<PAGE>   1
                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                    FORM 10-K

                Annual Report Pursuant to Section 13 or 15(d) of
                       the Securities Exchange Act of 1934

                   For the Fiscal Year Ended DECEMBER 31, 1998

                             Commission File Number
                                     0-09262

                         REAL ESTATE ASSOCIATES LIMITED

                        A CALIFORNIA LIMITED PARTNERSHIP

                  I.R.S. Employer Identification No. 95-3187912

       9090 WILSHIRE BOULEVARD, SUITE 201, BEVERLY HILLS, CALIFORNIA 90211

        Registrant's Telephone Number, Including Area Code (310) 278-2191

      Securities Registered Pursuant to Section 12(b) or 12(g) of the Act:

                                      NONE

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed with the Commission by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding twelve months (or such shorter period
that the registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days.

                                Yes [X]   No [ ]

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


<PAGE>   2
PART I.

ITEM 1. BUSINESS:

Real Estate Associates Limited ("REAL" or the "Partnership") is a limited
partnership which was formed under the laws of the State of California on
September 15, 1977. On October 27, 1978, REAL offered 16,500 Limited Partnership
Interests through a public offering managed by E.F. Hutton Inc.

The general partners of Real Estate Associates Limited are Charles H. Boxenbaum,
an individual residing in California, and National Partnership Investments Corp.
("NAPICO"), a California Corporation (the Corporate General Partner). The
business of REAL is conducted primarily by NAPICO.

Prior to December 30, 1998, NAPICO was a wholly owned subsidiary of Casden
Investment Corporation ("CIC"), which is wholly owned by Alan I. Casden. On
December 30, 1998, Casden Properties Operating Partnership, L.P. (the "Operating
Partnership"), a majority owned subsidiary of Casden Properties Inc., a real
estate investment trust organized by Alan I. Casden, purchased a 95.25% economic
interest in NAPICO. The current members of NAPICO's Board of Directors are
Charles H. Boxenbaum, Bruce E. Nelson, Alan I. Casden and Henry C. Casden.

REAL holds limited partnership interests in 9 local limited partnerships as of
December 31, 1998, after selling its interests in 9 local limited partnerships,
in December 1998 to the Operating Partnership and after having its interest in
one local limited partnership redeemed on September 30, 1998. Each of these
limited partnerships owns a single low income housing project which is
subsidized and/or has a mortgage note payable to or insured by agencies of the
federal or local government.

In order to stimulate private investment in low income housing, the federal
government and certain state and local agencies have provided significant
ownership incentives, including among others, interest subsidies, rent
supplements, and mortgage insurance, with the intent of reducing certain market
risks and providing investors with certain tax benefits, plus limited cash
distributions and the possibility of long-term capital gains. There remains,
however, significant risks. The long-term nature of investments in government
assisted housing limits the ability of REAL to vary its portfolio in response to
changing economic, financial and investment conditions; such investments are
also subject to changes in local economic circumstances and housing patterns, as
well as rising operating costs, vacancies, rent collection difficulties, energy
shortages and other factors which have an impact on real estate values. These
Projects also require greater management expertise and may have higher operating
expenses than conventional housing projects.

Under recent adopted law and policy, the United States Department of Housing and
Urban Development ("HUD") has determined not to renew the Housing Assistance
Payment ("HAP") Contracts on a long term basis on the existing terms. In
connection with renewals of the HAP Contracts under such new law and policy, the
amount of rental assistance payments under renewed HAP Contracts will be based
on market rentals instead of above market rentals, which was generally the case
under existing HAP Contracts. The payments under the renewed HAP Contracts are
not expected to be in an amount that would provide sufficient cash flow to
permit owners of properties subject to HAP Contracts to meet the debt service
requirements of existing loans insured by the Federal Housing Administration of
HUD ("FHA") unless such mortgage loans are restructured. In order to address the
reduction in payments under HAP Contracts as a result of this new policy, the
Multi-family Assisted Housing Reform and Affordability Act of 1997 ("MAHRAA"),
which was adopted in October 1997, provides for the restructuring of mortgage
loans insured by the FHA with respect to properties subject to the Section 8
program. Under MAHRAA, an FHA-insured mortgage loan can be restructured into a
first mortgage loan which will be amortized on a current basis and a low
interest second mortgage loan payable to FHA which will only be payable on
maturity of the first mortgage loan. This restructuring results in a reduction
in annual debt service payable by the owner of the FHA-insured mortgage loan and
is expected to result in an insurance



<PAGE>   3
payment from FHA to the holder of the FHA-insured loan due to the reduction in
the principal amount. MAHRAA also phases out project-based subsidies on selected
properties serving families not located in rental markets with limited supply,
converting such subsidies to a tenant-based subsidy.

