<PAGE>

                                 UNITED STATES
                      SECURITIES AND EXCHANGE COMMISSION
                           Washington, D. C. 20549
                                  FORM 10-K/A
                                Amendment No. 1
(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, 1998
                                          -------------------------

                                      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)

                             400 East South Street
                            Orlando, Florida 32801
         (Address of principal executive offices, including zip code)

      Registrant's telephone number, including area code: (407) 650-1000

          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
<PAGE>

     The Form 10-K of CNL Income Fund XV, Ltd. for the year ended December 31,
1998 is being amended to revise the disclosure under Item 1. Business, Item 2.
Properties, Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations and Item 8. Financial Statements and Supplementary
Data.


                                    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, totalled
$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 totalling $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 majority of the net sales proceeds in four Boston Market Properties (one of
which consisted of only land) and one Golden Corral Property.  During the year
ended December 31, 1997, Wood-Ridge Real Estate Joint Venture reinvested the
remaining proceeds from the sales of the two Properties in 1996, in a Taco Bell
Property in Anniston, Alabama.  In addition, during the year ended December 31,
1998, the Partnership acquired a Property in Fort Myers, Florida, with an
affiliate of the General Partners as tenants-in-common.  As a result of the
above transactions, as of December 31, 1998, the Partnership owned 50
Properties.  The 50 Properties include 14 wholly owned Properties consisting of
only land, six Properties owned by a joint venture in which the Partnership is a
co-venturer and two 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.
The Properties are leased on a triple-net basis with the lessees responsible for
all repairs and maintenance, property taxes, insurance and utilities.

     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. APF has agreed to issue shares of its
common stock, par value $0.01 per share (the "APF Shares"), as consideration for
the Merger. At a special meeting of the partners that is expected to be held in
the fourth quarter of 1999, Limited Partners holding in excess of 50% of the
Partnership's outstanding limited partnership interests must approve the

                                       2
<PAGE>

Merger prior to consummation of the transaction. If the Limited Partners at the
special meeting approve the Merger, APF will own the Properties and other assets
of the Partnership.

     In the event that the Limited Partners vote against the Merger, 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.

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 venture in which the Partnership is a co-venturer and the Properties
owned with affiliates as tenants-in-common, provide for initial terms ranging
from 15 to 20 years (the average being 19 years) and expire between 2009 and
2018.  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 $22,500 to
$190,600.  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.
Certain lessees 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 June 1998, October 1998 and January 1999, three tenants, Long John
Silvers, Inc., Finest Foodservice, LLP, and B.C. Superior, LLC, respectively,
filed for bankruptcy and rejected the leases relating to six of their ten leases
(including two Properties held by Wood-Ridge Real Estate Joint Venture) and
ceased making rental payments to the Partnership relating to those leases that
were rejected.  The Partnership will not recognize rental and earned income from
these six Properties until new tenants for these Properties are located or until
the Properties are sold and the proceeds from such sales are reinvested in
additional Properties.  As of March 11, 1999, the Partnership has continued
receiving rental payments on the Properties that have not been rejected.  While
Long John Silver's has not rejected or affirmed their remaining four leases,
there can be no assurance that some or all of the leases will not be rejected in
the future.  The lost revenues resulting from the six leases that were rejected,
as described above, and the possible rejection of the remaining four leases
could have an adverse effect on the results of operations of the Partnership if
the Partnership is unable to re-lease these Properties in a timely manner.  In
February 1999, the Partnership entered into a new lease for one of the six
Properties whose leases were rejected, with a new tenant. The lease terms for
this Property are substantially the same as the Partnership's other leases as
described above.  The General Partners are currently seeking either new tenants
or purchasers for the remaining five Properties.

Major Tenants

     During 1998, five lessees of the Partnership, Flagstar Enterprises, Inc.,
Checkers Drive-In Restaurants, Inc., Long John Silver's, Inc., Foodmaker, Inc.,
and Golden Corral Corporation, each contributed more than ten percent of the
Partnership's total rental income (including the Partnership's share of rental
income from six Properties owned by a joint venture and two Properties owned
with affiliates as tenants-in-common).  As of December 31, 1998, Flagstar
Enterprises, Inc. was the lessee under leases relating to eight restaurants,
Checkers Drive-In Restaurants, Inc. was the lessee under leases relating to 14
restaurants, Long John Silver's, Inc. was the lessee under leases relating to
four

                                       3
<PAGE>

restaurants (excluding four restaurants for which Long John Silver's rejected
the leases as a result of filing for bankruptcy as described above), Foodmaker,
Inc. was the lessee under leases relating to four 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,
Flagstar Enterprises, Inc., Checkers Drive-In Restaurants, Inc., Foodmaker,
Inc., and Golden Corral Corporation each will continue to contribute more than
ten percent of the Partnership's total rental income in 1999. In addition, five
Restaurant Chains, Hardee's, Checkers Drive-In Restaurants, Long John Silver's,
Golden Corral Family Steakhouse Restaurants ("Golden Corral") and Jack in the
Box, each accounted for more than ten percent of the Partnership's total rental
income during 1998 (including the Partnership's share of rental income from six
Properties owned by a joint venture and two Properties owned with affiliates as
tenants-in-common). In 1999, it is anticipated that Hardee's, Checkers Drive-In
Restaurants, Golden Corral, and Jack in the Box each will continue to account
for more than ten percent of the total rental income to which the Partnership is
entitled under the terms of the leases. Any failure of these lessees or
Restaurant Chains could materially affect the Partnership's income if the
Partnership is not able to re-lease the Properties in a timely manner, as
described above. No single tenant or group of affiliated tenants lease
Properties with an aggregate carrying value in excess of 20 percent of the total
assets of the Partnership.

Joint Venture and Tenancy in Common Arrangements

     In August 1994, the Partnership entered into a joint venture arrangement,
Wood-Ridge Real Estate Joint Venture with CNL Income Fund XIV, Ltd., an
affiliate of the General Partners to purchase and hold two Properties.  The
affiliate is a limited partnership organized pursuant to the laws of the State
of Florida.  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.  The joint venture
arrangement provides for the Partnership and its joint venture partner 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 has
a 50% interest in Wood-Ridge Real Estate Joint Venture.  The Partnership and its
joint venture partner are also jointly and severally liable for all debts,
obligations and other liabilities of the joint venture.

     Wood-Ridge Real Estate Joint Venture has an initial term of 30 years and,
after the expiration of the initial term, continues in existence from year to
year unless terminated at the option of either 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 agreed to by mutual agreement of the Partnership and its joint
venture partner to reinvest the sales proceeds in replacement Properties, and by
mutual agreement of the Partnership and its joint venture partner to dissolve
the joint venture.

     The Partnership shares management control equally with an affiliate of the
General Partners for Wood-Ridge Real Estate Joint Venture.  The joint venture
agreement restricts 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 Wood-Ridge Real Estate Joint Venture is
distributed 50 percent to each joint venture partner.  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 January 1996, the Partnership entered into an agreement to hold a Golden
Corral Property as tenants-in-common, with CNL Income Fund IV, Ltd., CNL Income
Fund VI, Ltd., and CNL Income Fund X, Ltd., each of which is an affiliate of the
General Partners.  The agreement provides for the Partnership and the affiliates
to share in the profits and losses of the Property in proportion to each co-
tenant's percentage interest.  The Partnership owns a 16 percent interest in
this Property.

                                       4
<PAGE>

     In June 1998, the Partnership entered into an agreement to hold a
Bennigan's Property as tenants-in-common, with CNL Income Fund VI, 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-tenant's percentage interest.  The Partnership owns a 15
percent interest in this Property.

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

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

Certain Management Services

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

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

Employees

     The Partnership has no employees.  The officers of CNL Realty Corporation
and the officers and employees of CNL Fund Advisors, Inc. perform certain
services for the Partnership.  In addition, the General Partners have available
to them the resources and expertise of the officers and employees of CNL 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, 1998, the Partnership owned 50 Properties.  Of the 50
Properties, 42 are owned by the Partnership in fee simple, six are owned through
one joint venture arrangement and two are owned through tenancy in common
arrangements.  See Item 1. Business - Joint Venture and Tenancy in Common
Arrangements.  The Partnership is not permitted to encumber its Properties under
the terms of its partnership agreement.  Reference is made to the Schedule of
Real Estate and Accumulated Depreciation for a listing of the Properties and
their respective costs, including acquisition fees and certain acquisition
expenses.  This schedule was filed with the Partnership's Form 10-K for the year
ended December 31, 1998.

