FORM 10-K

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

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

                      For the year ended December 31, 1997

                                       OR

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

                  For the transition period ________ to _______
                         Commission File Number T3-24235

                   SECURED INVESTMENT RESOURCES FUND, L.P. III
             (Exact name of registrant as specified in its charter)

                 Missouri                               48-6291172
      (State or other jurisdiction of       (I.R.S. Employer Identification No.)
       incorporation or organization)

1100 Main, Suite 2100 Kansas City, Missouri                      64105
 (Address of principal executive offices)                      (Zip Code)

(Registrant's telephone number, including area code)         (816) 421-4670

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

                                      None

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

                     Limited Partnership Interests ("Units")

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding  12 months  (or such  shorter  periods  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. [X]


                                        1

<PAGE>
                                     PART I

Item 1. Business

Secured  Investment  Resources  Fund,  L.P.  III  ("Partnership")  is a Missouri
limited  partnership  formed  pursuant to the Missouri  Revised  Uniform Limited
Partnership  Act on April 20, 1988. SIR Partners III,  L.P., a Missouri  limited
partnership,  Nichols Resources Ltd., a Missouri  corporation and James R. Hoyt,
an individual,  are the General Partners.  James R. Hoyt is the Managing General
Partner. The Partnership has no predecessors or subsidiaries.

On July 31, 1998,  Nichols  Resources,  Ltd., a General Partner,  filed Form 8-K
with the SEC describing a Settlement  Agreement and Mutual Release between James
R. Hoyt, Managing General Partner; SIR Partners III, L.P., a General Partner and
Nichols  Resources,  Ltd, also a General Partner.  Under terms of the agreement,
James R. Hoyt and SIR Partners  III have agreed to withdraw as General  Partners
of the  partnership  (as described in item 12).  This  settlement is expected to
have a positive future impact on the Partnership.

The  Partnership  was formed to engage in the business of acquiring,  improving,
developing,   operating  and  holding  for  investment   income  producing  real
properties   with  the   objectives  of  (i)   preserving   and  protecting  the
Partnership's capital; (ii) providing cash distributions from operations;  (iii)
providing   capital  growth  through   property   appreciation   of  Partnership
properties; and (iv) increasing equity in property ownership by the reduction of
mortgage  loans on  Partnership  properties.  The term of the  partnership is 60
years from the date of the Partnership Agreement (December 6, 1988), or the date
on which all of the assets acquired by the Partnership are sold and converted to
cash.

On December 7, 1990, the  Partnership  closed its offering having received gross
proceeds  of  $4,842,500  from the sale of 9,685  units of  limited  partnership
interests.

The Partnership acquired two apartment communities in 1989. The General Partners
feel  that  these  properties  met the  Partnership's  investment  criteria  and
objectives.  Because of many factors, the Partnership did not raise the level of
capital anticipated. Accordingly, the General Partners were unable to obtain the
targeted leveraged ratio and a residential/commercial property mix.

As of December 31, 1997, the Partnership has made cash  distributions to Limited
Partners of $363,928 for the period April 1, 1989 through  December 31, 1997. No
distributions have been made since July 1990. Future  distributions will only be
made from excess cash flow not needed for working capital reserves.

As of December 31, 1997,  the  Partnership  had no  employees.  As of January 1,
1995,  employees of SPECS,  Inc.  provide  property  management  services to the
Partnership  (as  described in Note E). James R. Hoyt,  a  General  Partner,  is
the owner of 33% of SPECS, Inc. as of December 31, 1997.


                                        2

<PAGE>
Item 1.  Business--Cont'd..

As of December 31, 1997, the  Partnership  was in negotiation  with the mortgage
holder  on KC Club  Apartments  concerning  a  restructure  of that  debt.  More
favorable   interest  rates  and  possible  principal  write  downs  were  under
consideration.  Due to the inability to restructure the debt, on January 7, 1998
the property was lost to foreclosure (as described in Note L).

Competition

The real estate  business is highly  competitive and the Partnership
competes with numerous entities engaged in real estate activities, some of which
may  have  greater  financial  resources  than  those  of the  Partnership.  The
Partnership's  management  believes  that success  against such  competition  is
dependent  upon the  geographic  location of the property,  the  performance  of
property  managers,  the  amount  of  new  construction  in  the  area  and  the
maintenance  and  appearance  of  the  property.  With  respect  to  residential
property, competition is also based upon the design and mix of the units and the
ability to provide a community  atmosphere  for  the tenants.  The Partnership's
direct competitors, located within five miles of the  Bicycle  Club  Apartments,
are Quail Run Apartments, 690 units built in 1985; Falcon Point, 192 units built
in 1988; The Ethans, 606 units built in 1988; Camden Passage, 598 units built in
1989-1998; The Lakes, 400 units built in 1987  and  Kelly  Crossing,  624  units
built  in  1998.  The  Bicycle Club Apartments is competitive in terms of square
footage per unit  and  rents  for  unit  types.  The   Partnership's  management
believes  that  general  economic  circumstances  and trends and  new properties
in the vicinity of each of the Partnership's properties will also be competitive
factors.

Inflation

The effects of inflation on the Partnership's  operations or investments are not
quantifiable.  Revenues from property operations fluctuate  proportionately with
increases and decreases in housing costs.  Fluctuations in the rate of inflation
also affect the sales values of properties  and,  correspondingly,  the ultimate
gains to be realized by the Partnership from property sales.

                                        3

<PAGE>

Item 2.  Properties

The following  table sets forth the investment  portfolio of the  Partnership at
December 31, 1997:

<TABLE>
<CAPTION>

                                                                                   Average
                                                            Properties at        Occupancy(*)
     Property          Description        Initial Cost      Date Acquired        Percentage
    ----------        -------------      --------------    ---------------      -------------
                                                                                1997    1996
<S>                    <C>                <C>               <C>                 <C>
KC Club Apartments      200 units         $5,070,992        June 14, 1989        84%     88%
Kansas City, MO

Greenhills Bicycle      312 units        $11,251,613        Oct. 27, 1989        91%     91%
Club Apartments
Kansas City, MO
</TABLE>

(*) Based upon vacancy amount (in dollars) as a percent of gross possible rents.
(Gross possible rents is calculated by multiplying  established market rents for
each unit type by the total unit mix.  Established  market  rents  are  budgeted
rents, established by conducting market surveys to determine the  typical  rents
charged for similar properties in the area and through knowledge  of  the  rates
the market will bear for similar unit types.)

The encumbrances against each property are described in Note C.

On January 7, 1998 KC Club  Apartments  was lost to  foreclosure as described in
Note L.


Description of Real Estate:

The partnership's  remaining  property,  the Greenhills Bicycle Club Apartments,
consists of 312 units of  multi-family  rental real estate.  On July 8, 1996 the
Partnership  refinanced  the matured first  mortgage on Greenhills  Bicycle Club
Apartments.  The terms of the  mortgage are  $8,100,000  at 9.0%  interest  with
monthly  principal  and interest  payments in the amount of $65,000  through the
loan maturity date of August 1, 2001. The outstanding  principal  balance of the
note at  December  31,  1997 is  $8,025,000.  The  balance to be due at maturity
assuming  no payment  has been made on  principal  in advance of its due date is
$7,766,000. The note can be prepaid with penalty. In addition, a second mortgage
note was signed by the Partnership.  The terms of the new note are $400,000 with
interest paid monthly at the rate of 9% with a maturity date of July 31, 2001 at
which time the principal shall be due. The note can be prepaid without penalty.

Competition:

The real estate business is highly competitive and the Partnership competes with
numerous  entities  engaged in real  estate  activities,  some of which may have
greater  financial  resources than those of the Partnership.  The  Partnership's
management  believes that success against such competition is dependent upon the
geographic location of the property,  the performance of property managers,  the
amount of new construction in the area and the maintenance and appearance of the
property.  With respect to residential property,  competition is also based upon
the  design  and mix of the  units  and  the  ability  to  provide  a  community
atmosphere for the tenants. The Partnership's direct competitors, located within
five miles of the  Bicycle  Club Apartments, are Quail Run Apartments, 690 units
built in 1985; Falcon Point, 192 units built  in  1988;  The Ethans,  606  units
built in 1988;


                                       4

<PAGE>

Item 2.  Properties

Competition - Cont'd

Camden Passage, 598 units built in 1989-1998; The Lakes, 400 units built in 1987
and Kelly  Crossing, 624 units built  in  1998.  The  Bicycle Club Apartments is
competitive in terms of square footage  per  unit  and  rents  for  unit  types.
The Partnership's  management believes that general economic  circumstances  and
trends  and  new  properties  in the  vicinity  of  each  of  the  Partnership's
properties will  also  be  competitive  factors.  The  partnership's  management
believes that the properties are adequately covered by insurance.

Operating Data:

The occupancy  rate for the Greenhills  Bicycle Club  Apartments for each of the
last five years was:

1993: 93%      1994: 92%        1995: 93%        1996: 91%       1997: 91%

The  average  effective  annual  rental per unit for each of the last five years
was:

1993: $4,685  1994: $4,870    1995: $5,360    1996: $5,750    1997: $6,000

Depreciation:

Investment  property is depreciated on a straight-line  basis over the estimated
useful life of the property (30 years for buildings  and 5 years for  furniture,
fixtures and equipment). Improvements are capitalized and depreciated over their
estimated  useful  lives.   Maintenance  and  repair  expenses  are  charged  to
operations  as incurred.  Cost  (including  capital  improvements  subsequent to
acquisition)  of the Greenhills  Bicycle Club Apartments at December 31, 1997 is
$11,045,368.