MAHRAA provides that properties begin the restructuring process in federal
fiscal year 1999 (beginning October 1, 1998). On September 11, 1998, HUD issued
interim regulations implementing MAHRAA and final regulations are expected to be
issued in 1999. With respect to the local limited partnerships' expiring HAP
Contracts, it is expected that the HAP payments will be reduced or terminated
pursuant to the terms of MAHRAA.

When the HAP Contracts are subject to renewal, there can be no assurance that
the local limited partnerships in which the Partnership has an investment will
be permitted to restructure its mortgage indebtedness under MAHRAA. In addition,
the economic impact on the Partnership of the combination of the reduced
payments under the HAP Contracts and the restructuring of the existing
FHA-insured mortgage loans under MAHRAA is uncertain.

The partnerships in which REAL has invested were, at least initially, organized
by private developers who acquired the sites, or options thereon, and applied
for applicable mortgage insurance and subsidies. REAL became the principal
limited partner in these local limited partnerships pursuant to arm's-length
negotiations with these developers, or others, who act as general partners. As a
limited partner, REAL's liability for obligations of the local limited
partnership is limited to its investment. The local general partner of the local
limited partnership retains responsibility for developing, constructing,
maintaining, operating and managing the project. Under certain circumstances of
default, REAL has the right to replace the general partner of the local limited
partnerships, but otherwise does not have control of sale or refinancing, etc.

Although each of the partnerships in which REAL has invested owns a project
which must compete in the market place for tenants, interest subsidies and rent
supplements from governmental agencies make it possible to offer these dwelling
units to eligible "low income" tenants at a cost significantly below the market
rate for comparable conventionally financed dwelling units in the area.



<PAGE>   4
During 1998, all of the projects in which REAL had invested were substantially
rented. The following is a schedule of the status as of December 31, 1998, of
the projects owned by local limited partnerships in which REAL is a limited
partner.

            SCHEDULE OF PROJECTS OWNED BY LOCAL LIMITED PARTNERSHIPS
                         IN WHICH REAL HAS AN INVESTMENT
                                DECEMBER 31, 1998

<TABLE>
<CAPTION>
                                                            Units Authorized
                                                               For Rental
                                                            Assistance Under
                                                              Section 8 or
                                                               Other Rent
                                           No. of              Supplement             Units          Percentage of
Name & Location                             Units                Program            Occupied          Total Units 
---------------                             -----                -------            --------          ----------- 
<S>                                        <C>              <C>                     <C>              <C> 
Belleville Manor                             32                   32/  0                32                100%
Marion, KY

Bethel Towers                               146                   93/ 53               144                 99%
Detroit, MI

Cherry Hill Place                           186                  186/  0               186                100%
Inkster, MI

Clinton Apts.                                32                   32/  0                31                 97%
Clinton, KY

Northwood Village                            72                   72/  0                70                 97%
Emporia, VA

Ridgeview Estates                            32                    0/ 32                31                 97%
Lewisburg, W. VA.

Wedgewood Village                            32                    0/ 32                32                100%
Ripley, W. VA

W. Lafayette Apts.                           49                   49/  0                46                 94%
W. Lafayette, OH

Williamson Towers                            76                   76/  0                74                 97%
Williamson, W. VA                                                                         
                                         ------                 --------              ----
                                            657                  540/117               646                 98%
                                         ======                 ========              ====
</TABLE>




<PAGE>   5
ITEM 2. PROPERTIES:

The local limited partnerships in which REAL holds interests own various
multi-family rental properties. See Item 1 for information pertaining to these
properties.


