10KSB 1 k15400.txt SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-KSB Annual Report Under Section 13 or 15(d) Of The Securities Exchange Act Of 1934 For the Fiscal Year Ended: December 31, 2000 Commission file number: 0-14089 AEI REAL ESTATE FUND XV LIMITED PARTNERSHIP (Name of Small Business Issuer in its Charter) State of Delaware 93-0926134 (State or other Jurisdiction of (I.R.S. Employer) Incorporation or Organization) Identification No.) 1300 Minnesota World Trade Center, St. Paul, Minnesota 55101 (Address of Principal Executive Offices) (651) 227-7333 (Issuer's telephone number) Securities registered pursuant to Section 12(b) of the Act: Name of each exchange on Title of each class which registered None None Securities registered pursuant to Section 12(g) of the Act: Limited Partnership Units (Title of class) Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or for 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 Check if disclosure of delinquent filers in response to Rule 405 of Regulation S-B is not contained in this Form, and no disclosure will be contained, to the best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB. [X] The Issuer's revenues for year ended December 31, 2000 were $660,430. As of February 28, 2001, there were 7,264.88 Units of limited partnership interest in the registrant outstanding and owned by nonaffiliates of the registrant, which Units had an aggregate market value (based solely on the price at which they were sold since there is no ready market for such Units) of $7,264,880. DOCUMENTS INCORPORATED BY REFERENCE The registrant has not incorporated any documents by reference into this report. Transitional Small Business Disclosure Format: Yes No [X] PART I ITEM 1. DESCRIPTION OF BUSINESS. AEI Real Estate Fund XV Limited Partnership (the "Partnership" or the "Registrant") is a limited partnership which was organized pursuant to the laws of the State of Delaware on October3, 1986. The registrant is comprised of AEI Fund Management 86-A, Inc. (AFM) as Managing General Partner, Robert P. Johnson as the Individual General Partner, and purchasers of partnership units as Limited Partners. The Partnership offered for sale up to $7,500,000 of limited partnership interests (the "Units") (7,500 Units at $1,000 per Unit) pursuant to a registration statement effective July 31, 1986. The Partnership commenced operations on October 3,1986 when minimum subscriptions of 1,300 Limited Partnership Units ($1,300,000) were accepted. The Partnership's offering terminated December 30, 1986 when the maximum subscription limit of 7,500 Limited Partnership Units ($7,500,000) was reached. The Partnership was organized to acquire, initially on a debt-free basis, existing and newly constructed commercial properties located in the United States, to lease such properties to tenants under triple net leases, to hold such properties and to eventually sell such properties. From subscription proceeds, the Partnership purchased eight properties, including partial interests in three properties, totaling $6,409,650. The balance of the subscription proceeds was applied to organization and syndication costs, working capital reserves and distributions, which represented a return of capital. The properties are all commercial, single tenant buildings leased under triple net leases. 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 appreciation, net cash flow and income tax considerations. In addition, certain lessees have been granted options to purchase properties after a specified portion of the lease term has elapsed. Prior to commencing the liquidation of the Partnership, the General Partners may reinvest the proceeds from the sale of properties in additional properties, provided that sufficient proceeds are distributed to the Limited Partners to pay federal and state income taxes related to any taxable gain recognized as a result of the sale. At any time prior to selling the properties, the Partnership may mortgage one or more of its properties in amounts not exceeding 50% of the fair market value of the property. Leases Although there are variations in the specific terms of the leases, the following is a summary of the general terms of the Partnership's leases. The properties are leased to various tenants under triple net leases, which are classified as operating leases. Under a triple net lease, the lessee is responsible for all real estate taxes, insurance, maintenance, repairs and operating expenses for the property. The initial lease terms are for 10 to 20 years. The leases provide for base annual rental payments, payable in monthly installments, and contain rent clauses which entitle the Partnership to receive additional rent in future years based on stated rent increases or if gross receipts for the property exceed certain specified amounts, among other conditions. The leases provide the lessee with two to three five-year renewal options subject to the same terms and conditions as the initial lease. Certain lessees have been granted options to purchase the property. Depending on the lease, the purchase price is either determined by a formula, or is the greater of the fair market value of the property or the amount determined by a formula. In all cases, if the option were to be exercised by the lessee, the purchase price would be greater than the original cost of the property. ITEM 1. DESCRIPTION OF BUSINESS. (Continued) On December 23, 1997, the Partnership purchased a 26.05% interest in a parcel of land in Troy, Michigan for $393,620. The land is leased to Champps Operating Corporation (Champps) under a Lease Agreement with a primary term of 20 years and annual rental payments of $27,553. Effective June 20, 1998, the annual rent was increased to $41,330. Simultaneously with the purchase of the land, the Partnership entered into a Development Financing Agreement under which the Partnership advanced funds to Champps for the construction of a Champps Americana restaurant on the site. Initially, the Partnership charged interest on the advances at a rate of 7.0%. Effective June 20, 1998, the interest rate was increased to 10.50%. On September3, 1998, after the development was completed, the Lease Agreement was amended to require annual rental payments of $133,356. The Partnership's share of the total acquisition costs, including the cost of the land, was $1,330,265. The remaining interests in the property are owned by AEI Real Estate Fund XVII Limited Partnership, AEI Real Estate Fund XVIII Limited Partnership and AEI Net Lease Income & Growth Fund XIX Limited Partnership, affiliates of the Partnership. In February, 1999, the Partnership entered into an agreement to sell the Fuddruckers property to an unrelated third party. On June 16, 1999, the sale closed with the Partnership receiving net sale proceeds of $1,145,424, which resulted in a net gain of $270,045. At the time of sale, the cost and related accumulated depreciation was $1,138,296 and $262,917, respectively. In March, 1999, the Partnership entered into an agreement to sell the Waco property to an unrelated third party. On May 10, 1999, the sale closed with the Partnership receiving net sale proceeds of $128,879, which resulted in a net gain of $4,228. At the time of sale, the cost and related accumulated depreciation was $287,710 and $163,059, respectively. During 1999, the Partnership sold its interest in the Timber Lodge Steakhouse, in three separate transactions, to unrelated third parties. The Partnership received total net sale proceeds of $566,111, which resulted in a total net gain of $81,897. The total cost and related accumulated depreciation of the property was $510,635 and $26,421, respectively. The majority of the net sale proceeds were reinvested in additional property. On July 14, 1999, the Partnership purchased a Children's World daycare center in West Chester, Ohio for $999,163. The property is leased to ARAMARK Educational Resources, Inc. under a Lease Agreement with a primary term of 15 years and annual rental payments of $93,162. On May 8, 2000, the Partnership purchased a 22% interest in a parcel of land in Austin, Texas for $295,345. The land is leased to Razzoo's, Inc. (RI) under a Lease Agreement with a primary term of 15 years and annual rental payments of $25,432. Effective October 4, 2000, the annual rent was increased to $29,172. Simultaneously with the purchase of the land, the Partnership entered into a Development Financing Agreement under which the Partnership will advance funds to RI for the construction of a Razzoo's restaurant on the site. Through December 