CORPORATE PROPERTY ASSOCIATES 15 INC - 10-K Annual Report

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
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FORM 10-K

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE FISCAL YEAR ENDED DECEMBER 31, 2003

OR

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

FOR THE TRANSITION PERIOD FROM ______________ TO ______________.

COMMISSION FILE NUMBER: 333-58854

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CORPORATE PROPERTY ASSOCIATES 15 INCORPORATED
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

MARYLAND 52-2298116
(STATE OF INCORPORATION) (I.R.S. EMPLOYER IDENTIFICATION NO.)

50 ROCKEFELLER PLAZA 10020
NEW YORK, NEW YORK 10020 (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICE)

REGISTRANT'S TELEPHONE NUMBERS:

INVESTOR RELATIONS (212) 492-8920
(212) 492-1100

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

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE

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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 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 [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained in this report, 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. [ ]

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act). Yes [X] No [ ].

Registrant has no active market for its common stock as of March 5, 2004.
Non-affiliates held 105,626,550 shares at March 5, 2004.

As of March 5, 2004, there are 106,010,397 shares of common stock of
Registrant outstanding.

Registrant incorporates by reference its definitive Proxy Statement with
respect to its 2004 Annual Meeting of Shareholders, to be filed with the
Securities and Exchange Commission within 120 days following the end of its
fiscal year, into Part III of this Report.

CORPORATE PROPERTY ASSOCIATES 15 INCORPORATED

PART I

Item 1. Business.

Corporate Property Associates 15 Incorporated ("CPA(R):15" or the "Company") was
formed as a Maryland corporation on February 26, 2001. Between November 7, 2001
and November 8, 2002, CPA(R):15 sold a total of 39,930,312 shares of common
stock for a total of $399,303,120 in gross offering proceeds. Between March 20,
2003 and August 7, 2003, CPA(R):15 completed an offering for an additional
64,687,294 shares of its common stock to the public, for total gross proceeds of
$646,872,940. CPA(R):15 is a Real Estate Investment Trust ("REIT") engaged in
the business of investing in commercial and industrial real estate. CPA(R):15
will use the proceeds of its original and current offering, combined with
limited recourse mortgage debt, to acquire and own commercial properties for
lease to companies nationwide and internationally. As of December 31, 2003,
CPA(R)15's portfolio consisted of 130 properties leased to 41 tenants and
totaling more than 18.4 million square feet.

CPA(R):15's core investment strategy is to purchase and own properties leased to
a variety of companies on a single tenant net lease basis. These leases
generally place the economic burden of ownership on the tenant by requiring the
tenant to pay the costs of maintenance, insurance, taxes, structural repairs and
other operating expenses. CPA(R):15 also generally intends to include in its
leases:

- clauses providing for mandated rent increases or periodic rent
increases tied to increases in the consumer price index or
other indices for the jurisdiction in which the property is
located or, when appropriate, increases tied to the volume of
sales at the property;

- covenants restricting the activity of the tenant to reduce the
risk of a change in credit quality;

- indemnification of CPA(R):15 for environmental and other
liabilities; and

- when appropriate, guarantees from parent companies or other
entities.

As a REIT, CPA(R):15 will not be subject to federal income taxation as long as
it satisfies certain requirements relating to the nature of its income, the
level of its distributions and other factors.

W. P. Carey & Co. LLC ("WPC"), CPA(R):15's advisor, provides both strategic and
day-to-day management for CPA(R):15, including acquisition services, research,
investment analysis, asset management, capital funding services, disposition of
assets, investor relations and administrative services. WPC also provides office
space and other facilities for CPA(R):15. WPC has dedicated senior executives in
each area of its organization so that CPA(R):15 functions as a fully integrated
operating company. CPA(R):15 pays asset management fees to WPC and pays certain
transactional fees. CPA(R):15 also reimburses WPC for certain expenses. WPC also
serves in this capacity for Carey Institutional Properties Incorporated
("CIP(R)"), Corporate Property Associates 12 Incorporated ("CPA(R):12"),
Corporate Property Associates 14 Incorporated ("CPA(R):14") and Corporate
Property Associates 16 - Global Incorporated ("CPA(R):16 - Global"). WPC is
listed on the New York Stock Exchange and Pacific Exchange under the symbol
"WPC."

CPA(R):15's principal executive offices are located at 50 Rockefeller Plaza, New
York, NY 10020 and its telephone number is (212) 492-1100. As of December 31,
2003, CPA(R):15 had no employees. WPC employs 120 individuals who perform
services for CPA(R):15.

BUSINESS OBJECTIVES AND STRATEGY

CPA(R):15's objectives are to:

- pay quarterly dividends at an increasing rate that for taxable
shareholders are partially free from current taxation;

- provide inflation protected income;

- purchase and own a diversified portfolio of net-leased real
estate that will increase in value; and

- increase the value of its shares by increasing the equity in
its real estate by making regular mortgage principal payments.

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CORPORATE PROPERTY ASSOCIATES 15 INCORPORATED

CPA(R):15 seeks to achieve these objectives by purchasing and holding industrial
and commercial properties each net leased to a single corporate tenant.
CPA(R):15 intends its portfolio to be diversified by geography, property type
and by tenant.

DEVELOPMENTS DURING 2003

As of August 7, 2003, the Company completed sales of its second offering of
shares of common stock, at which time the gross amount raised from the two
offerings aggregated approximately $1,000,000,000.

On January 28, 2003, the Company purchased land in Birmingham, United Kingdom
for $9,038,150 and entered into a build-to-suit commitment and a net lease with
Insulated Structures, Ltd. ("ISL"). The total cost for the ISL facility was
approximately $22,978,000. A lease with an initial term of 25 years commenced in
November 2003 at an initial annual rent of (pound)1,033,000 ($1,837,190 using
the exchange rate for the Great Britain Pound at December 31, 2003) with annual
rent increases of 2%. The Company has obtained (pound)9,300,000 (approximately
$16,540,050) of limited recourse mortgage financing which bears at an annual
interest rate of 4.80%. The loan provides for stated principal payments which
increase over the twenty-year term of the loan. A balloon payment of
(pound)5,583,750 ($9,930,699) is payable at maturity.

On February 7, 2003, the Company and two of its affiliates, CPA(R):12 and
CPA(R):14, through a newly formed limited liability company, with ownership
interests of 44%, 15% and 41%, respectively, purchased land and 15 health club
facilities for $178,010,471 and entered into a master net lease with Starmark.
The lease obligations of Starmark are jointly and unconditionally guaranteed by
seven of its affiliates. The Starmark lease provides for an initial lease term
of 20 years with three ten-year renewal terms. Annual rent is initially
$18,272,400 with Consumer Price Index ("CPI")-based increases scheduled in
November 2006, 2010, 2014, 2018, and 2021. In connection with the purchase, the
limited liability company obtained first mortgage limited recourse financing of
$88,300,000 and a mezzanine loan of $20,000,000. The first mortgage provides for
monthly payments of interest and principal of $563,936 at an annual interest
rate of 6.6% and based on a 30-year amortization schedule. The loan matures in
March 2013 at which time a balloon payment is payable. The mezzanine loan
provides for monthly payments of interest and principal of $277,201 at an annual
interest rate of 11.15% and will fully amortize over its ten-year term. The
limited liability company was granted warrants for Class C Unit interests in
Starmark. If exercised, the Unit interests would represent a 5% interest in
Starmark as of the date of grant. The warrants may be exercised at any time
through February 7, 2023 at an exercise price of $430 per unit. The warrant
agreement does not provide for a cashless exercise of units.

On February 12, 2003, the Company purchased land and buildings in Chattanooga,
Tennessee for $6,544,503 and entered into a master net lease with Waddington
North America Business Trust. The lease obligations are unconditionally
guaranteed by WNA American Plastics Industries, Inc. The lease has an initial
term of 19 years with two ten-year renewal options. Annual rent is $637,500 with
increases every three years based on a formula indexed to increases in the CPI
and capped at 3%.

On February 25, 2003, the Company purchased land and buildings in Mooresville,
North Carolina for $15,602,094 and entered into a lease agreement with Polar
Plastics (NC), Inc. ("Polar") at an annual rent of $1,460,200. The lease
obligations are unconditionally guaranteed by Polar Plastics, Inc., Polar's
parent company. The lease has an initial term of 20 years with two ten-year
renewal options and CPI-based rent increases every three years. In connection
with the purchase of the properties, the Company obtained $9,500,000 of limited
recourse mortgage financing collateralized by a deed of trust and a lease
assignment. The loan provides for monthly payments of interest and principal of
$69,826 at an annual interest rate of 6.32% and will fully amortize over 20
years.

On March 12, 2003, the Company sold a 35% interest in the limited liability
company that owns properties leased to Medica-France and Carrefour France, S.A.
to CPA(R):12 (Prior to the sale, the limited liability company was wholly-owned
by the Company). The purchase price for the 35% interest was based on the
appraised value of the properties (based on the current exchange rate for the
Euro) adjusted for capitalized costs incurred since the acquisitions including
fees paid to the Advisor, net of mortgage debt. Based on the formula, CPA(R):12
paid the Company $11,916,465 and assumed $1,031,046 of the Company's deferred
acquisition fee payable to an affiliate. In connection with the acquisition of
an additional Carrefour property in November 2003, the Company and CPA(R):12
sold a portion of their interests to W. P. Carey, reducing the Company's overall
interest in the Carrefour properties from 65% to 50.375%. In accordance with the
Company's diversification policy, the independent directors

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CORPORATE PROPERTY ASSOCIATES 15 INCORPORATED

determined that it was prudent to mitigate the Company's overall exposure to
Carrefour's credit. The Company received $5,647,899 for the sale of a portion of
the interest in the Carrefour properties with the sales price based on the
appraised value of the properties, and adjusted to reflect the appreciation of
the Euro.

On November 27, 2003, CPA(R):15, CPA(R):12 and W. P. Carey, with interests of
50.375%, 27.125% and 22.50%, respectively, purchased an additional Carrefour
property in Nimes, France for $20,634,503 (based on the exchange rate for the
euro as of the date of acquisition) and obtained additional recourse mortgage
financing of $16,750,058. The lease for the Nimes property provides for annual
rent of $1,921,330 and has a term through November 2012 with annual rent
increases based on the INSEE index.

On March 20, 2003, the Company purchased land in Miami, Florida for $15,422,649,
including certain capitalized costs, and entered into construction agency and
net lease agreements with Transworld Center, Inc. ("Transworld"). The
construction and lease obligations are unconditionally guaranteed by nine of its
affiliates. The total cost of the build-to-suit project was approximately
$21,000,000. On October 31, 2003, a lease with an initial term of 20 years was
to commence at an annual rent of $2,257,500. In November 2003, Transworld
notified the Company that it would not occupy the property. The Company is
attempting to enforce its rights under the Transworld lease and is pursuing
litigation against Transworld. The Company is remarketing the property.

On March 28, 2003, the Company purchased land in McCalla, Alabama for $3,813,136
and entered into a construction agency and net lease agreements with Oxford
Automotive, Inc. ("Oxford"). The construction and lease obligations are
unconditionally guaranteed by Oxford Automotive, Inc., Oxford's parent company.
The total cost of the build-to-suit project was approximately $15,707,000. On
March 1, 2004, a lease with an initial term of 15 years commenced at an annual
rent of $1,575,000. The lease provides for two ten-year renewal terms and for
rent increases every three years based on a formula indexed to increases in the
CPI.

On March 28, 2003, the Company purchased land and buildings in Rochester,
Minnesota for $12,565,445 and entered into a lease agreement with Pemstar, Inc.
at an annual rent of $1,278,000. The lease has an initial term of 20 years with
two ten-year renewal options and stated annual increases of 2%. In connection
with the purchase of the property, the Company obtained $7,500,000 of limited
recourse mortgage financing collateralized by a mortgage and lease assignment.
The loan provides for monthly payments of interest and principal of $55,302 at
an annual interest rate of 6.36% and will fully amortize over 20 years.

On April 1, 2003, the Company purchased land and buildings in Yardley,
Pennsylvania for $23,979,058 and entered into a lease agreement with MediMedia
USA, Inc. The lease obligations are unconditionally guaranteed by Santemedia
Group Holdings SARL. The lease has an initial term of 11 years and eight months
followed by renewal options of 10 years, 4.5 years and 5.5 years, and provides
for initial annual rent of $2,111,380 with stated rent increases of 10.41% every
five years. In connection with the purchase of the properties, the Company
obtained $14,000,000 of limited recourse mortgage financing collateralized by a
mortgage, security agreement and lease assignment. The loan provides for monthly
payments of interest and principal of $89,348 at an annual interest rate of
5.90% and based on a 25-year amortization schedule, and matures in April 2018,
at which time a balloon payment is payable.

On April 29, 2003, the Company purchased six properties in England, Northern
Ireland and Ireland for $35,213,502 and entered into leases with Qualceram
Shires plc ("Qualceram"). The leases have initial terms of 25 years at an annual
aggregate rent of (pound)1,844,918 ($3,281,187 using the exchange rate for the
Great Britain Pound at December 31, 2003). The leases provide for stated annual
increases of 1.75% for the first ten years followed by stated increases of 3%
per year compounded every five years thereafter. Qualceram has annual repurchase
options at the greater of fair value, as defined in the lease, or the sum of the
Company's purchase cost and a specified premium. On February 24, 2004, the
Company obtained (pound)12,410,000 ($23,493,371 using the exchange rate as of
February 24, 2004) of limited recourse mortgage financing collateralized by the
Qualceram properties. The loan provides for quarterly payments of principal and
interest of (pound)266,000 ($503,565 at February 24, 2004) at an annual interest
rate of 6.948%. The loan has a ten-year term at which time a balloon payment is
payable.

On July 2, 2003, the Company purchased land and buildings in Virginia Beach,
Virginia for $38,743,455 and entered into a net lease with Lillian Vernon
Corporation. The lease has an initial term of 20 years followed by two ten-year
renewal options, and provides for an annual rent of $3,848,000 with increases
every three years based on a

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CORPORATE PROPERTY ASSOCIATES 15 INCORPORATED

formula indexed to increases in the CPI. In connection with the acquisition, the
Company obtained $24,000,000 of limited recourse mortgage financing which is
collateralized by a deed of trust and lease assignment. The loan provides for
monthly payments of principal and interest totaling $175,703 based on an annual
interest rate of 6.27% and a 20-year amortization schedule. The loan matures in
September 2023, at which time a balloon payment will be due.

On July 31, 2003, the Company purchased land and buildings in Fort Smith
Arkansas for $6,492,146 and entered into a net lease with Qualserv Corporation.
The lease has an initial term of 15 years followed by two seven-year renewal
options and provides for an annual rent of $666,500 with increases every three
years based on a formula indexed to increases in the CPI.

On August 7, 2003, the Company purchased land and buildings in Corpus Christi;
Odessa; San Marcos and Waco, Texas for $13,821,990 and entered into a net lease
with Grande Communications Network, Inc. The lease has an initial term of 20
years followed by four five-year renewal options and provides for an annual rent
of $1,379,400 with annual increases based on a formula indexed to increases in
the CPI, capped at 3%. In connection with the acquisition, the Company obtained
$7,550,000 of limited recourse mortgage financing which is collateralized by a
deed of trust and lease assignment. The loan provides for monthly payments of
principal and interest totaling $57,273 based on an annual interest rate of
6.72% and a 20-year amortization schedule. The loan matures in September 2023,
at which time a balloon payment will be due.

On August 8, 2003, the Company purchased leasehold interests in buildings in
Cheektowaga, New York and Greenwood, Indiana for $12,665,445 and entered into
net leases with Galyan's Trading Company, Inc. ("Galyan's"). The leases have
terms through January 31, 2024 with five five-year renewal options. The leases
provide for an aggregate rent of $1,290,000 with rent increases every five years
based on a formula indexed to increases with the CPI, with each rent increase
capped at 10%. In connection with acquiring the Cheektowaga and Greenwood
properties, the Company obtained $8,200,000 of limited recourse mortgage
financing. The loans provide for aggregate monthly payments of principal and
interest of $63,329 at an annual interest rate of 6.95% based on a 20-year
amortization schedule. The loans mature on September 1, 2023 at which time they
will fully amortize. The Company also entered into a construction agency
agreement with Galyan's for property being constructed in Freehold, New Jersey.
The total cost will not exceed $9,000,000 and an initial lease term of 20 years
will commence when the building has been completed, but no later than November
5, 2004. If the entire project costs are used, initial annual rent will be
$967,500. The lease provides for six five-year renewal terms and rent increases
every five years based on a formula indexed to increases in the CPI, with each
rent increase capped at 10%.

On August 13, 2003, the Company purchased land and buildings in Jackson,
Tennessee and Bowling Green, Kentucky for $14,764,398 and entered into a net
lease with Kerr Group, Inc. The lease has an initial term of 18 years followed
by six five-year renewal options, and provides for an annual rent of $1,330,602
with stated annual increases of 3%. In connection with the acquisition, the
Company obtained $8,460,000 of limited recourse mortgage financing which is
collateralized by a deed of trust and mortgage agreement. The loan provides for
monthly payments of principal and interest of $61,588 at an annual interest rate
of 7.23% and based on an amortization schedule of 24 years and five months. The
loan matures on October 1, 2018.

On August 19, 2003, the Company entered into a construction agency agreement
with Dick's Sporting Goods, Inc. for a property in Indianapolis, Indiana. The
total cost of construction is estimated to amount to approximately $8,746,597.
Upon the earlier of completion or March 1, 2004, an initial lease term of 20
years and 11 months will commence. Initial annual rent will be $783,094 with
stated rent increases of 10.4% every five years. The lease provides for three
ten-year renewal terms. In connection with the acquisition, the Company obtained
$5,000,000 of limited recourse mortgage financing which is collateralized by a
deed of trust and mortgage agreement. The loan provides for monthly payments of
principal and interest of $40,157 at an annual interest rate of 7.46% and based
on a 20-year amortization schedule. The loan matures on November 1, 2024.

On August 26, 2003, the Company purchased land and buildings in Holyoke and
Westfield, Massachusetts, Mattoon, Illinois and Morristown, Tennessee for
$16,125,654 and entered into a net lease with American Pad & Paper LLC. The
lease has an initial term of 20 years followed by four five-year renewal
options, and provides for an annual rent of $1,578,504. The lease provides for
increases to the rent every two years based on a formula indexed to increases in
the CPI. In connection with the acquisition, the Company obtained $9,400,000 of
limited recourse

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CORPORATE PROPERTY ASSOCIATES 15 INCORPORATED

mortgage financing collateralized by a deed of trust and mortgage agreement. The
loan provides for monthly payments of principal and interest of $63,646 at an
annual interest rate of 6.53% and based on a 25-year amortization schedule. The
loan matures on October 1, 2013.

In June 2002, the Company purchased land and building in Tulsa, Oklahoma and
entered into a net lease with Fleming Companies, Inc. ("Fleming"). Fleming
declared bankruptcy on April 1, 2003, and on August 31, 2003, Fleming's
termination of the lease with the Company was approved by the bankruptcy court
at which time it vacated the property. The property is currently vacant.

On September 15, 2003, the Company purchased land in Avondale, Arizona and
entered into a built-to-suit commitment and net lease with Universal Technical
Institute of Arizona, Inc. The total cost of construction is estimated to amount
to approximately $34,138,907. Upon the earlier of completion or July 31, 2004 an
initial lease term of 20 years and 11 months will commence. If the entire
project costs are used, initial annual rent will be $3,106,640, with increases
every three years based on a formula indexed to increases in the Consumer Price
Index ("CPI"). The lease provides for four five-year renewal terms.

On September 30, 2003, the Company purchased land and buildings in Rochester
Hills and Canton, Michigan for $44,921,466 and entered into a net lease with
Life Time Fitness, Inc. The lease has an initial term of 20 years followed by
two ten-year renewal options, and provides for an annual rent of $4,247,100 with
stated increases every five years. In connection with the acquisition, the
Company obtained $27,000,000 of limited recourse mortgage financing
collateralized by a deed of trust and mortgage agreement. The loan provides for
monthly payments of principal and interest of $181,127 at an annual interest
rate of 6.43% and based on a 25-year amortization schedule. The loan matures on
January 1, 2014 at which time a balloon payment is due.

On October 30, 2003, the Company purchased land and buildings in Excelsior
Springs, Missouri; St. Petersburg, Florida; West Lafayette, Indiana; Pittsburgh,
Pennsylvania and Buffalo Grove, Illinois for $29,319,371 and entered into a net
lease with Precise Technology, Inc. The lease obligations are unconditionally
guaranteed by Precise Technology Group, Inc. The lease has an initial term of 20
years followed by two ten-year renewal options, and provides for an annual rent
of $2,640,400 with increases every two years based on a formula indexed to
increases in the CPI. In connection with the acquisition, the Company obtained
$17,200,000 of limited recourse mortgage financing collateralized by a deed of
trust and mortgage agreement. The loan provides for monthly payments of
principal and interest of $127,021 at an annual interest rate of 6.30% and based
on an amortization schedule of 19 years and nine months. The loan matures on
October 1, 2023.

On November 4, 2003, the Company purchased land and a building in West Midlands,
United Kingdom for $10,715,702 and entered into a net lease with Roundoak Rail
Limited and five of its affiliates. The lease has an initial term of 30 years
and provides for an initial annual rent of (pound)486,985 ($866,103 using the
exchange rate for the Great Britain Pound at December 31, 2003) with stated
increases every five years. In connection with the acquisition, the Company
obtained (pound)4,250,000 ($7,558,625) of limited recourse mortgage financing
collateralized by the property. The loan bears interest at an annual rate of
5.295% and provides for stated principal payments which increase over the
ten-year term of the loan. The loan matures on November 4, 2013 at which time a
balloon payment is due.

On November 7, 2003, the Company purchased land and buildings in Atlanta,
Georgia and Bel Air, Maryland for $28,272,251 and entered into a net lease with
Starmark Camhood II LLC. The lease has an initial term of 20 years followed by
three ten-year renewal options, and provides for annual rent of $2,632,500. The
lease provides for increases to the rent for every four years based on a formula
indexed to increases in the CPI. In connection with the acquisition, the Company
obtained $15,500,000 of limited recourse mortgage financing collateralized by
the properties. The loan provides for monthly payments of principal and interest
of $102,187 at an annual interest rate of 6.91% and based on a 30-year
amortization schedule. The loan matures on December 1, 2013. The Company was
granted warrants for Class C Unit interests in Starmark. If exercised, the Unit
interests would represent a 2% interest in Starmark as of the date of grant. The
warrants may be exercised at any time through November 7, 2023 at an exercise
price of $430 per unit.

On November 20, 2003, the Company purchased land and buildings in Alsip,
Illinois, Geddes, New York and Tolleson, Arizona for $33,649,215 and entered
into a net lease with Berry Plastics Corporation. The lease has an

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CORPORATE PROPERTY ASSOCIATES 15 INCORPORATED

initial term of 20 years followed by two ten-year renewals terms and provides
for initial annual rent of $2,960,000. The lease provides for annual rent
increases beginning on the fourth lease anniversary based on a formula indexed
to increases in the CPI. The Company has a commitment of up to $3,000,000 to
fund an expansion at the Tolleson, Arizona property which is expected to be
completed in June 2004. The Company also has an obligation to fund up to an
additional $1,000,000 for the expansion. If the entire project costs are used,
annual rent will increase by $366,000.

On November 24, 2003, the Company purchased land and buildings in Shelby and
Port Huron, Michigan for $11,518,325 and entered into a net lease with Sportrack
LLC. The lease has an initial term of 20 years followed by two ten-year renewals
terms and provides for initial annual rent of $1,045,000. The lease provides for
annual rent increases beginning on the second lease anniversary based on a
formula indexed to increases in the CPI.

On December 11, 2003, the Company purchased a 99.99% interest in land and
building in Kahl am Main, Germany for $16,690,366 and entered into a net lease
with Actuant Corporation and GB Tools and Supplies, Inc. The lease has an
initial term of 17 years followed by two five-year renewal terms and provides
for initial annual rent of #eu#1,306,500 ($1,640,572 using the exchange rate
for the Euro as of December 31, 2003). The lease provides for annual rent
increases based on a formula indexed to increases in the German Consumer Price
Index. An affiliate, CPA(R):16-Global has an option to purchase up to a 75%
interest in the property.

On December 16, 2003, the Company purchased land in Upper Uwchlan Township,
Pennsylvania and entered into a build-to-suit commitment and net lease with
Universal Technical Institute of Pennsylvania, Inc. The total cost of
construction is estimated to amount to approximately $23,200,000. Upon
completion, expected to be in July 2004, an initial lease term of 15 years will
commence. If the entire project costs are used, initial annual rent will be
$2,262,000, with increases every three years based on a formula indexed to
increases in the Consumer Price Index ("CPI"). The lease provides for four
five-year renewal terms.

On December 22, 2003, the Company purchased land and a building in Englewood,
Colorado for $9,766,295 and entered into a net lease with 24 Hour Fitness, Inc.
The lease has an initial term of 18 years and four months followed by two
five-year renewal options, and provides for an initial annual rent of $914,027.
The lease provides for stated rent increases every five years. In February 2004,
the Company obtained $6,300,000 of limited recourse mortgage financing
collateralized by a deed of trust and mortgage agreement. The loan provides for
monthly payments of principal and interest of $48,678 at an annual interest rate
of 6.29% and based on an 18-year amortization schedule. The loan matures on
April 1, 2022.

ACQUISITION STRATEGIES

WPC has a well-developed process with established procedures and systems for
acquiring net leased property on behalf of CPA(R):15. As a result of its
reputation and experience in the industry and the contacts maintained by its
professionals, WPC has a presence in the net lease market that has provided it
with the opportunity to invest in a significant number of transactions on an
ongoing basis. CPA(R):15 takes advantage of WPC's presence in the net lease
market to build its portfolio. In evaluating opportunities for CPA(R):15, WPC
carefully examines the credit, management and other attributes of the tenant and
the importance of the property under consideration to the tenant's operations.
Careful credit analysis is a crucial aspect of every transaction. CPA(R):15
believes that WPC has one of the most extensive underwriting processes in the
industry and has an experienced staff of professionals involved with
underwriting transactions. WPC seeks to identify those prospective tenants whose
creditworthiness is likely to improve over time. CPA(R):15 believes that the
experience of WPC's management in structuring sale-leaseback transactions to
meet the needs of a prospective tenant enables WPC to obtain a higher return for
a given level of risk than would typically be available by purchasing a property
subject to an existing lease.

WPC's strategy in structuring its net lease investments for CPA(R):15 is to:

- combine the stability and security of long-term lease
payments, including rent increases, with the appreciation
potential inherent in the ownership of real estate;

- enhance current returns by utilizing varied lease structures;

- reduce credit risk by diversifying investments by tenant, type
of facility, geographic location and tenant industry; and

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CORPORATE PROPERTY ASSOCIATES 15 INCORPORATED

- increase potential returns by obtaining equity enhancements
from the tenant when possible, such as warrants to purchase
tenant common stock.

FINANCING STRATEGIES

Consistent with its investment policies, CPA(R):15 will use leverage when
available on favorable terms. CPA(R):15 has approximately $596,003 in property
level debt outstanding, all of which bears interest at fixed rates. These
mortgages mature between 2012 and 2032 and have interest rates between 4.8% and
7.98%. WPC will seek opportunities and consider alternative financing techniques
to finance properties not currently subject to debt, refinance debt, reduce
interest expense or improve its capital structure.

TRANSACTION ORIGINATION

In analyzing potential acquisitions, WPC reviews and structures many aspects of
a transaction, including the tenant, the real estate and the lease, to determine
whether a potential acquisition can be structured to satisfy CPA(R):15's
acquisition criteria. The aspects of a transaction which are reviewed and
structured by WPC include the following:

Tenant Evaluation. WPC evaluates each potential tenant for its credit,
management, position within its industry, operating history and
profitability. WPC seeks tenants it believes will have stable or
improving credit. By leasing properties to these tenants, CPA(R):15 can
generally charge rent that is higher than the rent charged to tenants
with recognized credit and thereby enhance its current return from
these properties as compared with properties leased to companies whose
credit potential has already been recognized by the market.
Furthermore, if a tenant's credit does improve, the value of
CPA(R):15's property will likely increase (if all other factors
affecting value remain unchanged). WPC may also seek to enhance the
likelihood of a tenant's lease obligations being satisfied, such as
through a letter of credit or a guaranty of lease obligations from the
tenant's corporate parent. This credit enhancement provides CPA(R):15
with additional financial security. In evaluating a possible
investment, the creditworthiness of a tenant generally will be a more
significant factor than the value of the property absent the lease with
such tenant. While WPC will select tenants it believes are
creditworthy, tenants will not be required to meet any minimum rating
established by an independent credit rating agency. WPC's and the
investment committee's standards for determining whether a particular
tenant is creditworthy vary in accordance with a variety of factors
relating to specific prospective tenants. The creditworthiness of a
tenant is determined on a tenant by tenant, case by case basis.
Therefore, general standards for creditworthiness cannot be applied.

Leases with Increasing Rent. WPC typically includes, or attempts to
include a clause in each lease that provides for increases in rent over
the term of the lease. These increases are generally tied to increases
in indices such as the consumer price index. In the case of retail
stores, the lease may provide for participation in gross sales above a
stated level. The lease may also provide for mandated rental increases
on specific dates or other methods that may not be in existence or
contemplated by us as of the date of this report. WPC seeks to avoid
entering into leases that provide for contractual reductions in rents
during their primary term.

Properties Important to Tenant Operations. WPC generally seeks to
acquire properties with operations that are essential or important to
the ongoing operations of the tenant. WPC believes that these
properties provide better protection in the event a tenant files for
bankruptcy, since leases on properties essential or important to the
operations of a bankrupt tenant are less likely to be terminated by a
bankrupt tenant. WPC also seeks to assess the income, cash flow and
profitability of the business conducted at the property so that, if the
tenant is unable to operate its business, CPA(R):15 can either continue
operating the business conducted at the property or re-lease the
property to another entity in the industry which can operate the
property profitably.

Lease Provisions that Enhance and Protect Value. When appropriate, WPC
attempts to include provisions in its leases that require its consent
to specified tenant activity or require the tenant to satisfy specific
operating tests. These provisions include, for example, operational and
financial covenants of the tenant, prohibitions on a change in control
of the tenant and indemnification from the tenant against environmental
and other contingent liabilities. These provisions protect CPA(R):15's
investment from changes in the operating and financial characteristics
of a tenant that may impact its ability to satisfy its obligations to
us or could reduce the value of CPA(R):15's properties.

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CORPORATE PROPERTY ASSOCIATES 15 INCORPORATED

Diversification. WPC will continue to diversify CPA(R):15's portfolio
to avoid dependence on any one particular tenant, type of facility,
geographic location or tenant industry. By diversifying CPA(R):15's
portfolio, WPC reduces the adverse effect of a single under-performing
investment or a downturn in any particular industry or geographic
region.

WPC uses a variety of other strategies in connection with its acquisitions.
These strategies include attempting to obtain equity enhancements in connection
with transactions. Typically, these equity enhancements involve warrants to
purchase stock of the tenant or the stock of the parent of the tenant. If the
value of the stock exceeds the exercise price of the warrant, equity
enhancements help CPA(R):15 to achieve its goal of increasing funds available
for the payment of distributions.

As a transaction is structured, it is evaluated by the chairman of WPC's
investment committee. Before a property is acquired, the transaction is reviewed
by the investment committee to ensure that it satisfies CPA(R):15's investment
criteria. The investment committee is not directly involved in originating or
negotiating potential acquisitions, but instead functions as a separate and
final step in the acquisition process. WPC places special emphasis on having
experienced individuals serve on its investment committee and does not invest in
a transaction unless it is approved by the investment committee.

CPA(R):15 believes that the investment committee review process gives it a
unique competitive advantage over other net lease companies because of the
substantial experience and perspective that the investment committee has in
evaluating the blend of corporate credit, real estate and lease terms that
combine to make an acceptable risk.

The following people serve on the investment committee:

- George E. Stoddard, Chairman, was formerly responsible for the
direct corporate investments of The Equitable Life Assurance
Society of the United States and has been involved with the
CPA(R) programs for over 20 years.

- Frank J. Hoenemeyer, Vice Chairman, was formerly Vice
Chairman, Director and Chief Investment Officer of The
Prudential Insurance Company of America. As Chief Investment
Officer, Mr. Hoenemeyer was responsible for all of
Prudential's investments, including stocks, bonds, private
placements, real estate and mortgages.

- Nathaniel S. Coolidge previously served as Senior Vice
President -- Head of Bond & Corporate Finance Department of
the John Hancock Mutual Life Insurance Company. His
responsibility included overseeing fixed income investments
for Hancock, its affiliates and outside clients.

- Lawrence R. Klein is the Benjamin Franklin Professor of
Economics Emeritus at the University of Pennsylvania and its
Wharton School. Dr. Klein has been awarded the Alfred Nobel
Memorial Prize in Economic Sciences and currently advises
various governments and government agencies.

- Ralph F. Verni, is a private investor and business consultant
and formerly Chief Investment Officer of The New England
Mutual Life Insurance Company.

- Karsten von Koller was formerly Chairman and Member of the
Board of Managing Directors of Eurohypo AG, the leading
commercial real estate financing company in Europe.