ITEM 3. LEGAL PROCEEDINGS:

On August 27, 1998, two investors holding an aggregate of eight units of limited
partnership interests in Real Estate Associates Limited III (an affiliated
partnership in which NAPICO is the managing general partner) and two investors
holding an aggregate of five units of limited partnership interest in Real
Estate Associates Limited VI (another affiliated partnership in which NAPICO is
the managing general partner) commenced an action in the United States District
Court for the Central District of California against the Partnership, NAPICO and
certain other affiliated entities. The complaint alleges that the defendants
breached their fiduciary duty to the limited partners of certain NAPICO managed
partnerships and made materially false and misleading statements in the consent
solicitation statements sent to the limited partners of such partnerships
relating to approval of the transfer of partnership interests in limited
partnerships, owning certain of the properties, to the Operating Partnership
organized by an affiliate of NAPICO. The plaintiffs seek preliminary and
permanent injunctive relief and other equitable relief, as well as compensatory
and punitive damages. The managing general partner of such NAPICO managed
partnerships and the other defendants believe that the plaintiffs' claims are
without merit and intend to contest the action vigorously.

As of December 31, 1998, REAL's Corporate General Partner was a plaintiff or
defendant in several other lawsuits. None of these suits were related to REAL.


ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS:

In August 1998, a consent solicitation statement was sent to the limited
partners setting forth the terms and conditions of the purchase of the limited
partners' interests, held for investment by the Partnership, by the Operating
Partnership, together with certain amendments to the Partnership Agreement and
other disclosures of various conflicts of interest in connection with the
proposed transaction. Prior to the sale of the partnership interests, the
consents of the limited partners to the sale and amendments to the Partnership
Agreement were obtained.


PART II.

ITEM 5. MARKET FOR THE REGISTRANT'S PARTNERSHIP INTERESTS AND RELATED
        SECURITY HOLDER MATTERS:

The Limited Partnership Interests are not traded on a public exchange but were
sold through a public offering managed by E.F. Hutton Inc. It is not anticipated
that any public market will develop for the purchase and sale of any partnership
interest. Limited Partnership Interests may be transferred only if certain
requirements are satisfied. At December 31, 1998, there were 1,117 registered
holders of units in REAL. Distributions have not been made from the inception of
the Partnership to December 31, 1998. The Partnership has invested in certain
government assisted projects under programs which in many instances restrict the
cash return available to project owners. The Partnership was not designed to
provide cash distributions to investors in circumstances other than refinancing
or disposition of its investments in limited partnerships. In March 1999, the
Partnership made distributions of $3,861,000 to the limited partners and $39,000
to the general partners, primarily using proceeds from the sale of the
partnership interests.


<PAGE>   6
ITEM 6. SELECTED FINANCIAL DATA:

<TABLE>
<CAPTION>
                                                                        Year Ended December 31,
                                     -------------------------------------------------------------------------------------------
                                         1998                1997                1996                1995                1994
                                     -----------         -----------         -----------         -----------         -----------
<S>                                  <C>                 <C>                 <C>                 <C>                 <C>         
Loss from Operations                 $  (788,370)        $  (622,278)        $  (490,373)        $  (490,021)        $  (462,078)

Gain on sale of limited
    partnership interests              3,798,734                  --                  --                  --                  --

Distributions from Limited
   Partnerships Recognized
   as Income                             997,836             587,078             465,403           1,373,243             321,584

Equity in Income of
   Limited Partnerships
   and Amortization of
   Acquisition Costs                    (747,873)           (204,940)            177,874             384,476             226,840
                                     -----------         -----------         -----------         -----------         -----------

Net Income (Loss)                    $ 3,260,327         $  (240,140)        $   152,904         $ 1,267,698         $    86,346
                                     ===========         ===========         ===========         ===========         ===========

Net Income (Loss) per limited
   Partnership Interest              $       198         $       (15)        $         9         $        77         $         5
                                     ===========         ===========         ===========         ===========         ===========



Total assets                         $ 4,970,809         $ 1,864,839         $ 2,863,973         $ 2,715,836         $ 2,491,676
                                     ===========         ===========         ===========         ===========         ===========

Investments in Limited
   Partnerships                      $   530,241         $ 1,319,976         $ 2,486,997         $ 2,191,335         $ 1,843,340
                                     ===========         ===========         ===========         ===========         ===========

Accrued Fees and Expenses
   Due General Partner               $        --         $   181,333         $ 1,021,677         $ 1,014,337         $ 1,396,997
                                     ===========         ===========         ===========         ===========         ===========
</TABLE>



<PAGE>   7
ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATIONS:

LIQUIDITY

The Partnership's primary sources of funds include interest income on money
market accounts and certificates of deposit and distributions from local
partnerships in which the Partnership has invested. It is not expected that any
of the local limited partnerships in which the Partnership has invested will
generate cash flow sufficient to provide for distributions to the Partnership's
limited partners in any material amount. The Partnership made a cash
distribution to investors in March 1999, primarily using proceeds from the
disposition of its investments in certain limited partnerships.