31, 2000, the Partnership had advanced $282,465 for the construction of the property and was charging interest on the advances at a rate of 8.5%. Effective October 4, 2000, the interest rate was increased to 9.75%. The Partnership's share of the total purchase price, including the cost of the land, will be approximately $754,600. After the construction is complete, the Lease Agreement will be amended to require annual rental payments of approximately $73,000. The remaining interests in the property are owned by AEI Real Estate Fund XVII Limited Partnership, AEI Net Lease Income & Growth Fund XIX Limited Partnership, and AEI Income & Growth Fund XXII Limited Partnership, affiliates of the Partnership. ITEM 1. DESCRIPTION OF BUSINESS. (Continued) Major Tenants During 2000, three of the Partnership's lessees each contributed more than ten percent of the Partnership's total rental revenue. The major tenants in aggregate contributed 81% of the Partnership's total rental revenue in 2000. It is anticipated that, based on the minimum rental payments required under the leases, each major tenant will continue to contribute more than ten percent of the Partnership's total rental revenue in 2001 and future years. Any failure of these major tenants could materially affect the Partnership's net income and cash distributions. Competition The Partnership is a minor factor in the commercial real estate business. There are numerous entities engaged in the commercial real estate business which have greater financial resources than the Partnership. At the time the Partnership elects to dispose of its properties, the Partnership will be in competition with other persons and entities to find buyers for its properties. Employees The Partnership has no direct employees. Management services are performed for the Partnership by AEI Fund Management, Inc., an affiliate of AFM. ITEM 2. DESCRIPTION OF PROPERTIES. Investment Objectives The Partnership's investment objectives are to acquire existing or newly-developed commercial properties throughout the United States that offer the potential for (i) preservation and protection of the Partnership's capital; (ii) partially tax- deferred cash distributions from operations which may increase through rent participation clauses or mandated rent increases; and (iii) long-term capital gains through appreciation in value of the Partnership's properties realized upon sale. The Partnership does not have a policy, and there is no limitation, as to the amount or percentage of assets that may be invested in any one property. However, to the extent possible, the General Partners attempt to diversify the type and location of the Partnership's properties. Description of Properties The Partnership's properties are all commercial, single tenant buildings. The properties were acquired on a debt-free basis and are leased to various tenants under triple net leases, which are classified as operating leases. The Partnership holds an undivided fee simple interest in the properties. At any time prior to selling the properties, the Partnership may mortgage one or more of its properties in amounts not exceeding 50% of the fair market value of the property. The Partnership's properties are subject to the general competitive conditions incident to the ownership of single tenant investment real estate. Since each property is leased under a long-term lease, there is little competition until the Partnership decides to sell the property. At this time, the Partnership will be competing with other real estate owners, on both a national and local level, in attempting to find buyers for the properties. In the event of a tenant default, the Partnership would be competing with other real estate owners, who have property vacancies, to attract a new tenant to lease the property. The Partnership's tenants operate in industries that are very competitive and can be affected by factors such as changes in regional or local economies, seasonality and changes in consumer preference. ITEM 2. DESCRIPTION OF PROPERTIES. (Continued) The following table is a summary of the properties that the Partnership acquired and owned as of December 31, 2000. Total Property Annual Annual Purchase Acquisition Lease Rent Per Property Date Costs Lessee Payment Sq. Ft. Children's World ARAMARK Daycare Center Educational Franconia Hills, VA 3/24/87 $ 962,069 Resources, Inc. $150,913 $30.49 JEMCARE Learning Center Haltom City, TX 4/3/87 $ 417,213 JEMCARE, Inc. $ 30,402 $ 7.24 Arby's Restaurant RTM Marshall, MI 7/30/87 $ 586,425 Mid-America, Inc. $ 24,000 $ 7.75 Huntington Denny's Restaurant Restaurants Greenville, TX 1/10/96 $1,028,432 Group, Inc. $122,630 $24.89 Tractor Supply Company Store Maryville, TN Tractor Supply (20%) 2/14/96 $ 219,405 Company, Inc. $ 23,904 $ 6.27 Champps Americana Restaurant Champps Troy, MI Operating (26.05%) 9/3/98 $1,330,265 Corporation $133,356 $46.16 Children's World ARAMARK Daycare Center Educational West Chester, OH 7/14/99 $ 999,163 Resources, Inc. $ 93,162 $11.80 Razzoo's Restaurant Austin, TX (land only) (1) Razzoo's, (22%) 5/8/00 $ 295,345 Inc. $ 29,172 $13.53 (1) Restaurant was under construction as of December, 31, 2000. The properties listed above with a partial ownership percentage are owned with an affiliate of the Partnership and/or unrelated third parties. The remaining interests in the Tractor Supply Company store are owned by AEI Real Estate Fund 85-A Limited Partnership and unrelated third parties. The remaining interests in the Champps Americana restaurant are owned by AEI Real Estate Fund XVII Limited Partnership, AEI Real Estate Fund XVIII Limited Partnership and AEI Net Lease Income & Growth Fund XIX Limited Partnership. The remaining interests in the Razzoo's restaurant are owned by AEI Real Estate Fund XVII Limited Partnership, AEI Net Lease Income & Growth Fund XIX Limited Partnership and AEI Income & Growth Fund XXII Limited Partnership. ITEM 2. DESCRIPTION OF PROPERTIES. (Continued) The Partnership accounts for properties owned as tenants- in-common with affiliated Partnerships and/or unrelated third parties using the proportionate consolidation method. Each tenant-in-common owns a separate, undivided interest in the properties. Any tenant-in-common that holds more than a 50% interest does not control decisions over the other tenant-in- common interests. The financial statements reflect only this Partnership's percentage share of the properties' land, building and equipment, liabilities, revenues and expenses. The initial Lease terms are 20 years except for the JEMCARE property (10 years), the Tractor Supply Company store (14 years), the Children's World daycare center and Arby's and Razzoo's restaurants (15 years). The Leases contain renewal options which may extend the Lease term an additional 9 to 15 years. Pursuant to the Lease Agreements, the tenants are required to provide proof of adequate insurance coverage on the properties they occupy. The General Partners believe the properties are adequately covered by insurance and consider the properties to be well-maintained and sufficient for the Partnership's operations. For tax purposes, the Partnership's properties are depreciated under the Modified Accelerated Cost Recovery System (MACRS). The largest depreciable component of a property is the building which is depreciated, using the straight-line method, over 31.5, 39 or 40 years depending on the date when it was placed in service. The remaining depreciable components of a property are personal property and land improvements which are depreciated, using an accelerated method, over 5 and 15 years, respectively. Since the Partnership has tax-exempt Partners, the Partnership is subject to the rules of Section 168(h)(6) of the Internal Revenue Code which requires a percentage of the properties' depreciable components to be depreciated over longer lives using the straight-line method. In general, the federal tax basis of the properties for tax depreciation purposes is the same as the basis for book depreciation purposes. During the last five years or since the date of purchase, if purchased after December 31, 1995, all properties listed above were 100% occupied. ITEM 3. LEGAL PROCEEDINGS. None. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. None. PART II ITEM 5. MARKET FOR THE REGISTRANT'S PARTNERSHIP UNITS AND RELATED SECURITY HOLDER MATTERS. As of December 31, 2000, there were 655 holders of record of the registrant's Limited Partnership Units. There is no other class of security outstanding or authorized. The registrant's Units are not a traded security in any market. However, the Partnership may acquire Units from Limited Partners who have tendered their Units to the Partnership. Such Units may be acquired at a discount. The Partnership is not obligated to purchase in any year more than 5% of the total number of Units outstanding at the beginning of the year. In no event shall the Partnership be obligated to purchase Units if, in the sole discretion of the Managing General Partner, such purchase would impair the capital or operation of the Partnership. ITEM 5. MARKET FOR THE REGISTRANT'S PARTNERSHIP UNITS AND RELATED SECURITY HOLDER MATTERS. (Continued) During 2000, two Limited Partners redeemed a total of 30 Partnership Units for $12,072 in accordance with the Partnership Agreement. In prior years, a total of twenty-six Limited Partners redeemed 184.5 Units for $124,640. The redemptions increase the remaining Limited Partners' ownership in the Partnership. Cash distributions of $5,339 and $5,310 were made to the General Partners and $516,506 and $516,495 were made to the Limited Partners in 2000 and 1999, respectively. The distributions were made on a quarterly basis and represent Net Cash Flow, as defined. These distributions should not be compared with dividends paid on capital stock by corporations. ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS. Results of Operations For the years ended December 31, 2000 and 1999, the Partnership recognized rental income of $615,685 and $787,139, respectively. During the same periods, the Partnership earned investment income of $44,745 and $22,507, respectively. In 1999, rental income was higher due to deferred income recognized as a result of the sale of the Fuddruckers restaurant discussed below. In addition, in 2000, regular rental income decreased as a result of the property sales discussed below. The decrease in rental income was partially offset by additional rent received from two property acquisitions in 1999 and 2000 and by an increase in investment income earned on the net proceeds from the property sales. During the years ended December 31, 2000 and 1999, the Partnership paid Partnership administration expenses to affiliated parties of $114,868 and $110,722, respectively. These administration expenses include costs associated with the management of the properties, processing distributions, reporting requirements and correspondence to the Limited Partners. During the same periods, the Partnership incurred Partnership administration and property management expenses from unrelated parties of $16,684 and $18,187, respectively. These expenses represent direct payments to third parties for legal and filing fees, direct administrative costs, outside audit and accounting costs, taxes, insurance and other property costs. As of December 31, 2000, the Partnership's annualized cash distribution rate was 7.5%, based on the Adjusted Capital Contribution. Distributions of Net Cash Flow to the General Partners were subordinated to the Limited Partners as required in the Partnership Agreement. As a result, 99% of distributions and income were allocated to Limited Partners and 1% to the General Partners. Inflation has had a minimal effect on income from operations. It is expected that increases in sales volumes of the tenants, due to inflation and real sales growth, will result in an increase in rental income over the term of the Leases. Inflation also may cause the Partnership's real estate to appreciate in value. However, inflation and changing prices may also have an adverse impact on the operating margins of the properties' tenants which could impair their ability to pay rent and subsequently reduce the Partnership's Net Cash Flow available for distributions. ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS. (Continued) Liquidity and Capital Resources During 2000, the Partnership's cash balances decreased $586,576 as a result of cash used to purchase additional property. Net cash provided by operating activities decreased from $543,245 in 1999 to $519,332 in 2000, as a result of a decrease in income in 2000, which was partially offset by net timing differences in the collection of payments from the lessees and the payment of expenses. The major components of the Partnership's cash flow from investing activities are investments in real estate and proceeds from the sale of real estate. During the year ended December 31, 1999, the Partnership generated cash flow from the sale of real estate of $1,840,414. During the years ended December 31, 2000 and 1999, the Partnership expended $571,935 and $1,005,038, respectively, to invest in real properties (inclusive of acquisition expenses) as the Partnership reinvested cash generated from property sales. In February, 1999, the Partnership entered into an agreement to sell the Fuddruckers property to an unrelated third party. On June 16, 1999, the sale closed with the Partnership receiving net sale proceeds of $1,145,424, which resulted in a net gain of $270,045. At the time of sale, the cost and related accumulated depreciation was $1,138,296 and $262,917, respectively. In June, 1994, the Partnership received a lump sum payment of $210,277 as compensation for certain modifications made to the Fuddruckers' Lease. The lump sum payment was recognized as income over the Lease term using the straight line method. As a result of the sale, the Lease Agreement was terminated and the Partnership recognized the balance of the deferred income of $136,747 in the second quarter of 1999. In March, 1999, the Partnership entered into an agreement to sell the Waco property to an unrelated third party. On May 10, 1999, the sale closed with the Partnership receiving net sale proceeds of $128,879, which resulted in a net gain of $4,228. At the time of sale, the cost and related accumulated depreciation was $287,710 and $163,059, respectively. During 1999, the Partnership sold its interest in the Timber Lodge Steakhouse, in three separate transactions, to unrelated third parties. The Partnership received total net sale proceeds of $566,111, which resulted in a total net gain of $81,897. The total cost and related accumulated depreciation of the property was $510,635 and $26,421, respectively. The majority of the net sale proceeds were reinvested in additional property. On July 14, 1999, the Partnership purchased a Children's World daycare center in West Chester, Ohio for $999,163. The property is leased to ARAMARK Educational Resources, Inc. under a Lease Agreement with a primary term of 15 years and annual rental payments of $93,162. ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS. (Continued) On May 8, 2000, the Partnership purchased a 22% interest in a parcel of land in Austin, Texas for $295,345. The land is leased to Razzoo's, Inc. (RI) under a Lease Agreement with a primary term of 15 years and annual rental payments of $25,432. Effective October 4, 2000, the annual rent was increased to $29,172. Simultaneously with the purchase of the land, the Partnership entered into a Development Financing Agreement under which the Partnership will advance funds to RI for the construction of a Razzoo's restaurant on the site. Through December 31, 2000, the Partnership had advanced $282,465 for the construction of the property and was charging interest on the advances at a rate of 8.5%. Effective October 4, 2000, the interest rate was increased to 9.75%. The Partnership's share of the total purchase price, including the cost of the land, will be approximately $754,600. After the construction is complete, the Lease Agreement will be amended to require annual rental payments of approximately $73,000. The remaining interests in the property are owned by AEI Real Estate Fund XVII Limited Partnership, AEI Net Lease Income & Growth Fund XIX Limited Partnership, and AEI Income & Growth Fund XXII Limited Partnership, affiliates of the Partnership. The Partnership's primary use of cash flow is distribution and redemption payments to Partners. The Partnership declares its regular quarterly distributions before the end of each quarter and pays the distribution in the first week after the end of each quarter. The Partnership attempts to maintain a stable distribution rate from quarter to quarter. Redemption payments are paid to redeeming Partners in the fourth quarter of each year. The Partnership may acquire Units from Limited Partners who have tendered their Units to the Partnership. Such Units may be acquired at a discount. The Partnership is not obligated to purchase in any year more than 5% of the total number of Units outstanding at the beginning of the year. In no event shall the Partnership be obligated to purchase Units if, in the sole discretion of the Managing General Partner, such purchase would impair the capital or operation of the Partnership. During 2000, two Limited Partners redeemed a total of 30 Partnership Units for $12,072 in accordance with the Partnership Agreement. The Partnership acquired these Units using Net Cash Flow from operations. In prior years, a total of twenty-six Limited Partners redeemed 184.5 Units for $124,639. The redemptions increase the remaining Limited Partners' ownership in the Partnership. The continuing rent payments from the properties, together with cash generated from property sales, should be adequate to fund continuing distributions and meet other Partnership obligations on both a short-term and long-term basis. ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS. (Continued) Cautionary Statement for Purposes of the "Safe Harbor" Provisions of the Private Securities Litigation Reform Act of 1995 The foregoing Management's Discussion and Analysis contains various "forward looking statements" within the meaning of federal securities laws which represent management's expectations or beliefs concerning future events, including statements regarding anticipated application of cash, expected returns from rental income, growth in revenue, taxation levels, the sufficiency of cash to meet operating expenses, rates of distribution, and other matters. These, and other forward looking statements made by the Partnership, must be evaluated in the context of a number of factors that may affect the Partnership's financial condition and results of operations, including the following: Market and economic conditions which affect the value of the properties the Partnership owns and the cash from rental income such properties generate; the federal income tax consequences of rental income, deductions, gain on sales and other items and the affects of these consequences for investors; resolution by the General Partners of conflicts with which they may be confronted; the success of the General Partners of locating properties with favorable risk return characteristics; the effect of tenant defaults; and the condition of the industries in which the tenants of properties owned by the Partnership operate. ITEM 7. FINANCIAL STATEMENTS. See accompanying Index to Financial Statements. AEI REAL ESTATE FUND XV LIMITED PARTNERSHIP INDEX TO FINANCIAL STATEMENTS Report of Independent Auditors Balance Sheet as of December 31, 2000 and 1999 Statements for the Years Ended December 31, 2000 and 1999: Income Cash Flows Changes in Partners' Capital Notes to Financial Statements REPORT OF INDEPENDENT AUDITORS To the Partners: AEI Real Estate Fund XV Limited Partnership St. Paul, Minnesota We have audited the accompanying balance sheet of AEI Real Estate Fund XV Limited Partnership (a Delaware limited partnership) as of December 31, 2000 and 1999 and the related statements of income, cash flows and changes in partners' capital for the years then ended. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards 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. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of AEI Real Estate Fund XV Limited Partnership as of December31, 2000 and 1999, and the results of its operations and its cash flows for the years then ended, in conformity with generally accepted accounting principles. /s/BOULAY, HEUTMAKER, ZIBELL & CO. P.L.L.P. Minneapolis, Minnesota Boulay, Heutmaker, Zibell & Co. P.L.L.P. January 25, 2001 Certified Public Accountants AEI REAL ESTATE FUND XV LIMITED PARTNERSHIP BALANCE SHEET DECEMBER 31 ASSETS 2000 1999 CURRENT ASSETS: Cash and Cash Equivalents $ 370,051 $ 956,627 Receivables 33,671 22,460 ----------- ----------- Total Current Assets 403,722 979,087 ----------- ----------- INVESTMENTS IN REAL ESTATE: Land 1,797,000 1,501,655 Buildings and Equipment 4,041,317 4,041,317 Construction in Progress 282,465 0 Property Acquisition Costs 0 5,875 Accumulated Depreciation (1,063,528) (931,974) ----------- ----------- Net Investments in Real Estate 5,057,254 4,616,873 ----------- ----------- Total Assets $ 5,460,976 $ 5,595,960 =========== =========== LIABILITIES AND PARTNERS' CAPITAL CURRENT LIABILITIES: Payable to AEI Fund Management, Inc. $ 26,484 $ 24,819 Distributions Payable 117,220 117,276 ----------- ----------- Total Current Liabilities 143,704 142,095 ----------- ----------- PARTNERS' CAPITAL (DEFICIT): General Partners (10,288) (8,923) Limited Partners, $1,000 Unit value; 7,500 Units authorized and issued; 7,286 and 7,316 Units outstanding in 2000 and 1999, respectively 5,327,560 5,462,788 ----------- ----------- Total Partners' Capital 5,317,272 5,453,865 ----------- ----------- Total Liabilities and Partners' Capital $ 5,460,976 $ 5,595,960 =========== =========== The accompanying Notes to Financial Statements are an integral part of this statement. AEI REAL ESTATE FUND XV LIMITED PARTNERSHIP STATEMENT OF INCOME FOR THE YEARS ENDED DECEMBER 3l 2000 1999 INCOME: Rent $ 615,685 $ 787,139 Investment Income 44,745 22,507 ----------- ----------- Total Income 660,430 809,646 ----------- ----------- EXPENSES: Partnership Administration - Affiliates 114,868 110,722 Partnership Administration and Property Management - Unrelated Parties 16,684 18,187 Depreciation 131,554 137,580 ----------- ----------- Total Expenses 263,106 266,489 ----------- ----------- OPERATING INCOME 397,324 543,157 GAIN ON SALE OF REAL ESTATE 0 356,170 ----------- ----------- NET INCOME $ 397,324 $ 899,327 =========== =========== NET INCOME ALLOCATED: General Partners $ 3,974 $ 8,993 Limited Partners 393,350 890,334 ----------- ----------- $ 397,324 $ 899,327 =========== =========== NET INCOME PER LIMITED PARTNERSHIP UNIT (7,308 and 7,331 weighted average Units outstanding in 2000 and 1999, respectively) $ 53.82 $ 121.45 =========== =========== The accompanying Notes to Financial Statements are an integral part of this statement. AEI REAL ESTATE FUND XV LIMITED PARTNERSHIP STATEMENT OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31 2000 1999 CASH FLOWS FROM OPERATING ACTIVITIES: Net Income $ 397,324 $ 899,327 Adjustments To Reconcile Net Income To Net Cash Provided By Operating Activities: Depreciation 131,554 137,580 Gain on Sale of Real Estate 0 (356,170) (Increase) Decrease in Receivables (11,211) 7,238 Increase (Decrease) in Payable to AEI Fund Management, Inc. 1,665 (4,113) Decrease in Deferred Income 0 (140,617) ----------- ----------- Total Adjustments 122,008 (356,082) ----------- ----------- Net Cash Provided By Operating Activities 519,332 543,245 ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES: Investments in Real Estate (571,935) (1,005,038) Proceeds from Sale of Real Estate 0 1,840,414 ----------- ----------- Net Cash Provided By (Used For) Investing Activities (571,935) 835,376 ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES: Increase (Decrease) in Distributions Payable (56) 371 Distributions to Partners (521,723) (521,712) Redemption Payments (12,194) (9,272) ----------- ----------- Net Cash Used For Financing Activities (533,973) (530,613) ----------- ----------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (586,576) 848,008 CASH AND CASH EQUIVALENTS, beginning of period 956,627 108,619 ----------- ----------- CASH AND CASH EQUIVALENTS, end of period $ 370,051 $ 956,627 =========== =========== The accompanying Notes to Financial Statements are an integral part of this statement. AEI REAL ESTATE FUND XV LIMITED PARTNERSHIP STATEMENT OF CHANGES IN PARTNERS' CAPITAL FOR THE YEARS ENDED DECEMBER 31 Limited Partnership General Limited Units Partners Partners Total Outstanding BALANCE, December 31, 1998 $(12,606) $5,098,128 $5,085,522 7,336.55 Distributions (5,217) (516,495) (521,712) Redemption Payments (93) (9,179) (9,272) (21.00) Net Income 8,993 890,334 899,327 -------- ---------- ---------- ---------- BALANCE, December 31, 1999 (8,923) 5,462,788 5,453,865 7,315.55 Distributions (5,217) (516,506) (521,723) Redemption Payments (122) (12,072) (12,194) (30.00) Net Income 3,974 393,350 397,324 -------- ---------- ---------- ---------- BALANCE, December 31, 2000 $(10,288) $5,327,560 $5,317,272 7,285.55 ======== ========== ========== ========== The accompanying Notes to Financial Statements are an integral part of this statement. AEI REAL ESTATE FUND XV LIMITED PARTNERSHIP NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2000 AND 1999 (1) Organization - AEI Real Estate Fund XV Limited Partnership (Partnership) was formed to acquire and lease commercial