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.

                                       5
<PAGE>

     The following table lists the Properties owned by the Partnership as of
December 31, 1998 by state.  More detailed information regarding the location of
the Properties is contained in the Schedule of Real Estate and Accumulated
Depreciation filed with the Partnership's Form 10-K for the year ended December
31, 1998.

<TABLE>
<CAPTION>
         State                                  Number of Properties
         -----                                  --------------------
         <S>                                    <C>
         Alabama                                          1
         California                                       3
         Florida                                         10
         Georgia                                          4
         Kentucky                                         1
         Minnesota                                        1
         Missouri                                         1
         Mississippi                                      1
         North Carolina                                   6
         New Jersey                                       1
         New Mexico                                       1
         Ohio                                             2
         Oklahoma                                         2
         Pennsylvania                                     2
         South Carolina                                   5
         Tennessee                                        4
         Texas                                            4
         Virginia                                         1
                                                    --------
         TOTAL PROPERTIES:                               50
                                                    ========
</TABLE>

     Buildings.  Each of the Properties owned by the Partnership includes a
building that is one of a Restaurant Chain's approved designs.  However, the
buildings located on the 14 Checkers Properties owned by the Partnership and one
Boston Market Property owned by Wood-Ridge Real Estate Joint Venture 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 1,500 to 11,000
square feet.  All buildings on Properties are freestanding and surrounded by
paved parking areas.  Buildings are suitable for conversion to various uses,
although modifications may be required prior to use for other than restaurant
operations.  As of December 31, 1998, the Partnership had no plans for
renovation of the Properties.  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, 1998, 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 $32,521,622 and $6,778,303, respectively.

                                       6
<PAGE>

     The following table lists the Properties owned by the Partnership as of
December 31, 1998 by Restaurant Chain.

<TABLE>
<CAPTION>
         Restaurant Chain                                  Number of Properties
         ----------------                                  --------------------
         <S>                                               <C>
         Bennigan's                                                    1
         Boston Market                                                 4
         Checkers                                                     14
         Denny's                                                       2
         East Side Mario's                                             1
         Golden Corral                                                 5
         Hardee's                                                      7
         Jack in the Box                                               4
         Long John Silver's                                            9
         Quincy's                                                      1
         Taco Bell                                                     1
         Wendy's                                                       1
                                                                ---------
         TOTAL PROPERTIES:                                            50
                                                                =========
</TABLE>

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

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

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

     At December 31, 1998, 88% of the Properties were occupied.  At December 31,
1997, 1996, 1995 and 1994, all of the properties were occupied.  The following
is a schedule of the average annual rent for each of the five years ended
December 31:

<TABLE>
<CAPTION>
                                                               For the Year Ended December 31:
                                 1998                 1997                 1996                 1995                 1994
                             ---------------      ---------------      ---------------      ---------------      ---------------
   <S>                       <C>                  <C>                  <C>                  <C>                  <C>
   Rental Income (1)            $3,461,756           $3,906,700           $3,905,897           $3,838,766           $1,140,187
   Properties                           50                   49                   48                   44                   43
   Average per Unit             $   69,235           $   79,729           $   81,373           $   87,245           $   26,516
</TABLE>

(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.

                                       7
<PAGE>

     The following is a schedule of lease expirations for leases in place as of
December 31, 1998 for each of the ten years beginning with 1999 and thereafter.

<TABLE>
<CAPTION>
                                                                                                          Percentage of
                                               Number                     Annual Rental                    Gross Annual
             Expiration Year                  of Leases                      Revenues                     Rental Income
         ----------------------          ------------------             ------------------            ---------------------
         <S>                             <C>                            <C>                           <C>
                  1999                            --                             --                               --
                  2000                            --                             --                               --
                  2001                            --                             --                               --
                  2002                            --                             --                               --
                  2003                            --                             --                               --
                  2004                            --                             --                               --
                  2005                            --                             --                               --
                  2006                            --                             --                               --
                  2007                            --                             --                               --
                  2008                            --                             --                               --
               Thereafter                         45                      3,416,232                           100.00%
                                           ---------                    -----------                       ----------
               Totals (1)                         45                      3,416,232                           100.00%
                                           =========                    ===========                       ==========
</TABLE>

(1)  Excludes five Properties which were vacant at December 31, 1998.

     Leases with Major Tenants.  The terms of each of the leases with the
Partnership's major tenants as of December 31, 1998 (see Item 1.  Business -
Major Tenants), are substantially the same as those described in Item 1.
Business - Leases.

     Flagstar Corporation leases seven Hardee's restaurants.  The initial term
of each lease is 20 years (expiring between 2013 and 2014) and the average
minimum base annual rent is approximately $73,800 (ranging from approximately
$62,900 to $87,800).

     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
$42,900 (ranging from approximately $22,500 to $63,100).  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.

     Long John Silver's, Inc. leases four Long John Silver's restaurants
(excluding four other Properties which were rejected by this tenant as described
above in Item 1. Business -- Leases) with an initial term of 20 years (expiring
in 2014) and the average minimum base annual rent is approximately $74,400
(ranging from approximately $60,400 to $92,900).

     Foodmaker, Inc. leases four Jack in the Box restaurants.  The initial term
of each lease is 18 years (expiring in 2012) and the average minimum base annual
rent is approximately $91,100 (ranging from approximately $71,000 to $102,200).

     In addition, Golden Corral Corporation leases five Golden Corral
restaurants.  The initial term of each lease is 15 years (expiring between 2009
and 2011) and the average minimum base annual rent is approximately $136,900
(ranging from approximately $88,000 to $190,600).

Competition

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

                                       8
<PAGE>

                                    PART II

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

     The Partnership was organized on September 2, 1993, to acquire for cash,
either directly or through joint venture arrangements, both newly constructed
and existing restaurant Properties, as well as land upon which restaurant
Properties were to be constructed, which are leased primarily to operators of
selected national and regional fast-food and family-style Restaurant Chains.
The leases are generally triple-net leases, with the lessees responsible for all
repairs and maintenance, property taxes, insurance and utilities.  As of
December 31, 1998, the Partnership owned 50 Properties, either directly or
through joint venture or tenancy in common arrangements.

Capital Resources

     Currently, the Partnership's primary source of capital is cash from
operations (which includes cash received from tenants, distributions from joint
ventures and interest received, less cash paid for expenses).  Cash from
operations was $3,216,728, $3,306,595 and $3,434,682 for the years ended
December 31, 1998, 1997 and 1996, respectively.  The decrease in cash from
operations during 1998, as compared to 1997, and the decrease during 1997, as
compared to 1996, is primarily a result of changes in income and expenses as
described in "Results of Operations" below and changes in the Partnership's
working capital.

     In January 1996, the Partnership invested in a Golden Corral Property
located in Clinton, North Carolina, with affiliates of the General Partners as
tenants-in-common.  In connection therewith, the Partnership and its affiliates
entered into an agreement whereby each co-venturer will share in the profits and
losses of the Property in proportion to its applicable percentage interest.  As
of December 31, 1998, the Partnership owned a 16 percent interest in this
Property.

     In September 1996, Wood-Ridge Real Estate Joint Venture, a joint venture in
which the Partnership owns a 50 percent interest, sold its two Properties to the
tenant for $5,020,878 and received net sales proceeds of $5,001,180, resulting
in a gain  to the  joint  venture  of  approximately  $261,100  for financial
reporting purposes. These Properties were originally acquired by Wood-Ridge Real
Estate Joint Venture in September 1994 and had a combined total cost of
approximately $4,302,500, excluding acquisition fees and miscellaneous
acquisition expenses; therefore, the joint venture sold these Properties for
approximately $698,700 in excess of their original purchase price.  In October
1996, Wood-Ridge Real Estate Joint Venture reinvested $4,404,046 of the net
sales proceeds in five Properties.  In January 1997, the joint venture
reinvested $502,598 of the remaining net sales proceeds in an additional
Property.  As of December 31, 1998, the Partnership had received approximately
$52,000, representing its pro-rata share of the uninvested net sales proceeds.