CAPITAL RESOURCES

REAL received $16,500,000 in subscriptions for units of Limited Partnership
Interests (at $1,000 per unit) during the period October 27, 1978 through August
31, 1979 pursuant to a registration statement on Form S-11.

RESULTS OF OPERATIONS

The Partnership was formed to provide various benefits to its partners as
discussed in Item 1. It is anticipated that the local limited partnerships in
which REAL has invested could produce tax losses for as long as 20 years. Tax
benefits will decline over time as the advantages of accelerated depreciation
are greatest in the earlier years, as deductions for interest expense decrease
as mortgage principal is amortized and as the Tax Reform Act of 1986 limits the
deductions available.

At December 31, 1998, the Partnership had investments in 9 limited partnerships,
all of which own housing projects that were substantially all rented. The
Partnership sold its interests in 8 local partnerships in December 1998 and had
its interest in one local partnership redeemed in September 30, 1998. The
Partnership, as a limited partner, is entitled to 50% to 99% of the profits and
losses of the local limited partnerships. The Partnership accounts for its
investments in the local limited partnerships on the equity method, thereby
adjusting its investment balance by its proportionate share of the income or
loss of the local limited partnerships. Equity in losses of limited partnerships
are recognized in the financial statements until the limited partnership
investment account is reduced to a zero balance. Losses incurred after the
limited partnership investment account is reduced to zero are not recognized.
Limited partners are not liable for losses beyond their contributed capital. At
December 31, 1998, the Partnership has a positive investment balance in only one
local limited partnership.

Distributions received from limited partnerships are recognized as return of
capital until the investment balance has been reduced to zero or to a negative
amount equal to future capital contributions required. Subsequent distributions
received are recognized as income.

The total income from the 18 local limited partnerships that was allocated to
the Partnership was $540,000, $226,000 and $420,000 for the years ended December
31, 1998, 1997 and 1996, respectively. However, because losses incurred after
the investment account is reduced to a zero balance are not recognized and
subsequent income is not recognized until the investment account becomes
positive again, the Partnership recognized equity in (loss) income of limited
partnerships, substantially all from the partnerships with a positive investment
balance, of $(747,873), $(204,940) and $177,874 for the years ended December 31,
1998, 1997 and 1996, respectively. Two local partnerships with positive
investment balances generated income to the Partnership in 1996. However, one of
the local partnerships which generated income to the Partnership of $230,000 in
1996, generated a loss of $272,000 in 1997. The local partnership incurred a
loss in 1997 due to debt retirement and financing costs of $477,000 incurred in
connection with the refinancing of its mortgage payable. This local partnership,
using funds released from restricted escrow accounts, made a cash distribution
of $965,000 to the Partnership in 1997, which reduced the investment balance in
that partnership. It allowed the Partnership to pay down the accrued


<PAGE>   8
fees and expenses due general partner, which were $1,021,677 at December 31,
1996. Accrued fees and expenses due general partner were $0 and $181,333 at
December 31, 1998 and 1997, respectively. In addition, during the year ended
December 31, 1996, the Partnership contributed $154,270 to three local limited
partnerships in which it did not have an investment balance, thereby allowing
the Partnership to recognize a loss from those partnerships in that amount. This
reduced the income recognized from the partnerships with positive investment
balances. The equity in loss for the year ended December 31, 1998 includes
impairment losses of $897,681 recognized on certain of the investments in local
limited partnership. The cumulative amount of the unrecognized equity in losses
of certain limited partnerships was approximately $3,738,223 and $11,931,591 as
of December 31, 1998 and 1997, respectively.

Distributions from the local limited partnerships in which the Partnership did
not have a positive investment balance were $997,836, $587,078 and $465,403 for
the years ended December 31, 1998, 1997 and 1996, respectively. Distributions
were higher in 1998 than in 1997 and 1996 because the Partnership's interest in
one local limited partnership was redeemed on September 30, 1998 for a payment
of $589,915. These amounts were recognized as income on the accompanying
statements of operations, in accordance with the equity method of accounting.