properties to operating tenants. The Partnership's operations are managed by AEI Fund Management 86-A, Inc. (AFM), the Managing General Partner. Robert P. Johnson, the President and sole shareholder of AFM, serves as the Individual General Partner and an affiliate of AFM, AEI Fund Management, Inc. (AEI), performs the administrative and operating functions for the Partnership. The terms of the Partnership offering called for a subscription price of $1,000 per limited partnership unit, payable on acceptance of the offer. The Partnership commenced operations on October 3, 1986 when minimum subscriptions of 1,300 Limited Partnership Units ($1,300,000) were accepted. On December 30, 1986, the offering terminated when the maximum subscription limit of 7,500 Limited Partnership Units ($7,500,000) was reached. Under the terms of the Limited Partnership Agreement, the Limited Partners and General Partners contributed funds of $7,500,000 and $1,000, respectively. During operations, any Net Cash Flow, as defined, which the General Partners determine to distribute will be distributed 90% to the Limited Partners and 10% to the General Partners; provided, however, that such distributions to the General Partners will be subordinated to the Limited Partners first receiving an annual, noncumulative distribution of Net Cash Flow equal to 10% of their Adjusted Capital Contribution, as defined, and, provided further, that in no event will the General Partners receive less than 1% of such Net Cash Flow per annum. Distributions to the Limited Partners will be made pro rata by Units. Any Net Proceeds of Sale, as defined, from the sale or financing of properties which the General Partners determine to distribute will, after provisions for debts and reserves, be paid in the following manner: (i) first, 99% to the Limited Partners and 1% to the General Partners until the Limited Partners receive an amount equal to: (a) their Adjusted Capital Contribution plus (b) an amount equal to 6% of their Adjusted Capital Contribution per annum, cumulative but not compounded, to the extent not previously distributed from Net Cash Flow; (ii) next, 99% to the Limited Partners and 1% to the General Partners until the Limited Partners receive an amount equal to 14% of their Adjusted Capital Contribution per annum, cumulative but not compounded, to the extent not previously distributed; (iii) next, to the General Partners until cumulative distributions to the General Partners under Items (ii) and (iii) equal 15% of cumulative distributions to all Partners under Items (ii) and (iii). Any remaining balance will be distributed 85% to the Limited Partners and 15% to the General Partners. Distributions to the Limited Partners will be made pro rata by Units. AEI REAL ESTATE FUND XV LIMITED PARTNERSHIP NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2000 AND 1999 (1) Organization - (Continued) For tax purposes, profits from operations, other than profits attributable to the sale, exchange, financing, refinancing or other disposition of property, will be allocated first in the same ratio in which, and to the extent, Net Cash Flow is distributed to the Partners for such year. Any additional profits will be allocated 90% to the Limited Partners and 10% to the General Partners. In the event no Net Cash Flow is distributed to the Limited Partners, 90% of each item of income, gain or credit for each respective year shall be allocated to the Limited Partners, and 10% of each such item shall be allocated to the General Partners. Net losses from operations will be allocated 98% to the Limited Partners and 2% to the General Partners. For tax purposes, profits arising from the sale, financing, or other disposition of property will be allocated in accordance with the Partnership Agreement as follows: (i) first, to those Partners with deficit balances in their capital accounts in an amount equal to the sum of such deficit balances; (ii) second, 99% to the Limited Partners and 1% to the General Partners until the aggregate balance in the Limited Partners' capital accounts equals the sum of the Limited Partners' Adjusted Capital Contributions plus an amount equal to 14% of their Adjusted Capital Contributions per annum, cumulative but not compounded, to the extent not previously allocated; (iii) third, to the General Partners until cumulative allocations to the General Partners equal 15% of cumulative allocations. Any remaining balance will be allocated 85% to the Limited Partners and 15% to the General Partners. Losses will be allocated 98% to the Limited Partners and 2% to the General Partners. The General Partners are not required to currently fund a deficit capital balance. Upon liquidation of the Partnership or withdrawal by a General Partner, the General Partners will contribute to the Partnership an amount equal to the lesser of the deficit balances in their capital accounts or 1% of total Limited Partners' and General Partners' capital contributions. (2) Summary of Significant Accounting Policies - Financial Statement Presentation The accounts of the Partnership are maintained on the accrual basis of accounting for both federal income tax purposes and financial reporting purposes. Accounting Estimates Management uses estimates and assumptions in preparing these financial statements in accordance with generally accepted accounting principles. Those estimates and assumptions may affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenues and expenses. Actual results could differ from those estimates. AEI REAL ESTATE FUND XV LIMITED PARTNERSHIP NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2000 AND 1999 (2) Summary of Significant Accounting Policies - (Continued) The Partnership regularly assesses whether market events and conditions indicate that it is reasonably possible to recover the carrying amounts of its investments in real estate from future operations and sales. A change in those market events and conditions could have a material effect on the carrying amount of its real estate. Cash Concentrations of Credit Risk The Partnership's cash is deposited primarily in one financial institution and at times during the year it may exceed FDIC insurance limits. Statement of Cash Flows For purposes of reporting cash flows, cash and cash equivalents may include cash in checking, cash invested in money market accounts, certificates of deposit, federal agency notes and commercial paper with a term of three months or less. Income Taxes The income or loss of the Partnership for federal income tax reporting purposes is includable in the income tax returns of the partners. Accordingly, no recognition has been given to income taxes in the accompanying financial statements. The tax return, the qualification of the Partnership as such for tax purposes, and the amount of distributable partnership income or loss are subject to examination by federal and state taxing authorities. If such an examination results in changes with respect to the Partnership qualification or in changes to distributable Partnership income or loss, the taxable income of the partners would be adjusted accordingly. Real Estate The Partnership's real estate is leased under triple net leases classified as operating leases. The Partnership recognizes rental revenue on the accrual basis according to the terms of the individual leases. For leases which contain cost of living increases, the increases are recognized in the year in which they are effective. Real estate is recorded at the lower of cost or estimated net realizable value. The Partnership compares the carrying amount of its properties to the estimated future cash flows expected to result from the property and its eventual disposition. If the sum of the expected future cash flows is less than the carrying amount of the property, the Partnership recognizes an impairment loss by the amount by which the carrying amount of the property exceeds the fair value of the property. The Partnership has capitalized as Investments in Real Estate certain costs incurred in the review and acquisition of the properties. The costs were allocated to the land, buildings, and equipment. AEI REAL ESTATE FUND XV LIMITED PARTNERSHIP NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2000 AND 1999 (2) Summary of Significant Accounting Policies - (Continued) The buildings and equipment of the Partnership are depreciated using the straight line method for financial reporting purposes based on estimated useful lives of 30 years and 10 years, respectively. The Partnership accounts for properties owned as tenants- in-common