Item 3.  Legal Proceedings.

As of December 31, 1997, the Partnership  was in negotiations  with the mortgage
holder  on KC Club  Apartments  concerning  a  restructure  of that  debt.  More
favorable   interest  rates  and  possible  principal  write  downs  were  under
consideration.  Due to the inability to restructure the debt, on January 7, 1998
the property was lost to foreclosure.

The assets and  liabilities as of December 31, 1997 that were  applicable to the
foreclosed property approximated the following:

    Investment properties, net of accumulated depreciation       $3,388,000
    Other assets                                                     84,000
    Mortgage payable, including accrued interest                 (3,992,000)
    Other liabilities                                              (259,000)

Rental  revenue for the KC Club  Apartments for the year ended December 31, 1997
was $853,000 while operating expenses (including interest) were $1,160,000.

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

         None

                                       5

<PAGE>


                                     PART II

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

          (A) There is no established  public trading market for the Units  of
              the Partnership.

          (B) There  have  been  no distributions the last three  years.

          (C) As of December 31,  1997,  the   Partnership  had  admitted  539
              Limited Partners who purchased 9,685 units.

             (The remainder of this page intentionally left blank.)

Item 6.  Selected Financial Data,

<TABLE>
<CAPTION>
OPERATING DATA
(In Thousands)                     1997        1996        1995        1994        1993
                               --------    --------    --------    --------    --------
<S>                            <C>         <C>         <C>         <C>         <C>     
Rents                          $  2,791    $  2,768    $  2,697    $  2,299    $  2,261
Interest and earnings on
  investments                       196          90         128         106         103
Property operating
  expense                         1,473       1,504       1,560       1,454       1,260
Interest expense                  1,113       1,126         925         931         974
Depreciation/
   Amortization                     605         606         512         648         711
                               --------    --------    --------    --------    --------

Partnership Loss                   (204)       (378)       (172)       (628)       (581)
                               ========    ========    ========    ========    ========

PER LIMITED PARTNERSHIP UNIT
Partnership Loss (1)           $ (20.87)   $ (38.64)   $ (17.54)   $ (64.23)   $ (59.39)
                               ========    ========    ========    ========    ========

Cash Distribution              $   --      $   --      $   --      $   --      $   --
                               ========    ========    ========    ========    ========


BALANCE SHEET DATA                 1997        1996        1995        1994        1993
                               --------    --------    --------    --------    --------

(In Thousands)
Total Assets                   $ 11,617    $ 12,749    $ 13,223    $ 14,227    $ 14,779
Mortgage Debt                  $ 12,344    $ 12,931    $ 12,851    $ 13,737    $ 13,770

</TABLE>

(1) Partnership  loss per limited  partnership unit is computed by dividing loss
allocated  to the Limited  Partners by the  weighted  average  number of limited
partnership units outstanding (9,685 units for each period).

                                        6

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

Results of Operations

Revenue  for  the  Partnership  increased  in  1997 to  $2,987,000  compared  to
$2,858,000  (4.5%) in 1996. This increased revenue was the result of an increase
in gross  possible  rental rates.  During 1997 the operating and  administrative
costs decreased  $31,000 (2.1%) primarily in the areas of services,  payroll and
marketing.  The decrease  in  service,  payroll  and  marketing  was  caused  by
continuing  management  initiatives  to  decrease  administrative  expenses  and
budgets, and increase Net Operating Income.

Interest expense decreased from $1,126,000 in 1996 to $1,112,000 (1.2%) in 1997.
The decrease in interest expense was due to the reduction in  principal  related
to the KC Club Apartments of $530,000, which was paid with the proceeds  of  the
sale of the certificate of accrual (as described in note  D).  Depreciation  and
amortization expense decreased from $606,000 to  $605,000.  The  1997  net  loss
decreased by $174,000 (46.0%).

Revenue for the  Partnership  was  $2,858,000 for 1996 as compared to $2,825,000
(1.2%)  in 1995.  During  1996 the  operating  costs  decreased  $44,000  (3.4%)
primarily in the areas of services, marketing,  and  payroll.  The  decrease  in
service, payroll and marketing was caused by management initiatives to  decrease
administrative expenses and budgets, and increase Net Operating Income.

Interest expense increased from $925,000 in 1995 to $1,126,000  (21.7%) in 1996.
In 1995, the interest rate on the first mortgage of the Bicycle Club  Apartments
was 5.5%.  On December 31, 1995, the loan was refinanced with an  interest  rate
of 8% and on July 8, 1996, the loan was refinanced with an interest rate of  9%.
Therefore, the effective interest rate change from 5.5% in 1995 to approximately
8.5% in 1996, is the primary cause of the increase in interest expense from 1995
to 1996.  Depreciation and amortization  increased  from  $512,000  to  $606,000
(18.3%).  The increase in depreciation and amortization was due primarily to the
refinancing of the Bicycle Club Apartments.  When  the  loan  was  refinanced in
July, 1996 the unamortized loan fees  of  $44,000  relating  to the December 31,
1995 refinancing were written off.  An additional $29,000  of  amortization  was
amortized  relating  to the costs of refinancing  in  July,  1996.  Depreciation
expense increased due to depreciation of additions to fixed assets during  1996.
The 1996 net loss increased by $206,000 (120.3%).

Total expenses  decreased  $56,000 (3.5%) for 1996  operations  compared to 1995
results.   The  decrease  in  expenses  was  primarily  due  to  a  decrease  in
administrative, marketing, and payroll costs.

The Partnership  anticipates  that 1998 operations will improve as the result of
the  foreclosure of the KC Club  Apartments  and of planned  increases in rental
rates and decreased promotional rental incentives at the Greenhills Bicycle Club
Apartments.  This planned  increase in net rental  income will be coupled with a
close monitoring of costs.

                                       7

<PAGE>

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

Results Of Operations - Cont'd

Due to the  inability  to  renegotiate  loan terms with the lender,  the KC Club
Apartments was foreclosed in 1998. It is anticipated  that this will result in a
decrease in revenue with a corresponding  decrease in expenses.  The 1997 rental
revenue for the KC Club was  $853,000  and expenses  (including  interest)  were
$1,160,000.

Liquidity and Sources of Capital

During  1997,  the primary  source of working  capital was provided by investing
activities in the amount of $887,000.  Operations  used  $59,000,  and financing
activities  (primarily payments  on  debt,  as  described  in  the  Consolidated
Statement  of Cash Flows) used $594,000.  During the year accounts  payable  and
accrued  expenses  increased  by  $56,000  and  accrued  interest  decreased  by
$386,000.

The  Partnership  invested  $500,000  (held as a  Certificate  of Accrual with a
market  value of  $1,037,000  as of  December  31,  1996)  which was  pledged as
collateral on the KC Club Apartments  until the property's net operating  income
achieved  the level of 120% of the debt  service  on the first  mortgages  for a
consecutive 24- month period or May 31, 2004,  whichever is earlier. As a result
of  declining  cash  flows  for KC Club  Apartments,  on  August  1,  1997,  the
Certificate  of Accrual was sold.  The proceeds of  $1,083,000  were used to pay
$553,000  of accrued  interest  and  $530,000  of  delinquent  principal  on the
property.  The cash generated from operations for that property was insufficient
to service the mortgage  under the existing  payment  requirements.  The General
Partner  had  ongoing   negotiations  with  the  lender  concerning  a  complete
restructure  of the mortgage and related debt  service.  The  negotiations  were
unsuccessful and on January 7, 1998 the property was lost to foreclosure.

During 1996, the primary source of working capital was provided by existing cash
balances.  Operations provided $49,000,  investing activities consumed $207,000,
and financing activities used $246,000. During 1996 accounts payable and accrued
expenses decreased $339,000 and accrued interest payable increased by $142,000.

On July 8, 1996 the Partnership refinanced the matured $8,400,000 first mortgage
on  Greenhills  Bicycle  Club  Apartments.  The  terms of the new  mortgage  are
$8,100,000 at 9.0% interest with monthly  principal and interest payments in the
amount of $65,000 through the loan maturity date of August 1, 2001 (5 years).

In addition, a second mortgage note was signed by the Partnership.  The terms of
the note were  $400,000  with  interest  paid  monthly  at the rate of 9% with a
maturity  date of July 31, 2001 at which time the  principal  shall be due.  The
note can be prepaid at a discount.  The past due real estate taxes on Greenhills
Bicycle Club Apartments were paid in full from a portion of the proceeds of this
note.


                                        8
<PAGE>

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

Liquidity and Sources of Capital - Cont'd

The funds advanced by the Partnership to Secured Investment Resources Fund, L.P.
began to be repaid,  including  9%  interest,  in May,  1995.  No  principal  or
interest  payments were received in 1997,  while interest  accrued into the note
balance was $7,349.

