<PAGE>   1


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

(Mark One)

(X)      ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934 (NO FEE REQUIRED, EFFECTIVE OCTOBER 7, 1996)

For the fiscal year ended December 31, 1996

                                       or

( )      TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934 (NO FEE REQUIRED)

For the transition period from                     to
                               -------------------    ---------------------

Commission file number      0-18444
                       -----------------

                  Yager/Kuester Public Fund Limited Partnership
--------------------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)

          North Carolina                                56-1560476
(State or other jurisdiction of             (I.R.S. Employer Identification No.)
  incorporation or organization)


12201 Steele Creek Road, P.O. Box 412080
         Charlotte, North Carolina                             28241
----------------------------------------------         ---------------------
(Address of principal offices)                               (Zip Code)

Registrant's telephone number, including area code:      (704) 588-4074
                                                         --------------

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

                                                     Name of Each Exchange on
         Title of Each Class                             Which Registered
         -------------------                             ----------------
                None

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

Limited Partnership Units
                           -----------------------------------------------------
                            (Title of Class)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or 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        No   X
                                        -----    -----

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

State the aggregate market value of the voting stock held by nonaffiliates of
the registrant. The aggregate market value shall be computed by reference to the
price at which the stock was sold, or the average bid and asked prices of such
stock, as of a specified date within 60 days prior to the date of filing. Not
Applicable.

Documents Incorporated By Reference

         Exhibits (4) and (10.1) of Part IV, required by Item 601 of Regulation
S-K, are incorporated by reference from the prospectus of the registrant, dated
December 1, 1987, Registration Number 33-07056-A (hereinafter "Prospectus").

         This document contains 31 pages. The Exhibit Index is located on page
23.


                                        1


<PAGE>   2



                                     PART I

         Item 1. Business. The registrant is a North Carolina limited
     partnership formed in July 1986 (hereinafter referred to as the
     "Partnership"). The Partnership engaged in a "blind pool offering," the
     proceeds of which were used to purchase income-producing real property.
     During the year ended December 31, 1988, the Partnership received the
     minimum investment required to remove subscribers' funds from escrow. The
     Partnership's offering terminated with a total subscription of $3,195,000
     from investor limited partners. The net proceeds were used to purchase the
     properties described in Item 2 below, to pay the expenses of the offering
     and to fund the working capital account. The funds not required for those
     purposes, totaling $84,273, were returned to investors.

         The sole business of the Partnership is the operation of commercial
     office buildings purchased with the proceeds of the public offering. (See
     Item 2 below for a description of the properties.) During the year ended
     December 31, 1996, the occupancy of the United Carolina Bank Building was
     maintained at 96% and the EastPark Executive Center facilities were
     maintained at 95% occupancy. The lease terms with the major tenants at such
     properties are summarized below.

              (i) EastPark Executive Center, Charlotte, NC - the General
              Services Administrator ("GSA") has a lease term for a ten (10)
              year period ending on October 31, 2004, at a rental rate of $14.15
              per square foot. GSA may, at its election, terminate the lease
              after eight (8) years. The GSA leased premises include
              approximately 32,000 square feet. The Partnership incurred
              leasehold improvements expense of approximately $1,092,000 for the
              GSA space. Such improvements were completed in October 1996. The
              GSA lease accounts for approximately 78% of the rental income
              related to the EastPark Executive Center.

              (ii) United Carolina Bank Building, Greenville, SC - Metropolitan
              Life Insurance Company ("Metlife") is in the third year of a five
              year lease renewal. The rental rate is $14.00 per square foot
              during the first three years of the renewal term and escalates to
              $14.25 per square foot during the last two years of the renewal
              term. In lieu of granting an upfit allowance, Metlife was allowed
              a rent concession of $6,250 per month for the first twelve (12)
              months of the renewal term; the concession terminated July 31,
              1995. Metlife and United Carolina Bank ("UCB"), account for 66%
              and 26%, respectively, of the rental income related to the United
              Carolina Bank Building. The UCB lease (which currently provides
              for a $14.06 per square foot rental rate) will expire on July 31,
              1999.

         The General Partners entered into separate listing agreements for both
     properties with a Charlotte-based commercial real estate broker at the
     beginning of the third quarter of 1996. The Generals Partners believe the
     focus of the partnership should be towards selling the two Partnership
     properties separately now that the GSA upfit at the EastPark Executive
     Center is complete. The EastPark Executive Center and UCB Building are
     listed at $3,800,000 and $4,100,000 respectively.

          The Partnership has no employees of its own; management of the
     Partnership's property is performed by Kuester Properties, Inc., an
     affiliate of FSK Limited Partnership. Administration of the Partnership is
     performed by the General Partners. (See Items 10 and 13 below.)

         Item 2. Properties. On June 23, 1989, the Partnership purchased the
     EastPark Executive Center, an office complex comprised of two buildings
     located in Charlotte, North Carolina with net leasable area of 45,300
     square feet, for a purchase price of $3,155,138 of which $1,500,000 was
     provided by a first mortgage loan bearing interest at 10.5% per annum and
     having a term of 10 years. The lender, United of Omaha Life Insurance
     Company ("United Omaha"), is not affiliated with the Partnership.

         On November 30, 1989, the Partnership acquired the United Carolina Bank
     Building, a three-story office building in Greenville, South Carolina with
     net leasable area of 39,138 square feet, for a purchase price of $4,202,544
     of which $3,110,000 was provided by a first mortgage loan from United
     Omaha, bearing interest at 9.625% per annum and having a term of 7 years.
     During the fourth quarter of 1996, this debt was refinanced with First
     Union National Bank. (See item 7 below for a discussion of refinancing
     matters.)

          In connection with the office building purchases, $26,312 of
     acquisition costs were capitalized.

          No further purchases of real property are projected and no funds are
     available for that purpose.



                                        2


<PAGE>   3



         Item 3. Legal Proceedings. The Partnership is not involved in any
     legal proceedings and was not so involved during the year ended December
     31, 1996.

         Item 4. Submission of Matters to a Vote of Security Holders. Not
     applicable.