All properties purchased by CPA(R):15 are appraised by an independent appraiser.
CPA(R):15 will not purchase any property that has a total property cost (the
purchase price of the property plus all acquisition fees) which is in excess of
its appraised value. These appraisals may take into consideration, among other
things, the terms and conditions of the particular lease transaction, the
quality of the lessee's credit and the conditions of the credit markets at the
time the lease transaction is negotiated. The appraised value may be greater
than the construction cost or the replacement cost of a property, and the actual
sale price of a property if sold by CPA(R):15 may be greater or less than the
appraised value.

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CORPORATE PROPERTY ASSOCIATES 15 INCORPORATED

WPC's practices include performing evaluations of the physical condition of
properties and performing environmental surveys in an attempt to determine
potential environmental liabilities associated with a property prior to its
acquisition. CPA(R):15 will also consider factors peculiar to the laws of
foreign countries, in addition to the risk normally associated with real
property investments, when considering an investment located outside the United
States.

ASSET MANAGEMENT

CPA(R):15 believes that effective management of its net lease assets is
essential to maintain and enhance property values. Important aspects of asset
management include restructuring transactions to meet the evolving needs of
current tenants, re-leasing properties, refinancing debt, selling properties and
knowledge of the bankruptcy process.

WPC monitors, on an ongoing basis, compliance by tenants with their lease
obligations and other factors that could affect the financial performance of any
of its properties. Monitoring involves receiving assurances that each tenant has
paid real estate taxes, assessments and other expenses relating to the
properties it occupies and confirming that appropriate insurance coverage is
being maintained by the tenant. WPC reviews financial statements of its tenants
and undertakes regular physical inspections of the condition and maintenance of
its properties. Additionally, WPC periodically analyzes each tenant's financial
condition, the industry in which each tenant operates and each tenant's relative
strength in its industry.

HOLDING PERIOD

CPA(R):15 intends to hold each property it acquires for an extended period. The
determination of whether a particular property should be sold or otherwise
disposed of will be made after consideration of relevant factors with a view to
achieving maximum capital appreciation and after-tax return for the CPA(R):15
shareholders. If CPA(R):15's common stock is not listed for trading on a
national securities exchange or included for quotation on NASDAQ, CPA(R):15 will
generally begin selling properties or evaluating other liquidity options within
eight years after the proceeds of its public offerings are substantially
invested, subject to market conditions. The board of directors will make the
decision whether to list the shares, liquidate or devise an alternative
liquidity strategy which is likely to result in the greatest value for the
shareholders.

COMPETITION

CPA(R):15 faces competition for the acquisition of office and industrial
properties in general, and such properties net leased to major corporations in
particular, from insurance companies, credit companies, pension funds, private
individuals, investment companies and other REITs. CPA(R):15 also faces
competition from institutions that provide or arrange for other types of
commercial financing through private or public offerings of equity or debt or
traditional bank financings. CPA(R):15 believes its management's experience in
real estate, credit underwriting and transaction structuring will allow
CPA(R):15 to compete effectively for office and industrial properties.

ENVIRONMENTAL MATTERS

Under various federal, state and local environmental laws, regulations and
ordinances, current or former owners of real estate, as well as other parties,
may be required to investigate and clean up hazardous or toxic chemicals,
substances or waste or petroleum product or waste, releases on, under, in or
from a property. These parties may be held liable to governmental entities or to
third parties for specified damages and for investigation and cleanup costs
incurred by these parties in connection with the release or threatened release
of hazardous materials. These laws typically impose responsibility and liability
without regard to whether the owner knew of or was responsible for the presence
of hazardous materials, and the liability under these laws has been interpreted
to be joint and several under some circumstances. CPA(R):15's leases often
provide that the tenant is responsible for all environmental liability and for
compliance with environmental regulations relating to the tenant's operations.

CPA(R):15 typically undertakes an investigation of potential environmental risks
when evaluating an acquisition. Phase I environmental assessments are performed
by independent environmental consulting and engineering firms for all properties
acquired by CPA(R):15. Where warranted, Phase II environmental assessments are
performed.

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CORPORATE PROPERTY ASSOCIATES 15 INCORPORATED

Phase I assessments do not involve subsurface testing, whereas Phase II
assessments involve some degree of soil and/or groundwater testing. CPA(R):15
may acquire a property which is known to have had a release of hazardous
materials in the past, subject to a determination of the level of risk and
potential cost of remediation. CPA(R):15 normally requires property sellers to
indemnify it fully against any environmental problem existing as of the date of
purchase. Additionally, CPA(R):15 often structures its leases to require the
tenant to assume most or all responsibility for compliance with the
environmental provisions of the lease or environmental remediation relating to
the tenant's operations and to provide that non-compliance with environmental
laws is a lease default. In some cases, CPA(R):15 may also require a cash
reserve, a letter of credit or a guarantee from the tenant, the tenant's parent
company or a third party to assure lease compliance and funding of remediation.
The value of any of these protections depends on the amount of the collateral
and/or financial strength of the entity providing the protection. Such a
contractual arrangement does not eliminate CPA(R):15's statutory liability or
preclude claims against CPA(R):15 by governmental authorities or persons who are
not a party to the arrangement. Contractual arrangements in CPA(R):15's leases
may provide a basis for CPA(R):15 to recover from the tenant damages or costs
for which it has been found liable.

INDUSTRY SEGMENT

CPA(R):15 operates in one industry segment, investment in net leased real
property. For the year ended December 31, 2003, SFX Entertainment and Carrefour
France properties each were more than 10% of total lease revenue of CPA(R):15.
SFX Entertainment is a consolidated subsidiary of Clear Channel Communications,
which is publicly traded and files statements with the United States Securities
and Exchange Commission.

FACTORS AFFECTING FUTURE OPERATING RESULTS

The provisions of the Private Securities Litigation Reform Act of 1995 (the
"Act") became effective in December 1995. The Act provides a "safe harbor" for
companies which make forward-looking statements providing prospective
information. The "safe harbor" under the Act relates to protection for companies
with respect to litigation filed on the basis of such forward-looking
statements.

CPA(R):15 wishes to take advantage of the "safe harbor" provisions of the Act
and is therefore including this section in its Annual Report on Form 10-K. The
statements contained in this Annual Report, if not historical, are
forward-looking statements and involve risks and uncertainties which are
described below that could cause actual results to differ materially from the
results, financial or otherwise, or other expectations described in such
forward-looking statements. These statements are identified with the words
"anticipated," "expected," "intends," "seeks" or "plans" or words of similar
meaning. Therefore, forward-looking statements should not be relied upon as a
prediction of actual future results or occurrences.

CPA(R):15's future results may be affected by certain risks and uncertainties
including the following:

We may not be able to diversify our real estate portfolio.

The investment of a smaller sum of money will likely result in the acquisition
of fewer properties and, accordingly, less diversification of our real estate
portfolio than the investment of a larger sum in a greater number of properties.
The amount we have to invest will depend on the amount raised in our current
offering and the amount of money we are able to borrow. Lack of diversification
will increase the potential adverse effect on us and you of a single
under-performing investment.

We are subject to the risks of real estate ownership which could reduce the
value of our properties.

Our properties may include net leased industrial and commercial property. The
performance of CPA(R):15 is subject to risks incident to the ownership and
operation of these types of properties, including:

- changes in the general economic climate;

- changes in local conditions such as an oversupply of space or
reduction in demand for real estate;

- changes in interest rates and the availability of financing;

- competition from other available space; and

- changes in laws and governmental regulations, including those
governing real estate usage, zoning and taxes.

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CORPORATE PROPERTY ASSOCIATES 15 INCORPORATED

We may have difficulty selling or re-leasing our properties.

Real estate investments are relatively illiquid compared to most financial
assets and this illiquidity will limit our ability to quickly change our
portfolio in response to changes in economic or other conditions. The net leases
we may enter into or acquire may be for properties that are specially suited to
the particular needs of our tenant. With these properties, if the current lease
is terminated or not renewed, we may be required to renovate the property or to
make rent concessions in order to lease the property to another tenant. In
addition, in the event we are forced to sell the property, we may have
difficulty selling it to a party other than the tenant due to the special
purpose for which the property may have been designed. These and other
limitations may affect our ability to sell properties without adversely
affecting returns to our shareholders.

The inability of a tenant in a single tenant property to pay rent will reduce
our revenues.

We expect that most of our properties will each be occupied by a single tenant
and, therefore, the success of our investments is materially dependent on the
financial stability of such tenants. Lease payment defaults by tenants could
cause us to reduce the amount of distributions to shareholders. A default of a
tenant on its lease payments to us would cause us to lose the revenue from the
property and cause us to have to find an alternative source of revenue to meet
any mortgage payment and prevent a foreclosure if the property is subject to a
mortgage. In the event of a default, we may experience delays in enforcing our
rights as landlord and may incur substantial costs in protecting our investment
and reletting our property. If a lease is terminated, there is no assurance that
we will be able to lease the property for the rent previously received or sell
the property without incurring a loss.

If our tenants are highly leveraged, they may have a higher possibility of
filing for bankruptcy. Of tenants that experience downturns in their operating
results due to adverse changes to their business or economic conditions, those
that are highly leveraged may have a higher possibility of filing for
bankruptcy. In bankruptcy, a tenant has the option of vacating a property
instead of paying rent. Until such a property is released from bankruptcy, our
revenues would be reduced and could cause us to reduce distributions to
shareholders. We have highly leveraged tenants at this time, and we may have
additional highly leveraged tenants in the future.

The bankruptcy of tenants may cause a reduction in revenue. Bankruptcy of a
tenant could cause:

- the loss of lease payments;

- an increase in the costs incurred to carry the property;

- a reduction in the value of shares; and

- a decrease in distributions to shareholders.

Under bankruptcy law, a tenant who is the subject of bankruptcy proceedings has
the option of continuing or terminating any unexpired lease. If the tenant
terminates the lease, any claim we have for breach of the lease (excluding
collateral securing the claim) will be treated as a general unsecured claim. The
maximum claim will be capped at the amount owed for unpaid rent prior to the
bankruptcy unrelated to the termination, plus the greater of one year's lease
payments or 15% of the remaining lease payments payable under the lease (but no
more than three years' lease payments). In addition, due to the long-term nature
of our leases and terms providing for the repurchase of a property by the
tenant, a bankruptcy court could recharacterize a net lease transaction as a
secured lending transaction. If that were to occur, we would not be treated as
the owner of the property, but might have additional rights as a secured
creditor.

The programs managed by WPC or its affiliates have had tenants file for
bankruptcy protection and are involved in litigation. Four of the prior thirteen
CPA(R) funds reduced the rate of distributions to their investors as a result of
adverse developments involving tenants.

Our tenants generally do not have a recognized credit rating, which may create a
higher risk of lease defaults and therefore lower revenues than if our tenants
had a recognized credit rating. Generally, no credit rating agencies evaluate or
rank the debt or the credit risk of our tenants, as we seek tenants that we
believe will have improving credit profiles. Our long-term leases with certain
of these tenants may therefore pose a higher risk of default than would long
term leases with tenants whose credit potential has already been recognized by
the market.

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CORPORATE PROPERTY ASSOCIATES 15 INCORPORATED

There is not, and may never be a public market for our shares, so it will be
difficult for shareholders to sell shares quickly.

There is no current public market for the shares and, therefore, it will be
difficult for shareholders to sell their shares promptly. In addition, the price
received for any shares sold prior to a liquidity event is likely to be less
than the proportionate value of the real estate we own.

Liability for uninsured losses could adversely affect our financial condition.

Losses from disaster-type occurrences (such as wars or earthquakes) may be
either uninsurable or not insurable on economically viable terms. Should an
uninsured loss occur, we could lose our capital investment and/or anticipated
profits and cash flow from one or more properties.

Potential liability for environmental matters could adversely affect our
financial condition.

We intend to purchase industrial and commercial properties and are subject to
the risk of liabilities under federal, state and local environmental laws. Some
of these laws could impose the following on CPA(R):15:

- Responsibility and liability for the cost of removal or
remediation of hazardous substances released on our property,
generally without regard to our knowledge or responsibility of
the presence of the contaminants.

- Liability for the costs of removal or remediation of hazardous
substances at disposal facilities for persons who arrange for
the disposal or treatment of these substances.

- Potential liability for common law claims by third parties
based on damages and costs of environmental contaminants.

Our costs of investigation, remediation or removal of hazardous substances may
be substantial. In addition, the presence of hazardous substances on one of our
properties, or the failure to properly remediate a contaminated property, could
adversely affect our ability to sell or lease the property or to borrow using
the property as collateral.

Our use of debt to finance acquisitions could adversely affect our cash flow.

Most of our property acquisitions will be made by borrowing a portion of the
purchase price of our properties and securing the loan with a mortgage on the
property. If we are unable to make our debt payments as required, a lender could
foreclose on the property or properties securing its debt. This could cause us
to lose part or all of our investment which in turn could cause the value of the
shares and distributions to shareholders to be reduced. We generally borrow on a
non-recourse basis to limit our exposure on any property to the amount of equity
invested in the property. We expect to borrow between 55% and 65% of the
purchase price of our properties. There is no limitation on the amount borrowed
on a single property and the aggregate borrowings may not exceed 75% of the
value of all properties. Any borrowings in excess of 75% of the value of all
properties must be approved by a majority of the independent directors and
disclosed to shareholders. As of December 31, 2003, we had limited recourse
mortgage notes payable outstanding of $596,003.

The IRS may treat sale-leaseback transactions as loans, which could jeopardize
our REIT status.

The Internal Revenue Service may take the position that specific sale-leaseback
transactions we will treat as true leases are not true leases for federal income
tax purposes but are, instead, financing arrangements or loans. If a
sale-leaseback transaction were so recharacterized, we might fail to satisfy the
Asset Tests or the Income Tests and consequently lose our REIT status effective
with the year of recharacterization. Alternatively, the amount of our REIT
Taxable Income could be recalculated which could cause us to fail the
Distribution Test.

Balloon payment obligations may adversely affect our financial condition.

Some of our financing may require us to make a lump-sum or "balloon" payment at
maturity. Our ability to make any balloon payment is uncertain and may depend
upon our ability to obtain additional financing or our ability to sell the
property. At the time the balloon payment is due, we may or may not be able to
refinance the balloon payment on terms as favorable as the original loan or sell
the property at a price sufficient to make the balloon payment. A refinancing or
sale could affect the rate of return to shareholders and the projected time of
disposition of our assets. Currently, there are no balloon payment obligations
due prior to 2012.

Failure to qualify as a REIT could adversely affect our operations and ability
to make distributions.

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CORPORATE PROPERTY ASSOCIATES 15 INCORPORATED

If we fail to qualify as a REIT for any taxable year, we would be subject to
federal income tax on our taxable income at corporate rates. In addition, we
would generally be disqualified from treatment as a REIT for the four taxable
years following the year of losing our REIT status. Losing our REIT status would
reduce our net earnings available for investment or distribution to shareholders
because of the additional tax liability. In addition, distributions to
shareholders would no longer qualify for the distributions paid deduction and we
would no longer be required to make distributions. We might be required to
borrow funds or liquidate some investments in order to pay the applicable tax.

Qualification as a REIT is subject to the satisfaction of tax requirements and
various factual matters and circumstances which are not entirely within our
control. New legislation, regulations, administrative interpretations or court
decisions could change the tax laws with respect to qualification as a REIT or
the federal income tax consequences of being a REIT.

The limit on the number of shares of CPA(R):15 a person may own may discourage a
takeover.

Our articles of incorporation restrict ownership of more than 9.8% of the
outstanding shares by one person in order to meet REIT qualification rules.
These restrictions may discourage a change of control of CPA(R):15 and may deter
individuals or entities from making tender offers for shares, which offers might
be financially attractive to shareholders or which may cause a change in the
management of CPA(R):15.

We were incorporated in February 2001 and have a limited operating history.

We did not commence property acquisitions until the beginning of 2002. We can
not guaranty that we will continue to find suitable property investments, or
that all of our tenants will fulfill all of their lease obligations. Our failure
to timely invest the proceeds of our current offering or to invest in quality
properties could diminish returns to investors.

Our success will be dependent on the performance of WPC.

Our ability to achieve our investment objectives and to pay distributions is
dependent upon the performance of WPC in the acquisition of investments, the
selection of tenants, the determination of any financing arrangements, and upon
the management of the assets. You will have no opportunity to evaluate the terms
of transactions or other economic or financial data concerning our investments.
You must rely entirely on the management ability of WPC and the oversight of the
board of directors.

WPC may be subject to conflicts of interest.

WPC manages our business and selects our real estate investments. WPC has some
conflicts of interest in its management of CPA(R):15, which arise primarily from
the involvement of WPC and its affiliates in other activities that may conflict
with CPA(R):15 and the payment of fees by us to WPC and its affiliates. The
activities in which a conflict could arise between CPA(R):15 and WPC are:

- the receipt of commissions, fees and other compensation by WPC
and its affiliates for property purchases, leases, sales and
financing for CPA(R):15, which may cause WPC and its
affiliates to engage in transactions that generate higher
fees, rather than transactions that are more appropriate or
beneficial for our business;

- agreements between CPA(R):15 and WPC or any of its affiliates,
including agreements regarding compensation of WPC and its
affiliates, will not be negotiated on an arm's length basis as
would occur if the agreements were with unaffiliated third
parties;

- purchases and loans from affiliates, subject to CPA(R):15's
investment procedures, objectives and policies, which will
increase fees and interest payable to affiliates, thereby
decreasing our net income and possibly causing us to incur
higher leverage levels;

- competition with certain affiliates for property acquisitions,
which may cause WPC and its affiliates to direct properties
suitable for us to other related entities;

- disposition, incentive and termination fees, which are based
on the sale price of properties, may cause a conflict between
the advisor's desire to sell a property and our plans to hold
or sell the property.

Inherent in these transactions is the conflict of interest that arises due to
the potential impact of the transaction on the amount of fees received by WPC
and/or its affiliates and the distributions to shareholders.

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CORPORATE PROPERTY ASSOCIATES 15 INCORPORATED

Maryland law could restrict change in control.

Provisions of Maryland law applicable to us prohibit business combinations with:

- any person who beneficially owns 10% or more of the voting
power of outstanding shares;

- an affiliate who, at any time within the two-year period prior
to the date in question, was the beneficial owner of 10% or
more of the voting power of our outstanding shares ("an
interested shareholder"); or

- an affiliate of an interested shareholder.

These prohibitions last for five years after the most recent date on which the
interested shareholder became an interested shareholder. Thereafter, any
business combination must be recommended by our board of directors and approved
by the affirmative vote of at least 80% of the votes entitled to be cast by
holders of our outstanding shares and two-thirds of the votes entitled to be
cast by holders of our shares other than shares held by the interested
shareholder. These requirements could have the effect of inhibiting a change in
control even if a change in control were in shareholders' interest. These
provisions of Maryland law do not apply, however, to business combinations that
are approved or exempted by our board of directors prior to the time that
someone becomes an interested shareholder.

Our participation in joint ventures creates additional risk.

We may participate in joint ventures or purchase properties jointly with other
entities, some of which may be unaffiliated with us. There are additional risks
involved in these types of transactions. These risks include the potential of
our joint venture partner becoming bankrupt and the possibility of diverging or
inconsistent economic or business interests of us and our partner. These
diverging interests could result in, among other things, exposing us to
liabilities of the joint venture in excess of our proportionate share of these
liabilities. The partition rights of each owner in a jointly owned property
could reduce the value of each portion of the divided property. In addition, the
fiduciary obligation that WPC may owe to our partner in an affiliated
transaction may make it more difficult for us to enforce our rights. Certain
independent directors are independent directors of other affiliated REITS.

A delay in investing funds may cause a delay in our ability to deliver expected
returns to investors.

We have not yet identified all of the properties to be purchased with the
proceeds of our current offering. Therefore, there could be a substantial delay
between the time a new investor invests in shares and the time all offering
proceeds are invested by us. This could cause a substantial delay in the time it
takes for an investment in us to realize its full potential return.

There are special considerations for pension or profit-sharing trusts, Keoghs or
IRAs.

If you are investing the assets of a pension, profit sharing, 401(k), Keogh or
other retirement plan, IRA or benefit plan in CPA(R):15, you should consider:

- whether your investment is consistent with the applicable
provisions of ERISA or the Internal Revenue Code,

- whether your investment will produce unrelated business
taxable income, referred to as UBTI, to the benefit plan, and

- your need to value the assets of the benefit plan annually.

We have obtained an opinion of Reed Smith LLP that, under current ERISA law and
regulations, our assets should not be treated as "plan assets" of a benefit plan
subject to ERISA and/or Section 4975 of the Internal Revenue Code which
purchases shares. However, the opinion of Reed Smith is based on the facts and
assumptions described in this prospectus, on our articles of incorporation and
on our representations to them, and is not binding on the Internal Revenue
Service or the Department of Labor. If our assets were considered to be plan
assets, our assets would be subject to ERISA and/or Section 4975 of the Internal
Revenue Code, and some of the transactions we have entered into with WPC and its
affiliates could be considered "prohibited transactions" which could cause us,
WPC and its affiliates to be subject to liabilities and excise taxes. In
addition, WPC could be deemed to be a fiduciary under ERISA and subject to other
conditions, restrictions and prohibitions under Part 4 of Title I of ERISA. Even
if our assets are not considered to be plan assets, a prohibited transaction
could occur if we, Carey Financial Corporation, any selected dealer, the escrow
agent or any of their affiliates is a fiduciary (within the meaning of ERISA)
with respect to a purchase by a benefit plan and, therefore, unless an
administrative or statutory exemption applies in the

-14-

CORPORATE PROPERTY ASSOCIATES 15 INCORPORATED

event such persons are fiduciaries (within the meaning of ERISA) with respect to
your purchase, shares should not be purchased.

International investments involve additional risks.

We own properties in France, Germany and the United Kingdom and we may purchase
additional property located outside the United States. These investments may be
affected by factors peculiar to the laws of the jurisdiction in which the
property is located. These laws may expose us to risks that are different from
and in addition to those commonly found in the United States. Foreign
investments could be subject to the following risks:

- changing governmental rules and policies;

- enactment of laws relating to the foreign ownership of
property and laws relating to the ability of foreign persons
or corporations to remove profits earned from activities
within the country to the person's or corporation's country of
origin;

- variations in the currency exchange rates;

- adverse market conditions caused by changes in national or
local economic conditions;

- changes in relative interest rates;

- change in the availability, cost and terms of mortgage funds
resulting from varying national economic policies;

- changes in real estate and other tax rates and other operating
expenses in particular countries;

- changes in land use and zoning laws; and

- more stringent environmental laws or changes in such laws.

We may incur costs to finish build-to-suit properties.

We may sometimes acquire undeveloped or partially developed land parcels for the
purpose of owning to-be-built facilities for a prospective tenant. Oftentimes,
completion risk, cost overruns and on-time delivery are the obligations of the
prospective tenant. To the extent that the tenant or the third-party developer
experiences financial difficulty or other complications during the construction
process we may be required to incur project costs to complete all or part of the
project within a specified time frame. The incurrence of these costs or the
non-occupancy by the tenant may reduce the project's and our portfolio returns.

We may face competition for acquisition of properties.

We face competition for the acquisition of office and industrial properties in
general, and such properties not leased to major corporations in particular,
from insurance companies, credit companies, pension funds, private individuals,
investment companies and other REITs. We also face competition from institutions
that provide or arrange for other types of commercial financing through private
or public offerings of equity or debt or traditional bank financings.

The loss or default of certain major tenants could adversely affect our revenues
and distributions to shareholders.

As of December 31, 2003, the value of the SFX Entertainment and Carrefour France
properties each were more than 10% of our gross consolidated assets. Affiliates
own minority interests of 40% and 49.625% in the SFX Entertainment and Carrefour
France properties, respectively. Our performance could be adversely affected in
the event of bankruptcy or insolvency of any of these companies, a downturn in
their businesses or their failure to renew their leases upon expiration.

-15-

CORPORATE PROPERTY ASSOCIATES 15 INCORPORATED

Item 2. Properties.

Set forth below is certain information relating to CPA(R):15's
properties owned as of December 31, 2003.

SHARE OF
LESSEE (LEASE OBLIGOR)/ RENT PER CURRENT ANNUAL
LOCATION OWNERSHIP INTEREST SQUARE FOOTAGE SQUARE FOOT RENTS(1)
- ---------------------------------------------------------------------------------------------------------------

SOCIETE LOGIDIS AND SOCIETE CV LOGISTIQUE (CARREFOUR FRANCE, SA AND CARREFOUR HYPERMARCHES FRANCE, SA)(2)
Cholet, Ploufragan,
Colomiers, Crepy en
Vallois, Lens, Nimes, and
Thuit Hebert, France 50.375% 4,996,086 $ 2.14 14,523,306 (3)

STARMARK CAMHOOD, L.L.C. (3)
Tampa and Boca Raton, FL;
Newton, MA; Bloomington
(2), Brooklyn Center,
Bumsville, Eden Prairie (2),
Fridley, Minnetonka and St. 44% interest in a limited
Louis Park, MN; liability company 1,652,154 11.06 8,039,855
Albuquerque, NM (4) owning land and buildings(5)

SFX ENTERTAINMENT, INC. (CLEAR CHANNEL COMMUNICATIONS, INC.) (2)
60% interest in a limited
partnership owning land
New York, NY and buildings 227,685 47.94 6,548,587

TRUSERV CORPORATION(2)
Kingman, AR; Springfield,
OR; Fogelsville, PA; 50% interest in three
Jonesboro, GA; Kansas limited partnerships
City, MO; Woodland, CA; owning land and
Corsicana, TX buldings 3,628,156 3.49 6,003,575

FOSTER WHEELER REALTY SERVICES, INC. (FOSTER WHEELER LTD., FOSTER WHEELER INC. AND
FOSTER WHEELER INTERNATIONAL HOLDINGS, INC.) (2)
Clinton, NJ 100% 292,000 17.91 5,230,850

LIFE TIME FITNESS, INC. (2)
Rochester Hills, MI 100% 278,982 15.22 4,247,100

MEDICA-FRANCE, SA (2)
Paris, Rueil Malmaison,
Sarcelles, Poissy, Chatou,
and Rosny sous Bois, France 65% 336,766 12.01 4,859,744 (3)

LILLIAN VERNON CORP. (2)
Virginia Beach, VA 100% 827,000 4.65 3,848,000

QUALCERAM SHIRES LTD (3)
Dublin, IR; Bradford,
Belfast, Darwen,
Stoke-on-Trent and Rochdale,
United Kingdom 100% 820,889 3.85 3,158,372

LESSEE (LEASE OBLIGOR)/ INCREASE LEASE MAXIMUM
LOCATION FACTOR TERM TERM
- -----------------------------------------------------------------------------

SOCIETE LOGIDIS AND SOCIETE CV LOGISTIQUE (CARREFOUR FRANCE, SA AND CARREFOUR HYPERMARCHES FRANCE, SA)(2)
Cholet, Ploufragan,
Colomiers, Crepy en
Vallois, Lens, Nimes, and
Thuit Hebert, France INSEE (4) Dec. 2011 None

STARMARK CAMHOOD, L.L.C. (3)
Tampa and Boca Raton, FL;
Newton, MA; Bloomington
(2), Brooklyn Center,
Bumsville, Eden Prairie (2),
Fridley, Minnetonka and St.
Louis Park, MN; CPI Feb. 2023 Feb. 2053
Albuquerque, NM (4)

SFX ENTERTAINMENT, INC. (CLEAR CHANNEL COMMUNICATIONS, INC.) (2)
New York, NY Stated Sep. 2020 Sep. 2040

TRUSERV CORPORATION(2)
Kingman, AR; Springfield,
OR; Fogelsville, PA;
Jonesboro, GA; Kansas
City, MO; Woodland, CA;
Corsicana, TX Stated Dec. 2022 Nov. 2042
FOSTER WHEELER REALTY SERVICES, INC. (FOSTER WHEELER LTD., FOSTER WHEELER INC. AND
FOSTER WHEELER INTERNATIONAL HOLDINGS, INC.) (2)
Clinton, NJ CPI Aug. 2022 Aug. 2042

LIFE TIME FITNESS, INC. (2)
Rochester Hills, MI Stated Oct. 2023 Oct. 2053

MEDICA-FRANCE, SA (2)
Paris, Rueil Malmaison,
Sarcelles, Poissy, Chatou,
and Rosny sous Bois, France INSEE (4) Jun. 2010 Jun. 2010

LILLIAN VERNON CORP. (2)
Virginia Beach, VA CPI Jul. 2023 Jul. 2043

QUALCERAM SHIRES LTD (3)
Dublin, IR; Bradford,
Belfast, Darwen,
Stoke-on-Trent and Rochdale,
United Kingdom Stated Apr. 2028 Apr. 2028

-16-

CORPORATE PROPERTY ASSOCIATES 15 INCORPORATED

SHARE OF
LESSEE (LEASE OBLIGOR)/ RENT PER CURRENT ANNUAL
LOCATION OWNERSHIP INTEREST SQUARE FOOTAGE SQUARE FOOT RENTS(1)
- ---------------------------------------------------------------------------------------------------------------

DANKA OFFICE IMAGING COMPANY (2)
St. Petersburg, FL (3) 100% 337,727 9.06 3,060,000

BERRY PLASTICS CORP.
Alsip-Main and Alsip-North,
IL; Geddes, NY;
Tolleson, AZ 100% 862,862 3.43 2,960,000

MEADOWBROOK MEAT COMPANY (FAST FOOD MERCHANDISERS, INC. AND PROFICIENT FOOD COMPANY, INC.) (2)
Orlando, FL; Macon, GA;
Rocky Mount, NC (2);
Lewisville, TX 100% 575,858 4.62 2,660,000

PRECISE TECHNOLOGY, INC. (2)
Excelsior Springs, MO; St
Petersburg, FL;
West Lafayette, IN;
N. Versailles Twp, PA;
Buffalo Grove, IL 100% 616,031 4.29 2,640,400

STARMARK CAMHOOD II, L.L.C. (2)
Atlanta, GA;
Bel Air, MD 100% 186,000 14.15 2,632,500

OVERLAND STORAGE, INC. (2)
San Diego, CA 100% 158,585 16.53 2,621,285

SPORTRACK LLC
Shelby Township,
Port Huron 100% 294,883 8.63 2,545,000

TOWER AUTOMOTIVE PRODUCTS, INC. AND TOWER AUTOMOTIVE TOOL, LLC (TOWER AUTOMOTIVE, INC.) (2)
Auburn, IN; Bluffton, OH;
Milan, TN 100% 844,166 2.79 2,355,875

PETSMART, INC. (2)
Phoenix, AZ; Westlake
Village, CA; Boca Raton,
Lake Mary, Tallahassee,
Plantation, FL; Evanston, IL; 30% interest in two
Braintree, MA; Oxon Hill, limited partnerships
MD; Flint, MI; Fridley, owning land and
MN; Dallas, Southlake, TX buildings 946,177 7.68 2,178,825

MEDIMEDIA USA, INC. (2)
Lower Makefield T, PA 100% 107,000 19.73 2,111,376

LESSEE (LEASE OBLIGOR)/ INCREASE LEASE MAXIMUM
LOCATION FACTOR TERM TERM
- ------------------------------------------------------------------------------

DANKA OFFICE IMAGING COMPANY (2)
St. Petersburg, FL (3) CPI Jul. 2018 Jul. 2038

BERRY PLASTICS CORP.
Alsip-Main and Alsip-North,
IL; Geddes, NY;
Tolleson, AZ CPI Dec. 2023 Dec. 2033

MEADOWBROOK MEAT COMPANY (FAST FOOD MERCHANDISERS, INC. AND PROFICIENT FOOD COMPANY, INC.) (2)
Orlando, FL; Macon, GA;
Rocky Mount, NC (2);
Lewisville, TX Stated Jan. 2018 Jan. 2038

PRECISE TECHNOLOGY, INC. (2)
Excelsior Springs, MO; St
Petersburg, FL;
West Lafayette, IN;
N. Versailles Twp, PA;
Buffalo Grove, IL CPI Oct. 2023 Oct. 2043

STARMARK CAMHOOD II, L.L.C. (2)
Atlanta, GA;
Bel Air, MD CPI Nov. 2023 Nov. 2053

OVERLAND STORAGE, INC. (2)
San Diego, CA Stated Feb. 2014 Feb. 2019

SPORTRACK LLC
Shelby Township,
Port Huron CPI Nov. 2023 Nov. 2033

TOWER AUTOMOTIVE PRODUCTS, INC. AND TOWER AUTOMOTIVE TOOL, LLC (TOWER AUTOMOTIVE, INC.) (2)
Auburn, IN; Bluffton, OH;
Milan, TN CPI Apr. 2020 Apr. 2040

PETSMART, INC. (2)
Phoenix, AZ; Westlake
Village, CA; Boca Raton,
Lake Mary, Tallahassee,
Plantation, FL; Evanston, IL;
Braintree, MA; Oxon Hill,
MD; Flint, MI; Fridley,
MN; Dallas, Southlake, TX Stated Nov. 2021 Nov. 2041

MEDIMEDIA USA, INC. (2)
Lower Makefield T, PA Stated Dec. 2017 Dec. 2037

-17-

CORPORATE PROPERTY ASSOCIATES 15 INCORPORATED

SHARE OF
LESSEE (LEASE OBLIGOR)/ RENT PER CURRENT ANNUAL
LOCATION OWNERSHIP INTEREST SQUARE FOOTAGE SQUARE FOOT RENTS(1)
- ----------------------------------------------------------------------------------------------------------------

HOLOGIC, INC.
64% interest in a
Danbury, CT; jointly controlled
Bedford MA tenancy-in-common 269,042 11.73 2,019,802

INSULATED STRUCTURES INVESTMENTS LIMITED (SOLAR COLD SERVICES LTD., SCS (N) LTD., PIPE & RAIL LTD.,
P & R INSULATION LTD., ISL CONSTRUCTION LTD., INSULATED STRUCTURES LTD.) (2), (3)
Birmingham, United Kingdom 100% 206,000 8.92 1,837,777

AMERICAN PAD & PAPER, L.L.C. (2)
Holyoke, MA; Westfield, MA;
Matoon, IL;
Morristown, TN 100% 923,249 1.71 1,578,504

BE AEROSPACE, INC. (2)
Miami, FL 100% 188,065 7.89 1,484,557

POLAR PLASTICS, INC. (2)
Mooresville, NC 100% 384,600 3.80 1,460,200

TRENDS CLOTHING CORP. (2)
Miami, FL 100% 247,264 5.74 1,420,000

GRANDE COMMUNICATIONS NETWORKS, INC. (2)
Corpus Christi, TX;
Odessa, TX; San Marcos, TX;
Waco, TX 100% 119,609 11.53 1,379,400

RACAL INSTRUMENTS, INC. (RIG LIMITED) (2)
Irvine, CA 100% 98,631 13.56 1,337,732

KERR GROUP, INC. (2)
Bowling Green, KY;
Jackson, TN 100% 394,130 3.38 1,330,602

GALYAN'S TRADING COMPANY (5)
Buffalo, NY (2)
Greenwood, IN (2) 100% 164,794 7.83 1,290,000
Freehold, NJ under construction

RAVE MOTION PICTURES BATON ROUGE, L.L.C. (RAVE MOTION PICTURES L.L.C.) (2)
Baton Rouge, LA 100% 73,292 17.54 1,285,607

INTEGRACOLOR, LTD. (2)
Mesquite, TX (3) 100% 358,987 3.57 1,283,488

PEMSTAR INC. (2)
Rochester, MN 100% 260,287 4.91 1,278,000

LESSEE (LEASE OBLIGOR)/ INCREASE LEASE MAXIMUM
LOCATION FACTOR TERM TERM
- -----------------------------------------------------------------------------

HOLOGIC, INC.

