property and the reinvestment of the proceeds qualified as a like-kind exchange transaction for federal income tax 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. None of the Properties owned by the Partnership, or the joint ventures 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 3% of the aggregate adjusted tax basis of its Properties. 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. In February 2002, the Partnership sold its Property in Redlands, California to an unrelated third party. The Partnership intends to reinvest the net sales proceeds received in an additional Property. Currently, cash reserves, rental income from the Partnership's Properties and any 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 pay Partnership expenses, make distributions to partners or reinvest in additional Properties. At December 31, 2001, the Partnership had $1,364,847 invested in such short-term investments as compared to $1,360,947 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 3.1% annually. The funds remaining at December 31, 2001, after payment of distributions and other liabilities, will be used to meet the Partnership's working capital needs. Short-Term Liquidity The Partnership's short-term liquidity requirements consist primarily of the operating expenses of the Partnership. The Partnership's investment strategy of acquiring Properties for cash and leasing them under triple-net leases to operators who generally meet specified financial standards minimizes the Partnership's operating expenses. The General Partners believe that the leases will continue to generate cash flow in excess of operating expenses. Due to low operating expenses and ongoing cash flow, the General Partners believe that the Partnership has sufficient working capital reserves at this time. In addition, because substantially all 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 primarily on current and anticipated future cash from operations, the Partnership declared distributions to the Limited Partners of $3,200,000 for the years ended December 31, 2001, 2000 and 1999. This represents distributions of $0.80 for each of the years ended December 31, 2001, 2000 and 1999. No distributions were made to the General Partners for the years ended December 31, 2001, 2000, and 1999. No amounts distributed to the Limited Partners for the years ended December 31, 2001, 2000 or 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 the 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 $20,970 and $21,224, respectively, to related parties for 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 $910,747 at December 31, 2001, from $984,144 at December 31, 2000 primarily as a result of a decrease in accounts payable, deferred rental income, and rents paid in advance and deposits. The General Partners believe that the Partnership has sufficient cash on hand to meet its current working capital needs. Long-Term Liquidity The Partnership has no long-term debt or other long-term liquidity requirements. Critical Accounting Policies The Partnership's leases are accounted for under the provisions of Statement of Accounting Standard No. 13, "Accounting for Leases" ("FAS 13"), and have been accounted for using either the direct financing or the operating method. FAS 13 requires management to estimate the economic life of the leased property, the residual value of the leased property and the present value of minimum lease payments to be received from the tenant. In addition, management assumes that all payments to be received under its leases are collectible. Changes in management's estimates or assumption regarding collectibility of lease payments could result in a change in accounting for the lease at the inception of the lease. 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 its 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 The Partnership owned and leased 41 wholly owned Properties during 2001 and 2000 (including three Properties which were sold in 2001 and one Property which was sold in January 2000) and during 1999, the Partnership owned and leased 42 wholly owned properties (including one Property which was sold in November 1999). During 1999, the Partnership owned and leased two Properties with affiliates as tenants-in-common, was a co-venturer in one joint venture that owned and leased six Properties, and was a co-venturer in an additional joint venture that owned and leased one Property. During 2000, the Partnership sold its interest in one of its joint ventures that owned and leased one Property, and was a co-venturer in an additional joint venture that owned and leased one Property. During 2001, the Partnership owned and leased three Properties with affiliates as tenants-in-common, and was a co-venturer in an additional joint venture that owned and lease one Property. As of December 31, 2001, the Partnership owned, either directly or through joint venture or tenancy in common arrangements, 48 Properties, which are generally subject to long-term, triple-net leases. The leases of the Properties provide for minimum base annual rental payments (payable in monthly installments) ranging from approximately $26,900 to $296,600. 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 from the sixth or the ninth lease year), the annual base rent required under the terms of the lease will increase. For 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 $3,034,244, $3,285,081, and $3,206,290, respectively, in rental income from operating leases and earned income from direct financing leases from Properties wholly owned by the Partnership. Rental and earned income were impacted in each of the years presented due to the fact that in June 1998, Long John Silver's, Inc. filed for bankruptcy and rejected the leases relating to four of the eight Properties it leased. As a result, this tenant ceased making rental payments on the four rejected leases, causing a decrease in rental and earned income. The Partnership has continued receiving rental payments relating to the leases not rejected by the tenant. In May 1999, the Partnership re-leased one of the Properties with a rejected lease and rental payments commenced in July 1999 which caused an increase in rental and earned income during 2000. In each of November 1999 and January 2000, the Partnership sold one Property with a rejected lease to a third party. The Partnership will not recognize rental and earned income from the remaining Property until a new tenant is located or until the Property is sold and the proceeds from such sale are reinvested in an additional Property. In August 1999, Long