     In June 1998, the Partnership invested in a Bennigan's Property located in
Fort Myers, Florida, with an affiliate of the General Partners as tenants-in-
common.  In connection therewith, the Partnership and its affiliate entered into
an agreement whereby each co-venturer will share in the profits and losses of
the Property in proportion to its applicable percentage interest.  As of
December 31, 1998, the Partnership owned a 15 percent interest in this Property.

     None of the Properties owned by the Partnership, or the joint venture or
tenancy in common arrangements in which the Partnership owns an interest, is or
may be encumbered.  Subject to certain restrictions on borrowing, however, the
Partnership may borrow funds but will not encumber any of the Properties in
connection with any such borrowing.  The Partnership will not borrow for the
purpose of returning capital to the Limited Partners.  The Partnership will not
borrow under arrangements that would make the Limited Partners liable to
creditors of the Partnership.  The General Partners further have represented
that they will use their reasonable efforts to structure any borrowing so that
it will not constitute "acquisition indebtedness" for federal income tax
purposes and also will limit the Partnership's outstanding indebtedness to three
percent of the aggregate adjusted tax basis of its Properties.  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.

                                       9
<PAGE>

     Currently, cash reserves and rental income from the Partnership's
Properties and net sales proceeds from the sale of Properties, pending
reinvestment in additional Properties, are invested in money market accounts or
other short-term, highly liquid investments such as demand deposit accounts at
commercial banks, CDs and money market accounts with less than a 30-day maturity
date, pending the Partnership's use of such funds to pay Partnership expenses or
make distributions to partners.  At December 31, 1998, the Partnership had
$1,214,444 invested in such short-term investments as compared to $1,614,708 at
December 31, 1997.  The decrease in cash and cash equivalents during 1998, is
primarily due to the fact that in June 1998 the Partnership invested in a
Bennigan's Property as tenants-in-common with an affiliate of the General
Partners and due to the fact that the Partnership declared and paid a special
distribution of cumulative excess operating reserves to the Limited Partners of
$200,000 during 1998.  As of December 31, 1998, the average interest rate earned
on the rental income deposited in demand deposit accounts at commercial banks
was approximately three percent annually.  The funds remaining at December 31,
1998, after payment of distributions and other liabilities, will be used to meet
the Partnership's working capital and other needs.

Short-Term Liquidity

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

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

     Due to low operating expenses and ongoing cash flow, the General Partners
believe that the Partnership has sufficient working capital reserves at this
time.  In addition, because 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
on cash from operations and for the years ended December 31, 1998 and 1996,
cumulative operating reserves, the Partnership declared distributions to the
Limited Partners of $3,400,000, $3,200,000 and $3,280,000 for the years ended
December 31, 1998, 1997 and 1996, respectively. This represents distributions of
$0.85, $0.80, and $0.82 per Unit for the years ended December 31, 1998, 1997 and
1996, respectively. No amounts distributed or to be distributed to the Limited
Partners for the years ended December 31, 1998, 1997 or 1996 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 1998, 1997 and 1996, the affiliates incurred on behalf of the
Partnership $98,978, $78,821 and $86,714, respectively, for certain operating
expenses.  As of December 31, 1998 and 1997, the Partnership owed $23,337 and
$4,311, respectively, to related parties for such amounts, accounting and
administrative services and management fees.  As of March 11, 1999, the
Partnership had reimbursed the affiliates all such amounts.  Other liabilities,
including distributions payable, increased to $869,817 at December 31, 1998,
from $818,009 at December 31, 1997, primarily as a result of an increase in
rents paid in advance at December 31, 1998.  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.

                                       10
<PAGE>

Results of Operations

     The Partnership owned and leased 42 wholly owned Properties during 1996,
1997, and 1998.  In addition, during 1996, the Partnership was a co-venturer in
one joint venture that owned and leased seven Properties (including two
Properties in Wood-Ridge Real Estate Joint Venture, which were sold in September
1996) and the Partnership owned and leased one Property with affiliates, as
tenants-in-common.  During 1997, the Partnership was a co-venturer in one joint
venture that owned and leased six Properties and owned and leased one Property
with affiliates as tenants-in-common.  During 1998, the Partnership owned and
leased one additional Property with an affiliate as tenants-in-common.  As of
December 31, 1998, the Partnership owned, either directly or through joint
venture arrangements, 50 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
$22,500 to $190,600.  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, 1998, 1997 and 1996, the Partnership
earned $3,130,205, $3,586,791, and $3,596,466, respectively, in rental income
from operating leases (net of adjustments to accrued rental income) and earned
income from direct financing leases from Properties wholly owned by the
Partnership.  The decrease in rental and earned income during 1998, as compared
to 1997, is primarily due to a decrease in rental and earned income of
approximately $197,700 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 leased by Long John Silver's, Inc.  As a result, this tenant ceased
making rental payments on the four rejected leases.  The Partnership has
continued receiving rental payments relating to the leases not rejected by the
tenant.  In conjunction with the four rejected leases, during the year ended
December 31, 1998, the Partnership wrote off approximately $250,600 of accrued
rental income (non-cash accounting adjustment relating to the straight-lining of
future scheduled rent increases over the lease term in accordance with generally
accepted accounting principles).  The General Partners are currently seeking
either new tenants or purchasers for these Properties.  The Partnership will not
recognize rental and earned income from these Properties until new tenants for
these Properties are located or until the Properties are sold and the proceeds
from such sales are reinvested in additional Properties.  While Long John
Silver's, Inc. has not rejected or affirmed the remaining four leases, there can
be no assurance that some or all of the leases will not be rejected in the
future.  The lost revenues resulting from the four leases that were rejected, as
described above, and the possible rejection of the remaining four leases could
have an adverse effect on the results of operations of the Partnership if the
Partnership is unable to re-lease these Properties in a timely manner.

     During the years ended December 31, 1998, 1997 and 1996, the Partnership
also earned $41,463, $25,791, and $23,318, respectively, in contingent rental
income.  Contingent rental income for the year ended December 31, 1998, as
compared to 1997, increased primarily as a result of increased gross sales of
certain restaurant Properties that are subject to leases requiring payment of
contingent rental income.

     In addition, for the years ended December 31, 1998, 1997 and 1996, the
Partnership earned $236,553, $239,249 and $392,862, respectively, attributable
to net income earned by joint ventures in which the Partnership is a co-
venturer.  The decrease in net income earned by joint ventures during 1997, as
compared to 1996, is primarily attributable to the fact that in September 1996,
Wood-Ridge Real Estate Joint Venture, in which the Partnership owns a 50 percent
interest, recognized a gain of approximately $261,100 for financial reporting
purposes as a result of the sale of its Properties in September 1996, as
described above in "Capital Resources."  The joint venture reinvested the
majority of the net sales proceeds in five Properties in October 1996 and one
Property in January 1997, therefore, the sale of the two Properties did not have
a material adverse effect on operations.

     During the year ended December 31, 1998, five lessees of the Partnership,
Flagstar Enterprises, Inc., Checkers Drive-In Restaurants, Inc., Long John
Silver's, Inc., Foodmaker, Inc. and Golden Corral Corporation, each contributed
more than ten percent of the Partnership's total rental income (including the
Partnership's share of rental income from six Properties owned by a joint
venture and two Properties owned with affiliates as tenants-in-common).  As of
December 31, 1998, Flagstar Enterprises, Inc. was the lessee under leases
relating to eight restaurants, Checkers Drive-

                                       11
<PAGE>

In Restaurants, Inc. was the lessee under leases relating to 14 restaurants,
Long John Silver's, Inc. was the lessee under leases relating to four
restaurants (excluding the four leases rejected by the tenant as described
above), Foodmaker, Inc. was the lessee under leases relating to four 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, Flagstar Enterprises, Inc., Checkers Drive-In
Restaurants, Foodmaker, Inc., and Golden Corral Corporation each will continue
to contribute more than ten percent of the Partnership's total rental income in
1999. In addition, during the year ended December 31, 1998, five Restaurant
Chains, Hardee's, Checkers Drive-In Restaurants, Long John Silver's, Golden
Corral and Jack in the Box, each accounted for more than ten percent of the
Partnership's total rental income (including the Partnership's share of rental
income from six Properties owned by a joint venture and two Properties owned
with affiliates as tenants-in-common). In 1999, it is anticipated that Hardee's,
Checker's Drive-In Restaurants, Golden Corral and Jack in the Box each will
continue to account for more than ten percent of the total rental income to
which the Partnership is entitled under the terms of the leases. Any failure of
these lessees or Restaurant Chains could materially affect the Partnership's
income if the Partnership is not able to re-lease the Properties in a timely
manner.