Danbury, CT;
Bedford MA CPI Aug. 2022 Aug. 2042

INSULATED STRUCTURES INVESTMENTS LIMITED (SOLAR COLD SERVICES LTD., SCS (N) LTD., PIPE & RAIL LTD.,
P & R INSULATION LTD., ISL CONSTRUCTION LTD., INSULATED STRUCTURES LTD.) (2), (3)
Birmingham, United Kingdom Stated Oct. 2033 Nov. 2033

AMERICAN PAD & PAPER, L.L.C. (2)
Holyoke, MA; Westfield, MA;
Matoon, IL;
Morristown, TN CPI Sept. 2023 Sept. 2043

BE AEROSPACE, INC. (2)
Miami, FL Stated Sep. 2017 Sep. 2037

POLAR PLASTICS, INC. (2)
Mooresville, NC CPI Mar. 2023 Mar. 2043

TRENDS CLOTHING CORP. (2)
Miami, FL CPI Jun. 2017 Jun. 2037

GRANDE COMMUNICATIONS NETWORKS, INC. (2)
Corpus Christi, TX;
Odessa, TX; San Marcos, TX;
Waco, TX CPI Aug. 2023 Aug. 2043

RACAL INSTRUMENTS, INC. (RIG LIMITED) (2)
Irvine, CA Stated May 2022 May 2052

KERR GROUP, INC. (2)
Bowling Green, KY;
Jackson, TN Stated Aug. 2021 Aug. 2051

GALYAN'S TRADING COMPANY (5)
Buffalo, NY (2)
Greenwood, IN (2) CPI Jan. 2024 Jan. 2054
Freehold, NJ

RAVE MOTION PICTURES BATON ROUGE, L.L.C. (RAVE MOTION PICTURES L.L.C.) (2)

Baton Rouge, LA CPI Aug. 2023 Aug. 2043

INTEGRACOLOR, LTD. (2)
Mesquite, TX (3) CPI Jun. 2022 Jun. 2042

PEMSTAR INC. (2)
Rochester, MN Stated Feb. 2023 Mar. 2043

-18-

CORPORATE PROPERTY ASSOCIATES 15 INCORPORATED

SHARE OF
LESSEE (LEASE OBLIGOR)/ RENT PER CURRENT ANNUAL
LOCATION OWNERSHIP INTEREST SQUARE FOOTAGE SQUARE FOOT RENTS(1)
- ---------------------------------------------------------------------------------------------------------------

ADVANTIS TECHNOLOGIES, INC. (ROCKWOOD SPECIALTIES GROUP) (2)
Alpharetta, GA 100% 191,975 6.64 1,275,000

24 HOUR FITNESS USA, INC.
Englewood, CO 100% 50,000 18.28 914,027

ISL II - ROUNDOAK RAIL (2),(3)
Brierley Hill, United Kingdom 100% 120,646 7.18 865,943

ACTUANT CORP. AND GB TOOLS AND SUPPLIES, INC. (3)
Kahl am Main, Germany 100% 305,692 2.82 863,118

QUALSERV, CORP.
Fort Smith, AR 100% 440,159 1.51 666,500

WADDINGTON NORTH AMERICA BUSINESS TRUST
Chattanooga, TN 100% 238,585 2.67 637,500

BUILDERS FIRSTSOURCE - ATLANTIC GROUP, INC. AND BUILDERS FIRSTSOURCE - OHIO VALLEY, INC. (BUILDERS FIRSTSOURCE, INC.) (2)
40% interest in a limited
Norcross, GA; Elkwood, VA; partnership owning land
Cincinnati, OH and buldings 389,261 3.56 553,751

SSG PRECISION OPTRONICS, INC. (TINSLEY LABORATORIES, INC.)
Wilmington, MA 100% 37,696 13.82 521,193

DICK'S SPORTING GOODS, INC.
Greenwood, IN 100% under construction

OXFORD AUTOMOTIVE INC.
McCalla, AL 100% under construction

UNIVERSAL TECHNICAL INSTITUTE OF PENNSYLVANIA, INC.
Upper Uwchlan, PA 100% under construction

UNIVERSAL TECHNICAL INSTITUTE OF ARIZONA, INC.
Avondale, AZ 100% under construction

VACANT
Tulsa, OK 100% 757,784

LESSEE (LEASE OBLIGOR)/ INCREASE LEASE MAXIMUM
LOCATION FACTOR TERM TERM
- ----------------------------------------------------------------------------

ADVANTIS TECHNOLOGIES, INC. (ROCKWOOD SPECIALTIES GROUP) (2)
Alpharetta, GA CPI Jun. 2017 Jun. 2037

24 HOUR FITNESS USA, INC.
Englewood, CO Stated Apr. 2032 Apr. 2042

ISL II - ROUNDOAK RAIL (2),(3)
Brierley Hill, United Kingdom Stated Oct. 2033 Nov. 2033

ACTUANT CORP. AND GB TOOLS AND SUPPLIES, INC. (3)
Kahl am Main, Germany German CPI Jan. 2021 Jan. 2031

QUALSERV, CORP.
Fort Smith, AR CPI Jul. 2018 Jul. 2032

WADDINGTON NORTH AMERICA BUSINESS TRUST
Chattanooga, TN CPI Mar. 2022 Mar. 2042

BUILDERS FIRSTSOURCE - ATLANTIC GROUP, INC. AND BUILDERS FIRSTSOURCE - OHIO VALLEY, INC. (BUILDERS FIRSTSOURCE, INC.) (2)

Norcross, GA; Elkwood, VA;
Cincinnati, OH CPI Dec. 2017 Dec. 2037

SSG PRECISION OPTRONICS, INC. (TINSLEY LABORATORIES, INC.)
Wilmington, MA CPI Nov. 2022 Nov. 2036

DICK'S SPORTING GOODS, INC.
Greenwood, IN

OXFORD AUTOMOTIVE INC.
McCalla, AL

UNIVERSAL TECHNICAL INSTITUTE OF PENNSYLVANIA, INC.
Upper Uwchlan, PA

UNIVERSAL TECHNICAL INSTITUTE OF ARIZONA, INC.
Avondale, AZ

VACANT
Tulsa, OK

1. Share of Current Annual Rents is the product of the Square
Footage, the Rent per Square Foot, and the Ownership Interest
percentage.

2. This property is encumbered by a mortgage note payable.

3. Based on exchange rates at December 31, 2003.

4. INSEE construction index, an index published quarterly by the
French Government.

5. A portion of this property is under construction.

-19-

CORPORATE PROPERTY ASSOCIATES 15 INCORPORATED

Item 3. Legal Proceedings.

As of the date hereof, CPA(R):15 is not a party to any material pending legal
proceedings.

Following a broker-dealer examination of Carey Financial Corporation ("Carey
Financial"), the broker-dealer that managed the public offerings of the
Company's common stock (and a wholly-owned subsidiary of the Company's advisor,
W. P. Carey & Co. LLC), by the staff of the Securities and Exchange Commission,
the Company was notified that Carey Financial had received a letter on or about
March 4, 2004 from the staff of the Securities and Exchange Commission (the
"SEC" or the "Commission") alleging certain infractions by Carey Financial and
the Company of the Securities Act of 1933, as amended, the Securities Exchange
Act of 1934, as amended, and the rules and regulations thereunder and of the
National Association of Securities Dealers, Inc. ("NASD"). Although the letter
was delivered in the context of a broker-dealer examination of Carey Financial,
and states it is for the purpose of requiring Carey Financial to take
corrective action, it contains allegations against both Carey Financial and the
Company. It is not known at this time if the Commission intends to bring any
action against Carey Financial or the Company. The infractions alleged, as they
pertain to the Company, are described below.

The staff alleges that in connection with two public offerings of shares of the
Company in 2002 and 2003 for which Carey Financial served as the dealer
manager, CPA(R):15, Carey Financial and its retail distributors sold certain
securities without an effective registration statement. Specifically, the
staff alleges that the Company and Carey Financial oversold the amount of
securities registered in the first offering (the "Phase I Offering") completed
in the fourth quarter of 2002 and sold securities with respect to the second
offering (the "Phase II" Offering) before a registration statement with respect
to such offering became effective in the first quarter of 2003. It appears to
be the staff's position that, notwithstanding the fact that pending
effectiveness of the registration statement investor funds were delivered
into escrow and not to the Company or Carey Financial, such delivery involved
sales of securities in violation of Section 5 of the Securities Act of
1933. In the event the Commission pursues these allegations, or if
affected CPA(R):15 investors bring a similar private action, the Company might
be required to offer the affected investors the opportunity to receive a
return of their investment. It cannot be determined at this time the amount
of securities purchases the Company would be required to rescind, if any. As
such, the Company cannot predict the potential effect such an offer may
ultimately have on the operations of the Company. There can be no assurance
such effect, if any, would not be material. Further, if the Commission commenced
any action against the Company, it could seek different or additional penalties
or relief, including without limitation, injunctive relief and/or civil monetary
penalties.

The staff also alleges that the prospectus delivered with respect to the Phase
I Offering contained material misstatements and omissions because that
prospectus did not disclose that the proceeds of the Phase I Offering would be
used to advance commissions and expenses payable with respect to the Phase II
Offering. The staff claims that the failure to disclose the advances
constitutes a misstatement of a material fact in violation of Section 17(a) of
the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of
1934 and Rule 10b-5 promulgated under the Securities Exchange Act of 1934.
Carey Financial has reimbursed the Company for the interest cost of advancing
the commissions that were later recovered by the Company from the Phase II
Offering proceeds. It cannot be determined at this time what relief, if any,
would be granted if an action were to be brought by the Commission or
a private investor of CPA(R):15 with respect to these allegations. As such, the
Company cannot predict the potential effect such an action may ultimately have
on the Company's operations. There can be no assurance such effect, if any,
would not be material.

The staff also alleges that the Company's offering documents contained material
misstatements and omissions because they did not include a discussion of the
manner in which dividends would be paid to the initial investors in the Phase
II offering. The staff letter asserts that the payment of dividends to the
Phase II shareholders resulted in significantly higher annualized rates of
return than was being earned by the Phase I shareholders, and that the Company
failed to disclose to the Phase I shareholders the various rates of return. The
staff claims that the failure to make this disclosure constitutes a
misstatement of a material fact in violation of Section 17(a) of the Securities
Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule
10b-5 promulgated under the Securities Exchange Act of 1934. It cannot be
determined at this time what relief, if any, would be granted if an action were
to be brought by the Commission or a private investor of CPAR:15 with respect
to these allegations. As such, the Company cannot predict the potential effect
such an action may ultimately have on the Company's operations. There can be
no assurance such effect, if any, would not be material.

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

No matter was submitted during the fourth quarter of the year ended December 31,
2003 to a vote of security holders, through the solicitation of proxies or
otherwise.

-20-

CORPORATE PROPERTY ASSOCIATES 15 INCORPORATED

PART II

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

Information with respect to CPA(R):15's common equity is hereby incorporated by
reference to page 34 of CPA(R):15's Annual Report contained in Appendix A.

Item 6. Selected Financial Data.

Selected Financial Data are hereby incorporated by reference to page 1 of
CPA(R):15's Annual Report contained in appendix A.

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

Management's Discussion and Analysis are hereby incorporated by reference to
pages 2 to 12 of CPA(R):15's Annual Report contained in Appendix A.

Item 7A. Quantitative and Qualitative Disclosures about Market Risk:

Market risk is the exposure to loss resulting from changes in interest rates,
credit spreads, foreign currency exchange rates and equity prices. In pursuing
our business plan, the primary market risks to which we are exposed are interest
rate risk and currency exchange rates.

The value of our real estate is subject to fluctuations based on changes in
interest rates, local and regional economic conditions and changes in the
creditworthiness of lessees, and which may affect our ability to refinance our
debt when balloon payments are scheduled.

All of CPA(R):15's long-term debt of $596,003 bears interest at fixed rates, and
therefore the fair value of these instruments is affected by changes in the
market interest rates. The following table presents principal cash flows based
upon expected maturity dates of the debt obligations and the related
weighted-average interest rates by expected maturity dates for the fixed rate
debt. The interest rate on the fixed rate debt as of December 31, 2003 ranged
from 4.80% to 7.98%. CPA(R):15 had no variable rate debt as of December 31,
2003.

(in thousands) 2004 2005 2006 2007 2008 Thereafter Total Fair Value
---- ---- ---- ---- ---- ---------- ----- ----------

Fixed rate debt $ 9,016 $ 9,986 $ 10,773 $ 11,688 $ 12,723 $541,817 $596,003 $578,096
Weighted average
interest rate 6.10% 6.11% 6.10% 6.10% 6.09% 6.11%

CPA(R):15 conducts business in France, Germany and the United Kingdom. Realized
and unrealized gains from foreign currency transactions totaled $3,173. In 2003,
CPA(R):15 purchased properties in the United Kingdom and Germany and both the
lease and debt on these properties will be denominated in British Pounds and
Euros, respectively. CPA(R):15 is subject to material foreign currency exchange
rate risk from the effects of changes in exchange rates. To date, CPA(R):15 has
not entered into any foreign currency forward exchange contracts to hedge the
effects of adverse fluctuations affect foreign currency exchange rates.
CPA(R):15 has obtained limited recourse mortgage financing at a fixed rate of
interest in the local currency. To the extent that currency fluctuations affect
rental revenues as translated to dollars, the change in debt service, as
translated to dollars, will partially offset the fluctuations in revenue, and,
to some extent mitigate the risk from changes in foreign currency rates.
Scheduled future minimum rents, exclusive of renewals, under non-cancelable
leases resulting from CPA(R):15's foreign operations are as follows:

-21-

CORPORATE PROPERTY ASSOCIATES 15 INCORPORATED

(in thousands) 2004 2005 2006 2007 2008 Thereafter Total
---- ---- ---- ---- ---- ---------- -----

Rental income(1) $ 19,814 $ 19,814 $ 19,814 $ 19,814 $ 19,814 $ 42,304 $141,374
Interest income from direct financing leases(1) $ 7,499 $ 7,557 $ 7,616 $ 7,676 $ 7,799 $199,248 $237,395

Scheduled principal payments for the mortgage notes payable during each of the
next five years following December 31, 2003 and thereafter are as follows:

(in thousands) 2004 2005 2006 2007 2008 Thereafter Total
---- ---- ---- ---- ---- ---------- -----

Fixed rate debt (1) $ 3,056 $ 3,404 $ 3,751 $ 4,197 $ 4,794 $168,372 $187,574

(1) Based on December 31, 2003 exchange rate. The mortgage notes are denominated
in the functional currency of the country of each property.

Item 8. Financial Statements and Supplementary Data.

The following consolidated financial statements and supplementary data of
CPA(R):15 are hereby incorporated by reference to pages 13 to 33 of CPA(R):15's
Annual Report contained in Appendix A:

(i) Report of Independent Auditors

(ii) Consolidated Balance Sheets at December 31, 2003 and 2002

(iii) Consolidated Statements of Income for the years ended December 31,
2003, 2002 and the period from inception (February 26, 2001) through
December 31, 2001

(iv) Consolidated Statements of Shareholders' Equity for the period from
inception (February 26, 2001) through December 31, 2001, and the years
ended December 31, 2002 and 2003.

(v) Consolidated Statements of Cash Flows for the years ended December 31,
2003, 2002 and the period from inception (February 26, 2001) through
December 31, 2001

(vi) Notes to Consolidated Financial Statements

Item 9. Disagreements on Accounting and Financial Disclosure.

NONE

Item 9A. Controls and Procedures

The Co-Chief Executive Officers and Chief Financial Officer of CPA(R):15 have
conducted a review of CPA(R):15's disclosure controls and procedures as of
December 31, 2003.

CPA(R):15's disclosure controls and procedures include CPA(R):15's controls and
other procedures designed to ensure that information required to be disclosed in
this and other reports filed under the Securities Exchange Act of 1934, as
amended (the "Exchange Act") is accumulated and communicated to CPA(R):15's
management, including its chief executive officers and chief financial officer,
to allow timely decisions regarding required disclosure and to ensure that such
information is recorded, processed, summarized and reported, within the required
time periods. Based upon this review, CPA(R):15's chief executive officers and
chief financial officer have concluded that CPA(R):15's disclosure controls (as
defined in pursuant to Rule 13a-14(c) promulgated under the Exchange Act) are
sufficiently effective to ensure that the information required to be disclosed
by CPA(R):15 in the reports it files under the Exchange Act is recorded,
processed, summarized and reported with adequate timeliness. There have been no
significant changes in CPA(R):15's internal controls or in other factors that
could significantly affect these controls subsequent to the date of the
evaluation referred to above.

-22-

CORPORATE PROPERTY ASSOCIATES 15 INCORPORATED

PART III

Item 10. Directors and Executive Officers of the Registrant.

This information will be contained in CPA(R):15's definitive Proxy Statement
with respect to CPA(R):15's Annual Meeting of Shareholders, to be filed with the
Securities and Exchange Commission within 120 days following the end of
CPA(R):15's fiscal year, and is hereby incorporated by reference.

Item 11. Executive Compensation.

This information will be contained in CPA(R):15's definitive Proxy Statement
with respect to CPA(R):15's Annual Meeting of Shareholders, to be filed with the
Securities and Exchange Commission within 120 days following the end of
CPA(R):15's fiscal year, and is hereby incorporated by reference.

Item 12. Security Ownership of Certain Beneficial Owners and Management.

This information will be contained in CPA(R):15's definitive Proxy Statement
with respect to CPA(R):15's Annual Meeting of Shareholders, to be filed with the
Securities and Exchange Commission within 120 days following the end of
CPA(R):15's fiscal year, and is hereby incorporated by reference.

Item 13. Certain Relationships and Related Transactions.

This information will be contained in CPA(R):15's definitive Proxy Statement
with respect to CPA(R):15's Annual Meeting of Shareholders, to be filed with the
Securities and Exchange Commission within 120 days following the end of the
CPA(R):15's fiscal year, and is hereby incorporated by reference.

Item 14. Principal Accountant Fees and Services.

This information will be contained in CPA(R):15's definitive Proxy Statement
with respect to CPA(R):15's Annual Meeting of Shareholders, to be filed with the
Securities and Exchange Commission within 120 days following the end of the
CPA(R):15's fiscal year, and is hereby incorporated by reference.

-23-

CORPORATE PROPERTY ASSOCIATES 15 INCORPORATED

PART IV

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

(a) 1. Consolidated Financial Statements:

The following consolidated financial statements are filed as a part
of this Report:

Report of Independent Auditors.

Consolidated Balance Sheets at December 31, 2003 and 2002.

Consolidated Statements of Income for the years ended December
31, 2003, 2002 and the period from inception (February 26, 2001)
through December 31, 2001.

Consolidated Statements of Shareholders' Equity for the period
from inception (February 26, 2001) through December 31, 2001, and
the years ended December 31, 2002 and 2003.

Consolidated Statements of Cash Flows for the years ended
December 31, 2003, 2002 and the period from inception (February
26, 2001) through December 31, 2001.

Notes to Consolidated Financial Statements.

The consolidated financial statements are hereby incorporated by
reference to pages 13 to 33 of CPA(R):15's Annual Report contained
in Appendix A.

(a) 2. Financial Statements of Material Equity Investees:

Bolt (DE) Limited Partnership

Report of Independent Auditors.

Balance Sheets at December 31, 2003 and 2002 (unaudited).

Statements of Operations for the year ended December 31, 2003 and
the period from inception (December 3, 2002) to December 31,
2002 (unaudited).

Statements of Partners' Capital for the year ended December 31,
2003 and the period from inception (December 3, 2002) to December
31, 2002 (unaudited).

Statements of Cash Flows for the year ended December 31, 2003 and
the period from inception (December 3, 2002) to December 31,
2002 (unaudited).

Notes to Financial Statements.

Schedule III - Real Estate and Accumulated Depreciation as of
December 31, 2003 of Bolt (DE) Limited Partnership.

Well-Mez (Multi) LLC

Report of Independent Auditors.

Consolidated Balance Sheet at December 31, 2003.

Consolidated Statement of Income for the year ended December 31,
2003.

Consolidated Statement of Members' Equity for the year ended
December 31, 2003.

Consolidated Statement of Cash Flows for the year ended December
31, 2003.

Notes to Financial Statements.

-24-

CORPORATE PROPERTY ASSOCIATES 15 INCORPORATED

Schedule III - Real Estate and Accumulated Depreciation as of
December 31, 2003 of Well-Mez (Multi) LLC.

Wrench (DE) Limited Partnership

Report of Independent Auditors.

Balance Sheets at December 31, 2003 and 2002 (unaudited).

Statements of Operations for the year ended December 31, 2003 and
the period from inception (December 18, 2002) to December 31,
2002 (unaudited).

Statements of Partners' Capital for the year ended December 31,
2003 and for the period from inception (December 18, 2002) to
December 31, 2002 (unaudited).

Statements of Cash Flows for the year ended December 31, 2003 and
the period from inception (December 18, 2002) to December 31,
2002 (unaudited).

Notes to Financial Statements.

Schedule III - Real Estate and Accumulated Depreciation as of
December 31, 2003 of Wrench (DE) Limited Partnership.

The financial statements of material equity investees are contained
herewith in Item 15 on pages 26 to 49.

The separate financial statements of material equity investees have
been audited as of December 31, 2003 and for the year then ended in
accordance with Rule 3-09 of Regulation S-X.

(a) 3. Financial Statement Schedule:

The following schedules are filed as a part of this Report:

Report of Independent Auditors.

Schedule III - Real Estate and Accumulated Depreciation as of
December 31, 2003.

Schedule III of Registrant is contained on pages 58 to 62 of this
Form 10-K.

Financial Statement Schedules other than those listed above are
omitted because the required information is given in the
Consolidated Financial Statements, including the Notes thereto, or
because the conditions requiring their filing do not exist.

-25-

REPORT of INDEPENDENT AUDITORS

To the Partners of
BOLT (DE) LIMITED PARTNERSHIP:

In our opinion, the financial statements listed in the index appearing under
Item 15(a)(2) present fairly, in all material respects, the financial position
of BOLT (DE) LIMITED PARTNERSHIP at December 31, 2003 and the results of its
operations and its cash flows for the year then ended in conformity with
accounting principles generally accepted in the United States of America. In
addition, in our opinion, the financial statement schedule listed in the index
appearing under Item 15(a)(2) presents fairly, in all material respects, the
information set forth therein when read in conjunction with the related
financial statements. These financial statements and financial statement
schedule are the responsibility of the Company's management; our responsibility
is to express an opinion on these financial statements and financial statement
schedule based on our audits. We conducted our audits of these statements in
accordance with auditing standards generally accepted in the United States of
America, which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

/s/ PricewaterhouseCoopers LLP

New York, New York
March 5, 2004

26

BOLT (DE) LIMITED PARTNERSHIP

BALANCE SHEETS
December 31, 2003 and 2002

2003 2002
---- ----
(unaudited)

ASSETS:

Land $ 7,810,000 $ 7,810,000
Buildings, net of accumulated depreciation of $1,034,377 and
$47,562 at December 31, 2003 and 2002 38,439,892 39,423,655
Intangible assets, net of accumulated amortization of $282,052
and $0 at December 31, 2003 and 2002 5,906,162 6,188,214
Cash and cash equivalents 2,547 -
Escrow and restricted funds 2,881,393 -
Other assets 1,120,574 275,500
----------- -----------
Total assets $56,160,568 $53,697,369
=========== ===========

LIABILITIES and PARTNERS' CAPITAL:

Liabilities:
Mortgage note payable $27,273,832 -
Accrued interest payable 136,922 -
Accrued expenses 2,439 -
Prepaid rent 251,189 $ 251,189
----------- -----------
Total liabilities 27,664,382 251,189
----------- -----------

Commitments and contingencies

Partners' Capital:
General partner 14,248,093 26,723,090
Limited partners 14,248,093 26,723,090
----------- -----------
28,496,186 53,446,180
----------- -----------

Total liabilities and partners' capital $56,160,568 $53,697,369
=========== ===========

The accompanying notes are an integral part of these financial statements.

27

BOLT (DE) LIMITED PARTNERSHIP

STATEMENTS OF OPERATIONS
For the year ended December 31, 2003 and for the period
from inception (December 3, 2002) to December 31, 2002

2003 2002
---------- ----------
(unaudited)

Revenue:
Rental income $5,902,225 $ 13,221
---------- ----------
5,902,225 13,221
---------- ----------

Expenses:
Interest on mortgages 1,607,331 -
Depreciation and amortization of intangibles 1,268,866 47,562
General and administrative 7,200 -
---------- ----------
2,883,397 47,562
---------- ----------

Net income (loss) $3,018,828 $ (34,341)
========== ==========

The accompanying notes are an integral part of these financial statements.

28

BOLT (DE) LIMITED PARTNERSHIP

STATEMENTS OF PARTNERS' CAPITAL
For the year ended December 31, 2003 and for the period
from inception (December 3, 2002) to December 31, 2002

General Partner Limited Partners Total
--------------- ---------------- -----

Capital contributed (unaudited) $ 26,740,261 $ 26,740,260 $ 53,480,521

Net loss (unaudited) (17,171) (17,170) (34,341)
------------ ------------ ------------

Balance, December 31, 2002 (unaudited) 26,723,090 26,723,090 53,446,180

Distributions (13,984,411) (13,984,411) (27,968,822)

Net income 1,509,414 1,509,414 3,018,828
------------ ------------ ------------

Balance, December 31, 2003 $ 14,248,093 $ 14,248,093 $ 28,496,186
============ ============ ============

The accompanying notes are an integral part of these financial statements.

29

BOLT (DE) LIMITED PARTNERSHIP

STATEMENTS OF CASH FLOWS
For the year ended December 31, 2003 and for the period
from inception (December 3, 2002) to December 31, 2002

2003 2002
---- ----
(unaudited)

Cash flows from operating activities:
Net income (loss) $ 3,018,828 $ (34,341)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Straight-line rent adjustment (1,026,594) -
Depreciation and amortization 1,278,920 47,562
Increase in escrow and restricted funds (2,881,393) -
Increase in accrued expenses 2,439 -
Increase in accrued interest payable 136,922 251,189
------------ ------------
Net cash provided by operating activities 529,122 264,410
------------ ------------

Cash flows from investing activities:
Purchase of real estate assets - (53,469,431)
Costs capitalized subsequent to acquisition (3,052) -
------------ ------------
Net cash used in investing activities (3,052) (53,469,431)
------------ ------------

Cash flows from financing activities:
Distributions paid (27,968,822) -
Capital contributions 53,480,521
Proceeds from mortgage 27,550,047 -
Deferred financing costs and mortgage deposits 171,467 (275,500)
Payment of mortgage principal (276,215) -
------------ ------------
Net cash (used in) provided by financing activities (523,523) 53,205,021
------------ ------------

Net increase in cash and cash equivalents 2,547 -

Cash and cash equivalents, beginning of period - -
------------ ------------

Cash and cash equivalents, end of period $ 2,547 $ -
============ ============

The accompanying notes are an integral part of these financial statements.

30

BOLT (DE) LIMITED PARTNERSHIP

NOTES TO FINANCIAL STATEMENTS

1. Organization and Business:

Bolt (DE) Limited Partnership (the "Company") was formed in Delaware on
December 3, 2002 as a limited partnership. A partnership is not liable
for federal taxes as each partner recognizes his proportionate share of
income in his tax return, Accordingly, no provision for income taxes is
recognized.

The Company's business consists of the leasing of three industrial
properties to TruServ Corporation ("TruServ") pursuant to a master net
lease. The lease has an initial term of 20 years through December 31,
2022 with a first renewal term of nine years and eleven months followed
by a renewal term of ten years.

2. Summary of Significant Accounting Policies:

Use of Estimates:

The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the dates of the financial statements and the
reported amounts of revenues and expenses during the reporting period.
The most significant estimates relate to the assessment of the
realizability of real estate assets, classification of real estate
leased to others and identification of any intangible assets identified
in connection with asset acquisitions. Actual results could differ from
those estimates.

Real Estate Leased to Others:

Real estate is leased to others on a net lease basis, whereby the
tenant is generally responsible for all operating expenses relating to
the property, including property taxes, insurance, maintenance,
repairs, renewals and improvements. For the year ended December 31,
2003, TruServ was responsible for direct payments of real estate taxes
of approximately $642,000. Expenditures for maintenance and repairs
including routine betterments are charged to operations as incurred.
Significant renovations, which increase the useful life of the
properties, are capitalized.

The lease is accounted for under the operating method, that is real
estate is recorded at cost less accumulated depreciation, rental
revenue is recognized on a straight-line basis over the term of the
leases and expenses (including depreciation) are charged to operations
as incurred.

In connection with the Company's acquisition of properties, purchase
costs were allocated to the tangible and intangible assets and
liabilities acquired based on their estimated fair values. The value of
the tangible assets, consisting of land, buildings and tenant
improvements, are determined as if vacant. Intangible assets including
the above-market or below-market value of leases, the value of in-place
leases and the value of tenant relationships are recorded at their
relative fair values. No value was attributed to above-market or
below-market value of leases.

The total amount of other intangible assets was allocated to in-place
lease values and tenant relationship intangible values based on
management's evaluation of the specific characteristics of each
tenant's lease and the Company's overall relationship with each tenant.
Characteristics considered in allocating these values included the
tenant, the tenant's credit quality and the expectation of lease
renewals among other factors. The aggregate value of other intangible
assets acquired was measured based on the difference between (i) the
property valued with an in-place lease adjusted to market rental rates
and (ii) the property valued as if vacant. Independent appraisals or
management's estimates were used to determine these values.

Factors considered in the analysis included the estimated carrying
costs of the property during a hypothetical expected lease-up period,
current market conditions and costs to execute similar leases. The
Company also considered information obtained about a property in
connection with its pre-acquisition due diligence. Estimated carrying
costs include real estate taxes, insurance, other property operating
costs and estimates of lost rentals at market rates during the
hypothetical expected lease-up periods, based on management's
assessment of specific market conditions. Estimated costs to execute
leases including commissions and legal costs to the extent that such
costs were not already incurred with a new lease that has been
negotiated in connection with the purchase of the property are also
considered.

31

BOLT (DE) LIMITED PARTNERSHIP

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

The value of in-place leases are amortized to expense over the
remaining initial term of each lease. The value of tenant relationship
intangibles will be amortized to expense over the initial and renewal
terms of the leases but no amortization period for intangible assets
will exceed the remaining depreciable life of the building.

Depreciation is computed using the straight-line method over the
estimated useful life of the properties - 40 years.