As a result of the  foreclosure  of the KC Club  Apartments,  the  liquidity and
financial  condition  of the  Partnership  is  expected  to  improve.  The  cash
generated from operations for the KC Club Apartments was insufficient to service
the mortgage on the  property.  The 1997 Net  Operating  Income  after  interest
expense of the remaining property,  The Greenhills Bicycle Club Apartments,  was
$395,000.

One Time Gain on Sale of Investment

The  Partnership  recorded  a one  time  gain on the  sale of an  investment  of
$114,531.  The  Certificate  of Accrual  (as  described  in Note D.) was sold on
August 1, 1997 for $1,083,068.  The recorded value of the Certificate of Accrual
was $968,537, resulting in a one time gain on the sale of $114,531.

Year 2000

The Partnership is currently dependent upon the General Partners and SPECS, Inc.
("SPECS") for management and administrative services. It is anticipated that the
General  Partners  and SPECS  will have to modify or replace  portions  of their
software so that the computer  systems will  function  properly  with respect to
dates in the year 2000 and  thereafter  (the "Year 2000 Issue").  The project is
estimated to be completed no later than January,  1999. It is  anticipated  that
SPECS will install a Year 2000 compliant software system at the property by that
date. The cost of the conversion is not anticipated to be material.  The general
partners believe that with  modifications to existing software and conversion to
new software, the Year 2000 Issue will not pose significant operational problems
for its  computer  systems.  The  General  Partners  also  believe  that if such
conversions are not made, or are not completed timely, the Year 2000 issue would
not have a material impact on the operations of the Partnership.

Inflation

The effects of inflation on the Partnership's  operations or investments are not
quantifiable.  Revenues from property operations fluctuate  proportionately with
increases and decreases in housing costs.  Fluctuations in the rate of inflation
also affect the sales values of properties  and,  correspondingly,  the ultimate
gains to be realized by the Partnership from property sales.

                                       9

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

New Accounting Standards

SFAS No.  130,  "Reporting  Comprehensive  Income,"  was  issued  in June  1997.
Comprehensive  income is  defined  as net  income  plus  certain  items that are
recorded directly to shareholders'  equity,  such as unrealized gains and losses
on  available-for-sale  securities.  Components of comprehensive  income will be
included  in a  financial  statement  that  has the  same  prominence  as  other
financial  statements  starting in the first  quarter of fiscal  1999.  SFAS No.
130's disclosure requirements will have no impact on the Partnership's financial
condition or results of operations.

SFAS  No.  131,   "Disclosure  about  Segments  of  an  Enterprise  and  Related
Information," is effective for financial  statements for periods beginning after
December 15, 1997,  but interim  reporting is not required in 1998. An operating
segment is  defined  under SFAS No. 131 as a  component  of an  enterprise  that
engages in  business  activities  that  generate  revenue  and expense for which
operating  results are  reviewed by the chief  operating  decision  maker in the
determination   of  resource   allocation  and   performance.   The  Partnership
anticipates no impact of SFAS No. 131 on future financial statement disclosures.

In April 1998, the Accounting  Standards Executive Committee issued Statement of
Position 98-5 Reporting on the Costs of Start-Up  Activities.  SOP 98-5 provides
guidance on the financial reporting of start up costs and organization costs. It
requires costs of start-up  activities and organization  costs to be expensed as
incurred.  The SOP broadly defines start-up  activities and provides examples to
help entities determine what costs are and are not within the scope of this SOP.
The SOP applies to all  nongovernmental  entities and, in general,  is effective
for financial statements for fiscal years beginning after December 15, 1998.

The  Partnership  is not in its start-up phase and thus does not expect this SOP
to  have a  significant  effect  on its  financial  statement  when  it  becomes
effective.

In June  1998,  the  Financial  Accounting  Standards  Board  Issued  SFAS  133,
Accounting for Derivative Instruments and Hedging Activities.  SFAS 133 requires
companies to recognize all derivatives contracts as either assets or liabilities
in the balance  sheet and to measure them at fair value.  If certain  conditions
are met, a derivative may be specifically  designated as a hedge,  the objective
of which is to match  the  timing  of gain or loss  recognition  on the  hedging
derivative  with the  recognition  of (i) the  changes  in the fair value of the
hedged asset or liability that are  attributable  to the hedged risk or (ii) the
earnings  effect of the hedged  forecasted  transaction.  For a  derivative  not
designated as a hedging instrument,  the gain or loss is recognized in income in
the period of change.  SFAS 133 is effective  for all fiscal  quarters of fiscal
years beginning after June 15, 1999.

Historically,  the Partnership has not entered into derivatives contracts either
to  hedge  existing  risks  or  for  speculative  purposes.   Accordingly,   the
Partnership  does not expect  adoption of the new standard on January 1, 2000 to
affect its financial statements.

                                       10

<PAGE>

Item 8.  Financial Statements and Supplementary Data

                   SECURED INVESTMENT RESOURCES FUND, L.P. III


                                      Index
                                                                            Page
Independent Auditors' Report                                                 12

Financial Statements:

     Consolidated Balance Sheets - December 31,                           13-14
       1997 and 1996

     Consolidated Statements of Operations -
       Years ended December 31, 1997, 1996 and 1995                          15

     Consolidated Statements of Partnership Deficit
       Years ended December 31, 1997, 1996 and 1995                          16

     Consolidated Statements of Cash Flows -
       Years ended December 31, 1997, 1996 and 1995                       17-18

     Notes to Consolidated Financial Statements                           19-28

                                       11

<PAGE>

                          INDEPENDENT AUDITORS' REPORT

The Partners
Secured Investment Resources Fund, L.P. III
Mission, KS

   We have  audited  the  accompanying  consolidated  balance  sheets of Secured
Investment  Resources Fund, L.P. III and affiliated companies as of December 31,
1997 and 1996, and the related statements of operations, partnership deficit and
cash flows for each of the three years in the period ended December 31, 1997. We
have  also  audited  the  schedules  listed  in the  accompanying  index.  These
financial  statements and schedules are the  responsibility of the Partnership's
management.  Our  responsibility  is to express  an  opinion on these  financial
statements and schedules based upon 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 and schedules are
free of material  misstatement.  An audit includes  examining,  on a test basis,
evidence supporting the amounts and disclosures in the financial  statements and
schedules.  An audit also includes assessing the accounting  principles used and
significant  estimates  made by  management,  as well as evaluating  the overall
presentation  of the financial  statements  and  schedules.  We believe that our
audits provide a reasonable basis for our opinion.

   In our  opinion,  the  consolidated  financial  statements  referred to above
present  fairly,  in all material  respects,  the financial  position of Secured
Investment  Resources  Fund,  L.P.  III at December  31, 1997 and 1996,  and the
results of their  operations and their cash flows for each of the three years in
the period  ended  December  31,  1997 in  conformity  with  generally  accepted
accounting principles.

   Also in our opinion,  the schedules present fairly, in all material respects,
the information set forth therein.

                                                           s/ BDO Seidman LLP


St. Louis, Missouri
February 6, 1998



                                       12
<PAGE>

SECURED INVESTMENT RESOURCES FUND, L.P. III
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
                                                           December 31,
                                                     1997                   1996
                                                  -----------            ----------
<S>                                               <C>                      <C>        
ASSETS

INVESTMENT PROPERTIES (Notes B and C)

  Land and buildings                            $14,591,003              $14,569,699
  Furniture, fixtures and equipment               1,516,980                1,471,943
                                                -----------              -----------
                                                 16,107,983               16,041,642
     Less accumulated depreciation               (5,273,994)              (4,732,073)
                                                -----------              -----------
                                                 10,833,989               11,309,569
RESTRICTED DEPOSITS
  Certificate of Accrual on
    Treasury Security (Notes C and D)                ---                     898,023
    Restricted Reserve Fund                          93,553                   34,490
                                                -----------              -----------
                                                     93,553                  932,513

Cash                                                317,315                   82,985

Rents and other receivables, less
  allowance for doubtful accounts
  of $16,200 in 1997 and
  $12,000 in 1996                                     7,347                    5,106

Prepaid expenses and deposits                        30,695                   29,161

Due from related parties (Notes F and G)
  Notes receivable                                   85,694                   78,345
  Syndication costs                                  21,751                   21,751
Debt issuance costs, net of
  accumulated amortization of
  $94,880 in 1997 and $31,627
  in 1996.                                          226,659                  289,913
                                                -----------              -----------
                                                    689,461                  507,261
                                                -----------              -----------

TOTAL ASSETS                                    $11,617,003             $12,7849,343
                                                ===========              ===========

</TABLE>
See notes to consolidated financial statements.