John Silver's, Inc. assumed and affirmed its four remaining leases and the Partnership has continued to receive rental payments relating to these four leases. The decrease in rental and earned income during 2001, as compared to 2000, was partially due to the fact that during the year ended December 31, 2000, the Partnership received approximately $99,100 in bankruptcy proceeds relating to the Properties whose leases were rejected. The lost revenues resulting from the one remaining lease that was rejected, as described above, could have an adverse affect on the results of operations of the Partnership if the Partnership is unable to re-lease this Property in a timely manner. In addition, the decrease in rental and earned income during 2001, as compared to 2000, was partially due to the fact that the Partnership sold its Properties in Greer, South Carolina, and Woodland Hills and Altadena, California. The Partnership reinvested the proceeds from the sale of these Properties in a Property in Blue Springs, Missouri, as tenants-in-common with an affiliate of the General Partners and in a joint venture arrangement, CNL VII, XV Columbus Joint Venture with an affiliate of the General Partners. As a result of this reinvestment, rental and earned income are expected to remain at reduced amounts while equity in earnings of joint ventures is expected to increase. In addition, rental and earned income decreased during 2001 as compared to 2000, due to the fact that PRG, the tenant of one of the Partnership's Properties, experienced financial difficulties during 2000, ceased making rental payments to the Partnership, and in October 2001, filed for bankruptcy. As a result, the Partnership stopped recording rental revenue relating to this Property. The Partnership will not recognize any rental and earned income from this Property until the Property is re-leased or the Property is sold and the proceeds are reinvested in an additional Property. The General Partners are currently seeking a replacement tenant or purchaser for this Property. While the tenant has neither rejected or affirmed the lease, there can be no assurance that the lease will not be rejected in the future. The lost revenues resulting from the possible rejection of the lease could have an adverse effect on the results of operations of the Partnership, if the Partnership is not able to re-lease or sell the Property in a timely manner. The increase in rental and earned income during 2000, as compared to 1999, was partially offset by the fact that the Partnership established an allowance for doubtful accounts of approximately $25,700 for past due rental amounts relating to the Properties in Huntsville, Texas and Bartlesville, Oklahoma, in accordance with the Partnership's collection policy. The Partnership subsequently collected the amounts relating to the Property in Huntsville, Texas and recognized these amounts as income. The General Partners are continuing to pursue collection of the amounts related to the Property in Bartlesville, Oklahoma and will recognize such amounts as income if collected. No such allowance was recorded in 1999. In December 1999, the Partnership terminated the lease with the tenant of the Property in Mentor, Ohio. In connection therewith, during 1999, the Partnership received $450,000 as a lease termination fee from the former tenant in consideration for the Partnership releasing the tenant from its obligation under the terms of the lease. In December 1999, the Partnership re-leased the Property to a new tenant, and renovated the Property into a Bennigan's restaurant, as described above in "Capital Resources," for which rental payments commenced in May 2000. During the years ended December 31, 2001, 2000, and 1999, the Partnership also earned $23,529, $28,165, and $40,959, respectively, in contingent rental income. Contingent rental income decreased during 2001 and 2000, each as compared to the previous year, primarily as a result of a decrease in gross sales of certain restaurant Properties that are subject to leases requiring payment of contingent rent. In addition, for the years ended December 31, 2001, 2000 and 1999, the Partnership earned $435,239, $296,929, and $259,508, respectively, attributable to net income earned by joint ventures in which the Partnership is a co-venturer. 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 Partnership investing in a Property in Blue Springs, Missouri in April 2001 with an affiliate of the General Partners and in a Property in Homestead, Pennsylvania in June 2000, with an affiliate of the General Partners, as described above in "Capital Resources." The increase in net income earned by joint ventures during 2001 as compared to 2000 was also partially attributable to the Partnership investing in CNL VII, XV Columbus Joint Venture with an affiliate of the General Partners in August 2001. The increase in net income was partially offset due to the fact that in May 2001, Wood-Ridge Real Estate Joint Venture, in which the Partnership owns a 50% interest, sold its Property in Paris, Texas to the tenant for $800,000 in accordance with the purchase option under the lease agreement. This resulted in a loss to the joint venture of approximately $84,500. The increase in net income was also attributable to the fact that in conjunction with the sale of its Property in Paris, Texas, Wood-Ridge Real Estate Joint Venture received $200,000 in consideration for the Partnership releasing the tenant from its obligations under the lease. As of December 31, 2001, the Partnership and the other joint venture partner had each received $400,000 representing a return of capital from the net sales proceeds. The Partnership used these proceeds to invest in a joint venture arrangement, CNL VII, XV Columbus Joint Venture with an affiliate of the General Partners, as described above. During the year ended December 31, 2001, three lessees of the Partnership, Flagstar Enterprises, Inc., Checkers Drive-In Restaurants, Inc., and Golden Corral Corporation, each contributed more than 10% of the Partnership's total rental, earned and mortgage interest income (including the Partnership's share of rental and earned income from Properties owned by joint ventures and Properties owned with affiliates of the General Partners as tenants-in-common). As of December 31, 2001, Flagstar Enterprises, Inc. was the lessee under leases relating to seven restaurants, Checkers Drive-In Restaurants, Inc. was the lessee under leases relating to 14 restaurants, and Golden Corral Corporation was lessee under leases relating to five restaurants. It is anticipated