When events or changes in circumstances indicate that the carrying
amount of a long-lived asset may not be recoverable, the Company
assesses the recoverability of its long-lived assets, including
residual interests of real estate assets and investments, based on
projections of undiscounted cash flows, without interest charges, over
the life of such assets. In the event that such cash flows are
insufficient, the assets are adjusted to their estimated fair value.

Scheduled future minimum rents on the TruServ lease, exclusive of
renewals, under are as follows:

Year Ending December 31,
- ------------------------

2004 $ 4,947,066
2005 5,020,432
2006 5,120,841
2007 5,223,257
2008 5,327,723
Thereafter through 2022 86,806,805
------------
Total $112,446,124
------------

Cash Equivalents:

The Company considers all short-term highly liquid investments that are
both readily convertible to cash and have a maturity of three months or
less at the time of purchase to be cash equivalents. Items classified
as cash equivalents may include commercial paper and money market
funds. At December 31, 2003, the Company had on deposit at one
financial institution all of its cash and cash equivalents. The Company
had no cash at December 31, 2002.

Other Assets:

Other assets are comprised primarily of deferred rental income.
Deferred rental income is the aggregate difference between scheduled
rents which vary during the lease term and income recognized on a
straight-line basis.

3. Mortgage Note Payable:

The Company's mortgage note payable is collateralized by the Company's
three TruServ properties and by the rights of assignment on the
Company's master lease on the properties. The mortgage notes bear
interest at a rate of 5.83% per annum with a balloon payment of
$23,289,275 scheduled in February 2013.

Scheduled principal payments during each of the next five years
following December 31, 2003 and thereafter are as follows:

Year Ending December 31,
- ------------------------

2004 $ 338,641
2005 363,818
2006 385,915
2007 409,355
2008 429,865
Thereafter through 2013 25,346,238
-----------
Total $27,273,832
===========

The fair value of the Company's mortgage note payable at December 31,
2003 is approximately $26,900,000. .

32

BOLT (DE) LIMITED PARTNERSHIP

SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
as of December 31, 2003

Gross Amount at which Carried
Initial Cost to Company at Close of Period (c)
----------------------- ----------------------
Costs Capitalized
Subsequent to
Description Encumbrances Land Buildings Acquisition (a) Land Buildings Total
----------- ------------ ---- --------- --------------- ---- --------- -----

Real Estate Accounted for
Under the Operating Method:
$27,273,832 $7,810,000 $39,471,217 $3,052 $7,810,000 $39,474,269 $47,284,269
----------- ---------- ----------- ------ ---------- ----------- -----------
$27,273,832 $7,810,000 $39,471,217 $3,052 $7,810,000 $39,474,269 $47,284,269
=========== ========== =========== ====== ========== =========== ===========

Life on which
Depreciation in
Latest Statement of
Accumulated Income
Description Depreciation (c) Date Acquired is Computed
----------- ---------------- ------------- -----------

Real Estate Accounted for
Under the Operating Method:
$1,034,377 December 26, 2002 40 years
----------
$1,034,377
==========

(a) Consists of the costs of improvements subsequent to purchase
and other acquisition costs including legal fees, appraisal
fees, title costs and other related professional fees.

(b) At December 31, 2003, the aggregate cost of real estate owned
by Bolt (DE) Limited Partnership for Federal income tax
purposes is $53,472,483.

(c)

Reconciliation of Real Estate
Accounted for Under the Operating Method
December 31,
------------
2003 2002
----------- -----------

Balance at beginning of year $47,281,217 -
Additions 3,052 $47,281,217
----------- -----------
Balance at close of year $47,284,269 $47,281,217
=========== ===========

2003 2002
----------- -----------

Balance at beginning of year $ 47,562 -
Additions 986,815 $ 47,562
----------- -----------
Balance at close of year $ 1,034,377 $ 47,562
=========== ===========

33

REPORT of INDEPENDENT AUDITORS

To the Members of
WELL-MEZ (MULTI) LLC:

In our opinion, the financial statements listed in the index appearing under
Item 15(a)(2) present fairly, in all material respects, the financial position
of WELL-MEZ (MULTI) LLC at December 31, 2003 and the results of its operations
and its cash flows for the year then ended in conformity with accounting
principles generally accepted in the United States of America. In addition, in
our opinion, the financial statement schedule listed in the index appearing
under Item 15(a)(2) presents fairly, in all material respects, the information
set forth therein when read in conjunction with the related financial
statements. These financial statements and financial statement schedule are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements and financial statement schedule based on
our audits. We conducted our audits of these statements in accordance with
auditing standards generally accepted in the United States of America, which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

/s/ PricewaterhouseCoopers LLP

New York, New York
March 5, 2004

34

WELL-MEZ (MULTI) LLC
AND SUBSIDIARY

CONSOLIDATED BALANCE SHEET
December 31, 2003

ASSETS:
Land $ 44,473,000
Buildings, net of accumulated depreciation of $2,439,585 109,081,696
Intangible assets, net of accumulated amortization of $870,354 21,164,697
Cash and cash equivalents 7,620,313
Escrow and restricted funds 9,781,236
Other assets 108,300
------------
Total assets $192,229,242
============

LIABILITIES and MEMBERS' EQUITY:

Liabilities:
Mortgage notes payable $106,840,629
Accrued interest payable 682,352
Accounts payable and accrued expenses 157,704
Prepaid rent and security deposit 10,335,367
------------
Total liabilities 118,016,052
------------

Commitments and contingencies

Members' Equity 74,213,190
------------
Total liabilities and members' equity $192,229,242
============

The accompanying notes are an integral part of these financial statements.

35

WELL-MEZ (MULTI) LLC
AND SUBSIDIARY

CONSOLIDATED STATEMENT OF INCOME
For the year ended December 31, 2003

Revenue:
Rental income $16,373,633
Other income 43,493
-----------
16,417,126
-----------

Expenses:
Interest on mortgages 7,295,517
Depreciation and amortization of intangibles 3,309,939
General and administrative 143,927
-----------
10,749,383
-----------

Net income $ 5,667,743
===========

Note: The Company had no operations for the period of inception (December 11,
2002) to December 31, 2002

The accompanying notes are an integral part of these financial statements.

36

WELL-MEZ (MULTI) LLC
AND SUBSIDIARY

CONSOLIDATED STATEMENT OF MEMBERS' EQUITY
For the year ended December 31, 2003

Capital contributed $ 71,893,736

Distributions (3,348,289)

Net income 5,667,743
------------

Balance, December 31, 2003 $ 74,213,190
============

The accompanying notes are an integral part of these financial statements.

37

WELL-MEZ (MULTI) LLC
AND SUBSIDIARY

CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended December 31, 2003

2003
----

Cash flows from operating activities:
Net income $ 5,667,743
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 3,319,824
Increase in escrow and restricted funds and other assets (7,263,041)
Increase in accrued expenses 157,704
Increase in prepaid rent and security deposits 10,335,367
Increase in accrued interest payable 682,352
-------------
Net cash provided by operating activities 12,899,949
-------------

Cash flows from investing activities:
Purchase of real estate assets (178,029,332)
-------------
Net cash used in investing activities (178,029,332)
-------------

Cash flows from financing activities:
Distributions paid (3,348,289)
Capital contributions 71,893,736
Proceeds from mortgage 108,300,000
Deferred financing costs and mortgage deposits (2,636,380)
Payment of mortgage principal (1,459,371)
-------------
Net cash provided by financing activities 172,749,696
-------------

Net increase in cash and cash equivalents 7,620,313

Cash and cash equivalents, beginning of year -
-------------

Cash and cash equivalents, end of year $ 7,620,313
=============

The accompanying notes are an integral part of these financial statements.

38

WELL-MEZ (MULTI) LLC
AND SUBSIDIARY

NOTES TO FINANCIAL STATEMENTS

1. Organization and Business:

Well-Mez (Multi) LLC (the "Company") was formed in Delaware on December
11, 2002 as a limited liability company. The Company had no operations
until February 2003. As a limited liability company, the Company has
elected to be treated as a partnership for tax purposes. A partnership
is not liable for federal taxes as each partner recognizes his
proportionate share of income in his tax return. Accordingly, no
provision for income taxes is recognized.

The Company's business consists of the leasing of 15 health club
facilities to Starmark Camhood LLC ("Starmark") pursuant to a master
net lease. The lease has an initial term of 20 years with three renewal
terms of ten years.

2. Summary of Significant Accounting Policies:

Basis of Consolidation:

The consolidated financial statements include the accounts of the
Company and Well-Prop (Multi) LLC, a 100% owned subsidiary. All
material inter-entity transactions are eliminated.

Use of Estimates:

The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the dates of the financial statements and the
reported amounts of revenues and expenses during the reporting period.
The most significant estimates relate to the assessment of the
realizability of real estate assets and investments, classification of
real estate leased to others and identification of any intangible
assets identified in connection with asset acquisitions. Actual results
could differ from those estimates.

Real Estate Leased to Others:

Real estate is leased to others on a net lease basis, whereby the
tenant is generally responsible for all operating expenses relating to
the property, including property taxes, insurance, maintenance,
repairs, renewals and improvements. For the year ended December 31,
2003, Starmark was responsible for direct payments of real estate taxes
of approximately $2,549,000. Expenditures for maintenance and repairs
including routine betterments are charged to operations as incurred.
Significant renovations, which increase the useful life of the
properties, are capitalized.

The lease is accounted for under the operating method, that is real
estate is recorded at cost less accumulated depreciation, rental
revenue is recognized on a straight-line basis over the term of the
leases and expenses (including depreciation) are charged to operations
as incurred.

In connection with the Company's acquisition of properties, purchase
costs were allocated to the tangible and intangible assets and
liabilities acquired based on their estimated fair values. The value of
the tangible assets, consisting of land, buildings and tenant
improvements, are determined as if vacant. Intangible assets including
the above-market or below-market value of leases, the value of in-place
leases and the value of tenant relationships are recorded at their
relative fair values. No value was attributed to above-market or
below-market value of leases.

The total amount of other intangible assets was allocated to in-place
lease values and tenant relationship intangible values based on
management's evaluation of the specific characteristics of each
tenant's lease and the Company's overall relationship with each tenant.
Characteristics considered in allocating these values included the
tenant, the tenant's credit quality and the expectation of lease
renewals among other factors. The aggregate value of other intangible
assets acquired was measured based on the difference between (i) the
property valued with an in-place lease adjusted to market rental rates
and (ii) the property valued as if vacant. Independent appraisals or
management's estimates were used to determine these values.

Factors considered in the analysis included the estimated carrying
costs of the property during a hypothetical expected lease-up period,
current market conditions and costs to execute similar leases. The
Company also considered information obtained about a property in
connection with its pre-acquisition due diligence. Estimated carrying
costs include real estate taxes, insurance, other property operating
costs and estimates of lost rentals at market rates during

39

WELL-MEZ (MULTI) LLC
AND SUBSIDIARY

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

the hypothetical expected lease-up periods, based on management's
assessment of specific market conditions. Estimated costs to execute
leases including commissions and legal costs to the extent that such
costs were not already incurred with a new lease that has been
negotiated in connection with the purchase of the property are also
considered.

The value of in-place leases are amortized to expense over the
remaining initial term of each lease. The value of tenant relationship
intangibles will be amortized to expense over the initial and renewal
terms of the leases but no amortization period for intangible assets
will exceed the remaining depreciable life of the building.

Depreciation is computed using the straight-line method over the estimated
useful life of the properties - 40 years.

When events or changes in circumstances indicate that the carrying
amount of a long-lived asset may not be recoverable, the Company
assesses the recoverability of its long-lived assets, including
residual interests of real estate assets and investments, based on
projections of undiscounted cash flows, without interest charges, over
the life of such assets. In the event that such cash flows are
insufficient, the assets are adjusted to their estimated fair value.

Cash Equivalents:

The Company considers all short-term highly liquid investments
that are both readily convertible to cash and have a maturity
of three months or less at the time of purchase to be cash
equivalents. Items classified as cash equivalents may include
commercial paper and money market funds. At December 31, 2003,
the Company had on deposit at one financial institution all of
its cash and cash equivalents.

3. Mortgage Notes Payable:

The Company's mortgage notes payable are collateralized by the Company's
fifteen Starmark properties and by the rights of assignment on the Company's
master lease on the properties. Mortgage notes aggregating $88,300,000 bear
interest at a rate of 6.6% per annum with a balloon payment of $76,380,968
scheduled in March 2013. A subordinated mortgage note payable of $20,000,000
bears interest at 11.15% and will fully amortize in March 2013.

Scheduled principal payments during each of the next five years following
December 31, 2003 and thereafter are as follows:

Year Ending December 31,
- ------------------------

2004 $ 2,126,830
2005 2,357,684
2006 2,588,755
2007 2,843,915
2008 3,105,316
Thereafter through 2013 93,818,129
------------
Total $106,840,629
============

The fair value of the Company's mortgage notes payable at December 31, 2003
is approximately $105,552,000.

4. Real Estate Leased to Others Accounted for Under the Operating Method:

Scheduled future minimum rents, exclusive of renewals, under non-cancelable
operating leases are approximately as follows:

Year Ending December 31,
- ------------------------

2004 $ 18,272,400
2005 18,272,400
2006 18,272,400
2007 18,272,400
2008 18,272,400
Thereafter through 2023 258,859,000
------------
Total $350,221,000
============

40

WELL-MEZ (MULTI) LLC
AND SUBSIDIARY

SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
as of December 31, 2003

Gross Amount at which Carried
Initial Cost to Company at Close of Period (c)
----------------------- ----------------------
Costs Capitalized
Subsequent to
Description Encumbrances Land Buildings Acquisition (a) Land Buildings
- ----------------------- ------------ ---- --------- --------------- ---- ---------

Real Estate Accounted
for Under the
Operating Method:
$106,840,629 $44,473,000 $111,502,420 $18,861 $44,473,000 $111,521,281
------------ ----------- ------------ ------- ----------- ------------
$106,840,629 $44,473,000 $111,502,420 $18,861 $44,473,000 $111,521,281
============ =========== ============ ======= =========== ============

Life on which
Depreciation in
Latest Statement of
Accumulated Income
Description Total Depreciation (c) Date Acquired is Computed
- ---------------------- ----- ---------------- ------------- -------------------

Real Estate Accounted
for Under the
Operating Method:
$155,994,281 $2,439,585 February 7, 2003 40 years
------------ ----------
$155,994,281 $2,439,585
============ ==========

(a) Consists of the costs of improvements subsequent to purchase and other
acquisition costs including legal fees, appraisal fees, title costs and
other related professional fees.

(b) At December 31, 2003, the aggregate cost of real estate owned by
Well-Mez (Multi) LLC and subsidiary for Federal income tax purposes is
$178,029,332.

(c)

Reconciliation of Real Estate
Accounted for Under the Operating Method
December 31, 2003
-----------------

Balance at beginning of year -
Additions $155,994,281
------------
Balance at close of year $155,994,281
============

Reconciliation of Accumulated Depreciation
December 31, 2003
-----------------

Balance at beginning of year -
Depreciation expense $ 2,439,585
------------
Balance at close of year $ 2,439,585
============

41

REPORT of INDEPENDENT AUDITORS

To the Partners of
WRENCH (DE) LIMITED PARTNERSHIP:

In our opinion, the financial statements listed in the index appearing under
Item 15(a)(2) present fairly, in all material respects, the financial position
of WRENCH (DE) LIMITED PARTNERSHIP at December 31, 2003 and the results of its
operations and its cash flows for the year then ended in conformity with
accounting principles generally accepted in the United States of America. In
addition, in our opinion, the financial statement schedule listed in the index
appearing under Item 15(a)(2) presents fairly, in all material respects, the
information set forth therein when read in conjunction with the related
financial statements. These financial statements and financial statement
schedule are the responsibility of the Company's management; our responsibility
is to express an opinion on these financial statements and financial statement
schedule based on our audits. We conducted our audits of these statements in
accordance with auditing standards generally accepted in the United States of
America, which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

/s/ PricewaterhouseCoopers LLP

New York, New York
March 5, 2004

42

WRENCH (DE) LIMITED PARTNERSHIP

BALANCE SHEETS
December 31, 2003 and 2002

2003 2002
---- ----
(unaudited)

ASSETS:
Land $ 6,590,000 $ 6,590,000
Buildings, net of accumulated depreciation of $848,430 and
$38,649 at December 31, 2003 and 2002 31,544,460 32,351,191
Intangible assets, net of accumulated amortization of $265,625
and $0 at December 31, 2003 and 2002 5,577,764 5,843,389
Cash and cash equivalents 4,898 -
Escrow and restricted funds 2,896,150 2,735,142
Other assets 814,791 -
----------- -----------
Total assets $47,428,063 $47,519,722
=========== ===========

LIABILITIES and PARTNERS' CAPITAL:

Liabilities:
Mortgage note payable $27,052,307 $27,351,416
Accrued interest 135,810 4,577
Accrued expenses 23,185 -
Prepaid and deferred rent 1,306,940 1,335,188
----------- -----------
Total liabilities 28,518,242 28,691,181
----------- -----------

Commitments and contingencies

Partners' Capital:
General partner 9,454,910 9,414,270
Limited partners 9,454,911 9,414,271
----------- -----------
18,909,821 18,828,541
----------- -----------

Total liabilities and partners' capital $47,428,063 $47,519,722
=========== ===========

The accompanying notes are an integral part of these financial statements.

43

WRENCH (DE) LIMITED PARTNERSHIP

STATEMENTS OF OPERATIONS
For the year ended December 31, 2003 and for the period
from inception (December 18, 2002) to December 31, 2002

2003 2002
---- ----
(unaudited)

Revenue:
Rental income $4,796,305 $ 10,803
Other income 15,000 -
---------- ----------
4,811,305 10,803
---------- ----------

Expenses:
Interest on mortgages 1,606,131 4,577
Depreciation and amortization of intangibles 1,075,406 38,649
General and administrative 26,708 -
---------- ----------
2,708,245 43,226
---------- ----------

Net income (loss) $2,103,060 $ (32,423)
========== ==========

The accompanying notes are an integral part of these financial statements.

44

WRENCH (DE) LIMITED PARTNERSHIP

STATEMENTS OF PARTNERS' CAPITAL
For the year ended December 31, 2003 and for the period
from inception (December 18, 2002) to December 31, 2002

General Partner Limited Partners Total
--------------- ---------------- -----

Capital contributed (unaudited) $ 9,430,482 $ 9,430,482 $ 18,860,964

Net loss (unaudited) (16,212) (16,211) (32,423)
------------ ------------ ------------

Balance, December 31, 2002 (unaudited) 9,414,270 9,414,271 18,828,541

Distributions (1,010,890) (1,010,890) (2,021,780)

Net income 1,051,530 1,051,530 2,103,060
------------ ------------ ------------

Balance, December 31, 2003 $ 9,454,910 $ 9,454,911 $ 18,909,821
============ ============ ============

The accompanying notes are an integral part of these financial statements.

45

WRENCH (DE) LIMITED PARTNERSHIP

STATEMENTS OF CASH FLOWS
For the year ended December 31, 2003 and for the period
from inception (December 18, 2002) to December 31, 2002

2003 2002
---- ----
(unaudited)

Cash flows from operating activities:
Net income (loss) $ 2,103,060 $ (32,423)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Straight-line rent adjustment and amortization of deferred rent (812,114) -
Depreciation and amortization 1,078,323 38,649
Increase in other assets and escrow and restricted funds (161,517) -
Increase in accrued expenses 23,185 -
Increase in prepaid rent - 205,263
Increase in accrued interest 131,233 4,577
------------ ------------
Net cash provided by operating activities 2,362,170 216,066
------------ ------------

Cash flows from investing activities:
Purchase of real estate assets and liabilities - (43,693,304)
Cost capitalized subsequent to purchase (3,050) -
------------ ------------
Net cash used in investing activities (3,050) (43,693,304)
------------ ------------

Cash flows from financing activities:
Distributions paid (2,021,780) -
Capital contributions - 18,860,964
Proceeds from mortgage - 27,351,416
Deferred financing costs and mortgage deposits (33,333) (2,735,142)
Payment of mortgage principal (299,109) -
------------ ------------
Net cash (used in) provided by financing activities (2,354,222) 43,477,238
------------ ------------

Net increase in cash and cash equivalents 4,898 -

Cash and cash equivalents, beginning of period - -
------------ ------------

Cash and cash equivalents, end of period $ 4,898 $ -
============ ============

The accompanying notes are an integral part of these financial statements.

46

WRENCH (DE) LIMITED PARTNERSHIP

NOTES TO FINANCIAL STATEMENTS

1. Organization and Business:

Wrench (DE) Limited Partnership (the "Company") was formed in Delaware
on December 18, 2002 as a limited partnership. A partnership is not
liable for federal taxes as each partner recognizes his proportionate
share of income in his tax return. Accordingly, no provision for income
taxes is recognized.

The Company's business consists of the leasing of two industrial
properties to TruServ Corporation ("TruServ") pursuant to a master net
lease. The lease has an initial term of 20 years through December 31,
2022 with a first renewal term of nine years and eleven months followed
by a renewal term of ten years.

2. Summary of Significant Accounting Policies:

Use of Estimates:

The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.

Real Estate Leased to Others:

Real estate is leased to others on a net lease basis, whereby the
tenant is generally responsible for all operating expenses relating to
the property, including property taxes, insurance, maintenance,
repairs, renewals and improvements. For the year ended December 31,
2003, TruServ was responsible for direct payments of real estate taxes
of approximately $597,000. Expenditures for maintenance and repairs
including routine betterments are charged to operations as incurred.
Significant renovations, which increase the useful life of the
properties, are capitalized.

The lease is accounted for under the operating method, that is real
estate is recorded at cost less accumulated depreciation, rental
revenue is recognized on a straight-line basis over the term of the
leases and expenses (including depreciation) are charged to operations
as incurred.

In connection with the Company's acquisition of properties, purchase
costs were allocated to the tangible and intangible assets and
liabilities acquired based on their estimated fair values. The value of
the tangible assets, consisting of land, buildings and tenant
improvements, are determined as if vacant. Intangible assets including
the above-market value of leases, the value of in-place leases and the
value of tenant relationships are recorded at their relative fair
values. Below-market value of leases is included in deferred rent
liability.

The total amount of other intangible assets was allocated to in-place
lease values and tenant relationship intangible values based on
management's evaluation of the specific characteristics of each
tenant's lease and the Company's overall relationship with each tenant.
Characteristics considered in allocating these values included the
tenant, the tenant's credit quality and the expectation of lease
renewals among other factors. The aggregate value of other intangible
assets acquired was measured based on the difference between (i) the
property valued with an in-place lease adjusted to market rental rates
and (ii) the property valued as if vacant. Independent appraisals or
management's estimates were used to determine these values.

Factors considered in the analysis included the estimated carrying
costs of the property during a hypothetical expected lease-up period,
current market conditions and costs to execute similar leases. The
Company also considered information obtained about a property in
connection with its pre-acquisition due diligence. Estimated carrying
costs include real estate taxes, insurance, other property operating
costs and estimates of lost rentals at market rates during the
hypothetical expected lease-up periods, based on management's
assessment of specific market conditions. Estimated costs to execute
leases including commissions and legal costs to the extent that such
costs were not already incurred with a new lease that has been
negotiated in connection with the purchase of the property are also
considered.

47

WRENCH (DE) LIMITED PARTNERSHIP

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

The value of in-place leases are amortized to expense over the
remaining initial term of each lease. The value of tenant relationship
intangibles will be amortized to expense over the initial and renewal
terms of the leases but no amortization period for intangible assets
will exceed the remaining depreciable life of the building.

Depreciation is computed using the straight-line method over the
estimated useful life of the properties - 40 years.

When events or changes in circumstances indicate that the carrying
amount of a long-lived asset may not be recoverable, the Company
assesses the recoverability of its long-lived assets, including
residual interests of real estate assets and investments, based on
projections of undiscounted cash flows, without interest charges, over
the life of such assets. In the event that such cash flows are
insufficient, the assets are adjusted to their estimated fair value.

Scheduled future minimum rents on the TruServ lease, exclusive of
renewals, under are as follows:

Year Ending December 31,
- ------------------------

2004 $ 4,042,565
2005 4,102,517
2006 4,184,568
2007 4,268,259
2008 4,353,624
Thereafter through 2022 70,935,412
-----------
Total $91,886,945
===========

Cash Equivalents:

The Company considers all short-term highly liquid investments
that are both readily convertible to cash and have a maturity
of three months or less at the time of purchase to be cash
equivalents. Items classified as cash equivalents may include
commercial paper and money market funds. At December 31, 2003,
the Company had on deposit at one financial institution all of
its cash and cash equivalents.

Other Assets:

Other assets are comprised primarily of deferred rental
income. Deferred rental income is the aggregate difference
between scheduled rents which vary during the lease term and
income recognized on a straight-line basis.

3. Mortgage Notes Payable:

The Company's mortgage note payable is collateralized by the Company's two
TruServ properties and by the rights of assignment on the Company's master
lease on the properties. The mortgage notes bear interest at a rate of 5.83%
per annum with a balloon payment of $23,123,745 scheduled in January 2013.

Scheduled principal payments during each of the next five years following
December 31, 2003 and thereafter are as follows:

Year Ending December 31,
- ------------------------

2004 $ 337,715
2005 362,798
2006 384,834
2007 408,208
2008 428,685
Thereafter through 2013 25,130,067
-----------
Total $27,052,307
===========

The fair value of the Company's mortgage note payable at December 31,
2003 is approximately $26,683,000.

48

WRENCH (DE) LIMITED PARTNERSHIP

SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
as of December 31, 2003

Gross Amount at which Carried
Initial Cost to Company at Close of Period (c)
----------------------- ----------------------
Costs Capitalized
Subsequent to
Description Encumbrances Land Buildings Acquisition (a) Land Buildings
- ---------------------- ------------ ---- --------- --------------- ---- ---------

Real Estate Accounted
for Under the
Operating Method:
$27,052,307 $6,590,000 $32,389,840 $3,050 $6,590,000 $32,392,890
----------- ---------- ----------- ------ ---------- -----------
$27,052,307 $6,590,000 $32,389,840 $3,050 $6,590,000 $32,392,890
=========== ========== =========== ====== ========== ===========

Life on which
Depreciation in
Latest Statement of
Accumulated Income
Description Total Depreciation (c) Date Acquired is Computed
- ---------------------- ----- ---------------- ------------- -------------------

Real Estate Accounted
for Under the
Operating Method:
$38,982,890 $848,430 December 26, 2002 40 years
----------- --------
$38,982,890 $848,430
=========== ========

(a) Consists of the costs of improvements subsequent to purchase and other
acquisition costs including legal fees, appraisal fees, title costs and
other related professional fees.

(b) At December 31, 2003, the aggregate cost of real estate owned by Wrench
(DE) Limited Partnership for Federal income tax purposes is
$44,826,279.

(c)

Reconciliation of Real Estate
Accounted for Under the Operating Method
December 31, 2003
-----------------

Balance at beginning of year $38,979,840
Additions 3,050
-----------
Balance at close of year $38,982,890
===========

Reconciliation of Accumulated Depreciation
December 31, 2003
-----------------

Balance at beginning of year $ 38,649
Depreciation expense 809,781
--------
Balance at close of year $848,430
========

49

CORPORATE PROPERTY ASSOCIATES 15 INCORPORATED

(a) 4. Exhibits:

The following exhibits are filed as part of this Report. Documents
other than those designated as being filed herewith are incorporated
herein by reference.

Exhibit
No. Description Method of Filing
--- ----------- ----------------

3.1 Articles of Incorporation of Registrant Exhibit 3.1 to Registration Statement (Form S-11) No. 333-58854

3.2 Amended and Restated Bylaws of Registrant Exhibit 3.2 to Amendment No. 1 to Registration Statement (Form S-11/A)
No. 333-100525 dated May 1, 2003

4.1 2001 Dividend Reinvestment and Stock Purchase Exhibit 4.1 to Amendment No. 1 to Registration Statement (Form S-11/A)
Plan of Registrant No. 333-58854 dated November 1, 2001

10.1 Form of Sales Agency Agreement Exhibit 10.1 to Registration Statement (Form S-11) No. 333-58854

10.1(1) Form of Sales Agency Agreement Exhibit 10.1 to Amendment No. 1 to Registration Statement (Form S-11/A)
No. 333-58854 dated November 1, 2001

10.1(3) Form of Selected Dealer Agreement Exhibit 10.1 to Registration Statement (Form S-11) No. 333-100525

10.2 Form of Selected Dealer Agreement Exhibit 10.2 to Amendment No. 1 to Registration Statement (Form S-11/A)
No. 333-58854 dated November 1, 2001

10.2(1) Form of Selected Dealer Agreement Exhibit 10.2 to Registration Statement (Form S-11) No. 333-58854

10.2(2) Form of Escrow Agreement Exhibit 10.2 to Registration Statement (Form S-11) No. 333-100525

10.3 Form of Advisory Agreement Exhibit 10.3 to Registration Statement (Form S-11) No. 333-58854

10.3(1) Form of Advisory Agreement Exhibit 10.3 to Amendment No. 1 to Registration Statement (Form S-11/A)
No. 333-58854 dated November 1, 2001

10.3(2) Form of Investor Advisor Agreement Exhibit 10.3 to Registration Statement (Form S-11) No. 333-100525

10.4 Form of Wholesaling Agreement Exhibit 10.4 to Registration Statement (Form S-11) No. 333-58854

10.4(1) Form of Wholesaling Agreement Exhibit 10.4 to Amendment No. 1 to Registration Statement (Form S-11/A)
No. 333-58854 dated November 1, 2001

10.4(2) Sales Agency Agreement Exhibit 10.4 to Registration Statement (Form S-11) No. 333-100525

10.5 Form of Escrow Agreement Exhibit 10.5 to Registration Statement (Form S-11) No. 333-58854

50

CORPORATE PROPERTY ASSOCIATES 15 INCORPORATED

Exhibit
No. Description Method of Filing
--- ----------- ----------------

10.5(1) Form of Escrow Agreement Exhibit 10.5 to Amendment No. 1 to Registration Statement (Form S-11/A)
No. 333-58854 dated November 1, 2001

10.5(2) Opinion of Reed Smith LLP Exhibit 5.1 to Registration Statement (Form S-11/MEF) No. 333-100813

10.5(2) Advisory Agreement Exhibit 10.5 to Registration Statement (Form S-11) No. 333-100525

10.6 Form of Selected Investor Adviser Agreement Exhibit 10.6 to Amendment No. 1 to Registration Statement (Form S-11/A)
No. 333-58854 dated November 1, 2001

10.6(1) Wholesaling Agreement Exhibit 10.6 to Registration Statement (Form S-11) No. 333-100525

10.7 Amended and Restated Sales Agency Agreement Exhibit 10.7 to Post-Effective Amendment No. 2 to Registration Statement
(Form S-11/A) No. 333-58854 dated April 30, 2002

10.7(1) Amended and Restated Limited Partnership Exhibit 10.7 to Amendment No. 1 to Registration Statement (Form S-11/A)
Agreement of Goldfish (DE) LP No. 333-100525 dated November 21, 2002

10.8 Amended and Restated Advisory Agreement Exhibit 10.8 to Post-Effective Amendment No. 2 to Registration Statement
(Form S-11/A) No. 333-58854 dated April 30, 2002

10.8(1) Agreement of DE Limited Partnership of Exhibit 10.8 to Amendment No. 1 to Registration Statement (Form S-11/A)
Labrador (AZ) LP No. 333-100525 dated November 21, 2002

10.9 Amended and Restated Wholesaling Agreement Exhibit 10.9 to Post-Effective Amendment No. 2 to Registration Statement
(Form S-11/A) No. 333-58854 dated April 30, 2002

10.9(1) Agreement of DE Limited Partnership of BFS Exhibit 10.9 to Amendment No. 1 to Registration Statement (Form S-11/A)
(DE) LP No. 333-100525 dated November 21, 2002

10.10 Lease Agreement by and between Grocery (OK) Exhibit 10.10 to Amendment No. 2 to Registration Statement (Form S-11/A)
QRS 15-5, Inc., a Delaware corporation, as No. 333-100525 dated December 18, 2002
Landlord and Fleming Companies, Inc., an
Oklahoma corporation, as Tenant

10.11 Lease Agreement by and between Module (DE) Exhibit 10.11 to Amendment No. 2 to Registration Statement (Form S-11/A)
Limited Partnership, a Delaware limited No. 333-100525 dated December 18, 2002
partnership, as Landlord and Tower Automotive
Products Company, Inc., a Delaware
corporation, and Tower Automotive Tool LLC,
a Michigan limited liability company,
collectively as Tenant

51

Exhibit
No. Description Method of Filing
--- ----------- ----------------

10.12 Lease Agreement by and between Chassis (DE) Exhibit 10.12 to Amendment No. 2 to Registration Statement (Form S-11/A)
Limited Partnership, a Delaware limited No. 333-100525 dated December 18, 2002
partnership, as Landlord and Tower Automotive
Products Company, Inc., a Delaware
corporation, and Tower Automotive Tool LLC, a
Michigan limited liability company,
collectively as Tenant

10.13 Lease Agreement by and between Energy (NJ) Exhibit 10.13 to Amendment No. 2 to Registration Statement (Form S-11/A)
QRS 15-10, Inc., a Delaware corporation, as No. 333-100525 dated December 18, 2002
Landlord and Foster Wheeler Realty Services,
Inc., a Delaware corporation, as Tenant