                                     PART II

         Item 5. Market for the Partnership's Common Equity and Related
     Stockholder Matters. There is no established public trading market for the
     Partnership's securities. The Partnership has 535 limited partners. Cash
     distributions made to the limited partners during the past years are set
     out in the Statements of Cash Flow included in the Financial Statements
     included in Part II, Item 8 of this Report.

         Item 6.  Selected Financial Data.

<TABLE>
<CAPTION>
                                                            At or For
                                                      Year Ended December 31,
                                                      -----------------------

                                1996            1995            1994             1993              1992
                             ----------      ----------      ----------      -----------       -----------
<S>                           <C>            <C>             <C>             <C>               <C>
Summary of Operations

   Rental income              1,150,758      $1,172,935      $1,114,741      $ 1,067,859       $ 1,042,672

   Net income (loss)             40,561          29,787          17,865          (15,330)          (49,816)

   Net income (loss)
     per limited
     partnership unit              6.30            4.63            2.77            (2.38)            (7.74)

Summary of Financial
Position:

   Total assets              $7,864,107      $7,214,881      $6,951,442      $ 7,037,438       $ 7,107,578

   Long-term debt, less
     current maturities       4,059,909       1,288,754       4,220,469        4,330,390         4,363,603

   Distribution per
     limited partner-
     ship unit                     --              --              --               --                --

   Number of limited
     partnership units            6,370           6,370           6,370            6,370             6,370
</TABLE>


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

         Liquidity and Capital Resources

         During the year ended December 31, 1996, the Partnership continued to
     fund working capital requirements. The working capital deficiency decreased
     from ($3,094,205) at December 31, 1995 to ($864,930) at December 31, 1996.
     The increase in the working capital is primarily a result of the
     refinancing of the loan on the United Carolina Bank, which is now shown as
     a long-term liability. This loan was refinanced in the form of a line of
     credit for $2,840,000 through First Union Bank of North Carolina. The line
     of credit carries an interest rate at the 3-month LIBOR rate plus 1.75%
     and is repayable in monthly payments of accrued interest only until
     December 1, 1997 when all remaining principal and interest shall be due.
     If the UCB building is not sold by this time, the loan can be renewed for
     an additional year to expire on December 1, 1998.




                                        3


<PAGE>   4



         Although there was an overall decrease in current liabilities, there
     was an increase in the $1,000,000 line-of-credit note payable by the
     Partnership to First Union Bank of North Carolina for the EastPark
     Executive Center GSA upfit, of which $942,483 and $219,783 was
     outstanding at December 31, 1996 and 1995 respectively. The line of
     credit is unsecured and is payable on demand.

         The cumulative unpaid priority return to the unit holders increased
     from $1,681,265 at December 31, 1995 to $1,924,049 at December 31, 1996.
     This increase resulted from no distributions being made to partners during
     the year and the pro rata share due partners pursuant to the Limited
     Partnership Agreement. Based on current and projected commercial real
     estate market conditions, the General Partners believe that it is
     reasonably unlikely that a sale of the Partnership properties would produce
     net sale proceeds sufficient to pay the priority return. Furthermore, the
     General Partners believe that it is reasonably unlikely that the
     Partnership's operating income or any refinancing of Partnership debt would
     generate sufficient funds to pay the priority return.

         During the year ended December 31, 1996, the Partnership had net income
     of $40,561 compared to the net income of $29,787 and $17,865 in 1995 and
     1994, respectively. Rental income, operating expenses, and interest expense
     for the years ended December 31, 1996 and 1995 resulted exclusively from
     the operations of the Partnership's commercial real estate properties. The
     EastPark Executive Center buildings, purchased June 23, 1989, were 95%
     leased at December 31, 1995 and were 96% leased at December 31, 1996. The
     United Carolina Bank Building, purchased November 30, 1989, was 100% leased
     at December 31, 1995 and 96% in 1996. In March 1997, approximately 1,400
     square feet was leased to United Health Care Incorporated. This lease will
     expire on July 31, 1999. Occupancy at the United Carolina Bank Building is
     now at 100%.

         The Partnership entered into a Loan Extension and Modification
     Agreement dated as of May 12, 1993 with Internet Services Corporation, a
     North Carolina corporation (formerly International Network Services
     Corporation) owned equally by three trusts, the beneficial interests of
     which inure respectively to the benefit of the three children of Dexter
     Yager, the sole General Partner of DRY Limited Partnership, which limited
     partnership is one of the two general partners of the Partnership. Pursuant
     to the Agreement, the Partnership agreed to pay Internet $91,275 over a
     five-year period, with annual principal payments of $18,255 each, together
     with interest at the rate equal to the prime rate of NationsBank of North
     Carolina N.A., determined on an annual basis, plus two percent (2.0%).

         See Item 13 (Certain Relationships and Related Transactions) for a
     discussion regarding leasing commissions paid to Kuester Properties, Inc.,
     a General Partner of the Partnership.

         In the event that funds derived from operations are insufficient to
     meet the Partnership's working capital needs, the General Partners have
     agreed to fund the shortfall.

         Results of Operations

         Comparison of 1996 results with 1995.

         Operating results increased slightly from an operating income of
     $444,916 during the year ended December 31, 1995 to an operating income of
     $449,277 for the comparable year 1996. Operating income expressed as a
     percentage of rental income increased from 37.9% for the year ended
     December 31, 1995 to 39.0% for the comparable year 1996. While the overall
     occupancy rate for 1996 was comparable to 1995, rental income nevertheless
     decreased by approximately $22,000. This decrease of rental income in 1996
     can be attributed to the decrease in common area maintenance ("CAM")
     reimbursements provided by the Metropolitan Life Insurance Company lease at
     the UCB facility. Operating expenses were lower overall in 1996 by
     approximately $26,000. Decreased professional fees accounted for a major
     portion of such decrease. The remaining expense decrease can be attributed
     to decreased contract labor and miscellaneous expenses. Nonoperating income
     and expenses for the year ended December 31, 1996 decreased 1.5% from the
     comparable year 1995.



                                        4


<PAGE>   5


     Comparison of 1995 results with 1994.