                                       13

<PAGE>

SECURED INVESTMENT RESOURCES FUND, L.P. III
CONSOLIDATED BALANCE SHEETS--CONT'D.
<TABLE>
<CAPTION>
                                                            December 31,
                                                     1997                 1996
                                                  -----------          ----------

<S>                                               <C>                 <C>
LIABILITIES AND PARTNERSHIP DEFICIT

Mortgage debt (Note C)                            $12,344,460         $12,931,003
Accounts payable and accrued expenses --
     (Note H)                                         300,653             244,253
Accrued interest                                      141,133             527,106
Unearned revenue                                       14,449              30,360
Tenant security deposits                              105,913             102,050
                                                  -----------         -----------

TOTAL LIABILITIES                                  12,906,608          13,834,772
                                                  -----------         -----------

PARTNERSHIP DEFICIT
General Partners
     Capital contributions                              2,000               2,000
     Partnership deficit                              (52,051)            (50,009)
                                                  -----------         -----------
                                                      (50,051)            (48,009)
                                                  -----------         -----------

Limited Partners (9,865 units)
     Capital contributions                          3,915,084           3,915,084
     Partnership deficit                           (5,154,638)         (4,952,504)
                                                  -----------         -----------
                                                    1,239,554           1,037,420
                                                  -----------         -----------
TOTAL PARTNERSHIP DEFICIT                          (1,289,605)         (1,085,429)
                                                  -----------         -----------
TOTAL LIABILITIES & PARTNERSHIP DEFICIT           $11,617,003         $12,749,343
                                                  ===========         ===========

</TABLE>

See notes to consolidated financial statements.

                                       14

<PAGE>

SECURED INVESTMENT RESOURCES FUND, L.P. III
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
                                                                   Years Ended December 31,
                                                         1997                 1996             1995
                                                    ------------         ------------     ------------
<S>                                                 <C>                  <C>              <C>
REVENUES
     Rents                                           $2,790,617            $2,767,870       $2,697,035
     Interest and other investment
       income                                           196,127                90,428          128,763
                                                      ---------             ---------        ---------
                                                      2,986,744             2,858,298        2,825,798
                                                      ---------             ---------        ---------
OPERATING AND ADMINISTRATIVE EXPENSES
     Property operating expenses                      1,189,480             1,177,374        1,222,240
     General and administrative expenses                 54,526                70,752           70,672
     Professional services (Note E)                      91,873               118,896          136,955
     Management fees (Note E)                           137,445               137,449          130,229
     Depreciation and Amortization                      605,175               605,578          512,242
                                                      ---------             ---------        ---------
                                                      2,078,499             2,110,049        2,072,338
                                                      ---------             ---------        ---------

 NET OPERATING INCOME                                   908,245               748,249          753,460

NON-OPERATING EXPENSES
     Interest                                         1,112,421             1,126,256          925,019

PARTNERSHIP LOSS                                    $  (204,176)          $  (378,007)     $  (171,559)
                                                      =========             =========        =========

Allocation of loss
     General Partners                               $    (2,042)          $    (3,780)     $    (1,715)
     Limited Partners                                  (202,134)             (374,227)        (169,844)
                                                      ---------             ---------        ---------
                                                    $  (204,176)          $  (378,007)     $  (171,559)
                                                      =========             =========        =========

Partnership loss per
limited partnership unit                            $    (20.87)          $    (38.64)     $    (17.54)
                                                      =========             =========        =========
</TABLE>

See notes to consolidated financial statements.

                                       15

<PAGE>

SECURED INVESTMENT RESOURCES FUND, L.P. III
CONSOLIDATED STATEMENTS OF PARTNERSHIP DEFICIT
<TABLE>

Years Ended December 31, 1997, 1996 and 1995
<CAPTION>
                                        General          Limited*
                                        Partners         Partners         Total
                                        ----------      ----------      ---------
<S>                                     <C>             <C>              <C>
Balances at January 1, 1995             $(42,514)        $(493,349)     $(535,863)

Partnership loss                          (1,715)         (169,844)      (171,559)
                                        --------         ---------      ---------
Balances at December 31, 1995            (44,229)         (663,193)      (707,422)

Partnership loss                          (3,780)         (374,227)      (378,007)
                                        --------         ---------      ---------
Balances at December 31, 1996            (48,009)      $(1,037,420)    (1,085,429)

Partnership  loss                         (2,042)         (202,134)      (204,176)
                                        --------         ---------      ---------
Balances at December 31, 1997           $(50,051)      $(1,239,554)   $(1,289,605)
                                        ========         =========      =========

</TABLE>

* (9,685 Limited Partner Units)

See notes to consolidated financial statements.

                                       16
<PAGE>
SECURED INVESTMENT RESOURCES FUND, L.P. III

CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
                                                              Years Ended December 31,
                                                         1997            1996           1995
                                                       -------          ------         ------
<S>                                                    <C>            <C>           <C>
OPERATING ACTIVITIES
    Partnership loss                                  $ (204,176)     $ (378,007)   $ (171,559)
    Adjustments to reconcile
      partnership loss to net
      cash provided by (used in)
      operating activities:
         Depreciation and
           amortization                                  605,175         605,578       512,242
         Gain on sale of certificate of
           accrual on Treasury security                 (114,531)          ---            ---
         Provision for losses on rents
           and other receivables                           4,200           4,850          (664)
         Changes in assets
           and liabilities:
              Rent and other receivables                  (6,441)         (6,171)       48,063
              Prepaid expenses and deposits               (1,534)         (1,992)       22,148
              Accounts payable and
                 accrued expenses                         56,400        (339,486)      (12,170)
              Accrued interest                          (385,973)        141,726       240,385
              Unearned revenue                           (15,911)          2,881        17,520
              Tenant security deposits                     3,863          19,840         9,751
                                                       ---------        --------       -------

NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES                                     (58,928)         49,219       665,716

INVESTING ACTIVITIES
    Improvements to investment
      properties                                         (66,341)       (102,145)     (164,484)
    Interest earned on certificate
      of accrual on Treasury security                    (70,514)        (70,514)      (64,978)
    Proceeds from sale of certificate of
      accrual on Treasury security                     1,083,068           ---            ---
    Restricted deposits                                  (59,063)        (34,490)         ---
                                                       ---------        --------       -------

NET CASH PROVIDED BY
(USED IN) INVESTING ACTIVITIES                           887,150        (207,149)     (229,462)
                                                       ---------        --------       -------
</TABLE>
                                       17
<PAGE>

SECURED INVESTMENT RESOURCES FUND, L.P. III
CONSOLIDATED STATEMENTS OF CASH FLOWS--CONT'D
<TABLE>
<CAPTION>
                                                                  Years Ended December 31,
                                                            1997               1996               1995
                                                        ----------          ----------          --------
<S>                                                    <C>                 <C>                 <C>
FINANCING ACTIVITIES
    Debt issuance costs                                $  (---)            $ (321,890)         $    (235)
    Borrowings (payments) on debt                        (586,543)             79,621            (14,669)
         Received from related parties                     ---                  ---               18,879
         Note receivable from related parties              (7,349)             (3,702)           (98,080)
                                                       ----------          ----------          ---------
NET CASH USED IN
FINANCING ACTIVITIES                                     (593,892)           (245,971)           (94,105)
                                                       ----------          ----------          ---------

INCREASE/(DECREASE) IN CASH                               234,330            (403,901)          (342,149)

CASH BEGINNING OF PERIOD                                   82,895             486,886            144,737
                                                       ----------          ----------          ---------
CASH END OF PERIOD                                     $  317,315          $   82,985          $ 486,886
                                                       ==========          ==========          =========
</TABLE>
See notes to consolidated financial statements.

                                       18
<PAGE>

SECURED INVESTMENT RESOURCES FUND, L.P. III
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A--SIGNIFICANT ACCOUNTING POLICIES

Organization  and   Business--Secured   Investment   Resources  Fund,  L.P.  III
("Partnership")  is a  Missouri  limited  partnership  formed  pursuant  to  the
Missouri  Revised  Uniform  Limited  Partnership  Act on  April  20,  1988.  The
Partnership has invested in two apartment  complexes in the Metropolitan  Kansas
City Missouri area. It extends unsecured credit,  subject to security  deposits,
to its tenants in both complexes.  Tenant leases are generally subject to annual
renewals.  The General Partners' and Limited  Partners'  interest in Partnership
earnings or loss initially amounts to 1% and 99%,  respectively.  The allocation
of the 1% interest between the General Partners is discretionary.  At such point
in time cash  distributions  to the Limited  Partners  amount to their  original
invested  capital  plus  interest at a rate of the greater of 12% (14% for those
investors who  subscribed for units on or before 90 days after December 7, 1988)
or the increase in the consumer price index per annum, cumulative non-compounded
on their adjusted invested capital,  net income or loss will be allocated 15% to
the General Partners and 85% to the Limited Partners.

Consolidated  Limited  Partnerships--To  satisfy the lender's  requirements that
real estate  assets be in  single asset  partnerships,  in 1996 the  Partnership
formed a new single asset partnership by the name of Bicycle Club Joint Venture,
L.P.  The  Partnership  retained  the  same  partnership  structure  as  Secured
Investment  Resources  Fund, L.P. III, with Secured  Investment  Resources Fund,
L.P. III being the sole Limited Partner.  This single asset partnership has been
fully consolidated with the Partnership.

Depreciation--Investment  property is depreciated on a straight-line  basis over
the  estimated  useful life of the property (30 years for  buildings and 5 years
for  furniture,  fixtures  and  equipment).  Improvements  are  capitalized  and
depreciated over their estimated  useful lives.  Maintenance and repair expenses
are charged to operations as incurred.

Income  Taxes--Any  tax  liabilities  or benefits  arising from the  Partnership
operations  are  recognized   individually  by  the  respective   partners  and,
consequently,  no provision will be made by the  Partnership for income taxes or
income tax benefits.