that, based on the minimum rental payments required by the leases, these three lessees each will continue to contribute more than 10% of the Partnership's total rental income in 2002. In addition, during the year ended December 31, 2001, four Restaurant Chains, Hardee's, Checkers Drive-In Restaurants, Long John Silver's, and Golden Corral each accounted for more than 10% of the Partnership's total rental and earned income (including the Partnership's share of rental and earned income from Properties owned by joint ventures and Properties owned with affiliates of the General Partners as tenants-in-common). In 2002, it is anticipated that these four Restaurant chains each will continue to account for more than 10% of the total rental income to which the Partnership is entitled under the terms of the leases. Any failure of these lessees or Restaurant Chains could materially affect the Partnership's income if the Partnership is not able to re-lease the Properties in a timely manner. During the years ended December 31, 2001, 2000, and 1999 the Partnership earned $79,313, $95,923, and $41,969, respectively, in interest and other income. The decrease in interest and other income during 2001, as compared to 2000, was primarily attributable to the reinvestment of sales proceeds from the sale of Properties during 2000. The decrease during 2001 was partially offset by an increase in interest income related to the Partnership's sale of its Property in Greer, South Carolina, for which the Partnership accepted a promissory note, as described in "Capital Resources." The increase in interest and other income during 2000, as compared to 1999, was primarily attributable to interest income earned on the net sales proceeds relating to the 1999 and 2000 sales of Properties while pending reinvestment in additional Properties. Operating expenses, including depreciation and amortization expense and provision for write-down of assets were $1,350,888, $1,119,686, and $1,063,248, for the years ended December 31, 2001, 2000 and 1999, respectively. The increase in operating expenses during 2001, as compared to 2000, was primarily attributable to the Partnership recording a provision for write-down of assets, as described below. In addition, the increase during 2001, as compared to 2000, was partially attributable to an increase in costs incurred for administrative expenses for servicing the Partnership and its Properties, as permitted by the Partnership agreement. Operating expenses also increased during 2001, as compared to 2000, due to the fact that the Partnership recorded a provision for doubtful accounts of approximately $46,900 related to the Property in Bartlesville, Oklahoma, due to the fact that the tenant, PRG, experienced financial difficulties and filed for bankruptcy, as discussed above in "Capital Resources." The Partnership will pursue collection of these past due amounts. The Partnership also incurred insurance expense, maintenance expense, legal fee expense, and real estate taxes relating to this Property and the Property vacated by Long John Silver's as a result of this tenant filing bankruptcy in 1998. The Partnership will continue to incur such expenses, relating to these Properties until a replacement tenant or purchaser is located. In addition, the increase in operating expenses in 2000 was partially attributable to an increase in the state taxes incurred by the Partnership due to changes in the tax laws of a state in which the Partnership conducts its business. The increase in operating expenses during 2001 and 2000, each as compared to the previous year, was partially offset by, the Partnership incurring $45,089 and $195,622 during 2000 and 1999, respectively, in transaction costs related to the General Partners retaining financial and legal advisors to assist them in evaluating and negotiating the proposed and terminated merger with APF, as described in "Termination of Merger." No such expenses were incurred during the year ended December 31, 2001. In addition, the increase in operating expenses during 2000, as compared to 1999, was partially due to the Partnership recording a provision for write-down of assets, as described below. In addition, the increase in operating expenses during 2000 was partially due to an increase in depreciation expense resulting from the Partnership capitalizing $749,500 of renovation costs relating to the Property in Mentor, Ohio during 2000. During the quarter ended March 31, 2001, the Partnership recorded a provision for write-down of assets in the amount of $288,684 relating to the Property in Greer, South Carolina. The provision represented the difference between the carrying value of the Property at March 31, 2001 and the net sales proceeds received from the sale of the Property in April 2001, as described above in "Capital Resources." In addition, during the year ended December 31, 2001, the Partnership increased its provision for write-down of assets related to the Property in Bartlesville, Oklahoma by $223,839. PRG, the tenant, experienced financial difficulties and filed for bankruptcy, as described above. The provision represented the difference between the carrying value and the General Partners' estimated net realizable value at December 31, 2001. During the year ended December 31, 2000, the Partnership recorded a provision for write-down of assets in the amount of $446,975 relating to the Property in Medina, Ohio. The provision represented the difference between the carrying value of the Property and the General Partners' estimated net realizable value of the Property at December 31, 2000. In addition, during the year ended December 31, 2000, the Partnership recorded a provision for write-down of assets of $22,496 related to previously accrued rental income relating to the Property located in Huntsville, Texas due to financial difficulties the tenant experienced. The accrued rental income was the accumulated amount of non-cash accounting adjustments previously recorded in order to recognize future scheduled rent increases as income evenly over the term of the lease. The provision represented the difference between the carrying value of the Property, including the accumulated accrued rental income balance, and the General Partners' estimated net realizable value of the Property. During the year ended December 31, 1999, the Partnership recorded a provision for loss on assets of $83,897 relating to the Property in Lexington, North Carolina. The provision represented the difference between the carrying value of the Property at December 31, 1999, and the net sales proceeds received from the sale