          Operating results increased slightly from an operating income of
     $438,454 during the year ended December 31, 1994 to an operating income of
     $444,916 for the comparable year 1995. Operating income expressed as a
     percentage of rental income decreased from 39.3% for the year ended
     December 31, 1994 to 37.9% for the comparable year 1995. While the overall
     occupancy rate for 1995 was comparable to 1994, rental income nevertheless
     increased by approximately $58,000. This increase of rental income in 1995
     can be attributed to having a full year of the increased rental rates that
     were negotiated during the second half of 1994. Operating expenses were
     higher overall in 1995 by approximately $51,000. Increased professional
     fees, relating to the potential sale of the properties, comprised the
     greatest increase in the expenses. The remaining expense increase can be
     attributed to increased repairs, maintenance, depreciation and
     amortization. Nonoperating income and expenses for the year ended December
     31, 1995 decreased 1.3% from the comparable year 1994.

          Item 8. Financial Statements and Supplementary Data. The financial
     statements are attached hereto.


                                        5




<PAGE>   6



                       [MCGLADREY & PULLEN LLP LETTERHEAD]




                          INDEPENDENT AUDITOR'S REPORT


To the Partners
Yager/Kuester Public Fund
   Limited Partnership
Charlotte, North Carolina

We have audited the accompanying balance sheets of Yager/Kuester Public Fund
Limited Partnership as of December 31, 1996 and 1995, and the related statements
of operations, partners' equity and cash flows for each of the three years in
the period ended December 31, 1996. These financial statements are the
responsibility of the Partnership's management. Our responsibility is to express
an opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Yager/Kuester Public Fund
Limited Partnership as of December 31, 1996 and 1995, and the results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1996, in conformity with generally accepted accounting principles.



                                      /s/ McGladrey & Pullen, LLP



Charlotte, North Carolina
February 5, 1997




                                       6
<PAGE>   7



YAGER/KUESTER PUBLIC FUND
LIMITED PARTNERSHIP

BALANCE SHEETS
DECEMBER 31, 1996 AND 1995


<TABLE>
<CAPTION>
ASSETS                                                                       1996            1995
                                                                         ----------      ----------
<S>                                                                      <C>             <C>
Current Assets
  Cash and cash equivalents (Note 2)                                     $  103,036      $  139,930
  Accounts receivable, tenants (Note 9)                                      91,224          37,565
  Prepaid expenses                                                            2,200           1,100
  Securities available for sale (Notes 3 and 4)                             190,380         135,050
                                                                         ----------      ----------
          TOTAL CURRENT ASSETS                                              386,840         313,645
                                                                         ----------      ----------
Investments and Noncurrent Receivables
  Properties on operating leases and properties held for lease, net
    (Notes 5 and 6)                                                       7,371,229       6,774,759
  Accrued rent receivable                                                    44,785          57,283
                                                                         ----------      ----------
                                                                          7,416,014       6,832,042
                                                                         ----------      ----------
Other Assets
  Deferred charges, net of accumulated amortization
    1996 $11,282; 1995 $35,919                                               10,818          10,180
  Deferred leasing commissions, net of accumulated amortization
    1996 $31,476; 1995 $18,721                                               50,435          59,014
                                                                         ----------      ----------
                                                                             61,253          69,194
                                                                         ----------      ----------
                                                                         $7,864,107      $7,214,881
                                                                         ==========      ==========

LIABILITIES AND PARTNERS' EQUITY

Current Liabilities
  Note payable, bank (Note 6)                                            $  942,483      $  219,783
  Current maturities of long-term debt (Note 6)                              68,868       2,931,715
  Accounts payable                                                          109,107         128,472
  Accrued expenses                                                          131,312         127,880
                                                                         ----------      ----------
          TOTAL CURRENT LIABILITIES                                       1,251,770       3,407,850
                                                                         ----------      ----------
Long-Term Debt, less current maturities (Note 6)                          4,059,909       1,288,754
                                                                         ----------      ----------
Commitment and Contingency (Note 7)
Partners' Equity
  General partners                                                            2,199           1,795
  Limited partners (Note 7)                                               2,545,393       2,505,236
  Unrealized gain on investment securities (Note 4)                           4,836          11,246
                                                                         ----------      ----------
                                                                          2,552,428       2,518,277
                                                                         ----------      ----------
                                                                         $7,864,107      $7,214,881
                                                                         ==========      ==========
</TABLE>

See Notes to Financial Statements.


                                       7
<PAGE>   8


YAGER/KUESTER PUBLIC FUND
LIMITED PARTNERSHIP

STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994


<TABLE>
<CAPTION>
                                                         1996              1995              1994
                                                     -----------       -----------       -----------

<S>                                                  <C>               <C>               <C>
Rental income (Notes 5 and 9)                        $ 1,150,758       $ 1,172,935       $ 1,114,741
                                                     -----------       -----------       -----------
Operating expenses:
  Contract labor                                          18,028            40,307            33,690
  Depreciation and amortization                          204,261           179,987           173,606
  Repairs and maintenance                                146,900           133,822           125,585
  Management fees (Note 8)                                47,172            50,981            50,471
  Utilities                                              147,098           149,027           154,259
  Professional fees                                       30,954            57,331            22,696
  Property taxes                                          88,857            88,046            92,677
  Miscellaneous                                           18,211            28,518            23,303
                                                     -----------       -----------       -----------
                                                         701,481           728,019           676,287
                                                     -----------       -----------       -----------
          OPERATING INCOME                               449,277           444,916           438,454
                                                     -----------       -----------       -----------
Nonoperating income (expense):
  Interest income                                            651               724             4,360
  Interest expense                                      (425,669)         (422,066)         (432,683)
  Other                                                   16,302             6,213             7,734
                                                     -----------       -----------       -----------
                                                        (408,716)         (415,129)         (420,589)
                                                     -----------       -----------       -----------
          NET INCOME                                      40,561            29,787            17,865
Deduct net income applicable to limited
partners (per limited partner unit) 1996 $6.30;
1995 $4.63; 1994 $2.77                                    40,157            29,489            17,685
                                                     -----------       -----------       -----------
          NET INCOME APPLICABLE TO
          GENERAL PARTNERS (PER LIMITED
          PARTNER UNIT) 1996 $.06; 1995
          $.05; 1994 $.03                            $       404       $       298       $       180
                                                     ===========       ===========       ===========
</TABLE>

See Notes to Financial Statements.