     Operating expenses, including depreciation and amortization expense, were
$547,636, $473,109, and $483,551 for the years ended December 31, 1998, 1997 and
1996, respectively.  The increase in operating expenses during 1998, as compared
to 1997, is partially attributable to the fact that the Partnership accrued
insurance and real estate taxes as a result of Long John Silver's, Inc. filing
for bankruptcy and rejecting the leases relating to four Properties in June
1998.  In addition, the increase in operating expenses during the year ended
December 31, 1998, is partially attributable to an increase in depreciation
expense due to the fact that during the year ended December 31, 1998, the
Partnership reclassified these assets from net investment in direct financing
leases to land and buildings on operating leases.  The Partnership will continue
to incur certain expenses, such as real estate taxes, insurance and maintenance
relating to these Properties with rejected leases until replacement tenants or
purchasers are located.  The Partnership is currently seeking either replacement
tenants or purchasers for these Properties.

     The increase in operating expenses for 1998, is also partially due to the
fact that the Partnership incurred $23,196 in transaction costs related to the
General Partners retaining financial and legal advisors to assist them in
evaluating and negotiating the proposed Merger with APF, as described below.  If
the Limited Partners reject the Merger, the Partnership will bear the portion of
the transaction costs based upon the percentage of "For" votes and the General
Partners will bear the portion of such transaction costs based upon the
percentage of "Against" votes and abstentions.  The decrease in operating
expenses during 1997, as compared to 1996, is primarily attributable to a
decrease in accounting and administrative expenses associated with operating the
Partnership and its Properties.

     During the year ended December 31, 1998, the Partnership established an
allowance for loss on land and buildings of $280,907 for financial reporting
purposes relating to two of the four Long John Silver's Properties whose leases
were rejected by the tenant, as described above.  The loss represents the
difference between the carrying value of the Properties at December 31, 1998 and
the current estimated net realizable value for these Properties.  No such
allowance was established during the years ended December 31, 1997 and 1996.

     The Partnership's leases as of December 31, 1998, are triple-net leases and
contain provisions that the General Partners believe mitigate the adverse effect
of inflation.  Such provisions include clauses requiring the payment of
percentage rent based on certain restaurant sales above a specified level and/or
automatic increases in base rent at specified times during the term of the
lease.  Management expects that increases in restaurant sales volumes due to
inflation and real sales growth should result in an increase in rental income
over time.  Continued inflation also may cause capital appreciation of the
Partnership's Properties.  Inflation and changing prices, however, also may have
an adverse impact on the sales of the restaurants and on potential capital
appreciation of the Properties.

Proposed 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.  As consideration for the Merger, APF has agreed to issue
3,733,901 APF Shares.  In order to assist the General Partners in evaluating the
proposed merger consideration, the General Partners retained Valuation
Associates, a nationally recognized real estate appraisal firm, to appraise the
Partnership's restaurant property portfolio.  Based on Valuation Associates'
appraisal, the fair value of the Partnership's property portfolio and other was
$36,726,950 as of December 31, 1998.  The APF Shares are

                                       12
<PAGE>

expected to be listed for trading on the New York Stock Exchange concurrently
with the consummation of the Merger, and, therefore, would be freely tradable at
the option of the former Limited Partners. At a special meeting of the Limited
Partners that is expected to be held in the fourth quarter of 1999, Limited
Partners holding in excess of 50% of the Partnership's outstanding limited
partnership interests must approve the Merger prior to consummation of the
transaction. If the Limited Partners at the special meeting approve the Merger,
APF will own the Properties and other assets of the Partnership. The General
Partners intend to recommend that the Limited Partners of the Partnership
approve the Merger. In connection with their recommendation, the General
Partners will solicit the consent of the Limited Partners at the special
meeting.

Year 2000 Readiness Disclosure

Overview of Year 2000 Problem

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

Information and Non-Information Technology Systems

     The Partnership does not have any information or non-information technology
systems.  The General Partners and their affiliates provide all services
requiring the use of information and non-information technology systems pursuant
to a management agreement with the Partnership.  The information technology
system of the General Partners' affiliates consists of a network of personal
computers and servers built using hardware and software from mainstream
suppliers.  The non-information technology systems of the affiliates are
primarily facility related and include building security systems, elevators,
fire suppressions, HVAC, electrical systems and other utilities.  The affiliates
have no internally generated programmed software coding to correct, because
substantially all of the software utilized by the affiliates is purchased or
licensed from external providers.  The maintenance of non-information technology
systems at the Partnership's restaurant properties is the responsibility of the
tenants of such properties in accordance with the terms of the Partnership's
leases.

The Y2K Team

     In early 1998, the General Partners and their affiliates formed a Year 2000
committee (the "Y2K Team") for the purpose of identifying, understanding and
addressing the various issues associated with the year 2000 problem.  The Y2K
Team consists of the General Partners and members from their affiliates,
including representatives from senior management, information systems,
telecommunications, legal, office management, accounting and property
management.

Assessing Year 2000 Readiness

     The Y2K Team's initial step in assessing year 2000 readiness consists of
identifying any systems that are date-sensitive and, accordingly, could have
potential year 2000 problems.  The Y2K Team has conducted inspections,
interviews and tests to identify which of the systems used by the Partnership
could have a potential year 2000 problem.

     The information system of the General Partners' affiliates is comprised of
hardware and software applications from mainstream suppliers.  Accordingly, the
Y2K Team has contacted and is evaluating documentation from the respective
vendors and manufacturers to verify the year 2000 compliance of their products.
The Y2K Team has also requested and is evaluating documentation from the non-
information technology systems providers of the affiliates.

     In addition, the Y2K Team has requested and is evaluating documentation
from other companies with which the Partnership has material third party
relationships. Such third parties, in addition to the providers of information
and non-information technology systems, consist of the Partnership's transfer
agent and financial

                                       13
<PAGE>

institutions. The Partnership depends on its transfer agent to maintain and
track investor information and its financial institutions for availability of
cash.

     As of September 15, 1999, the Y2K Team had received responses from
approximately 60% of the third parties.  All of the responses were in writing.
Of the third parties responding, all indicated that they are currently year 2000
compliant or will be year 2000 compliant prior to the year 2000.  Although the
Y2K Team continues to receive positive responses from the companies with which
the Partnership has third party relationships regarding their year 2000
compliance, the General Partners cannot be assured that the third parties have
adequately considered the impact of the year 2000.

     In addition, the Y2K Team has requested documentation from the
Partnership's tenants. The Y2K Team is in the process of evaluating the
responses and expects to complete this process by October 31, 1999. The
Partnership has also instituted a policy of requiring any new tenants to
indicate that their systems are year 2000 compliant or are expected to be year
2000 compliant prior to the year 2000.

Achieving Year 2000 Compliance

     The Y2K Team has identified and completed upgrades of the hardware
equipment that was not year 2000 compliant. In addition, the Y2K Team has
identified and completed upgrades of the software applications that were not
year 2000 compliant, although the General Partners cannot be assured that the
upgrade solutions provided by the vendors have addressed all possible year 2000
issues.

     The cost for these upgrades and other remedial measures is the
responsibility of the General Partners and their affiliates. The General
Partners do not expect that the Partnership will incur any costs in connection
with year 2000 remedial measures.