of the Property to a third party in January 2000. In addition, during the year ended December 31, 1999, the Partnership recorded a provision for write-down of assets of $175,098 related to previously accrued rental income relating to the Property located in Mentor, Ohio. The accrued rental income was the accumulated amount of non-cash accounting adjustments previously recorded in order to recognize future scheduled rent increases as income evenly over the term of the lease. The tenant of this Property, terminated the lease relating to this Property. The provision represented the difference between the carrying value of the Property, including the accumulated accrued rental income balance and the General Partners' estimated net realizable value of the Property. As a result of the sale of the Partnership's Properties in Woodland Hills and Altadena, California, the Partnership recognized a gain of $418,754 during the year ended December 31, 2001. As a result of the sale of the Partnership's interest in Duluth Joint Venture, the Partnership recognized a gain of $38,003 during the year ended December 31, 2000. As a result of the sale of the Property in Gastonia, North Carolina the Partnership recognized a loss of $165,503 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 on results of operations of the Partnership. Continued inflation also may cause capital appreciation of the Partnership's Properties. Inflation and changing prices, however, also may have an adverse impact on the sales of the restaurants and on potential capital appreciation of the Properties. In December 1999, the Securities and Exchange Commission released SAB 101, which provides the staff's view in applying generally accepted accounting principles to selected revenue recognition issues. SAB 101 requires the Partnership to defer recognition of certain percentage rental income until certain defined thresholds are met. The Partnership adopted SAB 101 beginning January 1, 2000. Implementation of SAB 101 did not have a material impact on the partnership's result 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 CNL INCOME FUND XV, LTD. (A Florida Limited Partnership) CONTENTS Page ---- Report of Independent Certified Public Accountants 20 Financial Statements: Balance Sheets 21 Statements of Income 22 Statements of Partners' Capital 23 Statements of Cash Flows 24-25 Notes to Financial Statements 26-43 Report of Independent Certified Public Accountants To the Partners CNL Income Fund XV, 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 XV, 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, 2001 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) presents 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, except for Note 11, as to which the date is February 14, 2002 CNL INCOME FUND XV, LTD. (A Florida Limited Partnership) BALANCE SHEETS

See accompanying notes to financial statements. CNL INCOME FUND XV, 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 XV, 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 generally on a triple-net basis, whereby the tenant is responsible for all operating expenses relating to the property, including property taxes, insurance, maintenance and repairs. The leases are accounted for using either the direct financing or the operating methods. Such methods are described below: Direct financing method - The leases accounted for using the direct financing method are recorded at their net investment (which at the inception of the lease generally represents the cost of the asset) (Note 4). Unearned income is deferred and amortized to income over the lease terms so as to produce a constant periodical 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. CNL INCOME FUND XV, 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. In contrast, deferred rental income represents the aggregate amount of scheduled rental payments to date (including rental payments due during construction and prior to the property being placed in service) in excess of income recognized on a straight-line basis over the lease term commencing on the date the property is placed in service. 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. CNL INCOME FUND XV, LTD. (A Florida Limited Partnership) NOTES TO FINANCIAL STATEMENTS - CONTINUED Years Ended December 31, 2001, 2000, and 1999 1. Significant Accounting Policies - Continued: ------------------------------------------- Investment in Joint Ventures - The Partnership accounts for its interests in Wood-Ridge Real Estate Joint Venture, TGIF Pittsburgh Joint Venture, CNL VII, XV Columbus Joint Venture, and properties in Clinton, North Carolina, Fort Myers, Florida, and Blue Springs, Missouri held as tenants-in-common with affiliates, using the equity method since the joint venture agreement requires the consent of all partners on all key decisions affecting the operations of the underlying property. Cash and Cash Equivalents - The Partnership considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. Cash and cash equivalents consist of demand deposits at commercial banks and money market funds (some of which are backed by government securities). Cash equivalents are stated at cost plus accrued interest, which approximates market value. Cash accounts maintained on behalf of the Partnership in demand deposits at commercial banks and money market funds may exceed federally insured levels; however, the Partnership has not experienced any losses in such accounts. Lease Costs - Other assets include lease incentive costs and brokerage and legal 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. CNL INCOME FUND XV, LTD. (A Florida Limited Partnership) NOTES TO FINANCIAL STATEMENTS - CONTINUED Years Ended December 31, 2001, 2000, and 1999 1. Significant Accounting Policies - Continued: ------------------------------------------- Use of Estimates - The general partners of the Partnership have made a number of estimates and assumptions relating to the reporting of assets and liabilities and the disclosure of contingent assets and liabilities to prepare these financial statements in conformity with generally accepted accounting principles. The more significant areas requiring the use of management estimates relate to the allowance for doubtful accounts and future cash flows associated with long-lived assets. Actual results could differ from those estimates. Reclassification - Certain items in the prior years' financial statements have been reclassified to conform to 2001 presentation. These reclassifications had no effect on partners' capital or net income. Staff Accounting Bulleting 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 result of operations. Statement of Financial Accounting Standard No. 141 ("FAS 141") and Statement of Financial Accounting Standard 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 Standard 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" (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 CNL INCOME FUND XV, LTD. (A Florida Limited Partnership) NOTES TO FINANCIAL STATEMENTS - CONTINUED Years Ended December 31, 2001, 2000, and 1999 1. Significant Accounting Policies - Continued: ------------------------------------------- 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." 