                                       8
<PAGE>   9

YAGER/KUESTER PUBLIC FUND
LIMITED PARTNERSHIP

STATEMENTS OF PARTNERS' EQUITY
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994

<TABLE>
<CAPTION>
                                                                        Net unrealized
                                                                        Gain (Loss) on
                                                                          Securities
                                         General        Limited           Available
                                         Partners       Partners           For Sale           Total
                                        ----------      -----------       -----------       ----------
<S>                                     <C>             <C>               <C>
Balance, December 31, 1993              $    1,317      $ 2,458,062       $      --
                                                                                             2,459,379
  Net income                                   180           17,685              --             17,865
  January 1, 1994 adoption of FASB
    Statement No. 115 (Note 3)                --               --               1,811            1,811
  Change in fair market value on
    securities available for sale
    (Note 4)                                  --               --              (7,116)          (7,116)
                                        ----------      -----------       -----------       ----------
Balance, December 31, 1994                   1,497        2,475,747            (5,305)       2,471,939

  Net income                                   298           29,489              --             29,787
  Change in fair market value on
    securities available for sale
    (Note 4)                                  --               --              16,551           16,551
                                        ----------      -----------       -----------       ----------
Balance, December 31, 1995                   1,795        2,505,236            11,246        2,518,277

  Net Income                                   404           40,157              --             40,561
  Change in fair market value on
    securities available for sale
    (Note 4)                                  --               --               6,410)          (6,410)
                                        ----------      -----------       -----------       ----------
Balance, December 31, 1996              $    2,199      $ 2,545,393       $     4,836       $2,552,428
                                        ==========      ===========       ===========       ==========
</TABLE>

See Notes to Financial Statements.



                                       9
<PAGE>   10


YAGER/KUESTER PUBLIC FUND
LIMITED PARTNERSHIP

STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994

<TABLE>
<CAPTION>
                                                                 1996            1995            1994
                                                             -----------       ---------       ---------
<S>                                                          <C>               <C>             <C>
Cash Flows From Operating Activities
  Net income                                                 $    40,561       $  29,787       $  17,865
  Adjustments to reconcile net income to
    net cash provided by operating activities:
    Depreciation                                                 184,825         162,035         161,169
    Amortization                                                  19,436          17,952          12,437
    Net realized (gains) losses on sale of securities
      available for sale                                          (3,118)          3,940            --
    Changes in assets and liabilities:
      Increase in accounts receivable, tenant
        and accrued rent receivable                              (41,161)        (23,206)        (37,353)
      Increase (decrease) in:
      Accounts payable and accrued
        expenses                                                 (15,933)        107,238           2,664
      Other prepaids and accruals, net                            (1,100)           (877)          1,691
                                                             -----------       ---------       ---------
          NET CASH PROVIDED BY OPERATING
            ACTIVITIES                                           183,510         296,869         158,473
                                                             -----------       ---------       ---------
Cash Flows From Investing Activities
  Purchase of securities available for sale                     (145,542)       (193,803)        (29,570)
  Proceeds from sale of securities available for
    sale                                                          86,920         176,620            --
  Purchase of investment property                               (781,295)       (355,955)        (34,989)
  Disbursements for deferred leasing commissions                  (4,395)         (1,569)        (75,948)
  Disbursements for deferred charges                              (7,100)           --              --
                                                             -----------       ---------       ---------
          NET CASH USED IN INVESTING ACTIVITIES                 (851,412)       (374,707)       (140,507)
                                                             -----------       ---------       ---------
Cash Flows from Financing Activities
  Proceeds from long-term borrowings                           2,840,000            --              --
  Principal payments on long-term borrowings                  (2,931,692)       (109,921)       (101,219)
  Proceeds from note payable                                     722,700         219,783            --
                                                             -----------       ---------       ---------
                    NET CASH PROVIDED BY (USED IN)
                      FINANCING ACTIVITIES                       631,008         109,862        (101,219)
                                                             -----------       ---------       ---------
                    NET INCREASE (DECREASE) IN CASH AND
                      CASH EQUIVALENTS                           (36,894)         32,024         (83,253)
Cash and cash equivalents:
  Beginning                                                      139,930         107,906         191,159
                                                             -----------       ---------       ---------
  Ending                                                     $   103,036       $ 139,930       $ 107,906
                                                             ===========       =========       =========
</TABLE>



                                       10
<PAGE>   11

YAGER/KUESTER PUBLIC FUND
LIMITED PARTNERSHIP

STATEMENTS OF CASH FLOWS (CONTINUED)
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994


<TABLE>
<CAPTION>
                                                          1996           1995           1994
                                                       ---------       --------      ---------
<S>                                                    <C>             <C>           <C>
Supplemental Disclosure of Cash Flow Information:
  Cash payment for interest, net of interest
    capitalized                                        $ 424,000       $423,197      $ 433,719
Supplemental Disclosures of Noncash Transactions:
  Marketable equity securities transferred to
    securities available for sale                           --             --           80,990
  Net unrealized gain (loss) on securities
    available for sale                                    (6,410)        16,551         (5,305)
</TABLE>


See Notes to Financial Statements.



                                       11
<PAGE>   12



YAGER/KUESTER PUBLIC FUND
   LIMITED PARTNERSHIP


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




NOTE 1. NATURE OF BUSINESS AND ORGANIZATION, PARTNERSHIP AGREEMENT AND
        SIGNIFICANT ACCOUNTING POLICIES

Nature of business and organization: The Partnership is a North Carolina limited
partnership formed in July 1986. The purpose of the Partnership is to acquire,
operate, hold for investment and sell property. Properties currently held are
located in Charlotte, North Carolina and Greenville, South Carolina.

The general partners of the Partnership are DRY Limited Partnership, a North
Carolina limited partnership in which Dexter R. Yager, Sr. is the general
partner and FSK Limited Partnership, a North Carolina limited partnership in
which Faison S. Kuester, Jr. is the general partner.