10.14 Lease between Massachusetts Mutual Life Exhibit 10.14 to Amendment No. 2 to Registration Statement (Form S-11/A)
Insurance Company, Landlord and SFX No. 333-100525 dated December 18, 2002
Entertainment, Inc., Tenant as assumed by
Clear (NY) LP

10.15 Leasehold Mortgage and Security Agreement Exhibit 10.15 to Amendment No. 3 to Registration Statement (Form S-11/A)
between ENERGY (NJ) QRS 15-10, Inc., as No. 333-100525 dated January 15, 2003
mortgagor, and Morgan Stanley Dean Witter
Mortgage Capital, Inc., as mortgagee, dated
as of August 16, 2002, with respect to the
property leased to Foster Wheeler Realty
Services, Inc. in Clinton, New Jersey

10.16 Mortgage and Security Agreement between CLEAR Exhibit 10.16 to Amendment No. 3 to Registration Statement (Form S-11/A)
(NY) L.P., as mortgagor, and Lehman Brothers No. 333-100525 dated January 15, 2003
Bank, FSB, as mortgagee, dated as of December
12, 2002, with respect to the property leased
to SFX Entertainment, Inc. in New York, New
York

10.17 Mortgage and Security Agreement between Exhibit 10.17 to Amendment No. 3 to Registration Statement (Form S-11/A)
GROCERY (OK) QRS 15-5, Inc., as mortgagor, No. 333-100525 dated January 15, 2003
and Morgan Stanley Dean Witter Mortgage
Capital, Inc., as mortgagee, dated as of June
28, 2002, with respect to the property leased
to Fleming Companies, Inc. in Tulsa, Oklahoma

10.18 Mortgage and Security Agreement between Exhibit 10.18 to Amendment No. 3 to Registration Statement (Form S-11/A)
GOLDFISH (DE) LP, as mortgagor and Morgan No. 333-100525 dated January 15, 2003
Stanley Bank, as mortgagee, dated as of
November 28, 2002, with respect to the
property leased to PETsMART, Inc. in Fridley,
Minnesota

10.19 Deed of Trust and Security Agreement among Exhibit 10.19 to Amendment No. 3 to Registration Statement (Form S-11/A)
LABRADOR (AZ) LP, as grantor, the trustee of No. 333-100525 dated January 15, 2003
such trust, and Morgan Stanley Bank, as
beneficiary, dated as of November 28, 2002,
with respect to the property leased to
PETsMART, Inc. in Phoenix, Arizona

10.20 Mortgage between GOLDFISH (DE) LP, as Exhibit 10.20 to Amendment No. 3 to Registration Statement (Form S-11/A)
mortgagor and Morgan Stanley Bank, as No. 333-100525 dated January 15, 2003
mortgagee, dated as of November 28, 2002,
with respect to the property leased to
PETsMART, Inc. in Flint, Michigan

52

Exhibit
No. Description Method of Filing
--- ----------- ----------------

10.21 Mortgage and Security Agreement between Exhibit 10.21 to Amendment No. 3 to Registration Statement (Form S-11/A)
GOLDFISH (DE) LP, as mortgagor and Morgan No. 333-100525 dated January 15, 2003
Stanley Bank, as mortgagee, dated as of
November 28, 2002, with respect to the
property leased to PETsMART, Inc. in
Tallahassee, Florida

10.22 Mortgage and Security Agreement between Exhibit 10.22 to Amendment No. 3 to Registration Statement (Form S-11/A)
GOLDFISH (DE) LP, as mortgagor and Morgan No. 333-100525 dated January 15, 2003
Stanley Bank, as mortgagee, dated as of
November 28, 2002, with respect to the
property leased to PETsMART, Inc. in
Sawgrass, Florida

10.23 Mortgage and Security Agreement between Exhibit 10.23 to Amendment No. 3 to Registration Statement (Form S-11/A)
GOLDFISH (DE) LP, as mortgagor and Morgan No. 333-100525 dated January 15, 2003
Stanley Bank, as mortgagee, dated as of
November 28, 2002, with respect to the
property leased to PETsMART, Inc. in Lake
Mary, Florida

10.24 Mortgage and Security Agreement between Exhibit 10.24 to Amendment No. 3 to Registration Statement (Form S-11/A)
GOLDFISH (DE) LP, as mortgagor and Morgan No. 333-100525 dated January 15, 2003
Stanley Bank, as mortgagee, dated as of
November 28, 2002, with respect to the
property leased to PETsMART, Inc. in Boca
Raton, Florida

10.25 Mortgage and Security Agreement between Exhibit 10.25 to Amendment No. 3 to Registration Statement (Form S-11/A)
GOLDFISH (DE) LP, as mortgagor and Morgan No. 333-100525 dated January 15, 2003
Stanley Bank, as mortgagee, dated as of
November 28, 2002, with respect to the
property leased to PETsMART, Inc. in
Evanston, Illinois

10.26 Mortgage and Security Agreement between Exhibit 10.26 to Amendment No. 3 to Registration Statement (Form S-11/A)
GOLDFISH (DE) LP, as mortgagor and Morgan No. 333-100525 dated January 15, 2003
Stanley Bank, as mortgagee, dated as of
November 28, 2002, with respect to the
property leased to PETsMART, Inc. in
Braintree, Massachusetts

10.27 Deed of Trust and Security Agreement among Exhibit 10.27 to Amendment No. 3 to Registration Statement (Form S-11/A)
GOLDFISH (DE) LP, as grantor, the trustee of No. 333-100525 dated January 15, 2003
such trust, and Morgan Stanley Bank, as
beneficiary, dated as of November 28, 2002,
with respect to the property leased to
PETsMART, Inc. in Oxon Hill, Maryland

10.28 Deed of Trust and Security Agreement among Exhibit 10.28 to Amendment No. 3 to Registration Statement (Form S-11/A)
GOLDFISH (DE) LP, as grantor, the trustee of No. 333-100525 dated January 15, 2003
such trust, and Morgan Stanley Bank, as
beneficiary, dated as of November 28, 2002,
with respect to the property leased to
PETsMART, Inc. in Dallas, Texas

10.29 Deed of Trust and Security Agreement among Exhibit 10.29 to Amendment No. 3 to Registration Statement (Form S-11/A)
GOLDFISH (DE) LP, as grantor, the trustee of No. 333-100525 dated January 15, 2003
such trust, and Morgan Stanley Bank, as
beneficiary, dated as of November 28, 2002,
with respect to the property leased to
PETsMART, Inc. in Southlake, Texas

53

Exhibit
No. Description Method of Filing
--- ----------- ----------------

10.30 Deed of Trust, Assignment of Leases and Exhibit 10.30 to Amendment No. 3 to Registration Statement (Form S-11/A)
Rents, Security Agreement and Fixture Filing No. 333-100525 dated January 15, 2003
among GOLDFISH (DE) LP, as trustor, the
trustee of such trust, and Morgan Stanley
Bank, as beneficiary, dated as of November
28, 2002, with respect to the property leased
to PETsMART, Inc. in Westlake Village,
California

10.31 Lease between BOLT (DE) LIMITED PARTNERSHIP Exhibit 10.31 to Amendment No. 3 to Registration Statement (Form S-11/A)
and TruServ Corporation dated December 26, No. 333-100525 dated January 15, 2003
2002

10.32 Lease between HAMMER (DE) LIMITED PARTNERSHIP Exhibit 10.32 to Amendment No. 3 to Registration Statement (Form S-11/A)
and TruServ Corporation dated December 26, No. 333-100525 dated January 15, 2003
2002

10.33 Lease between WRENCH (DE) LIMITED PARTNERSHIP Exhibit 10.33 to Amendment No. 3 to Registration Statement (Form S-11/A)
and TruServ Corporation dated December 26, No. 333-100525 dated January 15, 2003
2002

10.34 Summary of Lease Agreement dated December 27, Exhibit 10.34 to Amendment No. 3 to Registration Statement (Form S-11/A)
2002 between Societe Logidis and Societe SCI No. 333-100525 dated January 15, 2003
Carlog. (Original document is in French only)

10.35 Summary of Lease Agreement dated December 27, Exhibit 10.35 to Amendment No. 3 to Registration Statement (Form S-11/A)
2002 between Societe Logidis and Societe SCI No. 333-100525 dated January 15, 2003
Carlog. (Original document is in French only)

10.36 Summary of Lease Agreement dated December 27, Exhibit 10.36 to Amendment No. 3 to Registration Statement (Form S-11/A)
2002 between Societe Logidis and Societe SCI No. 333-100525 dated January 15, 2003
Carlog. (Original document is in French only)

10.37 Summary of Lease Agreement dated December 27, Exhibit 10.37 to Amendment No. 3 to Registration Statement (Form S-11/A)
2002 between Societe Logidis and Societe SCI No. 333-100525 dated January 15, 2003
Carlog. (Original document is in French only)

10.38 Summary of Lease Agreement dated December 27, Exhibit 10.38 to Amendment No. 3 to Registration Statement (Form S-11/A)
2002 between Societe Logidis and Societe SCI No. 333-100525 dated January 15, 2003
Carlog. (Original document is in French only)

10.39 Summary of Lease Agreement dated December 27, Exhibit 10.39 to Amendment No. 3 to Registration Statement (Form S-11/A)
2002 between Societe Logidis and Societe SCI No. 333-100525 dated January 15, 2003
Carlog. (Original document is in French only)

10.40 Summary of Lease Agreement dated December 27, Exhibit 10.40 to Amendment No. 3 to Registration Statement (Form S-11/A)
2002 between CV logistique and Societe SCI No. 333-100525 dated January 15, 2003
Carlog. (Original document is in French only)

10.41 Summary of Mortgage terms with respect to the Exhibit 10.41 to Amendment No. 3 to Registration Statement (Form S-11/A)
financing of properties leased to Carrefour No. 333-100525 dated January 15, 2003
France SAS. (Original documents are in French
only)

21.1 Subsidiaries of Registrant as of March 11, Filed herewith
2004

31.1 Certification of Co-Chief Executive Officers Filed herewith

31.2 Certification of Chief Financial Officer Filed herewith

54

Exhibit
No. Description Method of Filing
--- ----------- ----------------

32.1 Section 906 Certification of Co-Chief Filed herewith
Executive Officers

32.2 Section 906 Certification of Chief Financial Filed herewith
Officer

99.1 Table VI: Acquisition of Properties by Prior Exhibit 99.1 to Registration Statement (Form S-11) No. 333-58854
Programs

99.1(1) Table VI: Acquisition of Properties by Prior Exhibit 99.1 to Amendment No. 1 to Registration Statement (Form S-11/A)
Programs No. 333-58854 dated November 1, 2001

99.1(2) Table VI: Acquisition of Properties by Prior Exhibit 99.1 to Post-Effective Amendment No. 2 to Registration Statement
Programs (Form S-11/A) No. 333-58854 dated April 30, 2002

(b) Reports on Form 8-K

During the quarter ended December 31, 2003 the Registrant was not
required to file any reports on Form 8-K.

(c) Pursuant to Rule 701 of Regulation S-K, the use of proceeds from the
Company's offering of common stock which commenced March 19, 2003 (File
#333-100525) is as follows as of December 31, 2003:

Shares registered: 69,000,000

Aggregate price of offering amount registered: $690,000,000

Shares sold: 64,687,294

Aggregated offering price of amount sold: $646,872,940

Direct or indirect payments to directors,
officers, general partners of the issuer or their associates, to persons owning
ten percent or more of any class of equity securities of the issuer and to
affiliates of the issuer: $ 13,473,245

Direct or indirect payments to others: $ 55,217,406

Net offering proceeds to the issuer after deducting expenses: $578,182,289

Purchases of real estate and equity investments: $212,608,219

Temporary investments in cash and cash equivalents: $365,574,070

55

CORPORATE PROPERTY ASSOCIATES 15 INCORPORATED

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.

CORPORATE PROPERTY ASSOCIATES 15 INCORPORATED
a Maryland corporation

3/12/04 BY: /s/ John J. Park
- ----------- -----------------------------
Date John J. Park
Managing Director and Chief Financial Officer
(Principal Financial 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.

CORPORATE PROPERTY ASSOCIATES 15 INCORPORATED

3/12/04 BY: /s/ William Polk Carey
- ----------- ------------------------------------
Date William Polk Carey
Chairman of the Board, Co-Chief
Executive Officer and Director
(Principal Executive Officer)

3/12/04 BY: /s/ Gordon F. DuGan
- ----------- ------------------------------------
Date Gordon F. DuGan
Vice Chairman of the Board, Co-Chief
Executive Officer,
Senior Managing Director and Chief
Acquisitions Officer
(Principal Executive Officer)

3/12/04 BY: /s/ Anne R. Coolidge
- ----------- ------------------------------------
Date Anne R. Coolidge
President

3/12/04 BY: /s/ Francis X. Diebold
- ----------- ------------------------------------
Date Francis X. Diebold
Director

3/12/04 BY: /s/ Elizabeth P. Munson
- ----------- ------------------------------------
Date Elizabeth P. Munson
Director

3/12/04 BY: /s/ Charles E. Parente
- ----------- ------------------------------------
Date Charles E. Parente
Director

3/12/04 BY: /s/ George E. Stoddard
- ----------- ------------------------------------
Date George E. Stoddard
Director

3/12/04 BY: /s/ John J. Park
- ----------- ------------------------------------
Date John J. Park
Managing Director and Chief Financial
Officer (Principal Financial Officer)

3/12/04 BY: /s/ Claude Fernandez
- ----------- ------------------------------------
Date Claude Fernandez
Managing Director and Chief Accounting
Officer (Principal Accounting Officer)

56

SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO SECTION
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (THE "ACT") BY REGISTRANTS WHICH
HAVE NOT REGISTERED SECURITIES PURSUANT TO SECTION 12 OF THE ACT

THE REGISTRANT'S PROXY STATEMENT HAS NOT BEEN SENT TO SECURITY HOLDERS, AND IS
TO BE FURNISHED TO SECURITY HOLDERS SUBSEQUENT TO THE FILING OF THE ANNUAL
REPORT ON THIS FORM.

57

REPORT of INDEPENDENT AUDITORS
ON FINANCIAL STATEMENT SCHEDULE

To the Board of Directors and Shareholders of
Corporate Property Associates 15 Incorporated:

Our audits of the consolidated financial statements referred to in our report
dated March 12, 2004 appearing in the 2003 Annual Report to Shareholders of
Corporate Property Associates 15 Incorporated (which report and consolidated
financial statements are incorporated by reference in this Annual Report on Form
10-K) also included an audit of the financial statement schedule listed in Item
15(a)(3) of this Form 10-K. In our opinion, this financial statement schedule
presents fairly, in all material respects, the information set forth therein
when read in conjunction with the related consolidated financial statements.

/s/ PricewaterhouseCoopers LLP

New York, New York
March 12, 2004

58

CORPORATE PROPERTY ASSOCIATES 15 INCORPORATED

SCHEDULE III - REAL ESTATE and ACCUMULATED DEPRECIATION

as of December 31, 2003

Initial Cost to Company
-----------------------
Description Encumbrances Land Buildings
----------- ------------ ---- ---------

Operating Method:
Industrial facilities leased to Tower Automotive, Inc. $ 11,884,873 $ 1,180,000 $ 19,815,621
Office facility leased to Racal Instruments, Inc. 3,323,788 4,930,000
Office facility leased to Advantis Technologies, Inc. 8,393,401 1,750,000 11,339,005
Vacant distribution and warehouse facility leased in Tulsa, Oklahoma 29,598,797 1,000,000 52,870,063
Distribution and warehouse facility leased to Trends Clothing Corp. 8,333,919 3,800,000 11,069,110
Leasehold interest in office facility leased to Foster Wheeler, Ltd. 28,820,276 - 47,015,707
Industrial facility leased to BE Aerospace, Inc. 10,371,886 6,600,000 8,870,072
Office facilities leased to Danka Office Imaging Company 20,468,187 1,750,000 7,408,115
Office, light engineering and warehouse facilities leased to Overland
Strorage, Inc. 19,759,580 8,050,000 22,046,836
Warehouse, distribution and office facilities leased to SSG Precision
Optronics, Inc. - 870,000 4,097,653
Assisted-living facilities leased to Medica-France, SA 42,053,394 5,329,401 35,001,068
Office facilities leased to Clear Channel Communications, Inc. 84,034,203 48,000,000 104,041,885
Warehouse and distribution facilities leased to Carrefour France, SA and
Carrefour Hypermarches France, SA 121,422,041 11,249,761 95,122,572
Warehouse, distribution and office facilities leased to Meadowbrook Meat
Company, Inc. 17,813,193 3,440,000 26,975,009
Movie Theatre leased to Rave Motion Pictures Baton Rouge LLC - 4,767,250 6,912,077
Industrial facility leased to Polar Plastics Inc. 9,326,537 600,000 13,836,806
Industrial facilities leased to Qualserv Corporation - 980,000 7,261,961

Costs
Capitalized Increases
Subsequent to (Decreases) in
Description Acquisition (a) Investment (b) Land Buildings
----------- --------------- -------------- ---- ---------

Operating Method:
Industrial facilities leased to Tower Automotive, Inc. $ 16,543 $ 1,180,000 $ 19,832,164
Office facility leased to Racal Instruments, Inc. 4,930,000
Office facility leased to Advantis Technologies, Inc. 1,750,000 11,339,005
Vacant distribution and warehouse facility leased in Tulsa, Oklahoma 2,016,978 (24,000,000) 1,000,000 30,887,041
Distribution and warehouse facility leased to Trends Clothing Corp. 33,983 3,800,000 11,103,093
Leasehold interest in office facility leased to Foster Wheeler, Ltd. 3,164 47,018,871
Industrial facility leased to BE Aerospace, Inc. 40,192 6,600,000 8,910,264
Office facilities leased to Danka Office Imaging Company 22,485,011 3,200,000 28,443,126
Office, light engineering and warehouse facilities leased to Overland
Strorage, Inc. 24,257 8,050,000 22,071,093
Warehouse, distribution and office facilities leased to SSG Precision
Optronics, Inc. 870,000 4,097,653
Assisted-living facilities leased to Medica-France, SA 11,290,457 2,071,238 6,689,419 47,002,745
Office facilities leased to Clear Channel Communications, Inc. 2,668,236 (2,800) 48,000,000 106,707,321
Warehouse and distribution facilities leased to Carrefour France, SA and
Carrefour Hypermarches France, SA 49,860,083 2,546,807 15,477,302 143,301,921
Warehouse, distribution and office facilities leased to Meadowbrook Meat
Company, Inc. 3,440,000 26,975,009
Movie Theatre leased to Rave Motion Pictures Baton Rouge LLC 4,767,250 6,912,077
Industrial facility leased to Polar Plastics Inc. 600,000 13,836,806
Industrial facilities leased to Qualserv Corporation 980,000 7,261,961

Gross Amount at which Carried Life on which
at Close of Period (d) Depreciation in
---------------------- Latest Statement
Accumulated of Income is
Description Total Depreciation (d) Date Acquired Computed
----------- ----- ---------------- ------------- --------

Operating Method:
Industrial facilities leased to Tower Automotive, Inc. $ 21,012,164 $ 896,868 April 10, 2002 40 years
Office facility leased to Racal Instruments, Inc. 4,930,000 May 21, 2002
Office facility leased to Advantis Technologies, Inc. 13,089,005 476,836 June 25, 2002 40 years
Vacant distribution and warehouse facility leased in Tulsa,
Oklahoma 31,887,041 1,902,740 June 28, 2002 40 years
Distribution and warehouse facility leased to Trends Clothing
Corp. 14,903,093 455,534 July 22, 2002 40 years
Leasehold interest in office facility leased to Foster Wheeler,
Ltd. 47,018,871 1,698,525 August 16, 2002 40 years
Industrial facility leased to BE Aerospace, Inc. 15,510,264 334,782 September 12, 2002 40 years
Office facilities leased to Danka Office Imaging Company 31,643,126 610,520 September 27, 2002 40 years
Office, light engineering and warehouse facilities leased to
Overland Strorage, Inc. 30,121,093 818,114 October 15, 2002 40 years
Warehouse, distribution and office facilities leased to SSG
Precision Optronics, Inc. 4,967,653 124,749 November 20, 2002 40 years
Assisted-living facilities leased to Medica-France, SA 53,692,164 1,553,933 December 4, 2002 40 years
Office facilities leased to Clear Channel Communications, Inc. 154,707,321 2,938,498 December 12, 2002 40 years
Warehouse and distribution facilities leased to Carrefour France,
SA and Carrefour Hypermarches France, SA 158,779,223 3,950,013 December 27, 2002 40 years
Warehouse, distribution and office facilities leased to
Meadowbrook Meat Company, Inc. 30,415,009 793,960 December 31, 2002 40 years
Movie Theatre leased to Rave Motion Pictures Baton Rouge LLC 11,679,327 72,384 October 9, 2002 40 years
Industrial facility leased to Polar Plastics Inc. 14,436,806 302,680 February 25, 2003 40 years
Industrial facilities leased to Qualserv Corporation 8,241,961 83,210 July 31, 2003 40 years

59

CORPORATE PROPERTY ASSOCIATES 15 INCORPORATED

SCHEDULE III - REAL ESTATE and ACCUMULATED DEPRECIATION

as of December 31, 2003

Initial Cost to Company
-----------------------
Description Encumbrances Land Buildings
----------- ------------ ---- ---------

Warehouse and distribution facility leased to Lillian Vernon Corporation 23,852,495 3,000,000 32,240,854
Health clubs leased to Life Time Fitness, Inc. 27,000,000 9,791,000 32,779,723
Health clubs leased to Starmark Camhood II LLC 15,500,000 5,262,000 20,113,107
Health club leased to 24-Hour Fitness United States, Inc. - 1,839,000 6,883,154
Industrial facilities leased to Waddington North America Business Trust - 540,000 5,880,961
Office facility lease to MediMedia USA, Inc. 13,842,319 900,000 20,120,153
Industrial facilities leased to Kerr Group 8,440,412 680,000 11,723,270
Warehouse, distribution and industrial facilities leased to American Pad
and Paper LLC 9,376,658 1,230,000 15,707,324
Industrial facilities leased to Precise Technology, Inc. 17,200,000 4,980,000 21,905,469
Industrial facilities leased to Berry Plastics Corporation - 4,210,000 23,910,675
Retail stores leased to Galyan's Trading Company 8,153,803 10,948,016
Land leased to Qualceram Shires plc. - 1,782,741
------------ ------------ ------------
$538,969,762 $138,511,153 $675,896,266
============ ============ ============

Costs
Capitalized Increases
Subsequent to (Decreases) in
Description Acquisition (a) Investment (b) Land Buildings
----------- -------------- -------------- ---- ---------

Warehouse and distribution facility leased to Lillian Vernon Corporation 3,000,000 32,240,854
Health clubs leased to Life Time Fitness, Inc. 9,791,000 32,779,723
Health clubs leased to Starmark Camhood II LLC 5,262,000 20,113,107
Health club leased to 24-Hour Fitness United States, Inc. 1,839,000 6,883,154
Industrial facilities leased to Waddington North America Business Trust 540,000 5,880,961
Office facility lease to MediMedia USA, Inc. 900,000 20,120,153
Industrial facilities leased to Kerr Group 680,000 11,723,270
Warehouse, distribution and industrial facilities leased to American Pad
and Paper LLC 1,230,000 15,707,324
Industrial facilities leased to Precise Technology, Inc. 4,980,000 21,905,469
Industrial facilities leased to Berry Plastics Corporation 4,210,000 23,910,675
Retail stores leased to Galyan's Trading Company 10,948,016
Land leased to Qualceram Shires plc. 1,782,741
----------- ------------ ------------ ------------
$88,438,904 $(19,384,755) $145,548,712 $737,912,856
=========== ============ ============ ============

Gross Amount at which Carried
at Close of Period (d) Life on which
---------------------- Depreciation in Latest
Accumulated Statement of Income
Description Total Depreciation (d) Date Acquired is Computed
----------- ----- ---------------- ------------- -----------

Warehouse and distribution facility leased to Lillian
Vernon Corporation 35,240,854 369,426 July 2, 2003 40 years
Health clubs leased to Life Time Fitness, Inc. 42,570,723 239,019 September 30, 2003 40 years
Health clubs leased to Starmark Camhood II LLC 25,375,107 62,853 November 7, 2003 40 years
Health club leased to 24-Hour Fitness United States, Inc. 8,722,154 7,170 December 22, 2003 40 years
Industrial facilities leased to Waddington North America
Business Trust 6,420,961 128,646 February 12, 2003 40 years
Office facility lease to MediMedia USA, Inc. 21,020,153 356,294 April 1, 2003 40 years
Industrial facilities leased to Kerr Group 12,403,270 109,906 August 13, 2003 40 years
Warehouse, distribution and industrial facilities leased
to American Pad and Paper LLC 16,937,324 147,256 August 19, 2003 40 years
Industrial facilities leased to Precise Technology, Inc. 26,885,469 124,279 October 29, 2003 40 years
Industrial facilities leased to Berry Plastics Corporation 28,120,675 64,400 November 20, 2003 40 years
Retail stores leased to Galyan's Trading Company 10,948,016 102,638 August 7, 2003 40 years
Land leased to Qualceram Shires plc. 1,782,741 April 29, 2003
------------ -----------
$883,461,568 $18,725,233
============ ===========

60

CORPORATE PROPERTY ASSOCIATES 15 INCORPORATED

SCHEDULE III - REAL ESTATE and ACCUMULATED DEPRECIATION

as of December 31, 2003

Gross Amount at which Carried
Initial Cost to Company at Close of Period (d)
----------------------- ----------------------
Costs
Capitalized Increases
Subsequent to Decreases) in Net
Description Encumbrances Land Buildings Acquisition (a) Investment (b) Total Date Acquired
----------- ------------ ---- --------- --------------- -------------- ----- -------------

Direct Financing Method:
Office facility leased to
Racal Instruments, Inc. $ 6,057,228 $ 8,525,497 $69,300 $ 389,569 $ 8,984,366 May 21, 2002
Distribution and warehouse
facility leased to
IntegraColor Ltd. 6,992,386 $ 1,513,400 10,842,621 12,356,021 June 14, 2002
Warehouse and distribution
facility leased to
Insulated Structures, Ltd. 16,540,050 4,108,250 17,234,383 1,650,166 22,992,799 January 28, 2003
Industrial facility lease
to Pemstar, Inc. 7,378,617 2,250,000 10,327,518 130,195 12,707,713 March 28, 2003
Industrial facilities
leased to Sports Rack LLC. - 1,330,000 10,301,807 (250,117) 11,381,690 November 24, 2003
Warehouse and distribution
facility leased to
Roundoak Rail Ltd. 7,558,625 2,206,360 8,691,488 498,223 11,396,071 November 3, 2003
Office facilities leased to
Grande Communications
Network, Inc. 7,506,183 1,800,000 12,021,990 (36,410) 13,785,580 August 7, 2003
Industrial facility leased
to Actuant Corporation
and GB Tools and
Supplies, Inc. 6,902,943 9,924,313 378,880 17,206,136 December 11, 2003
Industrial facilities
leased to Qualceram
Shires plc. 5,113,187 32,122,912 278,128 37,514,227 April 29, 2003
----------- ----------- ------------ ------- ---------- ------------
$52,033,089 $25,224,140 $119,992,529 $69,300 $3,038,634 $148,324,603
=========== =========== ============ ======= ========== ============

61

CORPORATE PROPERTY ASSOCIATES 15 INCORPORATED

NOTES to SCHEDULE III - REAL ESTATE
and ACCUMULATED DEPRECIATION

(a) Consists of the costs of improvements subsequent to purchase and
acquisition costs including construction costs on build-to-suit
transactions legal fees, appraisal fees, title costs and other related
professional fees.

(b) The (decrease) increase in net investment is due to the amortization of
unearned income producing a constant periodic rate of return on the net
investment which is more (less) than lease payments received, impairment
charges and foreign currency translation adjustments.

(c) At December 31, 2003, the aggregate cost of real estate owned by CPA(R):15
and its subsidiaries for Federal income tax purposes is $775,014,153.

(d)

Reconciliation of Real Estate Accounted for
Under the Operating Method
December 31,
------------
2003 2002
---- ----

Balance at beginning of year $559,521,150 -
Additions 285,402,611 $588,387,050
Impairment charge (24,000,000)
Dispositions - (11,614,766)
Reclassification to equity investment - (21,869,179)
Foreign currency translation adjustment 31,355,297 4,618,045
Reclassification of real estate under construction 31,182,510 -
------------ ------------
Balance at close of year $883,461,568 $559,521,150
============ ============

Reconciliation of Accumulated Depreciation
December 31,
------------
2003 2002
---- ----

Balance at beginning of year $ 2,323,336 -
Depreciation expense 15,973,840 $ 2,569,741
Dispositions - -
Reclassification to equity investment - (247,910)
Foreign currency translation adjustment 428,057 1,505
------------ ------------
Balance at close of year $ 18,725,233 $ 2,323,336
============ ============

62

APPENDIX A TO FORM 10-K

CORPORATE PROPERTY ASSOCIATES 15 INCORPORATED

2003 ANNUAL REPORT

SELECTED FINANCIAL DATA

(In thousands except per share and share amounts)

2003 2002 2001 (1)
---- ---- --------

OPERATING DATA:

Revenues $ 78,586 $ 14,394 $ 2

Net income (loss) 4,647 5,767 (69)

Basic earnings (loss) per share .06 .29 (3.42)

Dividends paid (2) 40,498 6,179 -

Dividends paid per share .62 .45 -

Weighted average shares outstanding - basic 78,939,049 19,720,070 20,000

Payment of mortgage principal (3) 7,864 385 -

BALANCE SHEET DATA:

Total consolidated assets 1,639,152 806,298 2,206

Long-term obligations(4) 607,739 382,918 -

(1) For the period from inception (February 26, 2001) through December 31,
2001.

(2) The Company paid its first dividend in April 2002.

(3) Represents scheduled mortgage principal amortization paid.

(4) Represents mortgage notes payable and deferred acquisition fee installments
that are due after more than one year.

-1-

MANAGEMENT'S DISCUSSION AND ANALYSIS

Overview

The following discussion and analysis of financial condition and results of
operations of Corporate Property Associates 15 Incorporated ("CPA(R):15") should
be read in conjunction with the consolidated financial statements and notes
thereto for the year ended December 31, 2003. The following discussion includes
forward looking statements. Forward looking statements, which are based on
certain assumptions, describe future plans, strategies and expectations of
CPA(R):15. Forward-looking statements discuss matters that are not historical
facts. Because they discuss future events or conditions, forward-looking
statements may include words such as "anticipate", "believe", "estimate",
"intend", "could", "should", "would", "may", or similar expressions. Do not
unduly rely on forward looking statements. They give our expectations about the
future and are not guarantees, and speak only as of the date they are made. Such
statements involve known and unknown risks, uncertainties and other factors that
may cause the actual results, performance or achievement of CPA(R):15 to be
materially different from the results of operations or plan expressed or implied
by such forward looking statements. The risk factors are fully described in Item
1 of this Annual Report on Form 10-K. Accordingly, such information should not
be regarded as representations by CPA(R):15 that the results or conditions
described in such statements or objectives and plans of CPA(R):15 will be
achieved.

CPA(R):15 was formed in 2001 and raised $1,046,176 from its public offerings,
which it is using along with limited recourse mortgage financing to purchase
properties and enter into long-term net leases with corporate lessees. CPA(R):15
structures the net leases to place certain economic burdens of ownership on
these corporate lessees by requiring them to pay the costs of maintenance and
repair, insurance and real estate taxes. The lease obligations are
unconditional. When possible, CPA(R):15 also negotiates guarantees of the lease
obligations from parent companies. CPA(R):15 negotiates leases that may provide
for periodic rent increases that are stated or based on increases in the
Consumer Price Index ("CPI") or, for retail properties, may provide for
additional rents based on sales in excess of a specified base amount. CPA(R):15
may also acquire interests in real estate through joint ventures with affiliates
who have similar investment objectives as CPA(R):15. These joint ventures, which
may be in the form of general partnerships, limited partnerships, limited
liability companies or tenancies-in-common, also enter into net leases on a
single-tenant basis. As of December 31, 2003, CPA(R):15 holds interests in seven
limited partnerships and one jointly controlled tenancy-in-common with three
affiliates, Corporate Property Associates 12 Incorporated ("CPA(R):12"),
Corporate Property Associates 14 Incorporated ("CPA(R):14") and W. P. Carey &
Co. LLC ("WPC").

As a real estate investment trust ("REIT"), CPA(R):15 is not subject to federal
income taxes on amounts distributed to shareholders provided it meets certain
conditions including distributing at least 90% of its REIT taxable income to
stockholders. CPA(R):15's objectives are to pay quarterly dividends at an
increasing rate, provide inflation-protected income through CPI-based rent
increases, own a diversified portfolio of net leased properties and increase the
equity in CPA(R):15's real estate portfolio by obtaining mortgage debt that
provides for scheduled principal payment installments.