Assessing the Risks to the Partnership of Non-Compliance and Developing
Contingency Plans

Risk of Failure of Information and Non-Information Technology Systems Used by
the Partnership

     The General Partners believe that the reasonably likely worst case scenario
with regard to the information and non-information technology systems used by
the Partnership is the failure of one or more of these systems as a result of
year 2000 problems.  Because the Partnership's major source of income is rental
payments under long-term triple-net leases, any failure of information or non-
information technology systems used by the Partnership is not expected to have a
material impact on the results of operations of the Partnership.  Even if such
systems failed, the payment of rent under the Partnership's leases would not be
affected.  In addition, the Y2K Team is expected to correct any Y2K problems
within the control of the General Partners and their affiliates before the year
2000.

     The Y2K Team has determined that a contingency plan to address this risk is
not necessary at this time.  However, if the Y2K Team identifies additional
risks associated with the year 2000 compliance of the information or non-
information technology systems used by the Partnership, the Y2K Team will
develop a contingency plan if deemed necessary at that time.

Risk of Inability of Transfer Agent to Accurately Maintain Partnership Records

     The General Partners believe that the reasonably likely worst case scenario
with regard to the Partnership's transfer agent is that the transfer agent will
fail to achieve year 2000 compliance of its systems and will not be able to
accurately maintain the records of the Partnership.  This could result in the
inability of the Partnership to accurately identify its Limited Partners for
purposes of distributions, delivery of disclosure materials and transfer of
units.  The Y2K Team has received certification from the Partnership's transfer
agent of its year 2000 compliance.  Despite the positive response from the
transfer agent, the General Partners cannot be assured that the transfer agent
has addressed all possible year 2000 issues.

     The Y2K Team has developed a contingency plan pursuant to which the General
Partners and their affiliates would maintain the records of the Partnership
manually, in the event that the systems of the transfer agent

                                       14
<PAGE>

are not year 2000 compliant. The General Partners and their affiliates would
have to allocate resources to internally perform the functions of the transfer
agent. The General Partners do not anticipate that the additional cost of these
resources would have a material impact on the results of operations of the
Partnership.

Risk of Loss of Short-Term Liquidity from Failure of Financial Institutions to
Achieve Year 2000 Compliance

     The General Partners believe that the reasonably likely worst case scenario
with regard to the Partnership's financial institutions is that some or all of
its funds on deposit with such financial institutions may be temporarily
unavailable.  The Y2K Team has received responses from 93% of the Partnership's
financial institutions indicating that their systems are currently year 2000
compliant or are expected to be year 2000 compliant prior to the year 2000.
Despite the positive responses from the financial institutions, the General
Partners cannot be assured that the financial institutions have addressed all
possible year 2000 issues.  The loss of short-term liquidity could affect the
Partnership's ability to pay its expenses on a current basis.  The General
Partners do not anticipate that a loss of short-term liquidity would have a
material impact on the results of operations of the Partnership.

     Based upon the responses received from the Partnership's financial
institutions and the inability of the Y2K Team to identify a suitable
alternative for the deposit of funds that is not subject to potential year 2000
problems, the Y2K Team has determined not to develop a contingency plan to
address this risk.

Risks of Late Payment or Non-Payment of Rent by Tenants

     The General Partners believe that the reasonably likely worst case scenario
with regard to the Partnership's tenants is that some of the tenants may make
rental payments late as the result of the failure of the tenants to achieve year
2000 compliance of their systems used in the payment of rent, the failure of the
tenant's financial institutions to achieve year 2000 compliance, or the
temporary disruption of the tenants' businesses.  The Y2K Team is in the process
of requesting responses from the Partnership's tenants indicating the extent to
which their systems are currently year 2000 compliant or are expected to be year
2000 compliant prior to the year 2000.  The General Partners cannot be assured
that the tenants have addressed all possible year 2000 issues.  The late payment
of rent by one or more tenants would affect the results of operations of the
Partnership in the short-term.

     The General Partners are also aware of predictions that the year 2000
problem, if uncorrected, may result in a global economic crisis.  The General
Partners are not able to determine if such predictions are true.  A widespread
disruption of the economy could affect the ability of the Partnership's tenants
to pay rent and, accordingly, could have a material impact on the results of
operations of the Partnership.

     Because payment of rent is under the control of the Partnership's tenants,
the Y2K Team is not able to develop a contingency plan to address these risks.
In the event of late payment or non-payment of rent, the General Partners will
assess the remedies available to the Partnership under its lease agreements.

Item 8.  Financial Statements and Supplementary Data

                                       15
<PAGE>

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

                                   CONTENTS
                                   --------
<TABLE>
<CAPTION>
                                                   Page
                                                   ----
<S>                                                 <C>
Report of Independent Accountants                    17

Financial Statements:

Balance Sheets                                       18

Statements of Income                                 19

Statements of Partners' Capital                      20

Statements of Cash Flows                             21

Notes to Financial Statements                        23
</TABLE>

                                       16
<PAGE>

                       Report of Independent Accountants
                       ---------------------------------



To the Partners
CNL Income Fund XV, Ltd.


In our opinion, the financial statements listed in the index appearing under
item 14(a)(1) present fairly, in all material respects, the financial position
of CNL Income Fund XV, Ltd. (a Florida limited partnership) at December 31, 1998
and 1997, and the results of its operations and its cash flows for each of the
three years in the period ended December 31, 1998 in conformity with generally
accepted accounting principles.  In addition, in our opinion, the financial
statement schedule 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 the financial statement schedule are the responsibility of the Partnership's
management; our responsibility is to express an opinion on these financial
statements and the financial statement schedule based on our audits.  We
conducted our audits of these statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation.  We believe that our
audits provide a reasonable basis for the opinion expressed above.



/s/ PricewaterhouseCoopers LLP

Orlando, Florida
January 27, 1999, except for the second paragraph of Note 10 for which the date
is March 11, 1999.

                                       17
<PAGE>

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

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

<TABLE>
<CAPTION>
                                                                            December 31,
                                                                    1998                      1997
                                                            ------------------         ------------------
                   ASSETS
                   ------
<S>                                                         <C>                        <C>
Land and buildings on operating leases, less
   accumulated depreciation and allowance
   for loss on land and building                                   $23,173,909               $22,145,138
Net investment in direct financing leases                            7,589,694                 9,264,307
Investment in joint ventures                                         2,743,450                 2,561,816
Cash and cash equivalents                                            1,214,444                 1,614,708
Receivables, less allowance for doubtful
   accounts of $849 in 1998                                             62,465                    26,888
Prepaid expenses                                                         9,627                     7,633
Organization costs, less accumulated
   amortization of $9,549 and $7,548                                       451                     2,452
Accrued rental income                                                1,565,014                 1,422,781
                                                            ------------------         -----------------

                                                                   $36,359,054               $37,045,723
                                                            ==================         =================

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

Accounts payable                                                   $       592               $     6,991
Accrued and escrowed real estate
   taxes payable                                                        16,019                     6,158
Distributions payable                                                  800,000                   800,000
Due to related parties                                                  23,337                     4,311
Rents paid in advance                                                   53,206                     4,860
                                                            ------------------         -----------------
       Total liabilities                                               893,154                   822,320

Partners' capital                                                   35,465,900                36,223,403
                                                            ------------------         -----------------

                                                                   $36,359,054               $37,045,723
                                                            ==================         =================
</TABLE>

                                       18
<PAGE>

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

                             STATEMENTS OF INCOME
                             --------------------
<TABLE>
<CAPTION>
                                                                                 Year Ended December 31,
                                                                1998                       1997                      1996
                                                         ----------------           ----------------          ----------------
<S>                                                      <C>                        <C>                       <C>
Revenues:
 Rental income from operating leases                           $2,443,550                 $2,527,261                $2,527,261
 Adjustments to accrued rental income                            (250,631)                        --                        --
 Earned income from direct
   financing leases                                               937,286                  1,059,530                 1,069,205
 Contingent rental income                                          41,463                     25,791                    23,318
 Interest and other income                                         62,819                     56,183                    55,964
                                                         ----------------           ----------------          ----------------
                                                                3,234,487                  3,668,765                 3,675,748
                                                         ----------------           ----------------          ----------------
Expenses:
 General operating and administrative                             137,794                    135,714                   149,388
 Professional services                                             26,208                     24,526                    19,881
 Management fees to related parties                                33,990                     35,321                    35,126
 Real estate taxes                                                 16,797                         --                        --
 State and other taxes                                             27,763                     29,200                    30,924
 Depreciation and amortization                                    281,888                    248,348                   248,232
 Transaction costs                                                 23,196                         --                        --
                                                         ----------------           ----------------          ----------------
                                                                  547,636                    473,109                   483,551
                                                         ----------------           ----------------          ----------------
Income Before Equity in Earnings
 of Joint Ventures and Provision for
 Loss on Land and Buildings                                     2,686,851                  3,195,656                 3,192,197