Partnership agreement: Under the terms of the partnership agreement, all taxable
income, tax losses and cash distributions from operations are to be allocated
99% to the limited partners and 1% to the general partners until the limited
partners receive a return of their initial capital contributions and a "Priority
Return". The Priority Return is a sum equal to 8% per annum cumulative, but not
compounded, (prorated for any partial year) of the adjusted capital
contributions of the limited partners, calculated from the last day of the
calendar quarter in which each limited partner is admitted to the Partnership to
the date of payment. Thereafter, taxable income, tax losses and cash
distributions from operations will be allocated 75% to the limited partners and
25% to the general partners.

Upon the sale or refinancing of any future partnership properties, the
partnership agreement specifies certain allocations of net proceeds and taxable
gain or loss from the transaction.

A summary of the Partnership's significant accounting policies follows:

Use of management's estimates: The preparation of financial statements in
conformity with generally accepted accounting principles 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.

Cash and cash equivalents: For purposes of reporting the statements of cash
flows, the Partnership includes all cash accounts, which are not subject to
withdrawal restrictions or penalties, and all highly liquid debt instruments
purchased with an original maturity of three months or less as cash and cash
equivalents on the accompanying balance sheets. At various times throughout the
year, the Partnership may have cash balances at financial institutions which
exceed federally-insured amounts.

Investments: Properties on operating leases and properties held for lease are
stated at the lower of cost less accumulated depreciation or fair market value.
Depreciation is computed by the straight-line method over 40 years for buildings
and over 15 years for building improvements.


                                       12
<PAGE>   13


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


NOTE 1. NATURE OF BUSINESS AND ORGANIZATION, PARTNERSHIP AGREEMENT AND
        SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Investment in securities available for sale and accounting change: Statement No.
115 requires that management determine the appropriate classification of
securities at the date of adoption, and thereafter at the date individual
investment securities are acquired, and that the appropriateness of such
classification be reassessed at each balance sheet date. Since the Partnership
neither buys securities in anticipation of short-term fluctuations in market
prices or can commit to holding debt securities to their maturities, the
investment in debt and marketable equity securities have been classified as
available for sale in accordance with Statement No. 115. Available for sale
securities are stated at fair value, and unrealized holding gains and losses are
reported as a separate component of partners' equity. Realized gains and losses,
including losses from declines in value of specific securities determined by
management to be other-than-temporary, are included in income. Realized gains
and losses are determined on the basis of the specific securities sold.

Note 3 to the financial statements provides further information about the effect
of adopting Statement No. 115.

Deferred charges: Deferred charges are related to prepaid fees which are
amortized over the length of the related loans, 1 to 10 years, on a
straight-line basis.

Deferred leasing commissions: Deferred leasing commissions related to obtaining
specific leases are amortized using the straight-line method over the
noncancelable lease terms which range from three to seven years.

Revenue recognition: Rental revenue is recognized evenly over the term of the
lease. In connection with negotiating and obtaining leases, the Partnership's
management may at times grant concessions, such as free rent for a specific
number of months during the lease. These costs are amortized over the life of
the lease.

Disclosures about the fair value of financial instruments: Financial Accounting
Standards Board Statement No. 107, Disclosures About Fair Value of Financial
Instruments, requires disclosure of fair value information about financial
instruments, whether or not recognized in the balance sheet, for which it is
practicable to estimate that value. Statement 107 excludes certain financial
instruments and all nonfinancial instruments from its disclosure requirements.
At December 31, 1996 and 1995 the carrying values of the Partnership's financial
instruments, including accounts receivable which are due on demand and the
mortgage payable which bears interest at market rates, approximate their fair
values.

Income taxes: Under current income tax laws, income or loss of the Partnership
is included in the income tax returns of the partners. Accordingly, the
Partnership will make no provision for federal or state income taxes.




                                       13
<PAGE>   14


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



NOTE 2. WORKING CAPITAL RESERVE

Per the Partnership Agreement, a minimum cash and cash equivalents reserve of
$94,500 must be maintained to fund any expenditures that the cash flow generated
from properties on operating leases is insufficient to meet. At December 31,
1996 and 1995, the Partnership exceeded the minimum requirement by $8,536 and
$45,430, respectively.


NOTE 3. ACCOUNTING CHANGE

As discussed in Note 1, the Partnership adopted FASB Statement No. 115 as of
January 1, 1994. There was no effect to net income in 1994 for adopting
Statement No. 115. The January 1, 1994 balance of partners' equity was increased
by $1,811 to recognize the net unrealized holding gain on securities at that
date.


NOTE 4. SECURITIES AVAILABLE FOR SALE

The following is a summary of the Partnership's securities available for sale as
of December 31, 1996 and 1995:

<TABLE>
<CAPTION>
                                                   Gross        Gross
                                                 Unrealized   Unrealized         Fair
                                      Cost         Gains        Losses          Value
                                    --------      -------      ---------       --------
                                                          1996
                                    ---------------------------------------------------
<S>                                 <C>           <C>          <C>             <C>
Securities available for sale:
  Common stock                      $107,500      $ 4,775      $    --         $112,275
  Corporate bonds and notes           57,615          261           (432)        57,444
  Government securities               20,429          232           --           20,661
                                    --------      -------      ---------       --------
                                    $185,544      $ 5,268      $    (432)      $190,380
                                    ========      =======      =========       ========

<CAPTION>
                                                           1995
                                    ---------------------------------------------------
<S>                                 <C>           <C>          <C>             <C>
Securities available for sale:
  Common stock                      $108,800      $11,100      $    --         $119,900
  Mutual fund                         15,004          146           --           15,150
                                    --------      -------      ---------       --------
                                    $123,804      $11,246      $    --         $135,050
                                    ========      =======      =========       ========
</TABLE>

     As of December 31, 1996, the Partnership did not have trading or held to
maturity securities.

     A summary of investment earnings included in nonoperating income (expense)
in the accompanying Statements of Operations for the years ended December 31,
1996, 1995 and 1994 is as follows:

<TABLE>
<CAPTION>
                                                                     1996          1995       1994
                                                                  -------       -------       ----
<S>                                                               <C>           <C>           <C>
    Realized gains on sale of securities available for sale       $ 3,162       $ 1,805       $--
    Realized losses on sale of securities available for sale          (44)       (5,745)       --
                                                                  -------       -------       ----
                                                                  $ 3,118       $(3,940)      $--
                                                                  =======       =======       ====
</TABLE>



                                       14
<PAGE>   15


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



NOTE 4. SECURITIES AVAILABLE FOR SALE (CONTINUED)

     The amortized cost and fair values of securities available for sale as of
December 31, 1996 by contractual maturity are shown below. The "other
securities" have no contractual maturity.