CPA(R):15 is advised by WPC pursuant to an Advisory Agreement. CPA(R):15's
contract with WPC is renewable annually by Independent Directors who are elected
by CPA(R):15's shareholders. In connection with each renewal, WPC is required to
provide the Independent Directors with a comparison of the fee structure with
several similar companies. The Advisory Agreement also provides that an
independent portfolio valuation be performed after a stated period and annually
thereafter. The portfolio valuation is used to determine the asset base for
calculating asset management and performance fees. Until the initial valuation
is performed, the fees are based on the cost of the properties.

Operating segments are components of an enterprise about which financial
information is available that is evaluated regularly by the chief operating
decision maker in deciding how to allocate resources and in assessing
performance. Management evaluates the performance of its portfolio of properties
as a whole, rather than by identifying discrete operating segments. This
evaluation includes assessing CPA(R):15's ability to meet distribution
objectives, increase the dividend and increase value by evaluating potential
investments in single tenant net lease real estate and by seeking opportunities
such as refinancing mortgage debt at lower rates of interest, restructuring
leases or paying off lenders at a discount to the face value of the outstanding
mortgage balance.

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MANAGEMENT'S DISCUSSION AND ANALYSIS, CONTINUED

Management's primary focus is providing CPA(R):15 with suitable investments and
reducing cash balances. As CPA(R):15 becomes fully invested, it intends to
maintain cash balances that are necessary to support its operations. Such
balances are currently in excess of what will be needed. CPA(R):15 is actively
engaged in acquiring properties and has used approximately $40,000 since
December 31, 2003 to acquire properties. As CPA(R):15 becomes fully invested,
Management will evaluate the results of CPA(R):15 with a primary focus on the
ability to generate cash flow necessary to meet its investment objectives of
overall property appreciation and increasing its distribution rate to its
shareholders. As a result, Management's assessment of operating results gives
less emphasis to the effect of unrealized gains and losses which may cause
fluctuations in net income for comparable periods but has no impact on cash flow
and to other noncash charges such as depreciation and impairment charges.
Impairment charges are intended to reflect an actual or potential decrease in
the value of an asset, and the effect of an impairment is likely to be reflected
in future cash flow. In evaluating cash flow from operations, Management
includes equity distributions that are included in investing activities to the
extent that the source of distributions in excess of equity income are the
result of noncash charges such as depreciation and amortization. For the year
ended December 31, 2003, cash flow generated from operations and equity
investments was greater than dividends paid, distributions to minority partners,
that is, to affiliates who have interests in investments that are included in
the Company's consolidated financial statements, and scheduled mortgage
principal payments. Cash flows from operating and equity investments were
$55,863 and its uses were $52,099. CPA(R):15 currently has cash balances which
are in excess of what is necessary to sustain operations. In determining the
distribution rate to shareholders, Management considers its projections of
future operations as well as its historical results. Management believes that
CPA(R):15 will meet its objectives but workout situations are more likely than
not to occur. Management believes that CPA(R):15 is building a strong portfolio
and will benefit from a strategy of diversification.

Results of Operations

Year Ended December 31, 2003 compared to Year Ended December 31, 2002

During the year ended December 31, 2003, CPA(R):15 invested approximately
$536,361 in real estate. CPA(R):15's asset base has increased from approximately
$806,298 at December 31, 2002 to $1,639,152 at December 31, 2003. As a result of
on-going acquisition activity, the results of operations for the year ended
December 31, 2003 are not directly comparable to the results for the year ended
December 31, 2002 and are not expected to be indicative of future operating
results.

CPA(R):15's net income for the year ended December 31, 2003 was $4,647. The
results for 2003 include a noncash impairment charge of $24,000 as the result of
the termination of a lease with Fleming Companies, Inc. for a property in Tulsa,
Oklahoma in connection with Fleming's bankruptcy liquidation. Additionally,
CPA(R):15 recognized gains in connection with sale of interests in properties
leased to Carrefour, S.A. and realized and unrealized gains on foreign currency
transactions. CPA(R):15 incurred a loss before gains of $1,283 for the year
ended December 31, 2003. Net income for the year ended December 31, 2002 was
$5,767. During the year ended December 31, 2003, CPA(R):15 and its equity
investees entered into net lease transactions with 25 tenants, including seven
build-to-suit transactions. CPA(R):15's portfolio as of December 31, 2003
(including the pro rata share of equity investments) is expected to generate,
after completion of build-to-suit construction projects, annual cash flow
(contractual rent less property-level mortgage debt service) of approximately
$56,928, as follows:

(In thousands) Annual Annual Estimated
Lease Obligor Contractual Rent Debt Service Cash Flow
------------- ---------------- ------------ ---------

Acquisitions completed in 2003
Starmark Camhood L.L.C. (1) $ 8,040 $ 4,441 $ 3,599
Berry Plastics Corporation 3,326 - 3,326
Universal Technical Institute of Arizona, Inc. (under
construction) 3,107 - 3,107
Universal Technical Institute of Pennsylvania, Inc.
(under construction) 2,262 2,262
Life Time Fitness, Inc. 4,247 2,174 2,073
Lillian Vernon Corporation 3,848 2,108 1,740
Actuant Corporation (2) 1,640 - 1,640
Oxford Automotive, Inc. (construction completed
subsequent to December 31, 2003) 1,575 - 1,575

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MANAGEMENT'S DISCUSSION AND ANALYSIS, CONTINUED

(In thousands) Annual Annual Estimated
Lease Obligor Contractual Rent Debt Service Cash Flow
------------- ---------------- ------------ ---------

Galyan's Trading Company (three properties including one property
under construction) 2,257 760 1,497
Starmark Camhood LLC II 2,633 1,226 1,407
Qualceram Shires plc (3) 3,281 1,892 1,389
Precise Technology, Inc. 2,640 1,524 1,116
Sportrack LLC 1,045 - 1,045
MediMedia USA, Inc. 2,111 1,072 1,039
Insulated Structures, Ltd. (3) 1,837 831 1,006
American Pad & Paper LLC 1,579 764 815
Grande Communications Networks, Inc. 1,379 687 692
Qualserv Corporation 667 - 667
WNA American Plastics Industries, Inc. 637 - 637
Polar Plastics, Inc. 1,460 838 622
Pemstar, Inc. 1,278 664 614
Kerr Group, Inc. 1,331 739 592
Roundoak Rail Limited (3) 866 452 414
24 Hour Fitness, Inc. 914 584 330
Dick's Sporting Goods, Inc. (under construction) 783 482 301
-------- ------- -------
54,743 21,238 33,505
-------- ------- -------

Acquisitions completed in 2002
Carrefour France, SA (2,4,5) 7,464 4,080 3,384
TruServ Corporation (1) 6,004 2,707 3,297
Clear Channel Communications, Inc. (4) 6,549 3,467 3,082
Foster Wheeler, Inc. 5,231 2,253 2,978
Meadowbrook Meat Company 2,660 1,306 1,354
Tower Automotive, Inc. 2,356 1,057 1,299
Rave Reviews Cinemas, L.L.C. 1,286 - 1,286
Overland Storage, Inc. 2,621 1,467 1,154
Petsmart, Inc. (1) 2,179 1,107 1,072
Medica - France, SA (2,4) 3,148 2,089 1,059
Danka Office Imaging Company 1,966 984 982
Hologic, Inc. (1) 2,020 1,051 969
BE Aerospace, Inc. 1,468 764 704
IntegraColor, Ltd. 1,257 564 693
Advantis Technologies, Inc. 1,275 610 665
Racal Instruments, Inc. 1,323 733 590
Trends Clothing Corp. 1,420 851 569
SSG Precision Optronics, Inc. 510 - 510
Builders FirstSource, Inc. (1) 554 271 283
Fleming Companies, Inc. (6) - 2,507 (2,507)
-------- ------- -------
51,291 27,868 23,423
-------- ------- -------
$106,034 $49,106 $56,928
======== ======= =======

(1) Pro rata share of equity investment

(2) Using exchange rate for the Euro as of December 31, 2003

(3) Using exchange rate for the Great Britain Pound as of December 31, 2003

(4) Net of minority interest

(5) Includes additional property purchased November 2003

(6) Lease terminated in August 2003

The leases generally have terms of 15 to 25 years with the lessees having
options for renewal terms. CPA(R):15's properties in France leased to Carrefour
France, S.A. and Medica-France have shorter terms (ranging from 7 1/2 to 9
years) with rolling three-year renewal terms which is a customary practice in
that market. CPA(R):15 has not hedged

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MANAGEMENT'S DISCUSSION AND ANALYSIS, CONTINUED

the risk of foreign currency fluctuations on the cash flow from its foreign
investments but CPA(R):15 believes it has mitigated the risk from fluctuations
by obtaining fixed rate mortgage debt on the properties in the functional
currency. As the result of capitalizing certain foreign subsidiaries with
intercompany debt that provides for scheduled settlements of principal, certain
foreign currency gains or losses are included in the determination of net income
rather than as increases or decreases to accumulated other comprehensive income
in shareholders' equity. A significant portion of income for the year ended
December 31, 2003 was due to foreign currency fluctuation as a result of
increases in the exchange rate for the British Pound and Euro. Future earnings
are likely to be affected by currency fluctuations as Management continues to
seek real estate investments outside of the United States. For the year ended
December 31, 2003, revenues from foreign properties represented 26% of total
consolidated revenues. CPA(R):15's foreign properties are generally more highly
leveraged with limited recourse mortgage debt than its domestic properties.
Additionally, affiliates own significant interests in the Carrefour and Medica
properties. Accordingly, the proportion of cash flow from foreign properties is
substantially lower than the percentage of revenues that such properties
contribute.

Since December 31, 2003, CPA(R): 15 has completed four net lease acquisitions,
including one build-to-suit transaction. Leases with Affina Corporation,
Plumbmaster, Inc. and Regie des Batiments (in Belgium) will contribute annual
lease revenues of $3,197. A build-to-suit transaction with Universal Technical
Institute of California, Inc. will generate up to $2,326 in annual lease
revenues upon completion of construction, expected in September 2004. In April
2003, the Fleming Companies, Inc. filed a voluntary petition of bankruptcy.
Fleming's lease termination was approved by the bankruptcy court and Fleming
vacated the property. Annual lease revenues from the Fleming lease were $5,508.
CPA(R):15 is aggressively seeking to re-lease the property and is negotiating a
forebearance agreement with the limited recourse mortgage lender on the Tulsa
property. In November 2003, the initial term of a lease with Transworld Center,
Inc. commenced at a property in Miami, Florida pursuant to a lease agreement and
construction agency agreement with Transworld. At that time, Transworld notified
CPA(R):15 that it would not occupy the property. CPA(R):15 is attempting to
enforce its rights under the Transworld lease and is pursuing litigation against
Transworld. CPA(R):15 is remarketing the property. The Transworld lease was
scheduled to contribute annual rent revenues and cash flows of $2,258. Annual
carrying costs on the Miami, Florida and Tulsa, Oklahoma properties are
estimated to be $1,542.

During the year ended December 31, 2003, CPA(R):15 recognized interest and other
income of $5,829, consisting of $3,410 of interest income on its uninvested cash
and $2,419 of property expense reimbursements received from lessees. The
reimbursements are used to pay property expenses that a lessee generally incurs
under a net lease, and the reimbursements, net of the expenses, have no effect
on net income. Interest income is expected to decrease as the proceeds of
CPA(R):15's offerings are invested in real estate. After CPA(R):15 is fully
invested, it will maintain cash balances which Management believes to be
sufficient for meeting working capital needs.

Property expense for the year ended December 31, 2003 includes $8,322 of asset
management and performance fees and $2,419 of expenses which have been
reimbursed by lessees. Asset management and performance fees are based on
CPA(R):15's assets invested in real estate and have increased solely as a result
of the increase in the asset base. For 2003, the Advisor received the
performance fee in shares of restricted stock of CPA(R):15. CPA(R):15's asset
base is projected to increase as it has substantial amounts of cash available
for investment and debt capacity as several of its properties are unleveraged.

In March 2003, CPA(R):15 sold a 35% interest in the limited liability company
that owns the Medica-France and Carrefour properties to CPA(R):12. The purchase
price was based on the appraised value of the properties (based on the then
current exchange rate for the Euro) adjusted for capitalized costs incurred
since the acquisitions including fees paid to the Advisor, net of mortgage debt.
CPA(R):15 received $11,916 and CPA(R):12 assumed $1,031 of CPA(R):15's deferred
acquisition fee payable to an affiliate. CPA(R):15 recognized a gain on the sale
of $961, of which $672 represents a foreign currency gain. In connection with
the acquisition of an additional Carrefour property in November 2003, CPA(R):15
and CPA(R):12 sold a portion of their interests to WPC, thereby reducing
CPA(R):15's overall interest in the Carrefour properties from 65% to 50.375%. In
accordance with CPA(R):15's diversification policy, the independent directors
determined that it was prudent to reduce CPA(R):15's overall exposure to
Carrefour's credit. CPA(R):15 received $5,648 for the sale of a portion of the
interest in the Carrefour properties as a result of an increase in the appraised
value of the properties, and, to a lesser extent, appreciation of the Euro.
CPA(R):15 recognized a gain on sale of $2,933, of which $465 represents a
foreign currency gain. CPA(R):15

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MANAGEMENT'S DISCUSSION AND ANALYSIS, CONTINUED

consolidates its controlling interests in the limited liability company in its
consolidated financial statements, and CPA(R):12's and W. P. Carey's interests
are recognized as minority interests.

CPA(R):15 completed sales of its second offering of shares of common stock as of
August 7, 2003, at which time the gross amount raised from the two offerings
aggregated approximately $1,046,000. CPA(R):15 is continuing to use the proceeds
of the offerings to make investments in net lease real estate. Management
expects that CPA(R):15's assets will continue to increase substantially over the
next several years. As the asset base of CPA(R):15 increases, lease revenues,
general and administrative, property and depreciation expenses will increase,
while interest expense will increase as mortgage loans are placed on
newly-acquired and existing properties.

As of December 31, 2003, CPA(R):15 recognized realized gains on foreign currency
transactions of $1,535 and unrealized foreign currency gains of $1,638. In
evaluating its ability to fund dividends, CPA(R):15 does not consider unrealized
gains and losses from foreign currency transactions.

Year Ended December 31, 2002 Compared to the Period from Inception (February 26,
2001) through December 31, 2001

The results of CPA(R):15 for the year ended December 31, 2002 are not comparable
to the results for the period ended December 31, 2001. CPA(R):15 recognized net
income of $5,767 in 2002 as compared with a net loss of $69 in 2001. CPA(R):15
did not have any significant operating activity during 2001 and did not begin
acquiring any substantial real estate interests until February 2002. During the
year the Company's asset base increased from approximately $2,206 to
approximately $806,298. During the fourth quarter of 2002, CPA(R):15's asset
base increased by $401,147. Accordingly, CPA(R):15 believes that the results of
operations for the year ended December 31, 2002 are not expected to be
representative of future results. During the year ended December 31, 2002,
CPA(R): 15 entered directly into net lease transactions with 17 tenants
including a build-to-suit transaction, acquired equity ownership interests with
affiliates which net lease properties to TruServ Corporation and increased its
interest in the Petsmart, Inc. and Builders FirstSource, Inc. partnerships in
which it owned de minimus interests in 2001. In connection with build-to-suit
projects, CPA(R):15 capitalizes interest cost and, in 2002, $321 was
capitalized. If there had been no funds applied to the development of
build-to-suit projects, the interest would have been expensed and included in
the determination of net income. The acquisitions (including the pro rata share
of equity investments) are expected to generate annual cash flow (contractual
rent less debt service on property-level mortgage debt) of approximately
$23,329, as shown above.

CPA(R):15's asset base increased substantially during the year as a result of
completing its initial "best efforts" public offering and obtaining $371,580 of
limited recourse mortgage financing. Management projects that CPA(R):15's asset
base will continue to increase substantially over the next several years. As the
asset base of the Company increases, general and administrative, property and
depreciation expenses will increase, while interest expense will increase as
mortgage loans are placed on newly-acquired and existing properties. Several
acquisitions, including those with Clear Channel Communications, Inc.,
Carrefour, TruServ and Medica-France, SA, occurred in December 2002 and,
therefore, their contribution to the results of operations and cash flow will
increase substantially in future years as compared to 2002.

Property expense for the year ended December 31, 2002 consists primarily of fees
to the Advisor for its performing asset management services on behalf of
CPA(R):15. For 2002, the Advisor elected to receive the performance component of
its fees in CPA(R):15 stock. Interest income was $1,687, representing a
substantial portion of CPA(R):15's revenues in 2002. As the proceeds of the
offering are fully invested in real estate, interest income will decrease and is
expected to be a minor component of overall revenues. After CPA(R):15 is fully
invested, CPA(R):15 will maintain cash balances which Management believes to be
sufficient for meeting working capital needs.

Financial Condition

A major objective of CPA(R):15 is to generate cash flow from operations and its
equity investments sufficient to fund dividends to shareholders at an increasing
rate, pay scheduled mortgage principal installments and pay distributions to
minority partners in certain consolidated entities. Cash flows from operations
and equity investments of $55,863 were sufficient to pay dividends of $40,498,
scheduled mortgage principal payments of $7,864 and distributions to minority
partners of $3,737. When evaluating cash generated from operations, Management
includes cash provided

-6-

MANAGEMENT'S DISCUSSION AND ANALYSIS, CONTINUED

from equity investments. Under accounting principles generally accepted in the
United States of America, distributions from equity investments in excess of
income from equity investments are a return of capital and presented as a cash
flow from investing activity. The ability of the equity investees to distribute
cash to CPA(R):15 in excess of their income is primarily due to noncash charges
for depreciation. CPA(R):15 evaluates its ability to pay dividends to
shareholders by using its projections of cash flow (lease revenues, net of
property-level debt service) from both its directly-owned real estate and its
equity investments.

CPA(R):15 used $536,361 to acquire properties net leased to 28 lessees on a
single-tenant basis and to purchase a 44% interest, through a limited liability
company owned with two affiliates, in 15 health club facilities leased to
Starmark. Since December 31, 2003, CPA(R):15 has used approximately $40,000 to
acquire properties leased to Plumbmaster, Inc., the Regie des Batiments in
Belgium, Affina Corporation and Universal Technical Institute of California,
Inc. CPA(R):15 expects to use substantially all of the net proceeds of its
offerings, along with limited recourse mortgage debt, to purchase investments in
real estate either directly or with affiliates. Acquisition activity can be
expected to continue for approximately one more year until all excess funds are
invested in real estate. Management believes that a fully invested, diversified
portfolio of real estate investments will mitigate the concentration of risk of
any single lessee. During 2003, CPA(R):15 used $37,833 of its cash to purchase
short-term investments (i.e., maturities of more than 90 days but less than one
year). As of March 1, 2004, up to approximately $47,300 was committed to
complete build-to-suit projects. During the year ended December 31, 2003,
CPA(R):15 received special distributions of $24,162 from equity investees in
connection with the investees' obtaining mortgage financing on their properties.

During the year ended December 31, 2003, CPA(R):15 raised $585,585, net of
costs, in its "best efforts" offering. CPA(R):15 also received $13,055 from
CPA(R):12 in connection with CPA(R):12's purchase of minority interests in the
Medica-France and Carrefour properties and $6,576 from W. P. Carey in connection
with its purchase of a minority interest in the Carrefour properties. After
CPA(R):15 is fully invested, CPA(R):15 intends to hold cash balances sufficient
to maintain its operations. CPA(R):15 is actively evaluating potential net lease
investments and is using its available cash along with limited recourse mortgage
financing to purchase properties. In connection with purchasing properties,
during the year ended December 31, 2003, CPA(R):15 obtained $194,680 of limited
recourse mortgage debt. Currently, all of CPA(R):15's mortgage debt bears
interest at fixed rates with no loans maturing before May 2012. CPA(R):15 has
benefited from historically low interest rates. As it continues to place
mortgage debt on its properties, it may be subject to increases in interest
rates and may finance the purchase of additional properties. A lender on limited
recourse mortgage debt has recourse only to the property collateralizing such
debt and not to any of CPA(R):15's other assets, while unsecured financing would
give a lender recourse to all of CPA(R): 15's assets. The use of limited
recourse debt, therefore, will allow CPA(R):15 to limit the exposure of all of
its assets to any one debt obligation. Management believes that the strategy of
combining equity and limited recourse mortgage debt will allow CPA(R):15 to meet
its short-term and long-term liquidity needs and will help to diversify
CPA(R):15's portfolio and, therefore, reduce concentration of risk in any
particular lessee. Therefore, after CPA(R):15 fully invests in real estate, it
will evaluate on an ongoing basis whether to obtain additional sources of funds
such as lines of credit; however, no consideration is being given to such
additional sources at this time.

As of March 1, 2004, CPA(R):15 has approximately $380,970 (cash and cash
equivalents and short-term investments) available for investment. Accordingly,
the asset base should continue to increase significantly as the available cash
is deployed fully in real estate.

CPA(R):15 invests its available cash in money market instruments. The spread
between short-term rates on money market instruments and rates of return on real
estate investments has increased significantly, primarily as the result of low
money market interest rates. A significant portion of CPA(R):15's cash balances
represent funds to be invested in real estate. If these cash balances are not
invested in real estate over the next several months, there is a risk that cash
flow from operations and equity investments will not meet Management's
projections. Management believes that any deficit would be short term and will
ultimately be eliminated after available cash is fully deployed in a portfolio
of diversified real estate properties.

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MANAGEMENT'S DISCUSSION AND ANALYSIS, CONTINUED

Off-Balance Sheet Arrangements, Guarantees and Aggregate Contractual
Arrangements

A summary of CPA(R):15's contractual obligations, guarantees and commitments as
of December 31, 2003 is as follows:

(in thousands) Total 2004 2005 2006 2007 2008 Thereafter
----- ---- ---- ---- ---- ---- ----------

Obligations:
Limited recourse mortgage notes
payable (1) $596,003 $ 9,016 $ 9,986 $10,773 $11,688 $12,723 $541,817
Notes payable 4,061 4,061
Deferred acquisition fees 24,005 3,253 6,001 6,001 6,001 2,749
Commitments:
Build-to-suit obligations 44,183 44,183
Share of minimum rents payable
under office cost-sharing
agreement 588 214 214 160
-------- ------- ------- ------- ------- ------- --------
$668,840 $60,727 $16,201 $16,934 $17,689 $15,472 $541,817
======== ======= ======= ======= ======= ======= ========

(1) The limited recourse mortgage notes payable were obtained in connection
with the acquisition of properties in the ordinary course of business.

As of December 31, 2003, CPA(R):15 was not involved in any material litigation.
Following a broker-deal examination of Carey Financial Corporation ("Carey
Financial"), the broker-dealer that managed the public offering of CPA(R):15's
common stock (and a wholly-owned subsidiary of our advisor, W.P. Carey & Co.
LLC) by the staff of the United States Securities and Exchange Commission (the
"SEC"), CPA(R):15 was notified that Carey Financial had received a letter on or
about March 4, 2004 from the staff of the SEC alleging certain infractions by
Carey Financial and CPA(R):15 of the Securities Act of 1933, as amended, the
Securities Exchange Act of 1934, as amended, and the rules and regulations of
the National Association of Securities Dealers, Inc. The letter was delivered
for the purpose of requiring Carey Financial to take corrective action and
without regard to any other action the SEC may take with respect to the
broker-dealer examination. It is not known at this time if the SEC intends to
bring any action against Carey Financial. The infractions alleged are described
in Item 3 of this Annual Report on Form 10-K and Note 17 to the accompanying
consolidated financial statements.

In connection with the purchase of its properties, CPA(R):15 requires the
sellers to perform environmental reviews. Management believes, based on the
results of such reviews, that CPA(R):15's properties were in substantial
compliance with Federal and state environmental statutes at the time the
properties were acquired. However, portions of certain properties have been
subject to some degree of contamination, principally in connection with either
leakage from underground storage tanks, surface spills from facility activities
or historical on-site activities. In most instances where contamination has been
identified, tenants are actively engaged in the remediation process and
addressing identified conditions. Tenants are generally subject to environmental
statutes and regulations regarding the discharge of hazardous materials and any
related remediation obligations. In addition, CPA(R):15's leases generally
require tenants to indemnify CPA(R):15 from all liabilities and losses related
to the leased properties with provisions of such indemnification specifically
addressing environmental matters. The leases generally include provisions which
allow for periodic environmental assessments, paid for by the tenant, and allow
CPA(R):15 to extend leases until such time as a tenant has satisfied its
environmental obligations. Certain of the leases allow CPA(R):15 to require
financial assurances from tenants such as performance bonds or letters of credit
if the costs of remediating environmental conditions are, in the estimation of
CPA(R):15, in excess of specified amounts. Accordingly, Management believes that
the ultimate resolution of any environmental matter will not have a material
adverse effect on CPA(R):15's financial condition, liquidity or results of
operations.

Critical Accounting Estimates

CPA(R):15 makes certain judgments and uses certain estimates and assumptions
when applying accounting principles generally accepted in the United States of
America in the preparation of its consolidated financial statements that affect
the reported amount of assets, liabilities, revenues and expenses. CPA(R):15
believes its most critical accounting estimates relate to its provision for
uncollected amounts from lessees, potential impairment of assets, identification
of discontinued operations, classification of real estate assets, determining
the value attributed to tangible and intangible assets, determining the fair
value of assets and liabilities which are "marked to market" but not actively
traded in a public market and determining the interest to be capitalized in
connection with real estate under construction. CPA(R):15's significant
accounting policies are described in the notes to the consolidated financial
statements. Certain policies, while significant, may not require the use of
estimates.

CPA(R):15 must assess its ability to collect rent and other tenant-based
receivables and determine an appropriate charge for uncollected amounts. Because
CPA(R):15's real estate operations have a limited number of lessees, Management
believes that it is necessary to evaluate the collectibility of these
receivables based on the facts and circumstances of each situation rather than
solely use statistical methods. CPA(R):15 generally recognizes a provision for
uncollected rents which typically ranges between 0.25% and 1% of lease revenues
(rental income and interest income from direct financing leases) and will
measure its allowance against actual rent arrearages and adjust the percentage
applied. For amounts in arrears, Management makes subjective judgments based on
its knowledge of a
-8-

MANAGEMENT'S DISCUSSION AND ANALYSIS, CONTINUED

lessee's circumstances and may reserve for the entire receivable amount from a
lessee because there has been significant or continuing deterioration in the
lessee's ability to meet its lease obligations. Under net leases, lessees are
obligated to pay real estate taxes on behalf of CPA(R):15; however, when a
lessee is in bankruptcy, CPA(R):15 may pay the tax obligation in order to
preserve its interest in the property. If such a payment relates to a
pre-petition period, CPA(R):15 may record such payment as an expense rather than
as a receivable when it assumes the chance of reimbursement by the lessee is
unlikely. Based on its actual experience in 2003, CPA(R):15 recorded a provision
equal to approximately 1.5% of lease revenues.

Operating real estate is stated at cost less accumulated depreciation. Costs
directly related to build-to-suit projects, primarily interest, if applicable,
are capitalized. Interest capitalized in 2003 and 2002 was approximately $3,178
and $321, respectively. CPA(R):15 considers a build-to-suit project as
substantially completed upon the completion of improvements, but no later than a
date that is negotiated and stated in the lease. If portions of a project are
substantially completed and occupied and other portions have not yet reached
that stage, the substantially completed portions are accounted for separately.
CPA(R):15 allocates costs incurred between the portions under construction and
the portions substantially completed and only capitalizes those costs associated
with the portion under construction. CPA(R):15 does not have a credit facility
and determines an interest rate to be applied for capitalizing interest based on
an average rate on its outstanding limited recourse mortgage debt.

CPA(R):15 classifies its directly-owned leased assets for financial reporting
purposes as either real estate leased under the operating method or net
investment in direct financing leases at the inception of a lease based on
several criteria, including, but not limited to, estimates of the remaining
economic life of the leased assets and the calculation of the present value of
future minimum rents. In determining the classification of a lease, CPA(R):15
uses estimates of remaining economic life provided by independent appraisals of
the leased assets. The calculation of the present value of future minimum rents
includes determining a lease's implicit interest rate, which requires an
estimate of the residual value of leased assets as of the end of the
non-cancelable lease term. Different estimates of residual value result in
different implicit interest rates and could possibly affect the financial
reporting classification of leased assets. The contractual terms of CPA(R):15's
leases are not necessarily different for operating and direct financing leases;
however the classification is based on accounting pronouncements which are
intended to indicate whether the risks and rewards of ownership are retained by
the lessor or transferred to the lessee. Management believes that it retains
certain risks of ownership regardless of accounting classification. Assets
classified as direct financing leases are not depreciated and, therefore, the
classification of assets, may have a significant impact on net income even
though it has no effect on cash flows.

CPA(R):15 also uses estimates and judgments when evaluating whether long-lived
assets are impaired. When events or changes in circumstances indicate that the
carrying amount of a property accounted for under the operating method may not
be recoverable, Management must first determine if the property will be held for
use or held for sale. Management then performs projections of cash flows, and if
such cash flows are insufficient, the assets are adjusted (i.e., written down)
to their estimated fair value. An analysis of whether a real estate asset has
been impaired requires Management to make its best estimate of market rents,
residual values and holding periods. As CPA(R):15's investment objective is to
hold properties on a long-term basis, holding periods will generally range from
five to ten years. In its evaluations, CPA(R):15 obtains market information from
outside sources; however, such information requires Management to determine
whether the information received is appropriate to the circumstances. Depending
on the assumptions made and estimates used, the estimated cash flow projected in
the evaluation of long-lived assets can vary within a range of outcomes. Because
CPA(R):15's properties are leased to single tenants, CPA(R):15 is more likely to
incur significant writedowns when circumstances affecting a tenant deteriorate
because of the possibility that a property will be vacated in its entirety. The
risk of vacancy for single tenant properties is different from the risks faced
by companies that own multi-tenant properties. Events or changes in
circumstances can result in further writedowns and impact the gain or loss
ultimately realized upon sale of the asset.

For direct financing leases, CPA(R):15 performs a review of its estimated
residual value of properties at least annually to determine whether there has
been an other than temporary decline in CPA(R):15's current estimate of residual
value of the underlying real estate assets of direct financing leases. If the
review indicates a decline in residual values that is other than temporary, a
loss is recognized and the accounting for the direct financing lease will be
revised using

-9-

MANAGEMENT'S DISCUSSION AND ANALYSIS, CONTINUED

the changed estimate, that is, a portion of the future cash flow from the lessee
will be recognized as a return of principal rather than as revenue. While an
evaluation of potential impairment of real estate accounted for under the
operating method is determined by a change in circumstances, the evaluation of a
direct financing lease can be affected by changes in long-term market conditions
even though the obligations of the lessee are being met. Changes in
circumstances include, but are not limited to, vacancy of a property not subject
to a lease and termination of a lease. CPA(R):15 may also assess properties for
impairment because it expects a lease not to be renewed and the lease is within
one year of its expiration, a lessee is experiencing financial difficulty and
Management expects that there is a reasonable probability that the lease will be
terminated in a bankruptcy organization or a property remains vacant for a
period that exceeds the period anticipated in a prior impairment evaluation.

When assets are identified by management as held for sale, CPA(R):15
discontinues depreciating the assets and estimates the sales price, net of
selling costs, of such assets. If in Management's opinion, the net sales price
of the assets, which have been identified for sale, is less than the net book
value of the assets, an impairment charge is recognized, and a valuation
allowance is established. To the extent that a purchase and sale agreement has
been entered into, the allowance is based on the negotiated sales price. To the
extent that CPA(R):15 has adopted a plan to sell an asset but has not entered
into a sales agreement, it will make judgments of the net sales price based on
current market information. Accordingly, the initial assessment may be greater
or less than the purchase price subsequently committed to and may result in a
further adjustment to the fair value of the property. If circumstances arise
that previously were considered unlikely and, as a result, the Company decides
not to sell a property previously classified as held for sale, the property is
reclassified as held and used. A property that is reclassified is measured and
recorded individually at the lower of (a) its carrying amount before the
property was classified as held for sale, adjusted for any depreciation expense
that would have been recognized had the property been continuously classified as
held and used, or (b) the fair value at the date of the subsequent decision not
to sell.

In 2002, CPA(R):15 acquired a subordinated interest in a mortgage trust that
consists of limited recourse loans on 62 properties that are owned by CPA(R):15
or three of its affiliates. The fair value of the interests in the trust is
determined using a discounted cash flow model with assumptions of market rates
and the credit quality of the underlying lessees. If there are adverse changes
in either market rates or the credit quality of the lessees, the model and,
therefore, the income recognized from the subordinated interests and the fair
value will be adjusted. CPA(R):15 measures derivative instruments, including
certain derivative instruments embedded in other contracts, if any, at fair
value and records them as an asset or liability, depending on CPA(R):15's right
or obligations under the applicable derivative contract. For derivatives
designated as fair value hedges, the changes in the fair value of both the
derivative instrument and the hedged item are recorded in earnings (i.e., the
forecasted event occurs). For derivatives designated as cash flow hedges, the
effective portions of the derivatives are reported in other comprehensive income
and are subsequently reclassified into earnings when the hedged item affects
earnings. Changes in the fair value of derivative instruments not designated as
hedging and ineffective portions of hedges are recognized in earnings in the
affected period. To determine the value of warrants for common stock which are
classified as derivatives, various estimates are included in the options pricing
model used to determine the value of a warrant.