Equity in Earnings of Joint Ventures                              236,553                    239,249                   392,862

Provision for Loss on Land and Buildings                         (280,907)                        --                        --
                                                         ----------------           ----------------          ----------------

Net Income                                                     $2,642,497                 $3,434,905                $3,585,059
                                                         ================           ================          ================

Allocation of Net Income:
 General partners                                              $   28,218                 $   34,349                $   35,851
 Limited partners                                               2,614,279                  3,400,556                 3,549,208
                                                         ----------------           ----------------          ----------------

                                                               $2,642,497                 $3,434,905                $3,585,059
                                                         ================           ================          ================

Net Income Per Limited Partner Unit                            $     0.65                 $     0.85                $     0.89
                                                         ================           ================          ================

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

                See accompanying notes to financial statements.

                                       19
<PAGE>

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

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

                 Years Ended December 31, 1998, 1997 and 1996


<TABLE>
<CAPTION>
                                   General Partners                            Limited Partners
                             --------------------------    ----------------------------------------------------------
                                            Accumulated                                   Accumulated    Syndication
                             Contributions   Earnings      Contributions  Distributions     Earnings        Costs        Total
                             -------------  -----------    -------------  -------------   ------------  ------------  ------------
<S>                          <C>            <C>            <C>            <C>             <C>           <C>           <C>
Balance, December 31, 1995          $1,000     $ 46,211      $40,000,000   $ (4,085,947)   $ 4,512,175   $(4,790,000)  $35,683,439

 Distributions to limited
   partners ($0.82 per
   limited partner unit)                --           --               --     (3,280,000)            --            --    (3,280,000)
 Net income                             --       35,851               --             --      3,549,208            --     3,585,059
                             -------------  -----------    -------------  -------------   ------------  ------------  ------------

Balance, December 31, 1996           1,000       82,062       40,000,000     (7,365,947)     8,061,383    (4,790,000)   35,988,498

 Distributions to limited
   partners ($0.80 per
   limited partner unit)                --           --               --     (3,200,000)            --            --    (3,200,000)
 Net income                             --       34,349               --             --      3,400,556            --     3,434,905
                             -------------  -----------    -------------  -------------   ------------  ------------  ------------

Balance, December 31, 1997           1,000      116,411       40,000,000    (10,565,947)    11,461,939    (4,790,000)   36,223,403

 Distributions to limited
   partners ($0.85 per
   limited partner unit)                --           --               --     (3,400,000)            --            --    (3,400,000)
 Net income                             --       28,218               --             --      2,614,279            --     2,642,497
                             -------------  -----------    -------------  -------------   ------------  ------------  ------------

Balance, December 31, 1998          $1,000     $144,629      $40,000,000   $(13,965,947)   $14,076,218   $(4,790,000)  $35,465,900
                             =============  ===========    =============  =============   ============  ============  ============
</TABLE>

                See accompanying notes to financial statements.

                                       20
<PAGE>

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

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


<TABLE>
<CAPTION>
                                                                                   Year Ended December 31,
                                                                       1998                   1997                    1996
                                                                   ------------           ------------            -------------
<S>                                                                <C>                    <C>                     <C>
Increase (Decrease) in Cash and Cash Equivalents:

Cash Flows from Operating Activities:
     Cash received from tenants                                     $ 3,143,119             $ 3,228,741             $ 3,378,973
     Distributions from joint ventures                                  271,075                 249,318                 259,407
     Cash paid for expenses                                            (252,042)               (218,106)               (246,748)
     Interest received                                                   54,576                  46,642                  43,050
                                                                   ------------           -------------           -------------
       Net cash provided by operating activities                      3,216,728               3,306,595               3,434,682
                                                                   ------------           -------------           -------------

   Cash Flows from Investing Activities:
     Investment in joint ventures                                      (216,992)                     --                (129,939)
     Return of capital from joint venture                                    --                  51,950                      --
                                                                   ------------           -------------           -------------
       Net cash provided by (used in) investing
         activities                                                    (216,992)                 51,950                (129,939)
                                                                   ------------           -------------           -------------

   Cash Flows from Financing Activities:
     Distributions to limited partners                               (3,400,000)             (3,280,000)             (3,200,000)
                                                                   ------------           -------------           -------------
         Net cash used in financing activities                       (3,400,000)             (3,280,000)             (3,200,000)
                                                                   ------------           -------------           -------------

Net Increase (Decrease) in Cash and Cash Equivalents                   (400,264)                 78,545                 104,743

Cash and Cash Equivalents at Beginning of Year                        1,614,708               1,536,163               1,431,420
                                                                   ------------           -------------           -------------

Cash and Cash Equivalents at End of Year                            $ 1,214,444             $ 1,614,708             $ 1,536,163
                                                                   ============           =============           =============
</TABLE>

                See accompanying notes to financial statements.

                                       21
<PAGE>

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

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

<TABLE>
<CAPTION>
                                                                                  Year Ended December 31,
                                                                    1998                    1997                     1996
                                                            ------------------      ------------------       ------------------
<S>                                                         <C>                     <C>                      <C>
Reconciliation of Net Income to Net Cash Provided by
 Operating Activities:

   Net income                                                $       2,642,497       $       3,434,905        $       3,585,059
                                                            ------------------      ------------------       ------------------
   Adjustments to reconcile net income to net cash
     provided by operating activities:
       Depreciation                                                    279,051                 245,563                  245,563
       Amortization                                                      2,837                   2,785                    2,669
       Equity in earnings of joint ventures, net of
         distributions                                                  34,522                  10,069                 (133,455)
       Provision for loss on land and buildings                        280,907                      --                       --
       Decrease (increase) in receivables                              (33,427)                  3,288                   58,013
       Decrease in net investment in direct
         financing leases                                               85,884                  87,508                   77,834
       Increase in prepaid expenses                                     (1,994)                   (584)                  (4,234)
       Increase in accrued rental income                              (142,233)               (431,079)                (431,654)
       Increase in accounts payable and accrued
         expenses                                                        3,462                   1,515                    1,972
       Increase (decrease) in due to related parties                    16,876                   2,956                   (6,880)
       Increase (decrease) in rents paid in
         advance                                                        48,346                 (50,331)                  39,795
                                                            ------------------      ------------------       ------------------
          Total adjustments                                            574,231                (128,310)                (150,377)
                                                            ------------------      ------------------       ------------------

Net Cash Provided by Operating Activities                    $       3,216,728       $       3,306,595        $       3,434,682
                                                            ==================      ==================       ==================

Supplemental Schedule of Non-Cash Financing
Activities:

 Distributions declared and unpaid at December 31            $         800,000       $         800,000        $         880,000
                                                            ==================      ==================       ==================
</TABLE>


                See accompanying notes to financial statements.

                                       22
<PAGE>

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

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

                 Years Ended December 31, 1998, 1997, and 1996


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

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

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

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

                                       23
<PAGE>

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

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

                 Years Ended December 31, 1998, 1997, and 1996


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

          Accrued rental income represents the aggregate amount of income
          recognized on a straight-line basis in excess of scheduled rental
          payments to date. Whenever a tenant defaults under the terms of its
          lease, or events or changes in circumstance indicate that the tenant
          will not lease the property through the end of the lease term, the
          Partnership either reserves or writes-off 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 change could occur in
     the near term which could adversely affect the general partners' best
     estimate of net cash flows expected to be generated from its properties and
     the need for asset impairment write downs.