Partnership  Loss Per  Limited  Partnership  Unit--Partnership  loss per limited
partnership  unit is  computed  by dividing  the loss  allocated  to the Limited
Partners by the weighted average number of limited  partnership  units sold. The
per unit  information has been computed based on 9,685 weighted  average limited
partnership units outstanding.

Debt  Issuance  Costs--Loan  costs,  when  incurrred,  are  capitalized  by  the
Partnership.  These costs are amortized over the term of the related loans.

                                       19

<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-- CONT'D.

NOTE A--SIGNIFICANT ACCOUNTING POLICIES-- CONT'D.

Restricted  Deposits--Certificates  of Accrual on  Treasury  Security  were sold
August 1, 1997. (As described in note D) These instruments are reported at cost,
adjusted for accretion of discounts  which  approximates  market.  The accretion
adjustment is recognized in interest  income using the interest  method over the
period to maturity.

Accounting 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
statement and the reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.

Accounting for the Impairment of Long-Lived Assets--SFAS 121 requires that long-
lived  assets  and  certain  intangibles  to be  held  and  used by an entity be
reviewed  for  impairment  when events or changes in circumstances indicate that
the carrying amount may not be recoverable. In addition, SFAS 121 requires long-
lived assets  and  certain  intangibles  to be disposed of to be reported at the
lower of carrying amount or fair value  less  costs  to  sell.  The  Partnership
evaluates long-lived assets to be held and  used for  impairment  when events or
changes in circumstances indicate that the  carrying  amount  of such assets may
not  be  recoverable.  Impairment  is recognized if expected undiscounted future
cash flows are less than the carrying amount of these assets. 

New Accounting  Standards-SFAS No. 130,  "Reporting  Comprehensive  Income," was
issued in June 1997.  Comprehensive income is defined as net income plus certain
items that are recorded  directly to  shareholders'  equity,  such as unrealized
gains and losses on available-for-sale  securities.  Components of comprehensive
income will be included in a financial statement that has the same prominence as
other  financial  statements  starting in the first quarter of fiscal 1999. SFAS
No.  130's  disclosure  requirements  will have no  impact on the  Partnership's
financial condition or results of operations.

SFAS  No.  131,   "Disclosure  about  Segments  of  an  Enterprise  and  Related
Information," is effective for financial  statements for periods beginning after
December 15, 1997,  but interim  reporting is not required in 1998. An operating
segment is  defined  under SFAS No. 131 as a  component  of an  enterprise  that
engages in  business  activities  that  generate  revenue  and expense for which
operating  results are  reviewed by the chief  operating  decision  maker in the
determination   of  resource   allocation  and   performance.   The  Partnership
anticipates no impact of SFAS No. 131 on future financial statement disclosures.

In April 1998, the Accounting  Standards Executive Committee issued Statement of
Position 98-5 Reporting on the Costs of Start-Up  Activities.  SOP 98-5 provides
guidance on the financial reporting of start up costs and organization costs. It
requires costs of start-up  activities and organization  costs to be expensed as
incurred.  The SOP broadly defines start-up  activities and provides examples to
help entities determine what costs are and are not within the scope of this SOP.
The SOP applies to all  nongovernmental  entities and, in general,  is effective
for financial statements for fiscal years beginning after December 15, 1998.

The  Partnership  is not in its start-up phase and thus does not expect this SOP
to  have a  significant  effect  on its  financial  statement  when  it  becomes
effective.

                                       20

<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-- CONT'D.

NOTE A--SIGNIFICANT ACCOUNTING POLICIES-- CONT'D.

In June  1998,  the  Financial  Accounting  Standards  Board  Issued  SFAS  133,
Accounting for Derivative Instruments and Hedging Activities.  SFAS 133 requires
companies to recognize all derivatives contracts as either assets or liabilities
in the balance  sheet and to measure them at fair value.  If certain  conditions
are met, a derivative may be specifically  designated as a hedge,  the objective
of which is to match  the  timing  of gain or loss  recognition  on the  hedging
derivative  with the  recognition  of (i) the  changes  in the fair value of the
hedged asset or liability that are  attributable  to the hedged risk or (ii) the
earnings  effect of the hedged  forecasted  transaction.  For a  derivative  not
designated as a hedging instrument,  the gain or loss is recognized in income in
the period of change.  SFAS 133 is effective  for all fiscal  quarters of fiscal
years beginning after June 15, 1999.

Historically,  the Partnership has not entered into derivatives contracts either
to  hedge  existing  risks  or  for  speculative  purposes.   Accordingly,   the
Partnership  does not expect  adoption of the new standard on January 1, 2000 to
affect its financial statements.

NOTE B--INVESTMENT PROPERTIES

Investment properties consists of the following:

<TABLE>
<CAPTION>
                                                                          December 31,
                                                                      1997          1996
                                                                  -----------   -----------
<S>                                                               <C>           <C>
Cost (including capital improvements
subsequent to acquisition):

     Greenhills Bicycle                                           $11,045,368   $10,988,697
     Club Apartments

     KC Club Apartments                                             5,050,435     5,040,765

     Office Equipment                                                  12,180        12,180
                                                                  -----------   -----------
                                                                   16,107,983    16,041,642

Less:
     Accumulated depreciation                                       5,273,994     4,732,073
                                                                  -----------   -----------
                                                                  $10,833,989   $11,309,569
                                                                  ===========   ===========
</TABLE>
Depreciation  expense was $541,921,  $529,408,  and $507,242 for the years ended
December 31, 1997, 1996, and 1995 respectively.

                                       21
<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONT'D

NOTE C--NON-RECOURSE MORTGAGE DEBT

Non-recourse mortgage debt consists of the following:

<TABLE>
<CAPTION>
                                               December 31,
                                           1997             1996
                                        -----------      -----------
<S>                                     <C>             <C>
Collateralized by Investment Property:
First Mortgages:

  Greenhills Bicycle
    Club Apartments                     $ 8,025,084      $ 8,082,102
  KC Club Apartments                    $ 3,922,211      $ 4,451,382

Second Mortgage:
  Greenhills Bicycle
    Club Apartments                     $   397,165      $   397,519
                                        -----------      -----------
                                        $12,344,460      $12,931,003
                                        ===========      ===========
</TABLE>

KC Club Apartments

The KC Club Apartments' mortgage note payable is collateralized by the apartment
buildings,  personal  property  and  assignment  of its leases  and  rents.  The
interest rate for this mortgage as of December 31, 1997 was 8.45%.

As a result of declining cash flows for KC Club  Apartments,  on August 1, 1997,
the  certificate  of accrual (as described in note D) was sold.  The proceeds of
$1,083,000  were used to pay  $553,000  of  accrued  interest  and  $530,000  of
delinquent  principal on the property.  The cash generated  from  operations for
that property was insufficient to service the mortgage under the current payment
requirements.  The Managing  General Partner had ongoing  negotiations  with the
lender  concerning  a complete  restructure  of the  mortgage  and related  debt
service.  The negotiations were unsuccessful and on January 7, 1998 the property
was lost to foreclosure. (See note L).

                                       22

<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONT'D

NOTE C--NON-RECOURSE MORTGAGE DEBT

Greenhills Bicycle Club Apartments

On July 8,  1996 the  Partnership  refinanced  the  matured  first  mortgage  on
Greenhills Bicycle Club Apartments. The terms of the new mortgage are $8,100,000
at 9.0% interest with monthly  principal and interest  payments in the amount of
$65,000 through the loan maturity date of August 1, 2001.

In addition, a second mortgage note was signed by the Partnership.  The terms of
the new note are $400,000  with  interest  paid monthly at the rate of 9% with a
maturity  date of July 31, 2001 at which time the  principal  shall be due.  The
past due real estate taxes on Greenhills  Bicycle Club  Apartments  were paid in
full from a portion of the proceeds of this note.

Cash paid for interest totaled $1,498,393,  $984,531, and $886,813 for the years
ended December 31, 1997, 1996, and 1995, respectively.

Maturities of mortgage debt are as follows:

                1998                           $3,984,578
                1999                               68,217
                2000                               74,616
                2001                            8,217,049
                Thereafter                              0
                                             ------------
                                             $ 12,344,460
                                             ============

NOTE D--LEASES

The Partnership  entered into a land lease agreement for the land underlying the
KC Club Apartments for a term of twenty years. The lease payments for years 1 to
15 are  calculated  at 50% of that year's net  operating  income in excess of an
ascending  scale from  $650,000 to  $800,000.  During years 16 to 20, the annual
lease payments are 10% of the land's then appraised  value.  For the years ended
December 31, 1997,  1996 and 1995,  the net operating  income did not exceed the
land lease  requirements which resulted in no lease payments.  In addition,  the
Partnership is obligated to pay real estate taxes assessed on the land value.

At all times during the term of the lease, the Partnership (or its assignee) has
the right to purchase the land at a price equal to the greater of  $2,000,000 or
fair market value at the time the option is exercised.  Should the buildings and
improvements  be sold prior to the end of the land lease  agreement  (20 years),
the  Partnership  is  under  no  obligation  for  payment  of  the  land  rental
assessments for the remaining portion of the land lease agreement. The lease was
effectively terminated upon foreclosure of the property.