In connection with the acquisition of properties, purchase costs will be
allocated to the tangible and intangible assets and liabilities acquired based
on their estimated fair values. The value of the tangible assets, consisting of
land, buildings and tenant improvements, will be determined as if vacant.
Intangible assets including the above-market or below-market value of leases,
the value of in-place leases and the value of tenant relationships will be
recorded at their relative fair values.

The value attributed to tangible assets will be determined in part using a
discounted cash flow model which is intended to approximate what a third party
would pay to purchase the property as vacant and rent at "market" rates. In
applying the model CPA(R):15 assumes that the disinterested party would sell the
property at the end of a market lease term. Assumptions used in the model are
property-specific as it is available; however, when certain necessary
information isn't available, CPA(R):15 will use available regional and
property-type information. Assumptions and estimates include a discount rate or
internal rate of return, marketing period necessary to put a lease in place,
carrying costs during the marketing period, leasing commissions and tenant
improvements allowances, market rents

-10-

MANAGEMENT'S DISCUSSION AND ANALYSIS, CONTINUED

and growth factors of such rents, market lease term and a cap rate to be applied
to an estimate of market rent at the end of the market lease term.

Above-market and below-market leases intangibles will be based on the difference
between the market rent and the contractual rents and will be discounted to a
present value using an interest rate reflecting CPA(R):15`s assessment of the
risk associated with the lease acquired. CPA(R):15 acquires properties subject
to net leases and considers the credit of the lessee in negotiating the initial
rent.

The total amount of other intangible assets will be allocated to in-place lease
values and tenant relationship intangible values based on our evaluation of the
specific characteristics of each tenant's lease and our overall relationship
with each tenant. Characteristics we will consider in allocating these values
include the nature and extent of the existing relationship with the tenant,
prospects for developing new business with the tenant, the tenant's credit
quality and the expectation of lease renewals among other factors. The aggregate
value of other intangible assets acquired will be measured based on the
difference between (i) the property valued with an in-place lease adjusted to
market rental rates and (ii) the property valued as if vacant. Independent
appraisals or our estimates will be used to determine these values.

Factors considered include the estimated carrying costs of the property during a
hypothetical expected lease-up period, current market conditions and costs to
execute similar leases. Estimated carrying costs will include real estate taxes,
insurance, other property operating costs and estimates of lost rentals at
market rates during the hypothetical expected lease-up periods, based on
assessments of specific market conditions. Estimated costs to execute leases
include commissions and legal costs to the extent that such costs are not
already incurred with a new lease that has been negotiated in connection with
the purchase of the property.

Accounting Pronouncements

In November 2002, the FASB issued Interpretation No. 45, "Guarantor's Accounting
and Disclosure Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness of Others," ("FIN 45") which changes the accounting for, and
disclosure of certain guarantees. Beginning with transactions entered into after
December 31, 2002, certain guarantees are required to be recorded at fair value,
which is different from prior practice, under which a liability was recorded
only when a loss was probable and reasonably estimable. In general, the change
applies to contracts or indemnification agreements that contingently require
CPA(R):15 to make payments to a guaranteed third-party based on changes in an
underlying asset, liability, or an equity security of the guaranteed party. The
adoption of the accounting provisions of FIN 45 on January 1, 2003 did not have
a material effect on CPA(R):15's financial statements.

In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based
Compensation - Transition and Disclosure," which amends SFAS No. 123, Accounting
for Stock Based Compensation. SFAS No. 148 provides alternative methods of
transition for a voluntary change to the fair value based method of accounting
for stock based compensation (i.e., recognition of a charge for issuance of
stock options in the determination of income.). However, SFAS No. 148 does not
permit the use of the original SFAS No. 123 prospective method of transition for
changes to the fair value based method made in fiscal years beginning after
December 15, 2003. In addition, this Statement amends the disclosure
requirements of SFAS No. 123 to require prominent disclosures in both annual and
interim financial statements about the method of accounting for stock based
employee compensation, description of transition method utilized and the effect
of the method used on reported results. The transition and annual disclosure
provisions for valuing stock-based compensation of SFAS No. 148 are to be
applied for fiscal years ending after December 15, 2002. CPA(R):15 does not have
any employees nor any stock-based compensation plans.

On January 17, 2003, the FASB issued Interpretation No. 46, "Consolidation of
Variable Interest Entities" ("FIN 46"), the primary objective of which is to
provide guidance on the identification of entities for which control is achieved
through means other than voting rights ("variable interest entities" or "VIEs")
and to determine when and which business enterprise should consolidate the VIE
(the "primary beneficiary"). In December 2003, the FASB issued a revised FIN 46
which modifies and clarifies various aspects of the original Interpretation. FIN
46 applies when either (1) the equity investors (if any) lack one or more of the
essential characteristics of controlling financial interest, (2) the equity
investment at risk is insufficient to finance that entity's activities without
additional

-11-

MANAGEMENT'S DISCUSSION AND ANALYSIS, CONTINUED

subordinated financial support or (3) the equity investors have
voting rights that are not proportionate to their economic interest. In addition
FIN 46 requires additional disclosures.

FIN 46 is effective immediately for VIEs created after January 31, 2003, and to
VIEs in which an enterprise obtains an interest after that date. For variable
interests in a VIE created or obtained prior to February 1, 2003, FIN 46 is
effective for periods ending after March 15, 2004.

CPA(R):15 has evaluated the potential impact and believes this interpretation
will not have a material impact on its accounting for its investments in
unconsolidated joint ventures as none of these investments are VIEs. CPA(R):15's
maximum loss exposure is the carrying value of its equity investments.

On April 30, 2003, the FASB issued SFAS No. 149, "Amendment of Statement 133 on
Derivative Instruments and Hedging Activities." SFAS No. 149 amends and
clarifies accounting for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging under SFAS No. 133. The
changes in the statement improve financial reporting by requiring that contracts
with comparable characteristics be accounted for similarly. In particular, the
statement (1) clarifies under what circumstances a contract with an initial net
investment meets the characteristics of a derivative instrument discussed in
paragraph 6(b) of SFAS No. 133, (2) clarifies when a derivative contains a
financing component, (3) amends the definition of an underlying to conform it to
language used in FIN 45, "Guarantor's Accounting and Disclosure Requirements for
Guarantees, Including Indirect Guarantees of Indebtedness of Others", and (4)
amends certain other existing pronouncements. SFAS No. 149 is generally
effective for contracts entered into or modified after June 30, 2003 and for
hedging relationships designated after June 30, 2003. The adoption of SFAS No.
149 did not have a material effect on the financial statements.

In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity." SFAS No. 150
establishes standards for the classification and measurement of certain
financial instruments with characteristics of both liabilities and equity. It
requires that an issuer classify a financial instrument that is within its scope
as a liability (or an asset in some circumstances). In particular, it requires
that mandatorily redeemable financial instruments be classified as liabilities
and reported at fair value and that changes in their fair values be reported as
interest cost.

This statement was effective for financial instruments entered into or modified
after May 31, 2003, and otherwise is effective for CPA(R):15 as of July 1, 2003.
On November 7, 2003, the FASB indefinitely deferred the classification and
measurement provisions of SFAS No. 150 as they apply to certain mandatorily
redeemable non-controlling interests. This deferral is expected to remain in
effect while these provisions are further evaluated by the FASB. Based on the
FASB's deferral of this provision, the adoption of SFAS No. 150 did not have a
material effect on CPA(R):15's financial statements.

-12-

REPORT of INDEPENDENT AUDITORS

To the Board of Directors and Shareholders of
Corporate Property Associates 15 Incorporated:

In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of income, shareholders' equity and cash flows present
fairly, in all material respects, the financial position of Corporate Property
Associates 15 Incorporated and its subsidiaries at December 31, 2003 and 2002,
and the results of their operations and their cash flows for the years ended
December 31, 2003 and 2002 and for the period from inception (February 26, 2001)
to December 31, 2001, in conformity with accounting principles generally
accepted in the United States of America. These financial statements are the
responsibility of W. P. Carey & Co. LLC (the "Advisor"); our responsibility is
to express an opinion on these financial statements based on our audits. We
conducted our audits of these statements in accordance with auditing standards
generally accepted in the United States of America, which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by the Advisor, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.

/s/ PricewaterhouseCoopers LLP

New York, New York
March 12, 2004

-13-

CORPORATE PROPERTY ASSOCIATES 15 INCORPORATED

CONSOLIDATED BALANCE SHEETS
(In thousands except share amounts)

December 31,
------------
ASSETS: 2003 2002
---- ----

Real estate leased to others:
Accounted for under the operating method:
Land $ 145,549 $ 98,460
Buildings 737,913 461,061
---------- --------
883,462 559,521
Less, accumulated depreciation 18,725 2,323
---------- --------
864,737 557,198
Net investment in direct financing leases 148,325 21,093
Intangible assets, net of accumulated amortization of $533 32,742 -
Real estate under construction 61,270 20,061
Equity investments 83,984 75,606
Cash and cash equivalents 346,217 94,762
Short-term investments 37,833 -
Other assets 64,044 37,578
---------- --------
Total assets $1,639,152 $806,298
========== ========

LIABILITIES, MINORITY INTEREST, AND SHAREHOLDERS' EQUITY:

Liabilities:
Limited recourse mortgage notes payable $ 596,003 $374,787
Notes payable 4,061 3,705
Accrued interest 2,464 991
Due to affiliates 2,912 7,622
Accounts payable and accrued expenses 6,907 5,910
Prepaid and deferred rental income and security deposits, net of
accumulated amortization of $172 38,504 15,494
Deferred acquisition fees payable to affiliate 24,005 13,012
Dividends payable 16,555 5,789
---------- --------
Total liabilities 691,411 427,310
---------- --------

Minority interest 52,650 28,193
---------- --------

Commitments and contingencies

Shareholders' equity:
Common stock, $.001 par value; authorized 120,000,000 shares; issued and
outstanding, 105,681,019 and 39,966,488 at December 31, 2003 and 2002 106 40
Additional paid-in capital 944,788 355,964
Dividend in excess of accumulated earnings (52,887) (6,270)
Accumulated other comprehensive income 3,255 1,061
---------- --------
895,262 350,795
Less, treasury stock at cost, 18,807 shares at December 31, 2003 (171) -
---------- --------
Total shareholders' equity 895,091 350,795
---------- --------
Total liabilities, minority interest and shareholders' equity $1,639,152 $806,298
========== ========

The accompanying notes are an integral part of the consolidated financial
statements.

-14-

CORPORATE PROPERTY ASSOCIATES 15 INCORPORATED

CONSOLIDATED STATEMENTS of INCOME

For the years ended December 31, 2003 and 2002 and the period
from inception (February 26, 2001) to December 31, 2001
(In thousands except share and per share amounts)

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

Revenues:
Rental income $ 65,912 $ 11,372
Interest income from direct financing leases 6,845 1,322
Interest and other income 5,829 1,700 $ 2
----------- ----------- -------
78,586 14,394 2
----------- ----------- -------

Expenses:
Interest expense 25,066 4,188
Depreciation and amortization 16,457 2,570
General and administrative 7,322 1,289 71
Property expense 12,554 1,559 -
Impairment charge on real estate 24,000 - -
----------- ----------- -------
85,399 9,606 71
----------- ----------- -------

(Loss) income before minority interest,
income from equity investments and gains (6,813) 4,788 (69)

Minority interest in income (2,703) (88) -
----------- ----------- -------

(Loss) income before income from equity
investments and gains (9,516) 4,700 (69)

Income from equity investments 8,233 1,067 -
----------- ----------- -------

(Loss) income before gains (1,283) 5,767 (69)

Unrealized gains on foreign currency transactions 1,638 - -
Gain on foreign currency transactions 1,535
Gain on sale 2,757 - -
----------- ----------- -------

Net income (loss) $ 4,647 $ 5,767 $ (69)
=========== =========== =======

Basic earnings (loss) per share $ 0.06 $ .29 $ (3.42)
=========== =========== =======

Weighted average shares outstanding - basic 78,939,049 19,720,070 20,000
=========== =========== =======

The accompanying notes are an integral part of the consolidated financial
statements.

-15-

CORPORATE PROPERTY ASSOCIATES 15 INCORPORATED

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

For the period from inception (February
26, 2001) through December 31, 2001
and for the years ended December 31,
2002 and 2003

(In thousands except share and per share amounts)

Dividends in Accumulated
Additional Excess of Other
Common paid-in Comprehensive Accumulated Comprehensive Treasury
stock capital (loss) income Earnings Income Stock Total
----- ------- ------------- -------- ------ ----- -----

20,000 shares issued
$.001 par,
at $10 per share $ 200 $ 200
Net loss $ (69) $ (69) (69)
=============
Balance at
---------- ------------ ---------
December 31, 2001 200 (69) 131

39,946,488 shares issued
$.001 par, at $10 per
share, net of offering
costs $ 40 355,764 355,804

Dividends (11,968) (11,968)

Comprehensive Income:
Net income 5,767 5,767 5,767
Other comprehensive
income:
Foreign currency
translation
adjustment 1,061 $ 1,061 1,061
-------------
$ 6,828
=============

------ ---------- ------------ ------------- ---------
Balance at
December 31, 2002 40 355,964 (6,270) 1,061 350,795

65,695,724 shares issued
$.001 par, at $10 per
share, net of offering
costs 66 588,824 588,890

Dividends (51,264) (51,264)

Purchase of treasury
stock, 18,807 shares $ (171) (171)

Comprehensive Income:
Net income $ 4,647 4,647 4,647
Other comprehensive
income:
Foreign currency
translation
adjustment 2,194 2,194 2,194
-------------
$ 6,841
=============
------ ---------- ------------ ------------- -------- ---------
Balance at
December 31, 2003 $ 106 $ 944,788 $ (52,887) $ 3,255 $ (171) $ 895,091
====== ========== ============ ============= ======== =========

The accompanying notes are an integral part of the consolidated financial
statements.

-16-

CORPORATE PROPERTY ASSOCIATES 15 INCORPORATED

CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)

For the period from
inception
(February 26, 2001)
Year Ended December 31, through December 31,
2003 2002 2001
---- ---- ----

Cash flows from operating activities:
Net income (loss) $ 4,647 $ 5,767 $(69)
Adjustments to reconcile net income (loss) to net cash provided
by operating activities:
Depreciation and amortization 16,534 2,582 -
Equity income in excess of distributions received (1,190) - -
Minority interest in income 2,703 88 -
Straight-line rent adjustments (4,882) (245) -
Fees paid to affiliate by issuance of stock 3,305 317 -
Impairment charge on real estate 24,000 - -
Unrealized gain on foreign currency transactions (1,638) - -
Gain on sale (2,757) - -
Realized gain on foreign currency transactions (1,535) - -
Increase in other assets (3,095) (2,651) -
Increase in accrued interest payable 1,389 983 -
Increase in accounts payable and accrued expenses 4,404 734 34
Increase in due to affiliates (a) 2,105 784 23
Increase in prepaid and deferred rent 11,546 4,974 -
-------- -------- ----
Net cash provided by (used in) operating activities 55,536 13,333 (12)
-------- -------- ----

Cash flows from investing activities:
Distributions from equity investments in excess of equity income 327 1,114 -
Distributions of mortgage financing from equity investees 24,162 - -
Purchase of short-term investments (37,833) - -
Acquisitions of real estate and equity investments and other
capitalized costs (b) (536,361) (662,856) -
VAT taxes recoverable on purchases of real estate (2,652) (4,036) -
Proceeds from sale of real estate 3,662 11,615 -
-------- -------- ----
Net cash used in investing activities (548,695) (654,163) -
-------- -------- ----

Cash flows from financing activities:
Proceeds from stock issuance, net of costs 585,585 355,486 200
Dividends paid (40,498) (6,179) -
Proceeds from mortgages (c) (d) 194,680 359,189 -
Proceeds from note payable 3,862 3,622 -
Prepayment of note payable (3,622) - -
Mortgage principal payments (7,864) (385) -
Distributions to minority partners (3,737) (235) -
Contributions from minority partners, net of distributions 17,659 28,340 -
Deferred financing costs and mortgage deposits (2,424) (4,512) -
Purchase of treasury stock (171) - -
-------- -------- ----
Net cash provided by financing activities 743,470 735,326 200
-------- -------- ----
Effect of exchange rate changes on cash 1,144 78 -
-------- -------- ----
Net increase in cash and cash equivalents 251,455 94,574 188

Cash and cash equivalents, beginning of period 94,762 188 -
-------- -------- ----
Cash and cash equivalents, end of period $346,217 $ 94,762 $188
======== ======== ====

-17-

CORPORATE PROPERTY ASSOCIATES 15 INCORPORATED

CONSOLIDATED STATEMENTS OF CASH FLOWS, Continued
(In thousands)

Non-cash investing and financing activities:

(a) Increase in due to affiliates excludes amounts which relate to the raising
of capital (financing activities) pursuant to the Company's public
offering. At December 31, 2002 and 2001, the amount due to the Company's
Advisor, WPC, was $6,815 and $1,889, respectively.

(b) Included in the cost basis of real estate investments acquired in 2003 and
2002 are deferred acquisition fees payable of $10,458 and $13,012,
respectively.

(c) Net of $8,172 held back by lenders to fund escrow accounts.

(d) In connection with acquiring properties in 2002, the Company assumed
mortgage notes payable of $8,630.

The Company assigned a security deposit of $10,462 to a lender which is included
in other assets and prepaid rental income and security deposits, respectively,
in 2002.

The accompanying notes are an integral part of the consolidated financial
statements.

-18-

CORPORATE PROPERTY ASSOCIATES 15 INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share amounts)

1. Summary of Significant Accounting Policies:

Basis of Consolidation:

The consolidated financial statements include the accounts of Corporate
Property Associates 15 Incorporated, its wholly-owned subsidiaries and
controlling majority-owned partnership interests (collectively, the
"Company"). The Company is not a primary beneficiary of any variable
interest entity ("VIE"). All material inter-entity transactions are
eliminated.

Use of Estimates:

The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the dates of the financial statements and the
reported amounts of revenues and expenses during the reporting period.
The most significant estimates relate to the assessment of the
realizability of real estate assets and investments, classification of
real estate leased to others and identification of any intangible
assets identified in connection with asset acquisitions. Actual results
could differ from those estimates.

Real Estate Leased to Others and Intangible Assets:

The Company leases real estate to others on a net lease basis, whereby
the tenant is generally responsible for all operating expenses relating
to the property, including real estate taxes, insurance, maintenance,
repairs, renewals and improvements. During the years ended December 31,
2003 and 2002, lessees were responsible for the direct payment of real
estate taxes of $6,687 and $2,247, respectively. The Company had no
lessees for the period from inception (February 26, 2001) through
December 31, 2001. Expenditures for maintenance and repairs including
routine betterments are charged to operations as incurred. Significant
renovations which increase the useful life of the properties are
capitalized.

The Company diversifies its real estate investments among various
corporate tenants engaged in different industries, by property type and
geographically.

The leases are accounted for under either the direct financing or
operating methods. Such methods are described below:

Direct financing method-Leases accounted for under the direct
financing method are recorded at their net investment (Note 5).
Unearned income is deferred and amortized to income over the lease
terms so as to produce a constant periodic rate of return on the
Company's net investment in the lease.

Operating method-Real estate is recorded at cost less accumulated
depreciation, rental revenue is recognized on a straight-line basis
over the term of the leases and expenses (including depreciation)
are charged to operations as incurred.

When events or changes in circumstances indicate that the carrying
amount of a long-lived asset may not be recoverable, the Company
assesses the recoverability of its long-lived assets, including
residual interests of real estate assets and investments, based on
projections of undiscounted cash flows, without interest charges, over
the life of such assets. In the event that such cash flows are
insufficient, the assets are adjusted to their estimated fair value.
Residual values of the net investment in direct financing leases are
reviewed at least annually. If a decline in the estimated residual
value is other than temporary, the

-19-

CORPORATE PROPERTY ASSOCIATES 15 INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
Amounts in thousands except share and per share amounts

accounting for the direct financing lease will be revised using the
changed estimate. The resulting reduction in the net investment in the
direct financing lease is recognized as a loss in the period in which
the estimate is changed.

In connection with the Company's acquisition of properties, purchase
costs are allocated to the tangible and intangible assets and
liabilities acquired based on their estimated fair values. The value of
the tangible assets, consisting of land, buildings and tenant
improvements, are determined as if vacant. Intangible assets including
the above-market or below-market value of leases, the value of in-place
leases and the value of tenant relationships are recorded at their
relative fair values. The below-market value of leases is classified as
deferred rental income in the accompanying consolidated financial
statements.

Above-market and below-market in-place lease values for owned
properties are recorded based on the present value (using an interest
rate reflecting the risks associated with the leases acquired) of the
difference between (i) the contractual amounts to be paid pursuant to
the leases negotiated and in-place at the time of acquisition of the
properties and (ii) management's estimate of fair market lease rates
for the property or equivalent property, measured over a period equal
to the remaining non-cancelable term of the lease. The capitalized
above-market lease value is amortized as a reduction of rental income
over the remaining non-cancelable term of each lease. The capitalized
below-market lease value is amortized as an increase to rental income
over the initial term and any fixed rate renewal periods in the
respective leases.

The total amount of other intangible assets are allocated to in-place
lease values and tenant relationship intangible values based on
management's evaluation of the specific characteristics of each
tenant's lease and the Company's overall relationship with each tenant.
Characteristics considered in allocating these values include the
nature and extent of the existing relationship with the tenant,
prospects for developing new business with the tenant, the tenant's
credit quality and the expectation of lease renewals among other
factors. The aggregate value of other intangible assets acquired will
be measured based on the difference between (i) the property valued
with an in-place lease adjusted to market rental rates and (ii) the
property valued as if vacant. Independent appraisals or management's
estimates are used to determine these values.

Factors considered in the analysis include the estimated carrying costs
of the property during a hypothetical expected lease-up period, current
market conditions and costs to execute similar leases. The Company also
considers information obtained about a property in connection with its
pre-acquisition due diligence. Estimated carrying costs include real
estate taxes, insurance, other property operating costs and estimates
of lost rentals at market rates during the hypothetical expected
lease-up periods, based on management's assessment of specific market
conditions. Estimated costs to execute leases including commissions and
legal costs to the extent that such costs are not already incurred with
a new lease that has been negotiated in connection with the purchase of
the property are also considered.

The value of in-place leases will be amortized to expense over the
remaining initial term of each lease. The value of tenant relationship
intangibles will be amortized to expense over the initial and renewal
terms of the leases but no amortization period for intangible assets
will exceed the remaining depreciable life of the building.

For properties under construction, interest is capitalized rather than
expensed and rentals received recorded as a reduction of capitalized
project (i.e., construction) costs.

Substantially all of the Company's leases provide for either scheduled
rent increases, periodic increases based on formulas indexed to the
Consumer Price Index ("CPI") or sales overrides. Rents from sales
overrides (percentage of sales rent) are recognized as reported by
lessees, that is, after the level of sales requiring a rental payment
to the Company is reached.

-20-

CORPORATE PROPERTY ASSOCIATES 15 INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
Amounts in thousands except share and per share amounts

Depreciation:

Depreciation is computed using the straight-line method over the
estimated useful lives of the properties--generally not to exceed 40
years.

Offering Costs:

Costs incurred in connection with the raising of capital are charged to
shareholders' equity.

Equity Investments:

The Company's ownership interests in (i) entities in which the entity
is not considered to be a VIE or the Company is not deemed to be the
primary beneficiary and the Company's ownership is 50% or less and has
the ability to exercise significant influence and (ii) jointly
controlled tenancies-in-common are accounted for under the equity
method, i.e., at cost, increased or decreased by the Company's share of
earnings or losses, less distributions.

Cash and Cash Equivalents and Short-term Investments:

The Company considers all short-term, highly liquid investments that
are both readily convertible to cash and have a maturity of generally
three months or less at the time of purchase to be cash equivalents.
Items classified as cash equivalents include commercial paper and
money-market funds. All of the Company's cash and cash equivalents were
held in the custody of three financial institutions at December 31,
2003 and 2002, and which balances at times exceed federally insurable
limits. The Company mitigates this risk by depositing funds with major
financial institutions. Instruments that have a maturity of three
months or more at the time of purchase are classified as short-term
investments in the accompanying consolidated financial statements.

Foreign Currency Translation:

The Company consolidates its real estate investments in France, Germany
and the United Kingdom. Since December 31, 2003, the Company has also
acquired a property in Belgium. The functional currency for the
investments is the Euro and the British Pound, respectively. The
translation from the Euro and British Pound is performed for assets and
liabilities using current exchange rates in effect at the balance sheet
date and for revenue and expense accounts using a weighted average
exchange rate during the period. The gains and losses resulting from
such translation are reported as a component of other comprehensive
income as part of shareholders' equity. The cumulative foreign currency
translation adjustment was $3,255 at December 31, 2003.

Foreign currency transactions may produce receivables or payables that
are fixed in terms of the amount of foreign currency that will be
received or paid. A change in the exchange rates between the functional
currency and the currency in which a transaction is denominated
increases or decreases the expected amount of functional currency cash
flows upon settlement of that transaction. That increase or decrease in
the expected functional currency cash flows is a foreign currency
transaction gain or loss that generally will be included in determining
net income for the period in which the exchange rate changes. Likewise,
a transaction gain or loss (measured from the transaction date or the
most recent intervening balance sheet date) whichever is later,
realized upon settlement of a foreign currency transaction generally
will be included in net income for the period in which the transaction
is settled. Foreign currency transactions that are (i) designated as,
and are effective as, economic hedges of a net investment and (ii)
intercompany foreign currency transactions that are of a long-term
nature (that is, settlement is not planned or anticipated in the
foreseeable future), when the entities to the transactions are
consolidated or accounted for by the equity method in the Company's
financial statements will not be included in determining net income but

-21-

CORPORATE PROPERTY ASSOCIATES 15 INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
Amounts in thousands except share and per share amounts

will be accounted for in the same manner as foreign currency
translation adjustments and reported as a component of other
comprehensive income as part of shareholder's equity.

Foreign currency intercompany transactions with subsidiaries that are
scheduled for settlement, consisting primarily of accrued interest and
the translation to the reporting currency of intercompany subordinated
debt with scheduled principal repayments, are included in the
determination of net income, and, for the year ended December 31, 2003,
the Company recognized unrealized gains of $1,638 from such
transactions. In 2003, the Company also recognized realized gains on
foreign currency transactions of $398, as a result of transferring cash
from foreign operations of subsidiaries to the parent company.

Other Assets:

Included in other assets are deferred charges and deferred rental
income. Deferred charges are costs incurred in connection with mortgage
note financing and are amortized over the term of the mortgage and
included in interest expense in the accompanying consolidated financial
statements. Deferred rental income is the aggregate difference between
contractual rents that vary during the term and income recognized on a
straight-line basis.

Treasury Stock:

Treasury stock is recorded at cost.

Deferred Acquisition Fees:

Fees are payable for services provided by W.P. Carey & Co. LLC (the
"Advisor") to the Company relating to the identification, evaluation,
negotiation, financing and purchase of properties. A portion of such
fees are deferred and are payable in annual installments with each
installment equal to .50% of the purchase price of the properties over
no less than four years following the first anniversary of the date a
property was purchased.

Earnings Per Share:

The Company has a simple equity capital structure with only common
stock outstanding. As a result, the Company has presented basic
per-share amounts in the accompanying financial statements.

Federal Income Taxes:

The Company is qualified as a real estate investment trust ("REIT") as
of December 31, 2003 as defined under the Internal Revenue Code of
1986. The Company is not subject to Federal income taxes on amounts
distributed to shareholders provided it distributes at least 90% of its
REIT taxable income to its shareholders and meets certain other
conditions. The Company and subsidiaries are subject to state and local
and foreign taxes, which aggregate $234 in 2003 and $34 in 2002 and are
included in general and administrative expenses.

Accounting Pronouncements:

In November 2002, the FASB issued Interpretation No. 45, "Guarantor's
Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness of Others," ("FIN 45") which
changes the accounting for, and disclosure of certain guarantees.
Beginning with transactions entered into after December 31, 2002,
certain guarantees are required to be recorded at fair value, which is
different from prior practice, under which a liability was recorded
only when a loss was probable and reasonably estimable. In general, the
change applies to contracts or indemnification agreements that
contingently require the Company to make payments to a guaranteed
third-party based on changes in an underlying

-22-

CORPORATE PROPERTY ASSOCIATES 15 INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
Amounts in thousands except share and per share amounts

asset, liability, or an equity security of the guaranteed party. The
adoption of the accounting provisions of FIN 45 on January 1, 2003 did
not have a material effect on the Company's financial statements.

In December 2002, the FASB issued SFAS No. 148, "Accounting for
Stock-Based Compensation - Transition and Disclosure," which amends
SFAS No. 123, Accounting for Stock Based Compensation. SFAS No. 148
provides alternative methods of transition for a voluntary change to
the fair value based method of accounting for stock based compensation
(i.e., recognition of a charge for issuance of stock options in the
determination of income.). However, SFAS No. 148 does not permit the
use of the original SFAS No. 123 prospective method of transition for
changes to the fair value based method made in fiscal years beginning
after December 15, 2003. In addition, this Statement amends the
disclosure requirements of SFAS No. 123 to require prominent
disclosures in both annual and interim financial statements about the
method of accounting for stock based employee compensation, description
of transition method utilized and the effect of the method used on
reported results. The transition and annual disclosure provisions for
valuing stock-based compensation of SFAS No. 148 are to be applied for
fiscal years ending after December 15, 2002. The Company does not have
any employees nor any stock-based compensation plans.

On January 17, 2003, the FASB issued Interpretation No. 46,
"Consolidation of Variable Interest Entities" ("FIN 46"), the primary
objective of which is to provide guidance on the identification of
entities for which control is achieved through means other than voting
rights ("variable interest entities" or "VIEs") and to determine when
and which business enterprise should consolidate the VIE (the "primary
beneficiary"). In December 2003, the FASB issued a revised FIN 46 which
modifies and clarifies various aspects of the original Interpretation.
FIN 46 applies when either (1) the equity investors (if any) lack one
or more of the essential characteristics of controlling financial
interest, (2) the equity investment at risk is insufficient to finance
that entity's activities without additional subordinated financial
support or (3) the equity investors have voting rights that are not
proportionate to their economic interest. In addition FIN 46 requires
additional disclosures.

FIN 46 is effective immediately for VIEs created after January 31,
2003, and to VIEs in which an enterprise obtains an interest after that
date. For variable interests in a VIE created or obtained prior to
February 1, 2003, FIN 46 is effective for periods ending after March
15, 2004.

The Company has evaluated the potential impact and believes this
interpretation will not have a material impact on its accounting for
its investments in unconsolidated joint ventures as none of these
investments are VIEs. The Company's maximum loss exposure is the
carrying value of its equity investments.

On April 30, 2003, the FASB issued SFAS No. 149, "Amendment of
Statement 133 on Derivative Instruments and Hedging Activities." SFAS
No. 149 amends and clarifies accounting for derivative instruments,
including certain derivative instruments embedded in other contracts,
and for hedging under SFAS No. 133. The changes in the statement
improve financial reporting by requiring that contracts with comparable
characteristics be accounted for similarly. In particular, the
statement (1) clarifies under what circumstances a contract with an
initial net investment meets the characteristics of a derivative
instrument discussed in paragraph 6(b) of SFAS No. 133, (2) clarifies
when a derivative contains a financing component, (3) amends the
definition of an underlying to conform it to language used in FIN 45,
"Guarantor's Accounting and Disclosure Requirements for Guarantees,
Including Indirect Guarantees of Indebtedness of Others", and (4)
amends certain other existing pronouncements. SFAS No. 149 is generally
effective for contracts entered into or modified after June 30, 2003
and for hedging relationships designated after June 30, 2003. The
adoption of SFAS No. 149 did not have a material effect on the
financial statements.

In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and
Equity." SFAS No. 150 establishes standards for the classification and
measurement of certain financial instruments with characteristics of
both liabilities and equity. It requires that an issuer classify a
financial instrument that is within its scope as a liability (or an
asset in some circumstances). In particular, it requires that
mandatorily redeemable financial instruments be

-23-

CORPORATE PROPERTY ASSOCIATES 15 INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
Amounts in thousands except share and per share amounts

classified as liabilities and reported at fair value and that changes
in their fair values be reported as interest cost.

This statement was effective for financial instruments entered into or
modified after May 31, 2003, and otherwise is effective for the Company
as of July 1, 2003. On November 7, 2003, the FASB indefinitely deferred
the classification and measurement provisions of SFAS No. 150 as they
apply to certain mandatorily redeemable non-controlling interests. This
deferral is expected to remain in effect while these provisions are
further evaluated by the FASB. The Company has an interest in one
limited partnership that is consolidated and that is considered a
mandatorily redeemable controlling interest with a finite life. In
accordance with the deferral noted above, this minority interest has
not been reflected as a liability. The carrying value approximates the
fair value of this minority interest at December 31, 2003. Based on the
FASB's deferral of this provision, the adoption of SFAS No. 150 did not
have a material effect on the Company's financial statements.