As of December 31, 1998, 1997 and 1996, the Partnership has cash and cash
equivalents of $540,568, $544,863 and $376,976, respectively. Substantially all
of these amounts are on deposit with two high credit quality financial
institutions, earning interest. This resulted in the Partnership earning
approximately $14,000, $16,000 and $16,000 in interest income for the years
ended December 31, 1998, 1997 and 1996, respectively. The amount of interest
income varies with market rates available on deposits and with the amount of
funds available for investment. Cash equivalents can be converted to cash to
meet obligations of the Partnership as they arise. The Partnership intends to
continue investing available funds in this manner.

A recurring partnership expense is the annual management fee. The fee is payable
to the Corporate General Partner of the Partnership and is calculated at .5
percent of the Partnership's invested assets. The management fee is paid to the
Corporate General Partner for its continuing management of partnership affairs.
The fee is payable beginning with the month following the Partnership's initial
investment in a local limited partnership. Since the invested assets did not
change until the end of the three year period ended December 31, 1998,
management fees have remained constant at $407,340 for each of these years.

Under recent adopted law and policy, the United States Department of Housing and
Urban Development ("HUD") has determined not to renew the Housing Assistance
Payment ("HAP") Contracts on a long term basis on the existing terms. In
connection with renewals of the HAP Contracts under such new law and policy, the
amount of rental assistance payments under renewed HAP Contracts will be based
on market rentals instead of above market rentals, which was generally the case
under existing HAP Contracts. The payments under the renewed HAP Contracts are
not expected to be in an amount that would provide sufficient cash flow to
permit owners of properties subject to HAP Contracts to meet the debt service
requirements of existing loans insured by the Federal Housing Administration of
HUD ("FHA") unless such mortgage loans are restructured. In order to address the
reduction in payments under HAP Contracts as a result of this new policy, the
Multi-family Assisted Housing Reform and Affordability Act of 1997 ( "MAHRAA"),
which was adopted in October 1997, provides for the restructuring of mortgage
loans insured by the FHA with respect to properties subject to the Section 8
program. Under MAHRAA, an FHA-insured mortgage loan can be restructured into a
first mortgage loan which will be amortized on a current basis and a low
interest second mortgage loan payable to FHA which will only be payable on
maturity of the first mortgage loan. This restructuring results in a reduction
in annual debt service payable by the owner of the FHA-insured mortgage loan and
is expected to result in an insurance payment from FHA to the holder of the
FHA-insured loan due to the reduction in the principal amount. MAHRAA also
phases out project-based subsidies on selected properties serving families not
located in rental markets with limited supply, converting such subsidies to a
tenant-based subsidy.


<PAGE>   9
MAHRAA provides that properties begin the restructuring process in federal
fiscal year 1999 (beginning October 1, 1998). On September 11, 1998, HUD issued
interim regulations implementing MAHRAA and final regulations are expected to be
issued in 1999. With respect to the local limited partnerships' expiring HAP
Contracts, it is expected that the HAP payments will be reduced or terminated
pursuant to the terms of MAHRAA.

When the HAP Contracts are subject to renewal, there can be no assurance that
the local limited partnerships in which the Partnership has an investment will
be permitted to restructure its mortgage indebtedness under MAHRAA. In addition,
the economic impact on the Partnership of the combination of the reduced
payments under the HAP Contracts and the restructuring of the existing
FHA-insured mortgage loans under MAHRAA is uncertain.

As a result of the foregoing, the Partnership in 1997 undertook an extensive
review of disposition, refinancing or re-engineering alternatives for the
properties in which the limited partnerships have invested and are subject to
HUD mortgage and rental subsidy programs. The Partnership has incurred expenses
in connection with this review by various third party professionals, including
accounting, legal, valuation, structural and engineering costs, which amounted
to $253,214 and $119,589 for the years ended December 31, 1998 and 1997,
respectively, and are included in general and administrative expenses.

On December 30, 1998, the Partnership sold its limited partnership interests in
8 local limited partnerships to the Operating Partnership. The sale resulted in
cash proceeds to the Partnership of $3,900,000 and a net gain of $3,798,734,
after deducting selling costs. The cash proceeds were held in escrow at December
31, 1998 and were collected subsequent to year-end. In March 1999, the
Partnership made cash distributions of $3,861,000 to the limited partners and
$39,000 to the general partners, primarily using proceeds from the sale of the
partnership interests.