<TABLE>
<CAPTION>
                                           Amortized       Fair
                                              Cost         Value
                                            --------      --------
<S>                                         <C>           <C>
Due after one year through five years       $ 18,404      $ 17,975
Due after five years through ten years        39,211        39,469
Other securities                             127,929       132,936
                                            --------      --------
                                            $185,544      $190,380
                                            ========      ========
</TABLE>

     Proceeds from sales of securities available for sale during the years ended
December 31, 1996, 1995 and 1994 are as follows:

<TABLE>
<CAPTION>
                                                                 1996          1995         1994
                                                                -------      --------      ------
<S>                                                             <C>          <C>           <C>
      Proceeds from sales of securities available for sale      $86,920      $176,620      $ --
                                                                =======      ========      ======
</TABLE>

Dividend income included in nonoperating income (expense) in the accompanying
Statements of Operations totaled $6,980, $7,778 and $4,821 for the years ended
December 31, 1996, 1995 and 1994, respectively.

The changes in the net unrealized gain (loss) on securities available for sale
during the years ended December 31, 1996 and 1995 were $(6,410) and $16,551,
respectively, which have been included in the separate component of partners'
equity.


NOTE 5. PROPERTIES ON OPERATING LEASES AND PROPERTIES HELD FOR LEASE

The Partnership leases office facilities under various lease agreements. The
following schedule provides an analysis of the Partnership's investment in
properties held for lease by major classes as of December 31, 1996 and 1995,
respectively.

<TABLE>
<CAPTION>
                                             1996            1995
                                          ----------      ----------
<S>                                       <C>             <C>
Land                                      $1,168,953      $1,168,953
Building                                   6,188,729       6,188,729
Building improvements                      1,257,567         476,272
                                          ----------      ----------
                                           8,615,249       7,833,954
                                          ----------      ----------
Less accumulated depreciation              1,244,020       1,059,195
                                          ----------      ----------
                                          $7,371,229      $6,774,759
                                          ==========      ==========
</TABLE>




                                       15
<PAGE>   16



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


NOTE 5. PROPERTIES ON OPERATING LEASES AND PROPERTIES HELD FOR LEASE (CONTINUED)

The following is a schedule by years of all minimum future rentals on
noncancelable operating leases as of December 31, 1996:

<TABLE>
<CAPTION>
Year Ending
December 31,                                              Amount
-------------                                          -----------
<C>                                                    <C>
1997                                                   $ 1,116,075
1998                                                     1,008,014
1999                                                       779,710
2000                                                       494,728
2001                                                       461,766
Thereafter                                                 375,695
                                                       -----------
                                                       $ 4,235,988
                                                       ===========
</TABLE>

The Partnership properties are currently contracted with a real estate broker.
It is the intention of the General Partners to market and sell the properties.
The new sales proceeds will be used to return partners' equity.


NOTE 6. NOTE PAYABLE, BANK, LONG-TERM DEBT AND PLEDGED ASSETS

The Partnership has a $1,000,000 line-of-credit with an outstanding balance of
$942,483 and $219,783 at December 31, 1996 and 1995, respectively. The
line-of-credit allows borrowings and repayments to be made on a daily basis.
Outstanding balances on the line-of-credit bear interest at a variable rate tied
to the bank's prime rate (prime rate was 8.25% at December 31, 1996). The
line-of-credit is unsecured and is payable on demand.

Long-term debt and pledged assets consists of the following at December 31,
1996:


<TABLE>

<S>                                                                                 <C>
Note payable to United of Omaha, due in monthly installments of $14,976,
  including interest at 10.5%, through June 1999, with $1,115,064 due in
  July 1999, collateralized by mortgage on land and building                        $ 1,252,267

Note payable to First Union National Bank of North Carolina, interest only at
  the 3-month LIBOR plus 1.75% due monthly, through November 1998, balance due
  December 1998, unsecured and guaranteed by a general partner (A)                    2,840,000

Note payable to Internet Services Corporation, related through common ownership,
  due in five annual principal installments of $18,255, plus interest at the prime
  rate (8.25% at December 31, 1996) of NationsBank of North Carolina, N.A., plus
  2%, unsecured, due January 1998                                                        36,510
                                                                                    -----------
                                                                                      4,128,777

Less current maturities                                                                  68,868
                                                                                    -----------
                                                                                    $ 4,059,909
                                                                                    ===========
</TABLE>

(A)  The note payable to First Union National Bank of North Carolina matures on
     December 1, 1997. The Partnership has acquired a commitment letter which
     allows the Partnership to extend the repayment of the note to December 1,
     1998. Should the commitment letter be exercised, the Bank will require that
     the note be secured by a deed of trust on the respective property. The debt
     is accordingly classified as long-term debt for financial reporting
     purposes.


                                       16
<PAGE>   17


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



NOTE 6. NOTE PAYABLE, BANK, LONG-TERM DEBT AND PLEDGED ASSETS (CONTINUED)

Future maturities of long-term debt are as follows:

<TABLE>
<CAPTION>
Year Ending
December 31,                                                  Amount
------------                                                ----------
<C>                                                         <C>
1997                                                        $   68,868
1998                                                         2,914,445
1999                                                         1,145,464
                                                            ----------
                                                            $4,128,777
                                                            ==========
</TABLE>

Interest expense to Internet Services Corporation, for the years ended December
31, 1996, 1995 and 1994 was $3,834, $5,476, and $5,842, respectively.


NOTE 7. PRIORITY RETURN

The cumulative unpaid priority return to the limited partners is $1,924,049 and
$1,681,265 at December 31, 1996 and 1995, respectively. There were no cash
distributions to the limited partners for the priority return for the years
ended December 31, 1996, 1995 and 1994. Based on current and projected real
estate market conditions, the General Partners believe that it is reasonably
unlikely that a sale of the Partnership properties would produce sufficient net
sales proceeds to pay the priority return.