with affiliated Partnerships and/or unrelated third parties using the proportionate consolidation method. Each tenant-in-common owns a separate, undivided interest in the properties. Any tenant-in-common that holds more than a 50% interest does not control decisions over the other tenant-in-common interests. The financial statements reflect only this Partnership's percentage share of the properties' land, building and equipment, liabilities, revenues and expenses. (3) Related Party Transactions - The Partnership owns a 20% interest in the Tractor Supply Company store. The remaining interests in this property are owned by AEI Real Estate Fund 85-A Limited Partnership, an affiliate of the Partnership, and unrelated third parties. The Partnership owns a 26.05% interest in the Champps Americana restaurant. The remaining interests in this property are owned by AEI Real Estate Fund XVII Limited Partnership, AEI Real Estate Fund XVIII Limited Partnership and AEI Net Lease Income & Growth Fund XIX Limited Partnership, affiliates of the Partnership. The Partnership owns a 22% interest in the Razzoo's restaurant. The remaining interests in this property are owned by AEI Real Estate Fund XVII Limited Partnership, AEI Net Lease Income & Growth Fund XIX Limited Partnership and AEI Income & Growth Fund XXII Limited Partnership, affiliates of the Partnership. The Partnership owned a 44.9042% interest in a restaurant in Waco, Texas and a 60% interest in the Fuddruckers restaurant. The remaining interests in these properties were owned by AEI Real Estate Fund XVI Limited Partnership, an affiliate of the Partnership. The Partnership owned a 30.794% interest in the Timber Lodge Steakhouse. The remaining interests in this property are owned by AEI Real Estate Fund XVII Limited Partnership and unrelated third parties. AEI Institutional Net Lease Fund '93 Limited Partnership, an affiliate of the Partnership, owned 38.412% interest in this property until the interest was sold in a series of transactions to unrelated third parties in 1998 and 1999. During 1999, the Partnership sold its interest in the property to unrelated third parties. AEI REAL ESTATE FUND XV LIMITED PARTNERSHIP NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2000 AND 1999 (3) Related Party Transactions - (Continued) AEI and AFM received the following compensation and reimbursements for costs and expenses from the Partnership: Total Incurred by the Partnership for the Years Ended December 3l 2000 1999 a.AEI and AFM are reimbursed for all costs incurred in connection with managing the Partnership's operations, maintaining the Partnership's books and communicating the results of operations to the Limited Partners. $ 114,868 $ 110,722 ======== ======== b.AEI and AFM are reimbursed for all direct expenses they have paid on the Partnership's behalf to third parties relating to Partnership administration and property management. These expenses included printing costs, legal and filing fees, direct administrative costs, outside audit and accounting costs, taxes, insurance and other property costs. $ 16,684 $ 18,187 ======== ======== c.AEI is reimbursed for all costs and direct expenses incurred by it in acquiring properties on behalf of the Partnership. The amounts are net of financing and commitment fees and expense reimbursements received by the Partnership from the lessees in the amount of $17,577 and $35,000 for 2000 and 1999, respectively. $ (9,730) $ (16,706) ======== ======== d.AEI is reimbursed for all costs incurred in connection with the sale of property. $ 0 $ 27,697 ======== ======== The payable to AEI Fund Management, Inc. represents the balance due for the services described in 3a, b, c and d. This balance is non-interest bearing and unsecured and is to be paid in the normal course of business. AEI REAL ESTATE FUND XV LIMITED PARTNERSHIP NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2000 AND 1999 (4) Investments in Real Estate - The Partnership leases its properties to various tenants through triple net leases, which are classified as operating leases. Under a triple net lease, the lessee is responsible for all real estate taxes, insurance, maintenance, repairs and operating expenses of the property. The initial Lease terms are 20 years except for the JEMCARE property (10 years), the Tractor Supply Company store (14 years), the Children's World daycare center and the Arby's and Razzoo's restaurants (15 years). The Leases contain renewal options which may extend the lease term an additional 9 to 15 years. The Leases contain rent clauses which entitle the Partnership to receive additional rent in future years based on stated rent increases or if gross receipts for the property exceed certain specified amounts, among other conditions. Certain lessees have been granted options to purchase the property. Depending on the lease, the purchase price is either determined by a formula, or is the greater of the fair market value of the property or the amount determined by a formula. In all cases, if the option were to be exercised by the lessee, the purchase price would be greater than the original cost of the property. The Partnership's properties are all commercial, single- tenant properties. The Arby's restaurant was built in 1972 and extensively remodeled in 1987. The JEMCARE Learning Center was constructed in 1986. The Children's World Daycare Center in Franconia Hills, Virginia was constructed in 1987. The Partnership acquired all of these properties during 1987 and 1988. The Denny's restaurant and Tractor Supply Company store were constructed in 1995 and acquired in 1996. The Champps Americana restaurant was constructed and acquired in 1998. The Children's World daycare center in West Chester, Ohio was constructed in 1997 and acquired in 1999. There have been no costs capitalized as improvements subsequent to the acquisitions. The cost of the properties and related accumulated depreciation at December 31, 2000 are as follows: Buildings and Accumulated Property Land Equipment Total Depreciation Children's World, Franconia Hills, VA $ 165,952 $ 796,117 $ 962,069 $ 397,601 JEMCARE Learning Center, Haltom City, TX 132,925 284,288 417,213 163,480 Arby's, Marshall, MI 120,499 465,926 586,425 242,419 Denny's, Greenville, TX 332,077 696,355 1,028,432 120,562 Tractor Supply Company, Maryville, TN 40,267 179,138 219,405 31,571 Champps Americana, Troy, MI 429,808 900,457 1,330,265 72,942 Children's World, West Chester, OH 280,127 719,036 999,163 34,953 Razzoo's, Austin, TX 295,345 0 295,345 0 ---------- ---------- ---------- ---------- $1,797,000 $4,041,317 $5,838,317 $1,063,528 ========== ========== ========== ========== AEI REAL ESTATE FUND XV LIMITED PARTNERSHIP NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2000 AND 1999 (4) Investments in Real Estate - (Continued) In February, 1999, the Partnership entered into an agreement to sell the Fuddruckers property to an unrelated third party. On June 16, 1999, the sale closed with the Partnership receiving net sale proceeds of $1,145,424, which resulted in a net gain of $270,045. At the time of sale, the cost and related accumulated depreciation was $1,138,296 and $262,917, respectively. In March, 1999, the Partnership entered into an agreement to sell the Waco property to an unrelated third party. On May 10, 1999, the sale closed with the Partnership receiving net sale proceeds of $128,879, which resulted in a net gain of $4,228. At the time of sale, the cost and related accumulated depreciation was $287,710 and $163,059, respectively. During 1999, the Partnership sold its interest in the Timber Lodge Steakhouse, in three separate transactions, to unrelated third parties. The Partnership received total net sale proceeds of $566,111, which resulted in a total net gain of $81,897. The total cost and related accumulated depreciation of the property was $510,635 and $26,421, respectively. The majority of the net sale proceeds were reinvested in additional property. On July 14, 1999, the Partnership purchased a Children's World daycare center in West Chester, Ohio for $999,163. The property is leased to ARAMARK Educational Resources, Inc. under a Lease Agreement with a primary term of 15 years and annual rental payments of $93,162. On May 8, 2000, the Partnership purchased a 22% interest in a parcel of land in Austin, Texas for $295,345. The land is leased to Razzoo's, Inc. (RI) under a Lease Agreement with a primary term of 15 years and annual rental payments of $25,432. Effective October 4, 2000, the annual rent was increased to $29,172. Simultaneously with the