2. Leases: ------ The Partnership leases its land or land and buildings 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 some leases classified as direct financing leases, the building portions of the property leases are accounted for as direct financing leases while the land portions of the majority of these leases are operating leases. The majority of the leases are for 15 to 20 years and provide for minimum and contingent rentals. In addition, the tenant generally 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 $ 14,236,528 $ 14,620,191 Buildings 9,789,456 9,758,133 ---------------- --------------- 24,025,984 24,378,324 Less accumulated depreciation (1,831,033) (1,659,134) ---------------- --------------- $ 22,194,951 $ 22,719,190 ================ =============== CNL INCOME FUND XV, 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 During the year ended December 31, 2001, the Partnership sold its property in Lexington, North Carolina for which the building was classified as a direct financing lease (see Note 4) for $599,500 and received net sales proceeds of $562,130. No gain or loss was recorded during 2000 due to the fact that the Partnership had previously recorded a provision for write-down of assets. During 2000, the Partnership established a provision for write-down of assets of $394,474 relating to the property in Medina, Ohio. The loss represented the difference between the carrying value of the property at December 31, 2000 and the general partners' estimated net realizable value for the property. In April 2001, the Partnership sold its property in Woodland Hills, California to an unrelated third party for approximately $1,292,200 and received net sales proceeds of approximately $1,253,700 resulting in a gain of approximately $246,700. In April 2001, the Partnership reinvested the net sales proceeds in a property in Blue Springs, Missouri as tenants-in-common with CNL Income Fund XIII, Ltd., an affiliate of the general partners (see Note 5). In addition, in October 2001, the Partnership sold its property in Altadena, California to an unrelated third party for $976,000 and received net sales proceeds of approximately $937,000 resulting in a gain of approximately $172,100. In December 2001, the Partnership reinvested the net sales proceeds plus a portion of the net sales proceeds from the sale of the property in Greer, South Carolina (see Note 4) in a Taco Cabana property in Houston, Texas. CNL INCOME FUND XV, 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 The following is a schedule of the future minimum lease payments to be received on noncancellable operating leases at December 31, 2001: 2002 $ 2,319,884 2003 2,335,799 2004 2,393,863 2005 2,522,417 2006 2,526,300 Thereafter 19,409,986 --------------- $ 31,508,249 =============== Since lease renewal periods are exercisable at the option of the tenant, the above table only presents future minimum lease payments due during the initial lease terms. In addition, this table does not include any amounts for future contingent rentals which may be received on the leases based on a percentage of the tenant's gross sales. 4. Net Investment in Direct Financing Leases: ----------------------------------------- The following lists the components of the net investment in direct financing leases at December 31: 2001 2000 ---------------- ---------------- Minimum lease payments receivable $ 8,590,810 $ 10,760,255 Estimated residual values 1,501,269 2,115,976 Less unearned income (5,286,481) (6,770,530) ---------------- ---------------- Net investment in direct financing leases $ 4,805,598 $ 6,105,701 ================ ================ CNL INCOME FUND XV, 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 - Continued: ----------------------------------------------------- The following is a schedule of future minimum lease payments to be received on direct financing leases at December 31, 2001: 2002 $ 661,894 2003 667,249 2004 667,249 2005 670,953 2006 678,361 Thereafter 5,245,104 --------------- --------------- $ 8,590,810 =============== The above table does not include future minimum lease payments for renewal periods or for contingent rental payments that may become due in future periods (see Note 3). In January 2000, the Partnership sold the property located in Lexington, North Carolina, 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 (see Note 3). During 2000, the Partnership established a provision for impairment in carrying value in the amount of $52,501 for its property in Bartlesville, Oklahoma. The provision represented the difference between the carrying value of the net investment in the direct financing lease and the estimated net realizable value of the investment in the direct financing lease at December 31, 2000. During 2001, the Partnership increased its provision by $223,839 due to the fact that the tenant of the property experienced financial difficulties and filed for bankruptcy in October 2001. The provision represented the difference between the carrying value of the property at December 31, 2001 and the general partners' estimated net realizable value for the property. CNL INCOME FUND XV, 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 - Continued: ----------------------------------------------------- In April 2001, the Partnership sold its property in Greer, South Carolina to the tenant and received net sales proceeds of $700,000 (consisting of $233,000 in cash and $467,000 in the form of a promissory note) resulting in a loss of $288,684 which the Partnership recorded as a provision for write-down of assets at March 31, 2001. The provision represented the difference between the carrying value of the net investment in the direct financing lease and the net sales proceeds received in April 2001. During the year ended December 31, 2001, the Partnership collected the entire amount due under the promissory note. 5. Investment in Joint Ventures: ---------------------------- The Partnership