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

     Investment in Joint Ventures - The Partnership accounts for its interests
     ----------------------------
     in Wood-Ridge Real Estate Joint Venture and properties in Clinton, North
     Carolina and Fort Myers, Florida, held as tenants-in-common with
     affiliates, using the equity method since the Partnership shares control
     with affiliates which have the same general partners.

     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.

                                       24
<PAGE>

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

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

                 Years Ended December 31, 1998, 1997, and 1996


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

     Cash accounts maintained on behalf of the Partnership in demand deposits at
     commercial banks and money market funds may exceed federally insured
     levels; however, the Partnership has not experienced any losses in such
     accounts.  The Partnership limits investment of temporary cash investments
     to financial institutions with high credit standing; therefore, the
     Partnership believes it is not exposed to any significant credit risk on
     cash and cash equivalents.

     Organization Costs - Organization costs were amortized over five years
     ------------------
     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.

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

2.   Leases:
     ------

     The Partnership leases its land or land and buildings primarily to
     operators of national and regional fast-food and family-style restaurants.
     The leases are accounted for under the provisions of Statement of Financial
     Accounting Standards No. 13, "Accounting for Leases."  Some of the leases
     are classified as operating leases and some of the leases are classified as
     direct financing leases. For the leases classified as direct financing
     leases, the building portions of the property leases are accounted for as
     direct financing leases while the land portions of the majority of these
     leases are operating leases.  Substantially all leases are for 15 to 20
     years and provide for minimum and contingent rentals. In addition,
     generally the tenant pays all property taxes and assessments, fully
     maintains the interior and

                                       25
<PAGE>

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

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

                 Years Ended December 31, 1998, 1997, and 1996


2.   Leases - Continued:
     ------------------

     exterior of the building and carries insurance coverage for public
     liability, property damage,   property damage, fire and extended coverage.
     The lease options generally allow tenants to renew the leases for two to
     five successive five-year periods subject to the same terms and conditions
     as the initial lease.  Most leases also allow the tenant to purchase the
     property at fair market value after a specified portion of the lease has
     elapsed.

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

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

<TABLE>
<CAPTION>
                                                          1998                   1997
                                                   ---------------        ---------------
            <S>                                      <C>                    <C>
            Land                                       $15,579,852            $15,579,852
            Buildings                                    8,955,616              7,366,887
                                                   ---------------        ---------------
                                                        24,535,468             22,946,739

            Less accumulated depreciation               (1,080,652)              (801,601)
                                                   ---------------        ---------------
                                                        23,454,816             22,145,138

            Less allowance for loss on
                land and buildings                        (280,907)                    --
                                                   ---------------        ---------------
                                                       $23,173,909            $22,145,138
                                                   ===============        ===============
</TABLE>

     During the year ended December 31, 1998, the Partnership established an
     allowance for loss on land and buildings of $280,907 for financial
     reporting purposes relating to two of the four Long John Silver's
     properties whose leases were rejected by the tenant as a result of the
     tenant filing for bankruptcy.  The loss represents the difference between
     the carrying value of the properties at December 31, 1998 and the current
     estimated net realizable value for these properties.

     Generally, the leases provide for escalating guaranteed minimum rents
     throughout the lease term.  Income from these scheduled rent increases is
     recognized on a straight-line basis over the terms of the leases.  For the
     years ended December 31, 1998, 1997 and 1996, the Partnership recognized
     $142,233 (net of $250,631 in write-offs), $431,079, and $431,654,
     respectively, of such rental income.

                                       26
<PAGE>

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

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

                 Years Ended December 31, 1998, 1997, and 1996


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, 1998:

<TABLE>
          <S>                                                              <C>
          1999                                                             $ 2,079,263
          2000                                                               2,205,272
          2001                                                               2,208,745
          2002                                                               2,239,958
          2003                                                               2,255,872
          Thereafter                                                        24,476,132
                                                                      -----------------

                                                                           $35,465,242
                                                                      =================
</TABLE>

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

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

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

<TABLE>
<CAPTION>
                                                         1998                 1997
                                                 -----------------     ----------------

          <S>                                   <C>                    <C>
          Minimum lease payments receivable           $ 15,275,632         $ 19,905,444
          Estimated residual values                      2,460,656            2,873,859
          Less unearned income                         (10,146,594)         (13,514,996)
                                                 -----------------     ----------------

          Net investment in direct financing
           leases                                     $  7,589,694         $  9,264,307
                                                 =================     ================
</TABLE>

                                       27
<PAGE>

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

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

                 Years Ended December 31, 1998, 1997, and 1996


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, 1998:

<TABLE>
          <S>                                     <C>
          1999                                     $       922,497
          2000                                             925,241
          2001                                             930,728
          2002                                             953,085
          2003                                             958,440
          Thereafter                                    10,585,641
                                                  -----------------

                                                   $    15,275,632
                                                  =================
</TABLE>

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

     During the year ended December 31, 1998, four of the eight leases with Long
     John Silver's, Inc. were rejected in connection with the tenant filing for
     bankruptcy.  As a result, the Partnership reclassified these assets from
     net investment in direct financing leases to land and buildings on
     operating leases.  In accordance with the Statement of Financial Accounting
     Standards #13, "Accounting for Leases," the Partnership recorded the
     reclassified assets at the lower of original cost, present fair value, or
     present carrying amount.  No losses on the termination of direct financing
     leases were recorded for financial reporting purposes.

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

     The Partnership has a 50 percent interest in the profits and losses of
     Wood-Ridge Real Estate Joint Venture. The remaining interest in this joint
     venture is held by an affiliate of the Partnership which has the same
     general partners. The Partnership also has a 16 percent interest in a
     Property in Clinton, North Carolina, with affiliates of the Partnership
     that has the same general partners, as tenants-in-common. The Partnership
     accounts for its investment in this property using the equity method since
     the Partnership shares control with affiliates, and amounts relating to its
     investment are included in investment in joint ventures.

                                       28
<PAGE>

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

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

                 Years Ended December 31, 1998, 1997, and 1996


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

     In January 1997, Wood-Ridge Real Estate Joint Venture reinvested $502,598,
     of the net sales proceeds from the sale of two properties during 1996 in
     one property. As of December 31, 1998, the Partnership had received
     approximately $52,000, representing its pro-rata share of the uninvested
     net sales proceeds. As of December 31, 1998, the Partnership owned a 50
     percent interest in the profits and losses of the joint venture.

     In June 1998, the Partnership acquired a property in Fort Myers, Florida,
     with an affiliate of the general partners as tenants-in-common. In
     connection therewith, the Partnership contributed an amount to acquire a 15
     percent interest in such property. The Partnership accounts for its
     investment in this property using the equity method since the Partnership
     shares control with affiliates, and amounts relating to its investment are
     included in investment in joint ventures.

     Wood-Ridge Real Estate Joint Venture owns and leases six properties to
     operators of national fast-food or family-style restaurants. The
     Partnership and affiliates, as tenants-in-common in two 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 at December 31:

<TABLE>
<CAPTION>
                                                                                 1998                1997
                                                                           ---------------     ---------------
          <S>                                                              <C>                 <C>
          Land and buildings on operating leases,
           less accumulated depreciation                                        $6,063,237          $5,563,722
          Net investment in direct financing lease                                 826,780                  --
          Cash                                                                      87,245              10,890
          Receivables                                                                1,677               5,923
          Accrued rental income                                                     96,768              74,001
          Other assets                                                                 857               1,078
          Liabilities                                                               69,285              18,195
          Partners' capital                                                      7,007,279           5,637,419
          Revenues                                                                 705,002             650,354
          Net income                                                               579,480             522,611
</TABLE>

     The Partnership recognized income totalling $236,553, $239,249 and $392,862
     for the years ended December 31, 1998, 1997 and 1996, respectively, from
     these entities.

                                       29
<PAGE>

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

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

                 Years Ended December 31, 1998, 1997, and 1996


6.   Allocations and Distributions:
     -----------------------------

     Generally, all net income and losses of the Partnership, excluding gains
     and losses from the sale of properties, are allocated 99 percent to the
     limited partners and one percent to the general partners.  Distributions of
     net cash flow are made 99 percent to the limited partners and one percent
     to the general partners; provided, however, that the one percent of net
     cash flow to be distributed to the general partners shall be subordinated
     to receipt by the limited partners of an aggregate, eight percent,
     cumulative, noncompounded annual return on their invested capital
     contributions (the "Limited Partners' 8% Return").