purchase of the land, the Partnership entered into a Development Financing Agreement under which the Partnership will advance funds to RI for the construction of a Razzoo's restaurant on the site. Through December 31, 2000, the Partnership had advanced $282,465 for the construction of the property and was charging interest on the advances at a rate of 8.5%. Effective October 4, 2000, the interest rate was increased to 9.75%. The Partnership's share of the total purchase price, including the cost of the land, will be approximately $754,600. After the construction is complete, the Lease Agreement will be amended to require annual rental payments of approximately $73,000. AEI REAL ESTATE FUND XV LIMITED PARTNERSHIP NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2000 AND 1999 (4) Investments in Real Estate - (Continued) The minimum future rental on the Leases for years subsequent to December 31, 2000 are as follows: 2001 $ 594,886 2002 582,555 2003 585,481 2004 588,463 2005 591,502 Thereafter 4,636,151 ----------- $ 7,579,038 =========== In 2000 and 1999, the Partnership recognized contingent rents of $20,819 and $22,978, respectively. (5) Deferred Income - In June, 1994, Fuddruckers, Inc., the restaurant concept's franchisor, acquired the operations of the Fuddruckers restaurant in St. Louis, Missouri, and assumed the lease obligations from the original lessee. As part of the agreement, the Partnership amended the Lease to reduce the annual base rent from $163,550 to $138,246. In consideration for the lease assumption and amendment, the Partnership received a lump sum payment from the original lessee of $210,277. The lump sum payment was recognized as income over the Lease term, which was scheduled to expire January 31, 2008, using the straight line method. As of March 31, 1999, the Partnership had recognized $73,530 of this payment as income. On June 16, 1999, the Partnership sold the Fuddruckers restaurant and the Lease Agreement was terminated. As a result, the Partnership recognized the balance of the deferred income of $136,747 in the second quarter of 1999. AEI REAL ESTATE FUND XV LIMITED PARTNERSHIP NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2000 AND 1999 (6) Major Tenants - The following schedule presents rent revenue from individual tenants, or affiliated groups of tenants, who each contributed more than ten percent of the Partnership's total rent revenue for the years ended December 31: 2000 1999 Tenants Industry ARAMARK Educational Resources, Inc. Child Care $ 243,462 $ 190,169 Champps Operating Corporation Restaurant 133,356 133,356 Huntington Restaurants Group, Inc. Restaurant 122,437 120,125 Fuddruckers Inc. Restaurant 0 203,980 --------- --------- Aggregate rent revenue of major tenants $ 499,255 $ 647,630 ========= ========= Aggregate rent revenue of major tenants as a percentage of total rent revenue 81% 82% ========= ========= (7) Partners' Capital - Cash distributions of $5,339 and $5,310 were made to the General Partners and $516,506 and $516,495 were made to the Limited Partners for the years ended December 31, 2000 and 1999, respectively. The Limited Partners' distributions represent $70.68 and $70.45 per Limited Partnership Unit outstanding using 7,308 and 7,331 weighted average Units in 2000 and 1999, respectively. The distributions represent $52.16 and $70.45 per Unit of Net Income and $18.52 and $-0- per Unit of return of contributed capital in 2000 and 1999, respectively. Distributions of Net Cash Flow to the General Partners during 2000 and 1999 were subordinated to the Limited Partners as required in the Partnership Agreement. As a result, 99% of distributions and income were allocated to the Limited Partners and 1% to the General Partners. The Partnership may acquire Units from Limited Partners who have tendered their Units to the Partnership. Such Units may be acquired at a discount. The Partnership is not obligated to purchase in any year more than 5% of the number of Units outstanding at the beginning of the year. In no event shall the Partnership be obligated to purchase Units if, in the sole discretion of the Managing General Partner, such purchase would impair the capital or operation of the Partnership. AEI REAL ESTATE FUND XV LIMITED PARTNERSHIP NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2000 AND 1999 (7) Partners' Capital - (Continued) During 2000, two Limited Partners redeemed a total of 30 Partnership Units for $12,072 in accordance with the Partnership Agreement. The Partnership acquired these Units using Net Cash Flow from operations. In 1999, five Limited Partners redeemed a total of 21 Partnership Units for $9,179. The redemptions increase the remaining Limited Partners' ownership in the Partnership. After the effect of redemptions and the return of capital from the sale of property, the Adjusted Capital Contribution, as defined in the Partnership Agreement, is $945.25 per original $1,000 invested. (8) Income Taxes - The following is a reconciliation of net income for financial reporting purposes to income reported for federal income tax purposes for the years ended December 31: 2000 1999 Net Income for Financial Reporting Purposes $ 397,324 $ 899,327 Depreciation for Tax Purposes (Over) Under Depreciation for Financial Reporting Purposes 12,898 (3,980) Income Accrued for Tax Purposes Under Income for Financial Reporting Purposes 0 (140,617) Real Estate Impairment Loss Not Recognized for Tax Purposes 0 0 Gain on Sale of Real Estate for Tax Purposes Under Gain for Financial Reporting Purposes 0 (347,171) ---------- ---------- Taxable Income to Partners $ 410,222 $ 415,519 ========== ========== AEI REAL ESTATE FUND XV LIMITED PARTNERSHIP NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2000 AND 1999 (8) Income Taxes - (Continued) The following is a reconciliation of Partners' capital for financial reporting purposes to Partners' capital reported for federal income tax purposes for the years ended December 31: 2000 1999 Partners' Capital for Financial Reporting Purposes $5,317,272 $5,453,865 Adjusted Tax Basis of Investments in Real Estate Over Net Investments in Real Estate for Financial Reporting Purposes 82,216 69,318 Syndication Costs Treated as Reduction of Capital for Financial Reporting Purposes 1,054,819 1,054,819 ---------- ---------- Partners' Capital for Tax Reporting Purposes $6,454,307 $6,578,002 ========== ========== (9) Fair Value of Financial Instruments - The estimated fair values of the financial instruments, none of which are held for trading purposes, are as follows at December 31: 2000 1999 Carrying Fair Carrying Fair Amount Value Amount Value Cash $ 304 $ 304 $ 452 $ 452 Money Market Funds 369,747 369,747 956,175 956,175 --------- --------- --------- --------- Total Cash and Cash Equivalents $ 370,051 $ 370,051 $ 956,627 $ 956,627 ========= ========= ========= ========= ITEM 8.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. None. PART III ITEM 9.DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT. The registrant is a limited partnership and has no officers, directors, or direct employees. The General Partners of the registrant are Robert P. Johnson and AFM. The General Partners manage and control the Partnership's affairs and have general responsibility and the ultimate authority in all matters affecting the Partnership's business. The director and officers of AFM are as follows: Robert P. Johnson, age 56, is Chief Executive Officer, President and Director and has held these positions since the formation of AFM in December, 1985, and has been elected to continue in these positions until December, 2001. From 1970 to the present, he has been employed exclusively in the investment industry, specializing in tax-advantaged limited partnership investments. In that capacity, he has been involved in the development, analysis, marketing and management of public and private investment programs investing in net lease properties as well as public and private investment programs investing in energy development. Since 1971, Mr. Johnson has been the president, a director and a registered principal of AEI Securities, Inc., which is registered with the Securities and Exchange Commission as a securities broker-dealer, is a member of the National Association of Securities Dealers, Inc. (NASD) and is a member of the Security Investors Protection Corporation (SIPC). Mr. Johnson has been president, a director and the principal shareholder of AEI Fund Management, Inc., a real estate management company founded by him, since 1978. Mr. Johnson is currently a general partner or principal of the