has a 50%, a 16% and a 15% interest in the profits and losses of Wood-Ridge Real Estate Joint Venture, a property in Clinton, North Carolina and a property in Fort Myers, Florida, held as tenants-in-common with affiliates of the general partners. The remaining interests in these joint ventures are held by affiliates of the Partnership, which have the same general partners. In December 1999, the Partnership entered into a joint venture arrangement, Duluth Joint Venture, with CNL Income Fund V, Ltd., CNL Income Fund VII, Ltd., and CNL Income Fund XIV, Ltd., each of which is a Florida limited partnership and an affiliate of the general partners, to construct and hold one restaurant property. The Partnership contributed $252,591 and $357,441 during 2000 and 1999, respectively, to Duluth Joint Venture to pay for construction costs. In October 2000, the Partnership sold its 33% interest to CNL Income Fund VII, Ltd. for $610,032 resulting in a gain of $38,003. In June 2000, the Partnership reinvested the net sales proceeds from the sale of its property in Lexington, North Carolina in a joint venture arrangement, TGIF Pittsburgh Joint Venture, with CNL Income Fund VII, Ltd., CNL Income Fund XVI, Ltd., and CNL Income Fund XVIII, Ltd., each of which is 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 23.62% interest in the profits and losses of the joint venture. CNL INCOME FUND XV, 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 April 2001, the Partnership used a portion of the net sales proceeds from the sale of its properties in Woodland Hills, California and Greer, South Carolina to acquire an interest in a Golden Corral property in Blue Springs, Missouri, as tenants-in-common, with CNL Income Fund XIII, Ltd., a Florida limited partnership, and an affiliate of the general partners. The Partnership acquired this interest from CNL BB Corp., an affiliate of the general partners (see Note 8). The Partnership contributed approximately $1,269,700 and as of December 31, 2001, the Partnership owned a 59% interest in this property. In May 2001, the Wood-Ridge Real Estate Joint Venture, in which the Partnership owns a 50% interest, sold its property in Paris, Texas to the tenant for $800,000, in accordance with the purchase option under the lease agreement. This resulted in a loss to the joint venture of approximately $84,500. In connection with the sale, the joint venture received $200,000 in lease termination income in consideration for the joint venture releasing the tenant from its obligations under the lease. As of December 31, 2001, the Partnership and the other joint venture partner each received approximately $400,000 representing a return of capital from the net sales proceeds. In August 2001, the Partnership used a portion of the amounts received as a return of capital, as described above, to enter into a joint venture arrangement, CNL VII, XV Columbus Joint Venture, with CNL Income Fund VII, Ltd., a Florida limited partnership and affiliate of the general partners, to construct one restaurant property in Columbus, Georgia. As of December 31, 2001, the Partnership had contributed approximately $466,120 to purchase land and pay for its share of construction costs relating to the joint venture and has agreed to contribute additional amounts during 2002 for additional construction costs. As of December 31, 2001, the Partnership owned a 31.25% interest in the profits and losses of the joint venture. CNL INCOME FUND XV, LTD. (A Florida Limited Partnership) NOTES TO FINANCIAL STATEMENTS - CONTINUED Years Ended December 31, 2001, 2000, and 1999 5. Investment in Joint Ventures - Continued: ---------------------------------------- Wood-Ridge Real Estate Joint Venture owns and leases five properties, TGIF Pittsburgh Joint Venture and CNL VII, XV Columbus Joint Venture, each own and lease one property to operators of national fast food or family-style restaurants. The Partnership and affiliates, as tenants-in-common in three separate tenancy-in-common arrangements, each own and lease one property to an operator of national fast food or family-style restaurants. The following presents the combined, condensed financial information for all of the Partnership's investments in joint ventures and properties held as tenants-in-common at December 31: 2001 2000 ------------- ------------- Land and buildings on operating leases, net $ 11,001,753 $ 8,336,028 Net investment in direct financing lease 793,308 805,673 Cash 115,891 107,284 Receivables 25,675 6,531 Other assets 15,426 17,451 Accrued rental income 341,059 251,902 Liabilities 184,716 44,218 Partners' capital 12,108,396 9,480,651 Revenues 1,227,630 984,548 Lease termination income 200,000 -- Loss on sale of assets (84,473) -- Net income 1,138,829 815,718 The Partnership recognized income totaling $435,249, $296,929, and $259,508, for the years ended December 31, 2001, 2000, and 1999, respectively, from these entities. 6. Allocations and Distributions: ----------------------------- From inception through December 31, 1999, generally, all net income and net 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, generally, 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 was subordinated to CNL INCOME FUND XV, LTD. (A Florida Limited Partnership) NOTES TO FINANCIAL STATEMENTS - CONTINUED Years Ended December 31, 2001, 2000, and 1999 6. Allocations and Distributions - Continued: ----------------------------------------- receipt by the limited partners of an aggregate, 8%, 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 sales 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 5% to the general partners. Any gain from a 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 5% 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 obligation of the Partnership, (iii), third, to pay all of the Partnership's liabilities, if any, to the general and limited partners, (iv) fourth, after allocations of net income, gains and/or losses, to the partners with positive capital account balances, in proportion to such balances, up to amounts sufficient to reduce such positive balances to zero, and (v) thereafter, any funds remaining shall then be distributed 95% to the limited partners and 5% 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. CNL INCOME FUND XV, LTD. (A Florida Limited Partnership) NOTES TO FINANCIAL STATEMENTS - CONTINUED Years Ended December 31, 2001, 2000, and 1999 6. Allocations and Distributions - Continued: ----------------------------------------- The Partnership declared distributions to the limited partners of $3,200,000, during each of the years ended December 31, 2001, 2000 and 1999. No distributions have been made to the general partners to date. 7. 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:

CNL INCOME FUND XV, LTD. (A Florida Limited Partnership) NOTES TO FINANCIAL STATEMENTS - CONTINUED Years Ended December 31, 2001, 2000, and 1999 8. 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 (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 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 agreed to pay the Advisor a 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 Advisor. 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 Advisor shall determine. The Partnership incurred management fees of $33,498, $35,870, and $33,430 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 3% 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 receipt by the limited partners of their aggregate Limited Partners' 8% Return plus their invested capital contributions. No deferred, subordinated real estate disposition fees have been incurred since inception. CNL INCOME FUND XV, LTD. (A Florida Limited Partnership) NOTES TO FINANCIAL STATEMENTS - CONTINUED Years Ended December 31, 2001, 2000, and 1999 8. Related Party Transactions - Continued: -------------------------------------- During the years ended December 31, 2001, 2000, and 1999, the Partnership's advisor and its affiliates of the general partners 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 $233,022, $102,104, and $126,857, for the years ended December 31, 2001, 2000, and 1999, respectively, for such services. In April 2001, the Partnership and CNL Income Fund XIII, Ltd., as tenants-in-common, acquired an interest in a Golden Corral property from CNL BB Corp., an affiliate of the general partners, for a purchase price of approximately $2,152,000 (see Note 5). CNL Income Fund XIII, Ltd., is a Florida limited partnership and an affiliate of the general partners. CNL BB Corp. had purchased and temporarily held title to this property in order to facilitate the acquisition of the property by the Partnership and CNL Income Fund XIII, Ltd., as tenants-in-common. The purchase price paid by the Partnership and CNL Income Fund XIII, Ltd., as tenants-in-common, represents the costs incurred by CNL BB Corp. to acquire and carry the property, including closing costs. In December 2001, the Partnership acquired a property located in Houston, Texas from CNL Funding 2001-A, LP, for a purchase price of approximately $1,445,200 (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, 2000, and 1999, totaled $20,970, $21,224, and $60,991, respectively. CNL INCOME FUND XV, LTD. (A Florida Limited Partnership) NOTES TO FINANCIAL STATEMENTS - CONTINUED Years Ended December 31, 2001, 2000, and 1999 9. Concentration of Credit Risk: ---------------------------- The following schedule presents total rental and earned income from individual lessees, each representing more than 10% of the Partnership's total rental and earned income (including the Partnership's share of total rental and earned income from joint ventures and the properties held as tenants-in-common with affiliates of the general partners) for each of the years ended December 31: 2001 2000 1999 ---------- ---------- ---------- Checkers Drive-In Restaurants, Inc. $ 717,759 $ 716,761 $ 717,964 Golden Corral Corporation 637,725 584,897 598,199 Flagstar Enterprises, Inc. 533,063 536,076 538,930 Jack in the Box Inc. (formerly Foodmaker, Inc.) N/A 417,426 417,559 In addition, the following schedule presents total rental and earned income from individual restaurant chains, each representing more than 10% of the Partnership's total rental and earned income (including the Partnership's share of total rental and earned income from joint ventures and the properties held as tenants-in-common with affiliates of the general partners) for each of the years ended December 31: 2001 2000 1999 ------------ ---------- --------- Checkers Drive-In Restaurants $ 717,758 $ 716,761 $ 717,964 Golden Corral Family Steakhouse Restaurants 637,725 584,897 598,199 Hardee's 533,063 536,076 538,930 Long John Silver's 396,422 392,709 407,021 Jack in the Box N/A 417,426 417,559 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 lessee or restaurant chain contributing more than ten percent of the Partnership's revenues 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. CNL INCOME FUND XV, LTD. (A Florida Limited Partnership) NOTES TO FINANCIAL STATEMENTS - CONTINUED Years Ended December 31, 2001, 2000, and 1999 9. Concentration of Credit Risk - Continued: ---------------------------------------- The information denoted by N/A indicates that for each period presented, the tenant or restaurant chain did not represent more than 10% of the Partnership's total rental and earned income. In January 2000, the Partnership sold a property, the lease of which had been rejected as a result of Long John Silver's, Inc. filing for bankruptcy in 1998. The Partnership will not recognize any rental and earned income from the remaining vacant Property until a new tenant is located or until the Property is sold and the proceeds from such sale are reinvested in an additional Property. The lost revenues resulting from the remaining rejected lease, as described above, could have an adverse affect on the results of operations of the Partnership if the Partnership is not able to re-lease this property in a timely manner. In August 1999, Long John Silver's, Inc. assumed and affirmed its remaining leases. 10. Selected Quarterly Financial Data: --------------------------------- The following table presents selected unaudited quarterly financial data for each full quarter during they years ended December 31, 2001 and 2000:

(1) Revenues include equity in earnings of joint ventures. (2) Revenues have been adjusted to reclassify any reversals of accrued rental income to provisions for write-down of assets. This reclassification had no effect on total net income. CNL INCOME FUND XV, LTD. (A Florida Limited Partnership) NOTES TO FINANCIAL STATEMENTS - CONTINUED Years Ended December 31, 2001, 2000, and 1999 11. Subsequent Event: ---------------- On February 14, 2002, the Partnership sold its property in Redlands, California for approximately $1,337,900 and received net sales proceeds of approximately $1,300,400 resulting in a gain of approximately $302,400 which will be recognized in the first quarter of 2002. 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. 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 5% 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. 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.