The Operating Partnership purchased such limited partner interests for cash,
which it raised in connection with a private placement of its equity securities.
The purchase was subject to, among other things, (i) the purchase of the general
partner interests in the local limited partnerships by the REIT; (ii) the
approval of HUD and certain state housing finance agencies; and (iii) the
consent of the limited partners to the sale of the local limited partnership
interests held for investment by the Partnership.

In August 1998, a consent solicitation statement was sent to the limited
partners setting forth the terms and conditions of the purchase of the limited
partners' interests held for investment by the Partnership, together with
certain amendments to the Partnership Agreement and other disclosures of various
conflicts of interest in connection with the proposed transaction. Prior to the
sale of the partnership interests, the consents of the limited partners to the
sale and amendments to the Partnership Agreement were obtained.

Operating expenses, other than management fees, consist of legal and accounting
fees for services rendered to the Partnership and administrative expenses, which
were generally consistent for the three years presented. Legal and accounting
fees were $74,602, $54,950 and $52,552 for the years ended December 31, 1998,
1997 and 1996, respectively. Administrative expenses were $320,345, $182,265 and
$48,007 for the years ended December 31, 1998, 1997 and 1996, respectively.
Included in administrative expenses are reimbursements to NAPICO for certain
expenses, which totaled $24,276, $24,279 and $22,039 for the years ended
December 31, 1998, 1997 and 1996, respectively. In addition, included in
administrative expenses in 1998 and 1997 is $253,214 and $119,589, respectively,
in expenses, related to the aforementioned third-party review of the properties
owned by the local partnerships.

The results of operations of the local limited partnerships were fairly constant
during the years ended December 31, 1998, 1997 and 1996. Contributing to the
relative stability of operations at the local partnerships is the fact that
substantially all of the local partnerships are operating apartment projects
which are subsidized and have mortgage notes payable to or insured by agencies
of the federal or local government.


<PAGE>   10
Total revenue for the 18 local partnerships has remained fairly constant, and
was $16,857,000, $16,935,000 and $16,955,000 for the years ended December 31,
1998, 1997 and 1996, respectively.

Total expenses for the 18 local partnerships remained fairly consistent, and
were $16,190,000, $16,637,000 and $16,384,000 for the years ended December 31,
1998, 1997 and 1996, respectively. Expenses were higher in 1997 as compared to
1998 and 1996 as a result one local partnership incurring $477,000 in debt
retirement and financing costs in connection with the refinancing of its
mortgage payable.

The total net income for the 18 local partnerships for 1998, 1997 and 1996
aggregated $667,000, $298,000 and $571,000, respectively. The income allocated
to the Partnership was $540,000, $226,000 and $420,000 for 1998, 1997 and 1996,
respectively. Net income was lower in 1997 as compared to 1998 and 1996, as a
result of the aforementioned increase in expenses.

The Partnership, as a Limited Partner in the local limited partnerships in which
it has invested, is subject to the risks incident to the construction,
management, and ownership of improved real estate. The Partnership investments
are also subject to adverse general economic conditions, and accordingly, the
status of the national economy including substantial unemployment, concurrent
inflation and changing legislation could increase vacancy levels, rental payment
defaults, and operating expenses, which in turn, could substantially increase
the risk of operating losses for the projects.

The Partnership has assessed the potential impact of the Year 2000 computer
systems issue on its operations. The Partnership believes that no significant
actions are required to be taken by the Partnership to address the issue and
that the impact of the Year 2000 computer systems issue will not materially
affect the Partnership's future operating results or financial condition.


ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA:

The Financial Statements and Supplementary Data are listed under Item 14.


ITEM 9. CHANGES WITH AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND 
        FINANCIAL DISCLOSURE:

Not applicable.

<PAGE>   11
                         REAL ESTATE ASSOCIATES LIMITED
                       (A California limited partnership)

                              FINANCIAL STATEMENTS,
                          FINANCIAL STATEMENT SCHEDULES
                   AND INDEPENDENT PUBLIC ACCOUNTANTS' REPORT
                                DECEMBER 31, 1998




<PAGE>   12
                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Partners of
Real Estate Associates Limited
(A California limited partnership)