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

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

     During the years ended December 31, 1998, 1997 and 1996, the Partnership
     declared distributions to the limited partners of $3,400,000, $3,200,000
     and $3,280,000, respectively. No distributions have been made to the
     general partners to date.

                                       30
<PAGE>

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

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

                 Years Ended December 31, 1998, 1997 and 1996


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:

<TABLE>
<CAPTION>
                                                                     1998                   1997                  1996
                                                               -------------          -------------         --------------
<S>                                                            <C>                    <C>                   <C>
     Net income for financial reporting                          $2,642,497             $3,434,905             $3,585,059
       purposes

     Depreciation for tax reporting
      purposes in excess of depreciation                           (126,518)              (160,007)              (160,007)
      for financial reporting purposes

     Direct financing leases recorded as
      operating leases for tax reporting                             85,884                 87,508                 77,834
      purposes

     Allowance for loss on land and                                 280,907                     --                     --
      buildings

     Equity in earnings of joint ventures
      for tax reporting purposes in
      excess of (less than) equity in
      earnings of joint ventures for                                 33,872                 23,823               (158,836)
      financial reporting purposes
                                                                   (142,233)              (431,079)              (431,654)
     Accrued rental income
                                                                     48,346                (50,331)                39,795
     Rents paid in advance

     Capitalization of transaction costs for
      tax reporting purposes                                         23,196                     --                     --

                                                                      1,686                   (670)                 2,127
     Other                                                     -------------          -------------         --------------

     Net income for federal income tax                           $2,847,637             $2,904,149             $2,954,318
      purposes                                                 =============          =============         ==============
</TABLE>

                                       31
<PAGE>

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

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

                 Years Ended December 31, 1998, 1997, and 1996


8.   Related Party Transactions:
     --------------------------

     One of the individual general partners, James M. Seneff, Jr., is one of the
     principal shareholders of CNL Group, Inc., the majority stockholder of CNL
     Fund Advisors,  Inc. The other individual general partner, Robert A.
     Bourne, serves as treasurer, director and vice chairman of the board of CNL
     Fund Advisors, Inc.  During the years ended December 31, 1998, 1997, and
     1996, CNL Fund Advisors, Inc. (hereinafter referred to as the "Affiliate")
     performed certain services for the Partnership, as described below.

     During the years ended December 31, 1998, 1997, and 1996, the Affiliate
     acted as manager of the Partnership's properties pursuant to a management
     agreement with the Partnership. In connection therewith, the Partnership
     agreed to pay the Affiliate 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 Affiliate.
     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 Affiliate shall determine.  The Partnership incurred management
     fees of $33,990, $35,321 and $35,126 for the years ended December 31, 1998,
     1997 and 1996, respectively.

     The Affiliate is also entitled to receive a deferred, subordinated real
     estate disposition fee, payable upon the sale of one or more properties
     based on the lesser of one-half of a competitive real estate commission or
     three percent of the sales price if the Affiliate 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 8% Preferred Return, plus their invested capital contributions.
     No deferred, subordinated real estate disposition fees have been incurred
     since inception.

     During the years ended December 31, 1998, 1997 and 1996, the Affiliate of
     the general partners provided accounting and administrative services to the
     Partnership on a day-to-day basis.  The Partnership incurred $92,573,
     $78,051 and $87,265 for the years ended December 31, 1998, 1997 and 1996,
     respectively, for such services.

     The due to related parties at December 31, 1998 and 1997, totalled $23,337
     and $4,311, respectively.

                                       32
<PAGE>

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

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

                 Years Ended December 31, 1998, 1997 and 1996


9.   Concentration of Credit Risk:
     ----------------------------

     The following schedule presents total rental and earned income from
     individual lessees or affiliated groups of lessees, each representing more
     than ten percent of the Partnership's total rental and earned income
     (including the Partnership's share of total rental and earned income from
     joint ventures) for each of the years ended December 31:

<TABLE>
<CAPTION>
                                                                 1998              1997              1996
                                                            -------------     -------------     -------------
        <S>                                                   <C>               <C>               <C>
        Checkers Drive-In Restaurants, Inc.                      $719,308          $716,905          $723,558
        Golden Corral Corporation                                 595,343           582,600           531,775
        Flagstar Enterprises, Inc. (and
         Quincy's Restaurants, Inc. for the
         years ended December 31, 1997                            541,527           635,413           638,042
         and 1996)
        Long John Silver's, Inc.                                  510,187           710,325           714,804
        Foodmaker, Inc.                                           417,426           417,426           417,426
</TABLE>

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

<TABLE>
<CAPTION>
                                                                 1998             1997              1996
                                                            -------------    -------------     -------------
        <S>                                                   <C>              <C>               <C>
        Checkers Drive-In Restaurants                            $719,308         $716,905          $723,558
        Golden Corral Family Steakhouse
         Restaurants                                              595,343          582,600           531,775
        Long John Silver's                                        573,104          773,265           777,743
        Hardee's                                                  541,527          543,889           546,037
        Jack in the Box                                           417,426          417,426           417,426
</TABLE>

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

                                       33
<PAGE>

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

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

                 Years Ended December 31, 1998, 1997 and 1996


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

     In June 1998, the tenant of eight of the Long John Silver's Properties
     filed for bankruptcy and rejected the leases relating to four Properties.
     The rental income relating to these Properties will terminate until new
     tenants or buyers for the Properties are located.  While Long John
     Silver's, Inc. has not rejected or affirmed the remaining four leases,
     there can be no assurance that some of all of the leases will not be
     rejected in the future.  The lost revenues resulting from the four leases
     that were rejected, as described above, and the possible rejection of the
     remaining four leases could have an adverse effect on the results of
     operations of the Partnership if the Partnership is unable to re-lease
     these Properties in a timely manner.

10.  Subsequent Events:
     -----------------

     In January 1999, a Boston Market tenant rejected its lease and ceased
     making rental payments related to this lease.

     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").  As consideration for the Merger, APF has agreed to issue
     3,733,901 shares of its common stock, par value $0.01 per share (the "APF
     Shares").  In order to assist the general partners in evaluating the
     proposed merger consideration, the general partners retained Valuation
     Associates, a nationally recognized real estate appraisal firm, to appraise
     the Partnership's restaurant property portfolio.  Based on Valuation
     Associates' appraisal, the fair value of the Partnership's property
     portfolio and other assets was $36,726,950 as of December 31, 1998.  The
     APF Shares are expected to be listed for trading on the New York Stock
     Exchange concurrently with the consummation of the Merger, and, therefore,
     would be freely tradable at the option of the former limited partners.  At
     a special meeting of the partners, limited partners holding in excess of
     50% of the Partnership's outstanding limited partnership interests must
     approve the

                                       34
<PAGE>

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

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

                 Years Ended December 31, 1998, 1997 and 1996


10.  Subsequent Events - Continued:
     -----------------------------

     Merger prior to consummation of the transaction.  The general partners
     intend to recommend that the limited partners of the Partnership approve
     the Merger.  In connection with their recommendation, the general partners
     will solicit the consent of the limited partners at the special meeting.
     If the limited partners reject the Merger, the Partnership will bear the
     portion of the transaction costs based upon the percentage of "For" votes
     and the general partners will bear the portion of such transaction costs
     based upon the percentage of "Against" votes and abstentions.

                                       35
<PAGE>

                                  SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, on the 28th day of
October, 1999.

                                 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.
<PAGE>

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

<TABLE>
<CAPTION>
Signature                                             Title                                    Date
---------                                             -----                                    ----
<S>                                       <C>                                              <C>
/s/ Robert A. Bourne                      President, Treasurer and Director                October 28, 1999
------------------------------------      (Principal Financial and Accounting
Robert A. Bourne                          Officer)

/s/ James M. Seneff, Jr.                  Chief Executive Officer and Director             October 28, 1999
------------------------------------      (Principal Executive Officer)
James M. Seneff, Jr.
</TABLE>