The  Partnership  invested  $500,000  (held as a  Certificate  of Accrual with a
market  value of  $1,037,000  as of  December  31,  1996)  which was  pledged as
collateral  until the property's net operating income achieves the level of 120%
of the debt service on the first mortgages for a consecutive 24-month

                                       23

<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONT'D

NOTE D--LEASES--CONT'D.

period or May 31, 2004,  whichever is earlier.  The  Certificate  of Accrual was
sold on August 1, 1997 for $1,083,000. The proceeds were used to pay $553,000 of
accrued  interest  and  $530,000 of  principal  on the KC Club  Apartments.  The
property was subsequently lost to foreclosure on January 7, 1998.

NOTE E--RELATED PARTY--MANAGEMENT FEES

SPECS, Inc., a Kansas corporation in which James R. Hoyt, a general partner,  is
a  shareholder,   receives  property  management  fees  for  providing  property
management services. SPECS, Inc. also performs various professional services for
the Partnership,  primarily tax accounting, audit preparation, SEC 10-Q and 10-K
preparation,  and investor  services.  Amounts paid by the Partnership to SPECS,
Inc. are as follows:

                                   1997               1996             1995
                               ---------          ---------        ---------
Property Management Fee        $ 137,445          $ 137,449        $ 130,229
Professional Services             42,707             45,335           44,000
                               ---------        -----------       ----------
                               $ 180,152          $ 182,784        $ 174,229
                               =========          =========        =========

The General Partners are entitled to receive a Partnership  Management Fee equal
to 5% of Cash  Flow  From  Operations  (as  defined)  for  managing  the  normal
operations of the Partnership.  There was no management fee due for years ending
December 31, 1997, 1996 and 1995.

NOTE F--RELATED PARTY--NOTE RECEIVABLE

On April 12, 1995,  the SIR Partners  III,  L.P.  executed a note payable to the
Partnership  in the amount of $522,004.  Interest  during 1995 was 9%.  Interest
earnings for the note was $50,509 in 1995.

On December 28, 1995, the note principal and all accrued  interest  through that
date was  retired  in full  pursuant  to an  assumption  agreement  between  the
Partnership, SIR Partners III, and James R. Hoyt. In exchange for payment of the
note (and excess  costs/fees  described in Note G), the Managing General Partner
assumed  full  responsibility  for the matured  second  mortgage  on  Greenhills
Bicycle Club  Apartments.  The Partnership was provided with an executed release
of the note and second deed of trust relating to the Greenhills mortgage.

                                       24

<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONT'D

NOTE F--RELATED PARTY--NOTE RECEIVABLE--CONT'D

Funds  advanced to Secured  Investment  Resources  Fund,  L.P.  are being repaid
beginning May 1, 1995 including 9% interest.  No principal or interest  payments
were received in 1997. Interest accrued on the note balance was $7,349.

Amounts due from related parties consist of the following:

                                                        December 31,
                                             1997                       1996
                                           --------                   -------
Secured Investment Resources Fund, L.P.    $85,694                    $78,345

NOTE G--SYNDICATION FEES AND ACQUISITION FEES

Because  of many  factors,  the  Partnership  did not raise the level of capital
anticipated during the offering period. As a result, syndication and acquisition
costs and the Related  Party Note  Receivable,  outlined in Note F, exceeded the
amount allowed per the Partnership Agreement. The General Partners are obligated
to reimburse these excess costs/fees.  James R. Hoyt has agreed to reimburse the
excess costs/fees to the Partnership (as described in Item 11 (c)).

SIR Partners III, L.P., a General  Partner of the Partnership (or its assignee),
has been  paid an  acquisition  fee of  $680,000.  This  fee was for  selecting,
evaluating,  negotiating,  and closing  services on the  acquisition  of KC Club
Apartments and Greenhills Bicycle Club Apartments.  As stated in the Prospectus,
acquisition  fees  may  not  exceed  11.5%  of the  gross  proceeds  of  limited
partnership  interests issued ($556,888).  The General Partners are obligated to
reimburse these excess costs/fees.

On December 28, 1995, the excess costs and fees were reduced to $21,751 pursuant
to an assumption agreement between the Partnership,  SIR Partners III, and James
R. Hoyt.  In exchange  for payment of the excess  costs and fees (as well as the
note receivable  described in Note F), the Managing General Partner assumed full
responsibility  for the matured second  mortgage on Greenhills  Apartments.  The
Partnership was provided with an executed release of the note and second deed of
trust relating to the Greenhills mortgage.  Subsequent to December 31, 1997, the
remainder of the excess costs and fees was paid in full.


                                                        December 31,
                                                1997                    1996
                                             ---------               ---------
General Partners--Excess
  Syndication Costs:
      Paid by the Partnership                 $21,751                 $21,751

                                       25

<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONT'D

NOTE H--ACCOUNTS PAYABLE AND ACCRUED EXPENSES

Accounts payable and accrued expenses consist of the following:

                                                         December 31,
                                                       1997       1996
                                                      ------     ------
Vendor Accounts Payable ..........................  $ 19,601   $ 15,417
Property Taxes ...................................   198,901    127,938
Professional Fees ................................    33,804     55,986
Utilities ........................................    25,713     25,054
Insurance ........................................     8,429      8,352
Payroll Reimbursement ............................    14,205     11,506
                                                    --------   --------
                                                    $300,653   $244,253
                                                    ========   ========

As of December 31, 1997,  unpaid  Property Taxes include  $134,900 of delinquent
1995-96 taxes and $57,600 of 1997 taxes related to the KC Club Apartments.

NOTE I--INCOME TAXES

The  Partners'  capital  accounts  differ for financial  reporting  purposes and
federal income tax purposes.  The primary  differences result from depreciation.
The effect of these items is summarized as follows:
                                                        December 31,
                                                 1997                   1996
                                                ------                 ------
Financial Reporting Basis:
     Total assets                           $ 11,617,003          $ 12,749,343
     Total liabilities                       (12,906,608)          (13,834,772)
                                           -------------          ------------
     Total Partners' (deficit) capital      $ (1,289,605)          $(1,085,429)
                                           =============          ============
Tax Basis:
     Total assets                           $ 12,000,633          $ 13,139,467
     Total liabilities                       (11,798,061)          (12,710,475)
                                           -------------         -------------
     Total Partners' capital               $     202,572         $     428,992
                                            ============         =============

                                          Years Ended December 31,
                                 1997              1996              1995
                                ------            ------            ------
Partnership loss-financial
     reporting purposes       $ (204,176)       $ (378,007)       $(171,559)
                             -----------       -----------       ----------
Book versus tax differences
     due to:
          Depreciation and
            amortization         (10,694)          (37,354)         (57,303)
          Other                  (11,550)            8,821           27,037
                               ---------        ------------       --------
                                 (22,244)          (28,533)         (30,266)
                               ---------        ----------         --------

Partnership loss-federal
         income tax purposes  $ (226,420)      $  (406,540)       $(201,825)
                              ===========      ============       ==========

                                       26

<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONT'D

NOTE J--CASH DISTRIBUTIONS

No distributions have been made since July 1990. Future  distributions will only
be made from excess cash flow not needed for working capital reserves.

NOTE K--PARTNERSHIP LIQUIDITY

The  Partnership  operates within the real estate industry and is subject to its
economic   forces,   which   contributes   additional   liquidity  risk  to  the
Partnership's investment portfolio. These risks include, but are not limited to,
changes in general or local economic  conditions,  changes in interest rates and
the  availability  of  permanent   mortgage   financing  which  may  render  the
acquisition,  sale or  refinancing  of the property  difficult or  unattractive,
changes in real estate and zoning laws,  increases in real estate taxes, federal
or local economic or rent controls,  floods,  earthquakes  and other acts of God
and other  factors  beyond the  control  of the  Partnership's  management.  The
illiquidity of real estate  investments  generally may impair the ability of the
Partnership to respond promptly to changing economic conditions.

The General Partners  believe that sufficient  working capital will be available
to fund known,  ongoing  operating and capital  expenditure  requirements of the
Partnership  during 1998. The  anticipated  working capital sources are payments
received on notes and  miscellaneous  receivables  and cash flow from operations
during  1998,  which is  expected  to improve  over that of the  previous  year.
Several  factors  which  could   positively   affect  1998  operations  are  the
implementation  of  rental  rate  increases  and  decreases  in  the  amount  of
promotional  rent  discounts   allowed  for  the  leasing  of  apartment  units.
Accomplishment  of these  objectives is partially  predicated on the real estate
economic  conditions  discussed  above,  which are  beyond  the  control  of the
Partnership, and will influence the achieved results.

As a result of the  foreclosure of the KC Club  Apartments (as described in Note
L), the  liquidity  and financial  condition of the  partnership  is expected to
improve.  The cash  generated  from  operations  for the KC Club  Apartments was
insufficient  to service the mortgage on the  property.  The 1997 Net  Operating
Income after interest expense of the remaining property,  The Greenhills Bicycle
Club Apartments, was $395,000.