                                       17
<PAGE>   18



YAGER/KUESTER PUBLIC FUND
   LIMITED PARTNERSHIP


NOTES TO FINANCIAL STATEMENTS



NOTE 8. MANAGEMENT AND ADMINISTRATIVE EXPENSES

Management expenses paid to a General Partner and to Internet Services
Corporation in connection with day-to-day operations of the Partnership amounted
to $47,172, $50,981, and $50,471 for the years ended December 31, 1996, 1995 and
1994, respectively.


NOTE 9. MAJOR TENANTS

Rental income for the years ended December 31, 1996, 1995 and 1994,
respectively, included approximate rentals from the following major tenants each
of which accounted for 10% or more of the total rental income of the Partnership
for those years:

<TABLE>
<CAPTION>
                               Approximate Amount of Rental Income
                                     Year Ended December 31,
                            -----------------------------------------
                              1996             1995            1994
                            -------          -------          -------
<S>                         <C>             <C>              <C>
           Tenant A         455,000         $451,000         $347,000
           Tenant B         353,000          306,000          310,000
           Tenant C         117,000          138,000          132,000
</TABLE>

Accounts receivable from each of the major tenants identified above were as
follows at December 31, 1996 and 1995, respectively:

<TABLE>
<CAPTION>
                                 December 31,
                            ----------------------
                              1996          1995
                            -------        -------
<S>                         <C>            <C>
           Tenant A         $37,884        $37,565
           Tenant B            --            --
           Tenant C            --            --
</TABLE>


                                       18


<PAGE>   19



          Item 9. Changes in and Disagreements With Accountants on Accounting
     and Financial Disclosure. Not applicable.


                                    PART III

          Item 10. Directors and Executive Officers of the Partnership. The
     Partnership has no executive officers and directors. The General Partners
     of the partnership are DRY Limited Partnership, the sole General Partner of
     which is Dexter R. Yager, Sr., and FSK Limited Partnership, the sole
     General Partner of which is Faison S. Kuester, Jr.

          Following is a brief discussion of the background and experience of
     Messrs. Kuester and Yager.

          Faison S. Kuester, Jr., 51, graduated from the University of North
     Carolina at Chapel Hill with a Bachelor of Arts Degree in History in 1967.
     He is a resident of Charlotte, North Carolina. After three years service in
     the United States Army as a Lieutenant, Mr. Kuester joined Independence
     Development Corporation in 1972 serving as a director of leasing and
     management for a period of three years. In 1974, Mr. Kuester formed his own
     company, Kuester Realty and Management, in order to lease and manage
     commercial properties in Charlotte, North Carolina and surrounding
     communities. In addition to leasing and managing various commercial
     properties, Kuester Realty had developed two medical clinics in the
     Charlotte area. In 1980, Kuester Properties, Inc. ("KPI") was formed to
     specialize in on-site management of apartment communities in the
     southeastern United States. The following year Cauble and Kuester Company,
     Inc. was organized to lease and manage commercial properties in the
     metropolitan Atlanta area. This partnership brought together Cauble and
     Company, experienced mortgage lenders and leasing agents in the Atlanta
     market, and Kuester Realty and Management. Finally, in 1983, Kuester
     Development Corporation was formed to allow the Kuester companies to engage
     in selective real estate development projects in the southeastern United
     States.

          Through Kuester Development Corporation, a wholly-owned subsidiary of
     KPI, Mr. Kuester has been directly involved with the development of several
     commercial real estate properties in North and South Carolina and Georgia.
     These include the First United National Bank Building in Wilmington, North
     Carolina, two retail office showroom projects, two medical office buildings
     and residential condominiums in Charlotte, North Carolina, an office
     building in Savannah, Georgia, and an office building in Greenville, South
     Carolina. Kuester Development Corporation also has developed over 700
     apartment units throughout Charlotte, North Carolina since 1983. KPI is
     active in the management of these units as well as managing other clients'
     multifamily developments.

          In 1989, Mr. Kuester, Jr. established Kuester Hospitality Corporation
     for the purpose of acquiring and managing health care facilities. In 1995,
     he established Kuester HealthCare Services, Inc. ("KHCS") to offer various
     health care services, including development and brokerage of health care
     facilities.

          KPI serves as property manager of the Partnership property.

          Dexter R. Yager, Sr., 57, is the President and founder of D&B Yager
     Enterprises, Inc., Mr. Yager's Amway distributorship business. Through D&B
     Yager Enterprises, Inc., Mr. Yager has been an independent distributor for
     Amway Corporation for over 30 years during which time he has achieved the
     status of Crown Ambassador, which is the highest level attainable as an
     Amway distributor. The Amway Corporation is one of the largest
     manufacturers of home care products in the world. He is also a former
     member and past president of the Amway Distributor Association Board of
     Directors. Mr. Yager has many other family-owned businesses and is
     responsible for the development of several businesses, including the
     following: Yager Personal Development, Inc., which handles Mr. Yager's
     services as a speaker at Amway events, Yager Construction Company, Inc.,
     which is a general building contractor; and Dexter and Birdie Yager Family
     Limited Partnership, which owns various real estate investments and manages
     real estate for the Yager family.

          Mr. Yager has significant experience in real estate investment for his
     own account. Mr. Yager personally, and through partnerships in which he and
     his wife own a majority interest, has made investments in raw land, office
     buildings, a shopping center, and other commercial and residential real
     estate having a market value in excess of $10,000,000. He has made
     substantial additional real estate investments through partnerships in
     which he does not own a majority interest.

          Item 11. Executive Compensation. The Partnership does not employ any
     executive officers or directors and no compensation is paid to any person
     for performing services typically provided by such an officer or director.
     Dexter R. Yager,


                                       19


<PAGE>   20



     Sr. and Faison S. Kuester have policymaking functions with regard to
     Partnership operations. See Item 10 for the relationship of such persons to
     the Partnership. See Item 13 for a description of payments made to Kuester
     Properties, Inc. for property management services and to Internet Services
     Corporation, Inc. for bookkeeping and accounting services.