2. Organization and Offering:

The Company was formed on February 26, 2001 under the General Corporation
Law of Maryland for the purpose of engaging in the business of investing
in and owning property net leased to creditworthy corporations and other
creditworthy entities. Subject to certain restrictions and limitations,
the business of the Company is managed the Advisor.

On April 2, 2001, the Advisor purchased 20,000 shares of common stock for
$200 as the initial shareholder of the Company. An initial offering of the
Company's shares which commenced on November 7, 2001 concluded on November
20, 2002, at which time the Company had issued an aggregate of 39,930,312
shares ($399,303). The Company commenced a second offering for a maximum
of an additional 69,000,000 shares of common stock on March 19, 2003 which
concluded on August 7, 2003, at which time the Company had issued an
aggregate of 64,687,294 shares ($646,873). The shares were offered to the
public on a "best efforts" basis at a price of $10 per share.

3. Agreements and Transactions with Related Parties:

In connection with performing management services on behalf of the
Company, the Advisory Agreement between the Company and the Advisor
provides that the Advisor receive asset management and performance fees,
each of which are 1/2 of 1% of Average Invested Assets, as defined in the
Advisory Agreement. The performance fee is subordinated to the Preferred
Return, a cumulative non-compounded dividend return of 6%. The Preferred
Return was met as of December 31, 2002. The Advisor has elected at its
option to receive the performance fee in restricted shares of common stock
of the Company rather than cash. The Advisor is also reimbursed for the
actual cost of personnel needed to provide administrative services
necessary to the operation of the Company. For the years ended December
31, 2003 and 2002, the Company incurred asset management fees of $4,161
and $737, respectively, with performance fees in like amount. For the
years ended December 31, 2003 and 2002, the Company incurred personnel
reimbursements of $1,163 and $193. No asset management and performance
fees or personnel reimbursements were incurred by the Company in 2001.

Fees are payable to the Advisor for services provided to the Company
relating to the identification, evaluation, negotiation, financing and
purchase of properties. A portion of such fees are deferred and are
payable in equal annual installments over no less than four years
following the first anniversary of the date a property was purchased. Such
deferred fees are only payable if the Preferred Return has been met. The
unpaid portion of the deferred fees bears interest at an annual rate of 6%
from the date of acquisition of a property until paid. For transactions
that were completed in 2003, current and deferred fees were $15,030 and
$12,024, respectively. An initial payment of deferred fees was paid to the
Advisor in January 2004.

The Advisor is obligated to reimburse the Company for the amount by which
operating expenses of the Company exceeds the 2%/25% Guidelines (the
greater of 2% of Average Invested Assets or 25% of Net Income) as defined
in the Advisory Agreement for any twelve-month period. If in any year the
operating expenses of the Company exceed the 2%/25% Guidelines, the
Advisor will have an obligation to reimburse the Company for such excess,
subject to certain conditions. Only if the Independent Directors find that
such excess expenses were justified based on any unusual and nonrecurring
factors which they deem sufficient, the Advisor may be paid in future
years for the full amount or any portion of such excess expenses, but only
to the extent that such reimbursement would not cause the Company's
operating expenses to exceed this limit in any

-24-

CORPORATE PROPERTY ASSOCIATES 15 INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
Amounts in thousands except share and per share amounts

such year. Charges related to asset impairment, bankruptcy of lessees,
lease payment defaults, extinguishment of debt or uninsured losses are
generally not considered unusual and nonrecurring. A determination that a
charge is unusual and nonrecurring, such as the costs of significant
litigation that are not associated with day-to day operations, or
uninsured losses that are beyond the size or scope of the usual course of
business based on the event history and experience of the Advisor and
Independent Directors, is made at the sole discretion of the Independent
Directors. The Company will record any reimbursement of operating expenses
as a liability until any contingencies are resolved and will record the
reimbursement as a reduction of asset management and performance fees at
such time that a reimbursement is fixed, determinable and irrevocable. The
operating expenses of the Company have not exceeded the amount that would
require the Advisor to reimburse the Company.

The Company owns interests in limited partnerships which range from 30% to
60% and a 64% interest in jointly controlled tenancy-in-common which owns
two properties subject to a master net lease. The remaining interests in
the limited partnerships and tenancy-in-common are owned by affiliates.

The Company is a participant in an agreement with certain affiliates for
the purpose of leasing office space used for the administration of real
estate entities and sharing the associated costs. Pursuant to the terms of
the agreement, the Company's share of rental occupancy and leasehold
improvement costs is based on gross revenues. Expenses of $136 and $3 were
incurred in 2003 and 2002, respectively. The Company's share of aggregate
future minimum lease payments as of December 31, 2003 is $588 through
2006.

4. Real Estate Leased to Others Accounted for Under the Operating Method:

Scheduled future minimum rents, exclusive of renewals, under
non-cancelable operating leases are as follows:

Year ended December 31,

2004 $ 76,169
2005 76,597
2006 77,973
2007 78,174
2008 78,636
Thereafter through 2028 868,551
----------
Total $1,256,100
==========

Contingent rents (including CPI-based increases) were approximately $77 in
2003. No contingent rents were realized in 2002 or 2001.

5. Net Investment in Direct Financing Leases:

Net investment in direct financing leases is summarized as follows:
December 31,

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

Minimum lease payments
receivable $ 342,603 $48,520
Unguaranteed residual value 128,003 20,951
--------- -------
470,606 69,471
Less: unearned income 322,281 48,378
--------- -------
$ 148,325 $21,093
========= =======

Scheduled future minimum rents, exclusive of renewals, under
non-cancelable direct financing lease are as follows:

Year ended December 31,

2004 $ 12,782
2005 12,897

-25-

CORPORATE PROPERTY ASSOCIATES 15 INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
Amounts in thousands except share and per share amounts

2006 13,014
2007 13,134
2008 13,314
Thereafter through 2033 277,462
--------
Total $342,603
========

Contingent rents (including CPI-based increases) were approximately $10 in
2003. No contingent rents were realized in 2002 or 2001.

6. Equity Investments:

The Company owns interests in single-tenant net leased properties
through equity interests in (i) partnerships and limited liability
companies in which its ownership interests are 50% or less and the
Company exercises significant influence, and (ii) as tenants-in-common
subject to common control. The ownership interests range from 30% to
64%. Contributions, distributions and allocations of income or loss
from the equity investees are based on ownership percentages and no
fees are paid by the Company or the partnerships to any of the general
partners of the limited partnerships. All of the underlying investments
are owned with affiliates that have similar investment objectives as
the Company. The lessees are Petsmart, Inc.; Builders FirstSource,
Inc.; TruServ Corporation and Hologic, Inc. As described below, the
Company along with two affiliates, CPA(R):12 and Corporate Property
Associates 14 Incorporated ("CPA(R):14") formed a limited liability
company and, on February 7, 2003, entered into a net lease with
Starmark Camhood, L.L.C. ("Starmark").

Summarized combined financial information of the equity investees is as
follows:

December 31, 2003 December 31, 2002 December 31, 2001
----------------- ----------------- -----------------

(in thousands)
Assets (primarily real estate) $450,586 $255,845 $87,325
Liabilities (primarily mortgage notes payable) 265,972 102,022 43,824
Partners' capital 184,614 153,823 43,501

For the period from
inception (February
Year Ended Year Ended 26, 2001) through
December 31, 2003 December 31, 2002 December 31, 2001
----------------- ----------------- -----------------

Revenues (primarily rental revenues) $43,749 $10,795 $ 681
Expenses (primarily interest on mortgages
and depreciation) (25,619) (6,064) (491)
------- ------- -----
Net income $18,130 $ 4,731 $ 190
======= ======= =====

On February 7, 2003, the Company, CPA(R):12 and CPA(R):15, through a
newly-formed limited liability company with ownership interests of 41%,
15% and 44%, respectively, purchased land and 15 health club facilities
for $178,010 and entered into a master net lease with Starmark. The
lease obligations of Starmark are jointly unconditionally guaranteed by
seven of its affiliates.

The Starmark lease provides for an initial lease term of 20 years with
three ten-year renewal terms. Annual rent is initially $18,272 with
CPI-based increases scheduled in November 2006, 2010, 2014, 2018 and
2021. $167 of annual rent will not be included in the determination of
the future rent increases.

In connection with the purchase, the limited liability company obtained
first mortgage limited recourse financing of $88,300 and a mezzanine
loan of $20,000. The first mortgage provides for monthly payments of
interest and principal of $564 at an annual interest rate of 6.6% and
based on a 30-year amortization schedule. The loan matures in March
2013 at which time a balloon payment is scheduled. The mezzanine

-26-

CORPORATE PROPERTY ASSOCIATES 15 INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
Amounts in thousands except share and per share amounts

loan provides for monthly payments of interest and principal of $277 at
an annual interest rate of 11.15% and will fully amortize over its
ten-year term.

The limited liability company was granted 5,276 warrants for Class C
Unit interests in Starmark and represent a 5% interest in the Company.
The warrants may be exercised at any time through February 7, 2023 at
an exercise price of $430 per unit. The warrant agreement does not
provide for a cashless exercise of units and therefore, are not
accounted for as a derivative instrument.

7. Mortgage Notes Payable:

Mortgage notes payable, all of which are limited recourse obligations, are
collateralized by the assignment of various leases and by real property
with a carrying value of approximately $878,522. As of December 31, 2003,
mortgage notes payable had fixed interest rates ranging from 4.80% to
7.98% per annum. The Company had no variable rate debt as of December 31,
2003.

Scheduled principal payments during each of the five years following
December 31, 2003 and thereafter are as follows:

Year Ending December 31, Fixed Rate Debt
- ------------------------ ---------------

2004 $ 9,016
2005 9,986
2006 10,773
2007 11,688
2008 12,723
Thereafter through 2032 541,817
--------
$596,003
========

Interest paid, excluding capitalized interest, was $25,507 in 2003 and
$3,319 in 2002, respectively. No interest was paid in 2001. Capitalized
interest was $3,178 and $321 in 2003 and 2002, respectively.

8. Dividends:

Dividends paid to shareholders consist of ordinary income, capital gains,
return of capital or a combination thereof for income tax purposes. The
Company paid its first dividend in April 2002. Dividends per share
reported for tax purposes for the years ended December 31, 2003 and 2002
were as follows:

2003 2002
---- ----

Ordinary income $.42 $.45
Return of capital .20 -
---- ----
$.62 $.45
==== ====

A dividend of $0.15665 per share for the quarter ended December 31, 2003
($16,555) was declared in December 2003 and paid in January 2004.

9. Lease Revenues:

The Company's operations consist of the investment in and the leasing of
industrial and commercial real estate. The financial reporting sources of
the leasing revenues below for the years ended December 31, 2003 and 2002
are as follows:

2003 2002
---- ----

Per Statements of Income:
Rental income from operating leases $65,912 $11,372
Interest from direct financing leases 6,845 1,322
Adjustment:

-27-

CORPORATE PROPERTY ASSOCIATES 15 INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
Amounts in thousands except share and per share amounts

Share of lease revenues applicable to minority interests (10,382) (235)
Share of leasing revenue from equity investments 14,653 2,638
------- -------
$77,028 $15,097
======= =======

For the years ended December 31, 2003 and 2002, the Company earned its net
leasing revenues from its investments from the following lease obligors:

2003 % 2002 %
---- - ---- -

Clear Channel Communications, Inc. (c) $ 8,491 11 $ 352 2%
Carrefour France, SA (c) 8,253 11 148 1
Starmark Camhood, L.L.C. (a) 7,204 9 - -
Foster Wheeler, Inc. 5,256 7 1,962 13
Fleming Companies, Inc. 4,483 6 2,800 19
Medica - France, SA (c) 3,175 4 300 2
Meadowbrook Meat Company 3,008 4 7 -
Overland Storage, Inc. 2,992 4 608 4
Petsmart, Inc. (a) 2,491 3 2,076 14
TruServ Corporation (a) 2,384 3 16 -
Tower Automotive, Inc. 2,356 3 1,701 11
Qualceram Shires plc 2,284 3 - -
Hologic, Inc. (b) 2,020 3 1,016 7
Lillian Vernon Corporation 1,910 2 - -
Danka Office Imaging Company 1,819 2 227 2
MediMedia USA, Inc. 1,751 2 - -
BE Aerospace, Inc. 1,627 2 479 3
Racal Instruments, Inc. 1,571 2 934 6
Trends Clothing Corp. 1,420 2 619 4
Advantis Technologies, Inc. 1,275 2 651 4
IntegraColor, Ltd. 1,266 2 681 5
Polar Plastics, Inc. 1,235 2 - -
Life Time Fitness, Inc. 1,187 2 - -
Other 7,570 9 520 3
------- --- ------- ---
$77,028 100% $15,097 100%
======= === ======= ===

(a) Represents the Company's proportionate share of lease revenues from
its equity investments.

(b) As of December 17, 2002, 36% of the Company's interest in these
properties was acquired by an affiliate, W. P. Carey, and the
remaining 64% interest is accounted for as an equity investment.

(c) Net of rental amount applicable to minority interests.

10. Segment Information:

The Company has determined that it operates in one business segment with
domestic and foreign investments. The Company acquired its first foreign
real estate investments in December 2002 and has investments in France,
the United Kingdom and Germany.

For 2003, geographic information for the real estate operations segment is
as follows:

Domestic Foreign Total
-------- ------- -----

Revenues $ 58,304 $ 20,282 $ 78,586

-28-

CORPORATE PROPERTY ASSOCIATES 15 INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
Amounts in thousands except share and per share amounts

Expenses 68,013 17,386 85,399
Income from equity investments 8,233 - 8,233
Net operating income (1) (4,016) 2,733 (1,283)
Total assets 1,332,841 306,311 1,639,152
Total long-lived assets 909,386 281,672 1,191,058

For 2002, geographic information for the real estate operations segment is
as follows:

Domestic Foreign Total
-------- ------- -----

Revenues $ 13,946 $ 448 $ 14,394
Expenses 9,211 394 9,605
Income from equity investments 1,067 - 1,067
Net operating income (1) 5,713 54 5,767
Total assets 633,824 172,474 806,298
Total long-lived assets 514,308 159,651 673,959

(1) Income before gains and losses

11. Impairment Charge on Real Estate:

In June 2002, the Company purchased land and building in Tulsa, Oklahoma
and entered into a net lease with Fleming Companies, Inc. ("Fleming").
Fleming declared bankruptcy on April 1, 2003, and on August 31, 2003,
Fleming's termination of the lease with the Company was approved by the
bankruptcy court at which time it vacated the property. In connection with
the termination of the lease, the Company has written down the property to
its estimated fair value and recognized an impairment charge of $24,000.

12. Sale of Interest in French Properties:

In December 2002, the Company purchased, in two separate transactions, 13
properties, seven leased to affiliates of Carrefour France, S.A.
("Carrefour") and six leased to S.A. Medica France ("Medica"). The total
cost for the properties was Euro 144,094 (approximately $147,294 as of the
purchase dates) and was financed with limited recourse mortgage loans of
Euro 118,244 (approximately $120,842 as of the purchase dates). On March
12, 2003, the Company sold a 35% interest in the limited liability company
that owns the Medica and Carrefour properties to CPA(R):12. The purchase
price was based on the appraised value of the properties (based on an
exchange rate for the Euro of $1.0959) adjusted for capitalized costs
incurred since the acquisitions including fees paid to the Advisor, net of
mortgage debt. Based on the formula, CPA(R):12 paid the Company, $11,916
and assumed $1,031 of the Company's deferred acquisition fee payable to an
affiliate.

The sale was approved by the Company's independent directors as being in
the best interests of the Company and was intended to facilitate the
Company's ability to raise capital. The continued holding of 100% of the
Medica and Carrefour interests would have required the Company to obtain
and provide financial information in its 1933 and 1934 Act filings on the
lease guarantors that is in accordance with accounting principles
generally accepted in the United States of America. This information is
not available to the Company.

In connection with the sale of the 35% interests, the Company recognized a
gain on sale of $961 of which $672 is attributable to foreign currency
gains, as a result of changes in rates from the dates of the initial
purchases of the properties, $305 is attributable to depreciation for the
period from the dates of the initial purchases of the properties through
March 12, 2003, the date of the sale of the 35% interest, less $16
attributable to costs incurred in connection with completing the sale.

In connection with the purchase of another Carrefour property on November
27, 2003, the Company and CPA(R):12 reduced their overall interests in
subsidiaries that own the Carrefour properties to 77.5% and sold a 22.5%
interest to W. P. Carey for $8,689. After the sale of the interests in the
Carrefour properties, the

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CORPORATE PROPERTY ASSOCIATES 15 INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
Amounts in thousands except share and per share amounts

Company retained a 50.375% interest through its 65% interest in the
limited liability company. W. P. Carey's purchase price was based on an
independent appraisal of the Carrefour properties.

In connection with the sale, the Company recognized a gain of $2,933 (net
of a portion of the gain allocable to CPA(R):12) of which $2,106 is
attributable to the appreciation in the properties, $465 is attributable
to foreign currency gains as a result of changes in foreign exchange rates
and $362 is attributable to depreciation recorded at the properties. The
Independent Directors approved the partial sale of the interests in
Carrefour as the Company believes that it is in its best interests not to
increase its overall concentration of risk in Carrefour. The purchase of
the Carrefour property acquired in November 2003 is described in Note 13.

13. Acquisitions of Real Estate and Real Estate Interests:

A. On December 22, 2003, the Company purchased land and a building in
Englewood, Colorado for $9,766 and entered into a net lease with 24
Hour Fitness, Inc. The lease has an initial term of 18 years and four
months followed by two five-year renewal options, and provides for an
initial annual rent of $914. The lease provides for stated rent
increases every five years. In February 2004, the Company obtained
$6,300 of limited recourse mortgage financing collateralized by a deed
of trust and mortgage agreement. The loan provides for monthly payments
of principal and interest of $49 at an annual interest rate of 6.29%
and based on an 18-year amortization schedule. The loan matures on
April 1, 2022.

B. On December 16, 2003, the Company purchased land in Upper Uwchlan
Township, Pennsylvania and entered into a build-to-suit commitment and
net lease with Universal Technical Institute of Pennsylvania, Inc. The
total cost of construction is estimated to amount to approximately
$23,200. Upon completion, expected to be in July 2004, an initial lease
term of 15 years will commence. If the entire project costs are used,
initial annual rent will be $2,262, with increases every three years
based on a formula indexed to increases in the Consumer Price Index
("CPI"). The lease provides for four five-year renewal terms.

C. On December 11, 2003, the Company purchased 99.99% interest in land and
building in Kahl am Main, Germany for $16,690 (based on the exchange
rate for the Euro on the date of acquisition) and entered into a net
lease with Actuant Corporation and GB Tools and Supplies, Inc. The
lease has an initial term of 17 years followed by two five-year renewal
terms and provides for initial annual rent of $1,602 (based on the
exchange rate for the Euro at the acquisition date). The lease provides
for annual rent increases based on a formula indexed to increases in
the German Consumer Price Index. Corporate Property Associates
16-Global Incorporated, an affiliate, which owns the remaining .01%
interest has an option to increase its ownership interest to 75%.

D. On November 27, 2003, the Company purchased land and building in Nimes,
France and entered into a lease with Carrefour for Euro 17,777 ($20,634
as of the date of acquisition) and obtained limited mortgage financing
of Euro 14,025 ($16,750) which was added to the existing outstanding
balance on other Carrefour properties that were purchased in 2002. The
Carrefour loans are cross-collateralized to eight Carrefour properties.
The Nimes lease provides for annual rents of Euro 1,609 ($1,921) and
has a term through November 2012 with annual increases based on the
INSEE, a French construction cost index. As described in Note 12, the
Company reduced its overall ownership interest in the Carrefour
properties to 50.375% during 2003.

E. On November 24, 2003, the Company purchased land and buildings in
Shelby and Port Huron, Michigan for $11,518 and entered into a net
lease with Sportrack LLC. The lease has an initial term of 20 years
followed by two ten-year renewals terms and provides for initial annual
rent of $1,045. The lease provides for annual rent increases beginning
on the second lease anniversary based on a formula indexed to increases
in the CPI.

F. On November 20, 2003, the Company purchased land and buildings in
Alsip, Illinois, Geddes, New York and Tolleson, Arizona for $36,649 and
entered into a net lease with Berry Plastics Corporation. The lease has
an initial term of 20 years followed by two ten-year renewals terms and
provides for initial annual rent of $2,960. The lease provides for
annual rent increases beginning on the fourth lease anniversary based
on a formula indexed to increases in the CPI. The purchase price
included $3,000 to fund an expansion at the Tolleson, Arizona property
to be completed in June 2004. The Company also has an obligation to
fund up

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CORPORATE PROPERTY ASSOCIATES 15 INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
Amounts in thousands except share and per share amounts

to an additional $1,000 for the expansion. If the entire project costs
are used, annual rent will increase by $366.

G. During the year ended December 31, 2003, the Company acquired
properties and real estate investments which were previously described
in its Quarterly Reports on Form 10-Q for the periods ended September
30, 2003, June 30, 2003 and March 31, 2003. A summary of the properties
and investments acquired is as follows:

Initial Original Annual
Annual Mortgage Debt
Lease Obligor: Cost Location Rent Financing Service Date Acquired
- -------------- ---- -------- ---- --------- ------- -------------

Starmark Camhood II LLC $28,272 Atlanta, GA and Bel $ 2,633 $ 15,500 $ 1,226 November 7, 2003
Air, MD

Roundoak Rail Limited 10,715 West Midlands, United 713 6,223 452 (a) November 4, 2003
Kingdom
Precise Technology, Inc. 29,319 Excelsior Springs, 2,640 17,200 1,524 October 30, 2003
MO; St. Petersburg,
FL; West Lafayette,
IN; North Versailles
Township, PA and
Buffalo Grove, IL

Life Time Fitness, Inc. 44,921 Rochester Hills and 4,247 27,000 2,174 September 30, 2003
Canton, MI
Universal Technical Institute 34,139 Avondale, AZ 3,107 (b) September 15, 2003
of Arizona, Inc.
American Pad & Paper LLC 16,126 Holyoke and 1,579 9,400 764 August 26, 2003
Westfield, MA,
Mattoon, IL and
Morristown, TN

Dick's Sporting Goods, Inc. 8,747 Indianapolis, IN 783 5,000 482 (c) August 19, 2003
Kerr Group, Inc. 14,764 Jackson, TN and 1,331 8,460 739 August 13, 2003
Bowling Green, KY

Galyan's Trading Company 22,089 Cheektowaga, NY, 2,257 8,200 760 (d) August 8, 2003
Greenwood, IN and
Freehold, NJ

Grande Communications 13,822 Corpus Christi, 1,379 7,550 687 August 7, 2003
Networks, Inc. Odessa, San Marcos
and Waco, TX

Qualserv Corporation 6,492 Fort Smith, AR 667 - - July 31, 2003
Lillian Vernon Corporation 38,743 Virginia Beach, VA 3,848 24,000 2,108 July 2, 2003
Qualceram Shires plc 35,213 England, Northern 2,759 19,580 1,679 (e) April 29, 2003
Ireland and Ireland

MediMedia USA, Inc. 23,979 Yardley, PA 2,111 14,000 1,072 April 1, 2003
Oxford Automotive 15,707 McCalla, AL 1,575 - - (c) March 28, 2003
Alabama, Inc.

Pemstar, Inc. 12,565 Rochester, MN 1,278 7,500 664 March 28, 2003
Transworld Center, Inc. 21,000 Miami, FL - - - (f) March 20, 2003
Polar Plastics (NC), Inc. 15,602 Mooresville, NC 1,460 9,500 838 February 25, 2003
Waddington North America 6,545 Chattanooga, TN 637 - - February 12, 2003
Business Trust

Starmark Camhood LLC 78,324 15 health club 8,040 47,652 4,441 (g) February 7, 2003
facilities
Insulated Structures, Ltd. 22,021 Birmingham, UK 1,698 15,283 798 (a) January 28, 2003

-31-

CORPORATE PROPERTY ASSOCIATES 15 INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
Amounts in thousands except share and per share amounts

(a) Payment varies based on principal payment schedule.

(b) Build-to-suit commitment; lease scheduled to commence in July 2004.

(c) Build-to-suit commitment; lease scheduled to commence in March 2004.

(d) Includes build-to-suit commitment at Freehold, NJ property; lease
scheduled to commence in November 2004.

(e) Debt obtained February 24, 2004. For comparison purposes, shown using
exchange rate as of April 29, 2003.

(f) Property has not been occupied due to dispute.

(g) Accounted for as an equity investment; amounts are pro rata
representing the Company's 44% ownership interest.

14. Disclosure About Fair Value of Financial Instruments:

The Company estimates that the fair value of mortgage notes payable at
December 31, 2003 was $578,096. The fair value of debt instruments was
evaluated using discounted cash flow model with rates which take into
account the credit of the tenants and interest rates risks.

15. Selected Quarterly Financial Data (unaudited):

Three Months Ended
------------------
March 31, 2003 June 30, 2003 September 30, 2003 December 31, 2003
-------------- ------------- ------------------ -----------------

Revenues $ 15,873 $ 17,467 $ 21,542 $ 23,704
Expenses 12,661 13,061 41,767 17,910
Net income (loss) 5,492 5,631 (19,035) 12,559
Net income per share -
Basic .14 .08 (.20) .04
Dividends declared per share .1550 .1563 .1565 .1567

Three Months Ended
------------------
March 31, 2002 June 30, 2002 September 30, 2002 December 31, 2002
-------------- ------------- ------------------ -----------------

Revenues $ 117 $1,182 $4,813 $8,281
Expenses 121 759 3,102 5,623
Net income 109 739 2,023 2,896
Net income per share -
Basic .03 .06 .08 .08
Dividends declared per share .1499 .1513 .1525 .1537

The Company had no activity from the period of inception (February 26,
2001) to June 30, 2001.

16. Subsequent Events:

A. On January 2, 2004, the Company purchased land and buildings in Concord
Township, Pennsylvania and Oceanside, California for $9,843 and entered
into a net lease with Plumbmaster, Inc. The lease has an initial term
of 20 years followed by one nine-year and eleven-month renewal option
and one four-year renewal option, and provides for an initial annual
rent of $855. The lease provides for a stated rent increase in the
second lease year as well as rent increases based on a formula indexed
to increases in the CPI in the second lease year and annually
thereafter.

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CORPORATE PROPERTY ASSOCIATES 15 INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
Amounts in thousands except share and per share amounts

B. On January 2, 2004, the Company purchased land and buildings in Mons,
Belgium for $12,120 (based on the exchange rate for the Euro on the
date of acquisition) and entered into a net lease with the Regie des
Batiments. The lease has an initial term of 18 years and provides for
an initial annual rent of $1,088. The lease provides for annual rent
increases based on a formula indexed to increases in the CPI.

C. On January 8, 2004, the Company purchased land and buildings in Peoria,
Illinois for $12,565 and entered into a net lease with Affina
Corporation. The lease has an initial term of 20 years followed by two
ten-year renewal options, and provides for an initial annual rent of
$1,254. The lease provides for annual rent increases based on a formula
indexed to increases in the CPI.

D. On February 6, 2004, the Company purchased land in Rancho Cucamonga,
California and entered into a build-to-suit commitment and net lease
with Universal Technical Institute of California, Inc. The total cost
of construction is estimated to amount to approximately $25,149. Upon
completion, expected to be in September 2004, an initial lease term of
15 years will commence. If the entire project costs are used, initial
annual rent will be $2,326, with increases every three years based on a
formula indexed to increases in the CPI. The lease provides for four
five-year renewal terms.

E. On February 24, 2004, the Company obtained(pound)12,410 ($23,493 using
the exchange rate for the Great Britain Pound as of February 24, 2004)
of limited recourse mortgage financing collateralized by the Qualceram
properties. The loan provides for quarterly payments of principal and
interest totaling(pound)266 ($504 at February 24, 2004) at an annual
interest rate of 6.948%. The loan has a ten-year term at which time a
balloon payment is payable.

17. Commitment and Contingencies:

As of December 31, 2003, the Company was not involved in any material
litigation.

Following a broker-dealer examination of Carey Financial Corporation ("Carey
Financial"), the broker-dealer that managed the public offerings of the
Company's common stock (and a wholly-owned subsidiary of our advisor, W. P.
Carey & Co. LLC), by the staff of the Securities and Exchange Commission, the
Company was notified that Carey Financial had received a letter on or about
March 4, 2004 from the staff of the Securities and Exchange Commission alleging
certain infractions by Carey Financial and the Company of the Securities Act of
1933, as amended, the Securities Exchange Act of 1934, as amended, and the
rules and regulations thereunder and of the National Association of Securities
Dealers, Inc. ("NASD"). Although the letter was delivered in the context of a
broker-dealer examination of Carey Financial, and states it is for the purpose
of requiring Carey Financial to take corrective action, it contains allegations
against both Carey Financial and the Company. It is not known at this time if
the Commission intends to bring any action against Carey Financial or the
Company. The infractions alleged, as they pertain to the Company, are
described below.

The staff alleges that in connection with two public offerings of shares of the
Company in 2002 and 2003 for which Carey Financial served as the dealer manager,
CPA(R):15, Carey Financial and its retail distributors sold certain securities
without an effective registration statement. Specifically, the staff alleges
that the Company and Carey Financial oversold the amount of securities
registered in the first offering (the "Phase I Offering") completed in the
fourth quarter of 2002 and sold securities with respect to the second offering
(the "Phase II" Offering) before a registration statement with respect to such
offering became effective in the first quarter of 2003. It appears to be the
staff's position that, notwithstanding the fact that pending effectiveness of
the registration statement investor funds were delivered into escrow and not to
the Company or Carey Financial, such delivery involved sales of securities in
violation of Section 5 of the Securities Act of 1933. In the event the
Commission pursues these allegations, or if affected CPA(R):15 investors bring a
similar private action, the Company might be required to offer the affected
investors the opportunity to receive a return of their investment. It cannot be
determined at this time the amount of securities purchases the Company would be
required to rescind, if any. As such, the Company cannot predict the potential
effect such an offer may ultimately have on the operations of the Company.
There can be no assurance such effect, if any, would not be material. Further,
if the Commission commenced any proceeding against the Company, it could impose
or seek different or additional penalties or relief, including without
limitation, injunctive relief and/or civil monetary penalties.

The staff also alleges that the prospectus delivered with respect to the Phase
I Offering contained material misstatements and omissions because that
prospectus did not disclose that the proceeds of the Phase I Offering would be
used to advance commissions and expenses payable with respect to the Phase II
Offering. The staff claims that the failure to disclose the advances
constitutes a misstatement of a material fact in violation of Section 17(a) of
the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of
1934 and Rule 10b-5 promulgated under the Securities Exchange Act of 1934.

-33-

Carey Financial has reimbursed the Company for the interest cost of advancing
the commissions that were later recovered by the Company from the Phase II
Offering proceeds. It cannot be determined at this time what relief, if any,
would be granted if an action were to be brought by the Commission or
a private investor of CPA(R):15 with respect to these allegations. It cannot be
determined at this time what remedy, if any, would be pursued by the Commission
if any action were to be brought by the Commission with respect to
these allegations. As such, the Company cannot predict the potential effect
such an action may ultimately have on the Company's operations. There can be no
assurance such effect, if any, would not be material.

The staff also alleges that the Company's offering documents contained material
misstatements and omissions because they did not include a discussion of the
manner in which dividends would be paid to the initial investors in the Phase II
offering. The staff letter asserts that the payment of dividends to the Phase II
shareholders resulted in significantly higher annualized rates of return than
was being earned by the Phase I shareholders, and that the Company failed to
disclose to the Phase I shareholders the various rates of return. The staff
claims that the failure to make this disclosure constitutes a misstatement of a
material fact in violation of Section 17(a) of the Securities Act of 1933,
Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated
under the Securities Exchange Act of 1934. It cannot be determined at this time
what relief, if any, would be granted if an action were to be brought by the
Commission or a private investor of CPA(R):15 with respect to these allegations.
It cannot be determined at this time what remedy, if any, would be pursued by
the Commission if an action were to be brought by the Commission with respect to
these allegations. As such, the Company cannot predict the potential effect such
an action may ultimately have on the Company's operations. There can be no
assurance such effect, if any, would not be material. There can be no assurance
that if the Commission brought an action against the Company the remedy imposed
would not be material.

MARKET FOR THE COMPANY'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS

There is no established public trading market for the Shares of the Company. As
of December 31, 2003, there were 34,349 holders of record of the Shares of the
Company.

The Company is required to distribute annually 90% of its Distributable REIT
Taxable Income to maintain its status as a REIT. Quarterly dividends paid by the
Company since its inception are as follows:

Cash Dividends Paid Per Share

2003 2002
---- ----

First quarter $.1537 -
Second quarter $.1550 $.1499
Third quarter .1563 .1513
Fourth quarter .1565 .1525
----- -----
$.6215 $.4537
====== ======

REPORT ON FORM 10-K

The Advisor will supply to any shareholder, upon written request and without
charge, a copy of the Annual Report on Form 10-K ("10-K") for the year ended
December 31, 2003 as filed with the Securities and Exchange Commission ("SEC").
The 10-K may also be obtained through the SEC's EDGAR database at www.sec.gov.

-34-