NOTE L--SUBSEQUENT EVENT

As of December 31, 1997, the Partnership  was in negotiations  with the mortgage
holder  on KC Club  Apartments  concerning  a  restructure  of that  debt.  More
favorable   interest  rates  and  possible  principal  write  downs  were  under
consideration.  Due to the inability to restructure the debt, on January 7, 1998
the property was lost to foreclosure.

The assets and  liabilities as of December 31, 1997 that were  applicable to the
foreclosed property approximated the following:

   Investment properties, net of accumulated depreciation          $3,388,000
   Other assets                                                        84,000
   Mortgage payable, including accrued interest                    (3,992,000)
   Other liabilities                                                 (259,000)

Rental  revenue for the KC Club  Apartments for the year ended December 31, 1997
was $853,000 while operating expenses (including interest) were $1,160,000.

                                       27

<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONT'D
NOTE M--DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS

The  carrying  values  reflected  in the  balance  sheets at  December  31, 1997
reasonably  approximate  the fair  values  for cash  and cash  equivalents.  The
Partnership  cannot estimate the fair value of its borrowings  collateralized by
the KC Club  Apartments  at December  31, 1997 as there is no readily  available
market value for instruments  with similar  characteristics.  The estimated fair
value  of  the  borrowings   collateralized   by  the  Bicycle  Club  Apartments
approximate the carrying values.

(The remainder of this page is left blank intentionally)

                                       28

<PAGE>

Item 9.  Changes in and Disagreements with Registrant's Certifying Accountants
         on Accounting and Financial Disclosure.

None.

                                    Part III

Item 10.  Directors and Executive Officers of the Registrant.

The General  Partners of the  Partnership  are James R. Hoyt  (individual),  SIR
Partners III, L.P. (partnership) and Nichols Resources, Ltd. (corporation).

Nichols Resources,  Ltd. (a corporate General Partner) is a Missouri corporation
formed on August  22,  1988 for the  purpose  of acting as a general  partner of
public real estate programs and otherwise  investing in and dealing with limited
partnerships,  property  management  and the real estate  syndication  business.
Nichols  Resources,  Ltd.  was a  wholly-owned  subsidiary  of the J.C.  Nichols
Company  until  January,  1998.  It is  now a  wholly-owned  subsidiary  of  MJS
Associates,  Inc., a Missouri corporation with executive offices located at 1100
Main Street, Ste 2100 Kansas City, Missouri 64105. MJS Associates, Inc. acquired
all of the  outstanding  stock of Nichols  Resources,  Ltd. in January 1998 from
J.C. Nichols  company.  Nichols  Resources,  Ltd. issued 15,000 shares of common
stock for $1,500,000 on August 22, 1988.

James R. Hoyt ( Managing General Partner),  age 60, holds a Bachelor's Degree in
Business  Administration and is a licensed real estate broker in two states. Mr.
Hoyt has been  actively  involved for more than the past twenty years in various
real estate endeavors including  development,  syndication,  property management
and brokerage.

Mr. Hoyt is the  Managing  General  Partner  and  sponsor of Secured  Investment
Resources Fund,  L.P.  (S.I.R.) and Secured  Investment  Resources Fund. L.P. II
(S.I.R.  II). Since 1983,  Mr. Hoyt has been involved as the Individual  General
Partner in ten specified real estate private placement offerings. As of December
31, 1997, these partnerships,  including Secured Investment Resources Fund, L.P.
III, have raised a total of $60,709,750.

SIR Partners III, L.P.  f/k/a Hoyt  Partners III,  L.P., (a limited  partnership
General Partner) is a limited  partnership  organized on February 23, 1988 under
the statutes of the State of Missouri. James R. Hoyt is the General Partner. The
Partnership  was  formed  for the  purpose  of acting as a general  partner  and
acquisition agent of Secured Investment Resources Fund, L.P. III.

Item 11. Management Compensation

During  1997,  The  Partnership  paid  $137,445  in fees to related  parties for
property  management  services.  The  Partnership  also paid  $42,707 to related
parties for professional services as described in Note E.

                                       29

<PAGE>

Item 12.  Security ownership of Certain Beneficial owners and Management.

(a)  Security Ownership of certain beneficial owners.

No  individual  or group as  defined  by  Section  13 (b) (3) of the  Securities
Exchange Act of 1934,  known to the registrant is the  beneficial  owner of more
than 5 percent of the registrant's securities.

(b)  Security ownership of Management.

The General  Partners do not own any limited  partner units,  although  together
they own a 1% general partnership  interest in the Partnership.  As of September
1,  1998,  officers  and  directors  of  Nichols  Resources,  Ltd.  as  a  group
beneficially  own  20  limited  partnership  units  of  the  Partnership,  which
represent less than 1% of the outstanding limited partner units.

(c )   Change in Control.

On July 21st, 1998, Nichols Resources Ltd., a general partner of the Partnership
("Nichols"),  Bond Purchase,  L.L.C.  ("Bond") and David L. Johnson ("Johnson ")
and other affiliates of Johnson,  along with the Partnership,  SIR Partners III,
L.P., general partner of the Partnership ("SIR Partners III"),  SPECS, Inc., the
company  which  provides  the  Partnership   management  and  investor  services
("SPECS")  and  James R.  Hoyt,  Managing  General  Partner  of the  Partnership
("Hoyt"),  entered into a certain  Settlement  Agreement and Mutual Release (the
"Agreement").  The Agreement settled a dispute which had arisen between Nichols,
SIR Partners III and Hoyt,  general  partners of the Partnership over the proper
course of action to be taken for the  Partnership.  This dispute resulted in the
filing of a civil action in the Circuit Court of Jackson County, Missouri.

Pursuant to the Agreement, Nichols has agreed (i) to pay $100,000 in cash to SIR
Partners III and Hoyt,  $21,751 of which will be paid by Hoyt to the Partnership
to pay a receivable  owed by the general  partners of the Partnership for unpaid
excess  syndication  costs and  expenses  currently  shown on the  Partnership's
financial  statements and (ii) to dismiss the civil actions  filed.  In exchange
for the $100,000 in cash and the  dismissal of the civil  actions,  SIR Partners
III and Hoyt have agreed (i) to transfer their General Partnership  interests to
Nichols and (ii) to withdraw as Managing  General Partner and general  partners.
Under the Partnership's  Amended and Restated  Agreement of Limited  Partnership
dated  December  6, 1988  (the  "Partnership  Agreement"),  such  transfers  and
withdrawals are subject to the

                                       30

<PAGE>

Item 12.  Security ownership of Certain Beneficial owners and Management
          --Cont'd

majority vote of the  Partnership's  limited partners (the "Limited  Partners").
Hoyt and SIR Partners III have also agreed that Nichols,  as general  partner of
the  Partnership,  shall have the right to designate the  management  company to
manage the assets of the  Partnership and to execute all documents to effectuate
the release of the current management contract.

Nichols,  as a general  partner of the  Partnership,  intends to call for a vote
without a meeting  of the  Limited  Partners,  file a proxy  statement  with the
Securities and Exchange Commission and solicit proxies from the Limited Partners
to seek  approval  from the  Limited  Partners  to the  transfer  of the general
partnership  interests,  the  withdrawal of Hoyt and SIR Partners III as general
partners of the  Partnership  and the  replacement  of Hoyt as Managing  General
Partner in favor of Nichols.  Hoyt and SIR Partners III have agreed to use their
best efforts to assist in obtaining  approval  from the limited  partners of the
withdrawal of Hoyt and SIR Partners III as General  Partners of the partnership.
In the  event the  majority  approval  is  obtained,  Nichols  shall be the sole
general partner of the Partnership.


Item 13.  Certain Relationships and Related Transactions.

See Notes to Financial Statements, Notes E, F and G appearing in Item 8.

(The remainder of this page left blank intentionally)

                                       31

<PAGE>

                                    PART IV

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

     (a)(1)  The following Financial Statements of Secured Investment Resources
             Fund, L.P. III, are included in Item 8:

SECURED INVESTMENT RESOURCES FUND, L.P. III                               Page

     (i)  Independent Auditors' Report                                       12

    (ii)  Consolidated Balance Sheets -
            December 31, 1997 and 1996                                    13-14

   (iii)  Consolidated Statements of Operations -
            Years Ended December 31, 1997,
            1996, and 1995                                                   15

    (iv)  Consolidated Statements of Partnership
            Deficit  - Years Ended December 31,
            1997, 1996, and 1995                                             16

     (v)  Consolidated Statements of Cash Flows -
            Years Ended December 31, 1997,
            1996, and 1995                                                17-18

    (vi)  Notes to Consolidated Financial
            Statements                                                    19-28


     (a)(2)  The following Financial Statement Schedules as
             part of this report:

          (i)  Schedule II - Allowance For Doubtful
                 Accounts Information                                        36
         (ii)  Schedule III - Real Estate and
                 Accumulated Depreciation                                 37-38

All schedules  other than those  indicated in the index have been omitted as the
required information is presented in the financial statements,  related notes or
is inapplicable.

                                       32

<PAGE>

     (a)(3)    The following Exhibits are Incorporated by Reference and are an
                 integral part of this Form 10-K.