general partner in fifteen limited partnerships. Mark E. Larson, age 48, is Executive Vice President, Treasurer and Chief Financial Officer and has been elected to continue in these positions until December, 2001. Mr. Larson has been Treasurer and Executive Vice President since December, 1987 and Chief Financial Officer since January, 1990. In January, 1993, Mr. Larson was elected to serve as Secretary of AFM and will continue to serve until December, 2001. Mr. Larson has been employed by AEI Fund Management, Inc. and affiliated entities since 1985. From 1979 to 1985, Mr. Larson was with Apache Corporation as manager of Program Accounting responsible for the accounting and reports for approximately 45 public partnerships. Mr. Larson is responsible for supervising the accounting functions of AFM and the registrant. ITEM 10. EXECUTIVE COMPENSATION. The General Partner and affiliates are reimbursed at cost for all services performed on behalf of the registrant and for all third party expenses paid on behalf of the registrant. The cost for services performed on behalf of the registrant is actual time spent performing such services plus an overhead burden. These services include organizing the registrant and arranging for the offer and sale of Units, reviewing properties for acquisition and rendering administrative and management services. ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. The following table sets forth information pertaining to the ownership of the Units by each person known by the Partnership to beneficially own 5% or more of the Units, by each General Partner, and by each officer or director of the Managing General Partner as of February28, 2001: Name and Address Number of Percent of Beneficial Owner Units Held of Class AEI Fund Management 86-A, Inc. 3 * 1300 Minnesota World Trade Center 30 East 7th Street, St. Paul, Minnesota 55101 Robert P. Johnson 0 0% 1300 Minnesota World Trade Center 30 East 7th Street, St. Paul, Minnesota 55101 Mark E. Larson 17.67 * 1300 Minnesota World Trade Center 30 East 7th Street, St. Paul, Minnesota 55101 * Less than 1% The persons set forth in the preceding table hold sole voting power and power of disposition with respect to all of the Units set forth opposite their names. The General Partners know of no holders of more than 5% of the outstanding Units. ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. The registrant, AFM and its affiliates have common management and utilize the same facilities. As a result, certain administrative expenses are allocated among these related entities. All of such activities and any other transactions involving the affiliates of the General Partner of the registrant are governed by, and are conducted in conformity with, the limitations set forth in the Limited Partnership Agreement of the registrant. Reference is made to Note 3 of the Financial Statements, as presented, and is incorporated herein by reference, for details of related party transactions. ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K AND FORM 8-K/A. A. Exhibits - Description 10.1 Net Lease Agreement dated January 10, 1996, between the Partnership and Huntington Restaurants Group, Inc. relating to the property at 3103 W. I-30, Greenville, Texas (incorporated by reference to Exhibit 10.1 of Form 8-K filed on January 17, 1996). 10.2 Net Lease Agreement dated December 23, 1997 between the Partnership, AEI Net Lease Income & Growth Fund XIX Limited Partnership, AEI Real Estate Fund XVIII Limited Partnership, AEI Real Estate Fund XVII Limited Partnership and Champps Entertainment, Inc. relating to the property at 301 West Big Beaver Road, Troy, Michigan (incorporated by reference to Exhibit 10.9 of Form 10-KSB on March 23, 1998). ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K AND FORM 8-K/A. (Continued) A. Exhibits - Description 10.3 First Amendment to Net Lease Agreement dated September 3, 1998 between the Partnership, AEI Net Lease Income & Growth Fund XIX Limited Partnership, AEI Real Estate Fund XVIII Limited Partnership, AEI Real Estate Fund XVII Limited Partnership and Champps Entertainment, Inc. relating to the property at 301 West Big Beaver Road, Troy, Michigan (incorporated by reference to Exhibit 10.2 of Form 8-K on September 15, 1998). 10.4 Purchase Agreement dated February 4, 1999 between the Partnership, AEI Real Estate Fund XVI Limited Partnership and Elizabeth Cockrum relating to the property at 2175 Barrett Station Road, St. Louis, Missouri (incorporated by reference to Exhibit 10.1 of Form 8-K on June21, 1999). 10.5 Purchase Agreement dated March 24, 1999 between the Partnership, AEI Real Estate Fund XVI Limited Partnership and Tom Salome relating to the property at 1812 North Valley Mills Drive, Waco, Texas (incorporated by reference to Exhibit 10.1 of Form 10-QSB on July 30, 1999). 10.6 Amendment to Purchase Agreement dated May 19, 1999 between the Partnership, AEI Real Estate Fund XVI Limited Partnership and Elizabeth Cockrum relating to the property at 2175 Barrett Station Road, St. Louis, Missouri (incorporated by reference to Exhibit 10.2 of Form 8-K on June 21, 1999). 10.7 Purchase and Sale Agreement and Escrow Instructions dated May 20, 1999 between AEI Fund Management, Inc. and ARAMARK Educational Resources, Inc. relating to the property at 7236 Tylers Corner, West Chester, Ohio (incorporated by reference to Exhibit 10.1 of Form 8-K on July 26, 1999). 10.8 Second Assignment of Purchase and Sale Agreement and Escrow Instructions dated June 18, 1999 between the Partnership, AEI Fund Management, Inc. and ARAMARK Educational Resources, Inc. relating to the property at 7236 Tylers Corner, West Chester, Ohio (incorporated by reference to Exhibit 10.2 of Form 8-K on July 26, 1999). 10.9 Net Lease Agreement dated July 14, 1999 between the Partnership and ARAMARK Educational Resources, Inc. relating to the property at 7236 Tylers Corner, West Chester, Ohio (incorporated by reference to Exhibit 10.3 of Form 8-K on July 26, 1999). 10.10 Purchase Agreement dated August 4, 1999 between the Partnership and AEI Institutional Net Lease Fund '93 Limited Partnership and VTA Building Company relating to the property at 3950 Second Street South, St. Cloud, Minnesota (incorporated by reference to Exhibit 10.7 of Form 10-QSB on November 8, 1999). 10.11 Purchase Agreement dated October 6, 1999 between the Partnership and Kenneth F. Cairns relating to the property 3950 Second Street South, St. Cloud, Minnesota (incorporated by reference to Exhibit 10.8 of Form 10-QSB on November 8, 1999). 10.12 Purchase Agreement dated October 7, 1999 between the Partnership and Kathleen DeVoe Hans relating to the property at 3950 Second Street South, St. Cloud, Minnesota (incorporated by reference to Exhibit 10.9 of Form 10-QSB on November 8, 1999). 10.13 Purchase Agreement dated November 18, 1999 between the Partnership and AEI Real Estate Fund XVII Limited Partnership and Kilduff 1996 Revocable Trust, dated June 20, 1996 relating to the property at 3950 Second Street South, St. Cloud, Minnesota (incorporated by reference to Exhibit 10.14 of Form 10-KSB filed on March 10, 2000). 10.14 Development Financing Agreement dated May 8, 2000 between the Partnership, AEI Real Estate Fund XVII Limited Partnership, AEI Net Lease Income & Growth Fund XIX Limited Partnership, AEI Income & Growth Fund XXII Limited Partnership and Razzoo's, Inc. relating to the property at 11617 Research Blvd., Austin, Texas (incorporated by reference to Exhibit 10.1 of Form 10-QSB filed on August 2, 2000). 10.15 Net Lease Agreement dated May 8, 2000 between the Partnership, AEI Real Estate Fund XVII Limited Partnership, AEI Net Lease Income & Growth Fund XIX Limited Partnership, AEI Income & Growth Fund XXII Limited Partnership and Razzoo's, Inc. relating to the property at 11617 Research Blvd., Austin, Texas (incorporated by reference to Exhibit 10.2 of Form 10-QSB filed on August 2, 2000). B. Reports on Form 8-K and Form 8-K/A - None. 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. AEI REAL ESTATE FUND XV Limited Partnership By: AEI Fund Management 86-A, Inc. Its Managing General Partner March 9, 2001 By:/s/ Robert P. Johnson Robert P. Johnson, President and Director (Principal Executive Officer) 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. Name Title Date /s/ Robert P. Johnson President (Principal Executive Officer) March 9, 2001 Robert P. Johnson and Sole Director of Managing General Partner /s/ Mark E. Larson Executive Vice President, Treasurer March 9, 2001 Mark E. Larson and Chief Financial Officer (Principal Accounting Officer)