          Item 12. Security Ownership of Certain Beneficial Owners and
     Management. The General Partners initially contributed a total of $2,500 to
     the capital of the Partnership, consisting of a $1,600 contribution from
     DRY Limited Partnership and $900 from FSK Limited Partnership. The General
     Partners own a 1% interest in all items of Partnership income, gain, loss,
     deductions or credits including 1% of net cash from operations. The General
     Partners also own a residual 25% interest in net cash from a sale or
     refinancing of the Partnership Property, subordinated to the receipt by the
     Limited Partners of the return of their capital contributions and their
     priority return and to the payment of any subordinated real estate
     commissions due to affiliates of the General Partners.

          The General Partners do not own any Limited Partnership interest in
     the Partnership.

          Item 13. Certain Relationships and Related Transactions. During the
     fiscal year ended December 31, 1996, Kuester Properties, Inc. received
     management fees of $46,517 for management of the Partnership property.
     Internet Services Corporation, Inc. received $7,327 for providing
     accounting/bookkeeping services. See Item 7 for a description of a loan to
     the Partnership by Internet Services Corporation, a corporation owned
     equally by three trusts, the beneficial interests of which inure to the
     benefit of three children of Dexter R. Yager, Sr., the sole General Partner
     of DRY Limited Partnership, which limited partnership is one of the two
     general partners of the Partnership. Janitorial services for the EastPark
     Executive Center are provided by Marquis Cleaning Services, which is
     operated and owned by Dexter R. Yager's nephew.

          The General Partners believe that the terms for the above mentioned
     services are as favorable as those the Partnership might have obtained from
     unaffiliated parties.

                                     PART IV

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

          (a)(1) The following financial statements of the Partnership are
     included in Part II, Item 8 hereof.

                 (i)   Independent Auditor's Report

                 (ii)  Balance Sheets as of December 31, 1996 and 1995

                 (iii) Statements of Operations for years ended December 31,
                       1996, 1995 and 1994

                 (iv)  Statements of Partners' Equity for years ended
                       December 31, 1996, 1995 and 1994

                 (v)   Statements of Cash Flows for years ended December 31,
                       1996, 1995 and 1994

                 (vi)  Notes to Financial Statements

          (a)(2) All schedules have been omitted because they are inapplicable,
                 not required, or the information is included elsewhere in the
                 financial statements or notes thereto.

          (a)(3) Exhibits:

               (4)  Instrument defining rights of securities holders - set forth
                    in the Limited Partnership Agreement which is contained in
                    the Prospectus incorporated herein by reference.

             (10.1) Limited Partnership Agreement - contained in Prospectus
                    incorporated herein by reference.

             (10.2) Exclusive Leasing and Management Agreement dated October
                    1, 1994 (EastPark Executive Center).

             (10.3) Exclusive Leasing and Management Agreement dated October
                    1, 1994 (United Carolina Bank Building).

             (10.4) Listing Agreement of Property for Sale - United Carolina
                    Bank Building.



                                       20


<PAGE>   21



             (10.5) Listing Agreement of Property for Sale - EastPark
                    Executive Center.

             (10.6) Promissory Note with First Union Bank of North Carolina
                    dated November 27, 1996 for the United Carolina Bank
                    Building.

               (23) Consent of Independent Auditor

               (27) Financial Data Schedule.

          (b)  Reports on Form 8-K: None.

          (c)  Exhibits: The exhibits listed in Item 14(a)(3) above and not
               incorporated herein by reference are filed with this Form 10-K.




                                       21


<PAGE>   22




                                   SIGNATURES

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


                                     YAGER/KUESTER PUBLIC FUND
                                     LIMITED PARTNERSHIP

                                     By: FSK Limited Partnership


March 27, 1997                           By:   /s/ Faison S. Kuester, Jr.
                                              ----------------------------
                                              Faison S. Kuester, Jr.
                                              General Partner
                                              (Principal Executive Officer)


         Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below on March 27, 1997 by the following persons on
behalf of the Partnership and in the capacities and on the dates indicated.


 /s/ Jerry R.  Haynes                       /s/ Faison S. Kuester
--------------------------------------      -----------------------------------
(Principal Accounting Officer)              Faison S. Kuester, Jr., General
                                            Partner of FSK Limited Partnership,
                                            General Partner of the Partnership

Date  March 27, 1997                        Date  March 27, 1997
     ----------------------------------           ---------------


                                            /s/ Dexter R. Yager, Sr.
                                            -----------------------------------
                                            Dexter R. Yager, Sr., General
                                            Partner of DRY Limited Partnership,
                                            General Partner of the Partnership

                                            Date  March 27, 1997
                                                  --------------

                                       22


<PAGE>   23



                                  EXHIBIT INDEX

     The following documents are included in this Form 10-K as an Exhibit:

<TABLE>
<CAPTION>

             Designation
             Number Under
Exhibit      Item 601 of                                                                  Page
Number       Regulation S-K      Exhibit Description                                     Number
------       --------------      -------------------                                     ------

<S>                <C>           <C>                                                      <C>
    1*             (4)           Limited Partnership Agreement

    2*             (10.1)        Limited Partnership Agreement

    3**            (10.2)        Exclusive Leasing and Management Agreement
                                 dated October 1, 1994 - (EastPark Executive Center)

    4**            (10.3)        Exclusive Leasing and Management Agreement
                                 dated October 1, 1994 - (United Carolina Bank
                                 building)

    5***           (10.4)        Listing Agreement of Property for Sale - United
                                 Carolina Bank Building

    6***           (10.5)        Listing Agreement of Property for Sale - EastPark
                                 Executive Center.

    7              (10.6)        Promissory Note with First Union Bank of North           24
                                 Carolina dated November 27, 1996

    8              (23)          Consent of Independent Auditor                           30

    9              (27)          Financial Data Schedule                                  31
</TABLE>


----------
*    Incorporated by reference to Exhibit A of the Partnership's Prospectus
     dated December 1, 1987, Registration Number 33-07056-A.

**   Incorporated by reference to Exhibit 3 and 4 of the Partnership's Form 10-K
     for year ended December 31, 1995.

***  Incorporated by reference to Exhibit 3 and 4 of the Partnership's Form 10-Q
     for the quarter ended June 30, 1996.



                                       23