Exhibit Number           Description

     (3)       (a)  Amended and Restated Agreement of Limited
                      Partnership. (iii)

               (b)  Certificate of Limited Partnership. (i)

     (4)       (a)  Form of Subscription Agreement. (iii)

               (b)  Form of Certificate evidencing units. (i)

    (10)       (a)  Property Management Agreement As amended. (ii)

               (b)  Escrow Agreement between the Partnership and
                      The Mission Bank. (i)

               (c)  Real Estate Contract of Sale for the Brywood Hills
                      Apartments. (iv)

               (d)  Real Estate Contract of Sale for The Greenhills Bicycle
                      Club (formerly Candlewyck Apartments). (v)

               (e)  Deed of Trust and Promissory Note for Brywood Hills
                      Apartments. (vii)

               (f)  Deed of Trust and Promissory Notes for Greenhills
                      Bicycle Club (formerly Candlewyck Apartments). (vii)

     (16)      (a)  Letter regarding change in certifying accountant. (vi)

     (25)      (a)  Power of Attorney. (i)

     (27)      (a)  Secured Investment Resources Fund, L.P. III Financial
                      Data Schedule at December 31, 1997 and for the year
                      then ended.

     (28)      (b)  Guarantee of General Partners.  (i)

                                       33

<PAGE>

          (i)      Previously  filed on September 13, 1988 as an Exhibit to the
                   Registration  Statement on Form S-11 (file no. 3324235) such
                   Exhibit  and  Registration  Statement incorporated herein by
                   reference.

         (ii)      Previously filed on December 7, 1988 as an Exhibit to
                   Amendment #1 to  registration  Statement of Form S-11 such
                   Exhibit and Registration  Statement incorporated herein by
                   reference.

        (iii)      Previously  filed  on  December  7,  1988  as part of
                   Amendment   #1   to   Registration    Statement   and
                   incorporated herein by reference.

         (iv)      Previously filed as an exhibit to a current report on Form
                   8-K dated June 12,  1989 which  exhibit and Form is
                   incorporated herein by reference.

          (v)      Previously filed as an exhibit to a current report on Form
                   8-K dated  October  30,  1989 which  exhibit and Form is
                   incorporated herein by reference.

         (vi)      Previously filed as an exhibit to a current report on Form
                   8-K dated  December  4, 1989 which  exhibit  and Form
                   incorporated herein by reference.

        (vii)      Filed herewith.

          (b)      Report of Form 8-K filed during the fourth quarter. 
                   A Form  8-K was  filed  on July 31,  1998  (file  no.
                   000-18475),  such  Form 8-K  incorporated  herein  by
                   reference.

          (c)      See Exhibit Index contained herein.

          (d)      See (a)(2) above.

                                       34

<PAGE>

                                   SIGNATURES

Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
Registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned hereunto duly authorized.

                                             Secured Investment Resources
                                             Fund, L.P., III, a Missouri limited
                                             partnership (Registrant)

Date: March 3, 1999                          By: Nichols Resources, Ltd., its
                                                 general partner


                                             By: /s/ Christine A. Robinson
                                                 Christine A. Robinson
                                                 President

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

No annual report of proxy material has been sent to security  holders during the
Registrant's  last fiscal year,  but an annual report and proxy material will be
furnished to security  holders  subsequent to the filing of the annual report on
this form.




/s/ James R. Hoyt     Individual general                      March 5, 1999
James R. Hoyt         partner of the Registrant

/s/ David L. Johnson  Director of Nichols                     March 3, 1999
David L. Johnson      Resources, Ltd., a
                      corporate general partner
                      of the Registrant

/s/ John W. Alvey     Director of Nichols                     March 3, 1999
John W. Alvey         Resources, Ltd., a
                      corporate general partner
                      of the Registrant

/s/ Daniel W. Pishny  Director of Nichols                     March 3, 1999
Daniel W. Pishny      Resources, Ltd., a
                      corporate general partner
                      of the Registrant


                                       35

<PAGE>
                   Secured Investment Resources Fund L.P. III
                  Schedule II - Allowance for Doubtful Accounts
                                December 31, 1997

       Balance at                              Bad Debt Write       Balance at
      Beginning of          Charged to         Offs Deducted            End
         Period            Operations          From Allowance       of  Period
    For Years Ended
      December 31,

   1995      $ 7,814       $   (664)         $    --                $  7,150

   1996      $ 7,150       $  4,850          $    --                $ 12,000

   1997      $12,000       $ 62,400          $  58,200              $ 16,200

              (the remainder of this page left blank intentionally)

                                       36

<PAGE>
<TABLE>
Secured Investment Resource Fund , LP III
Schedule III - Real Estate & Accumulated Depreciation
December 31, 1997
<CAPTION>
 

                                        Initial Cost to Partnership (a)         Subsequent to Acquisition
                                        -----------------------------------     ---------------------------
                                                    Building &    Furniture                   Reduction
                        Encumbrances      Land      Improvement   Equipment     Improvements  of Basis (b)
                        ------------     -------    -----------   ---------     ------------  ------------
<S>                     <C>               <C>       <C>           <C>           <C>           <C>
Garden Apartments:
 KC Club Apartments        3,922,211           0      4,775,465     295,527       195,464      (216,021)
 Kansas City, MO

 Green Hills Bike Club     8,422,249     430,937      9,988,057     832,619       379,597      (576,842)
 Kansas City, MO

Other Equipment                    0           0              0           0        12,180             0
                          ----------    --------     ----------    ---------    ---------      --------

          TOTAL           12,344,460     430,937     14,763,522   1,128,146       587,241      (792,863)
                         ===========    ========    ===========  ==========      ========     =========



<CAPTION>
                                                       Gross Amount at Which
                                                    Carried at Close of Period
                                 --------------------------------------------------------------
                                     Building &     Furniture                  Accumulated      Date        Depreciation
                          Land      Improvements    Equipment       Total      Depreciation   Acquired          Life
                        ------     -------------   ----------      ------     -------------  ---------     --------------
<S>                       <C>       <C>             <C>             <C>       <C>            <C>           <C>
Garden Apartments:
 KC Club Apartments          0        4,641,246       409,189   5,050,435        1,662,423    06/30/89        30 Yrs(1)
 Kansas City, MO                                                                                               5 Yrs(2)
       
 Green Hills Bike Club 407,226        9,542,531     1,095,611  11,045,368        3,599,391    10/27/89        30 Yrs(1)
 Kansas City, MO                                                                                               5 Yrs(2)

 Other Equipment             0                0        12,180      12,180           12,180                     5 Yrs(2)
                      ---------     ------------   ----------- -----------      -----------
       TOTAL           407,226       14,183,777     1,516,980  16,107,983        5,273,994
                      =========     ===========    =========== ===========    =============
</TABLE>
[FN]

     (1)  Estimated  useful  life of  buildings
     (2)  Estimated  useful  life of furniture and fixtures

     NOTES:

     (a) The initial cost to the  Partnership  represents the original  purchase
         price of the properties, including $205,562 and $145,578 of
         improvements incurred in 1988 and 1987, respectively, which were
         contemplated at the time the property was acquired.

     (b) Receipts  received under the terms of certain  guarantee  agreement are
         recorded by the Partnership as a reduction of the basis of the property
         to which guaranteed income relates.

                                       37

<PAGE>

Secured Investment Resource Fund , LP III
Schedule III - Real Estate & Accumulated Depreciation
December 31, 1997 --CONT'D

     (c) reconciliation of Real Estate Owned:
<TABLE>
<CAPTION>
                                                                     Buildings &      Furniture &
                                     Total             Land          Improvement       Equipment
                                 --------------    ------------    ---------------- ---------------
<S>                                  <C>               <C>            <C>             <C> 
Balance at  January 1, 1995          15,775,013         407,226       14,132,554      1,235,233
 Additions during year:
   Reclassification                           0               0                0              0
   Improvements                         164,484               0           21,756        142,728
                                 --------------    ------------    -------------    -----------

Balance at December 31, 1995         15,939,497         407,226       14,154,310      1,377,961
 Additions during year:
  Improvements                          102,145               0            8,163         93,982
                                 --------------    ------------    -------------    -----------

Balance at December 31, 1996         16,041,642         407,226       14,162,473      1,471,943
 Additions during year:
  Improvements                           66,341               0           21,304         45,037
                                 --------------    ------------    -------------    -----------

Balance at December 31, 1997         16,107,983         407,226       14,183,777      1,516,980
                                 ==============    ============    =============    ===========


     (d) Reconciliation of Accumulated Depreciation:

Balance at  January 1, 1995           3,695,423               0        2,574,786      1,120,637
 Additions during year:
  Depreciation Expenses                 507,242                          437,578         69,664
                                 --------------    ------------    -------------    -----------
Balance at December 31, 1995          4,202,665               0        3,012,364      1,190,301
 Additions during year:
  Depreciation Expenses                 529,408                          435,991         93,417
                                 --------------    ------------    -------------    -----------
Balance at December 31, 1996          4,732,073               0        3,448,355      1,283,718
 Additions during year:
   Depreciation Expenses                541,921                          462,547         79,374
                                 --------------    ------------    -------------    -----------

Balance at December 31, 1997          5,273,994               0        3,910,902      1,363,092
                                 ==============    ============    =============    ===========

     (e) The total gross  amount of real estate at  December  31, 1997  includes
         $566,888 of acquisition fees paid to affiliates.
</TABLE>
                                       38