The Partnership, with CNL Income Fund XIII, Ltd., an affiliate of the General Partners, acquired an interest in a Golden Corral Property from CNL BB Corp., an affiliate of the General Partners, for a purchase price of $2,152,000. CNL BB Corp. had purchased and temporarily held title to this Property in order to facilitate the acquisition of the Property by the Partnership. The purchase price paid by the Partnership represents the costs incurred by CNL BB Corp. to acquire and carry the Property, including closing costs. The Partnership, acquired a Jack in the Box Property from CNL Funding 2001-A, LP, an affiliate of the General Partners, for a purchase price of $1,445,200. CNL Funding 2001-A, LP had purchased and temporarily held title to this Property in order to facilitate the acquisition of the Property by the Partnership. The purchase price paid by the Partnership represents the costs incurred by CNL Funding 2001-A, LP to acquire and carry the Property, including closing costs. 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 XV, Ltd. (Included as Exhibit 3.2 to Registration Statement No. 33-69968 on Form S-11 and incorporated herein by reference.) 4.1 Affidavit and Certificate of Limited Partnership of CNL Income Fund XV, Ltd. (Included as Exhibit 3.1 to Registration Statement No. 33-69968 on Form S-11 and incorporated herein by reference.) 4.2 Amended and Restated Agreement of Limited Partnership of CNL Income Fund XV, Ltd. (Included as Exhibit 4.2 to Form 10-K filed with the Securities and Exchange Commission on March 30,1995, incorporated herein by reference.) 10.1 Management Agreement between CNL Income Fund XV, 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 for Form 10-Q filed with the Securities and Exchange Commission on August 7, 2001 and incorporated herein be reference.) (b) The Registrant filed no reports on Form 8-K during the period October 1, 2001 through December 31, 2001. 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 20th day of March, 2002. CNL INCOME FUND XV, 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. 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.

CNL INCOME FUND XV, LTD. (A Florida Limited Partnership) SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS Years Ended December 31, 2001, 2000, and 1999

(a) deducted from receivables and accrued rental income on the balance sheet. (b) reduction of rental and other income. (c) amounts written off as uncollectible. CNL INCOME FUND XV, LTD. (A Florida Limited Partnership) SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION December 31, 2001

CNL INCOME FUND XV, LTD. (A Florida Limited Partnership) NOTES TO SCHEDUE 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:

(b) Depreciation expense is computed for buildings and improvements based upon estimated lives of 30 years. (c) As of December 31, 2001, the aggregate cost of the Properties owned by the Partnership and joint ventures for federal income tax purposes was $45,122,373 and $12,142,818, respectively. All of the leases are treated as operating leases for federal income tax purposes. (d) The building portion of this Property is owned by the tenant; therefore, depreciation is not applicable. (e) 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. (f) 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. (g) 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 the net investment in direct financing leases; therefore, depreciation is not applicable. CNL INCOME FUND XV, LTD. (A Florida Limited Partnership) NOTES TO SCHEDUE III - REAL ESTATE AND ACCUMULATED DEPRECIATION - CONTINUED December 31, 2001 (h) Effective June 11, 1998, the lease for this Property was terminated, resulting in the reclassification of the building portion of the lease to an operating lease. The building was recorded at net book value and depreciated over its remaining estimated life of approximately 26 years. The undepreciated cost of the Property in Medina, Ohio was written down to its estimated net realizable value due to an impairment in value. The Partnership recognized the impairments by recording a provision for write-down of assets in the amount of $394,474 in 2000. The impairment at December 31, 2000 represented the difference between the Property's carrying value and the estimated net realizable value of the Property at December 31, 2000. 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. (i) Effective December 9, 1999, the lease for this property was terminated resulting in the reclassification of the building portion of the lease to an operating lease. The building was recorded at net book value and depreciated over its remaining estimated life of approximately 25 years. (j) Effective October 1, 1999, the lease for this property was amended, resulting in the reclassification of the building portion of the lease to an operating lease. The building was recorded at net book value and depreciated over its remaining estimated life of approximately 25 years. (k) Effective June 11, 1998, the lease for this Property was terminated, resulting in the reclassification of the building portion of the lease to an operating lease. The building was recorded at net book value and depreciated over its remaining estimated life of approximately 26 years. The undepreciated cost of the Property in Lancaster, South Carolina was written down to its estimated net realizable value due to an impairment in value. The Partnership recognized the impairment during 1998, by recording a provision for write-down of assets in the amount of $108,410 and $167,526, respectively. The impairment represented the difference between the Property's carrying value and the estimated net realizable value of the Property at December 31, 1998. In May 1999, the Partnership re-leased the Property to a new tenant. In connection, the building portion of the lease was reclassified from an operating lease to a net investment in direct financing lease, based on the net carrying value of the building.

CNL INCOME FUND XV LTD 10-K