We have audited the accompanying balance sheets of Real Estate Associates
Limited (a California limited partnership) as of December 31, 1998 and 1997, and
the related statements of operations, partners' equity (deficiency) and cash
flows for each of the three years in the period ended December 31, 1998. Our
audits also included the financial statement schedules listed in the index in
item 14. These financial statements and financial statement schedules are the
responsibility of the management of the Partnership. Our responsibility is to
express an opinion on these financial statements and financial statement
schedules based on our audits. We did not audit the financial statements of
certain limited partnerships, the investments in which are reflected in the
accompanying financial statements using the equity method of accounting. The
investments in these limited partnerships represent 9 percent and 10 percent of
total assets as of December 31, 1998 and 1997, respectively, and the equity in
income (loss) of these limited partnerships represent 2 percent, 5 percent and
17 percent of the total net income (loss) of the Partnership for the years ended
December 31, 1998, 1997 and 1996, respectively, and represent a substantial
portion of the investee information in Note 2 and the financial statement
schedules. The financial statements of these limited partnerships are audited by
other auditors. Their reports have been furnished to us and our opinion, insofar
as it relates to the amounts included for these limited partnerships, is based
solely on the reports of the other auditors.

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

In our opinion, based on our audits and the reports of other auditors, the
financial statements referred to above present fairly, in all material respects,
the financial position of Real Estate Associates Limited as of December 31, 1998
and 1997, and the results of its operations and its cash flows for each of the
three years in the period ended December 31, 1998 in conformity with generally
accepted accounting principles. Also, in our opinion, based on our audits and
the reports of other auditors, such financial statement schedules, when
considered in relation to the basic financial statements taken as a whole,
present fairly in all material respects the information set forth therein.


DELOITTE & TOUCHE LLP

Los Angeles, California
April 6, 1999



<PAGE>   13
                    [RESNICK FEDDER & SILVERMAN LETTERHEAD]

                          INDEPENDENT AUDITOR'S REPORT


To the Partner
Cherry Hill Limited Dividend Housing Association
Inkster, Michigan


     We have audited the accompanying balance sheet of Cherry Hill Limited
Dividend Housing Association, (a limited partnership), as of December 31, 1997,
and the related statements of operations, changes in partners' capital, and cash
flows for the year then ended. These financial statements are the responsibility
of the partnership's management. Our responsibility is to express an opinion on
these financial statements based on our audit.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Cherry Hill Limited Dividend
Housing Association, as of December 31, 1997, and the results of its
operations, the changes in partners' capital, and cash flows for the year then
ended, in conformity with generally accepted accounting principles.


                          
                                 /s/  REZNICK FEDDER & SILVERMAN
                                ------------------------------------


Atlanta, Georgia
January 15, 1998   



                                      -3-

<PAGE>   14
                         [COOPERS & LYBRAND LETTERHEAD]

REPORT OF INDEPENDENT ACCOUNTANTS

To the Partners of
Cherry Hill Limited Dividend
Housing Association:

We have audited the accompanying balance sheet of Cherry Hill Limited Dividend
Housing Association (a Michigan limited partnership), MSHDA Development No.
559, as of December 31, 1996 and the related statements of profit and loss,
partners' equity, and cash flows for the year then ended. These financial
statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Cherry Hill Limited Dividend
Housing Association as of December 31, 1996 and the results of its operations
and its cash flows for the year then ended in conformity with generally
accepted accounting principles.

In accordance with Government Auditing Standards, we have also issued a report
dated February 1, 1997 on our consideration of Cherry Hill Limited Dividend
Housing Association's internal control structure and a report dated February 1,
1997 on its compliance with laws and regulations.

Our audit was conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental data included on pages
12 and 13 is presented for purposes of additional analysis and is not a
required part of the basic financial statements of Cherry Hill Limited Dividend
Housing Association. Such information has been subjected to the auditing
procedures applied in the audit of the basic financial statements and, in our
opinion, is fairly stated, in all material respects, in relation to the basic
financial statements taken as a whole.


                                       1
<PAGE>   15
We have previously audited and expressed an unqualified opinion on the basic
financial statements of Cherry Hill Limited Dividend Housing Association for
the years 1990 through 1995. The supplemental data included on page 14,
relating to the years 1990 through 1996, is fairly stated, in all material
respects, in relation to the basic financial statements from which it has been
derived. The data on page 14 for the years 1980 through 1989 was not audited by
us and, accordingly, we do not express an opinion on such data. That data was
audited by other auditors who have ceased operations and whose report, dated
January 17, 1990, stated that such information was fairly stated, in all
material respects, in relation to the basic financial statements taken as a
whole.

/s/ COOPER & LYBRAND L.L.P.
---------------------------

Detroit, Michigan
February 1, 1997


                                       2
<PAGE>   16



                          [REZNICK FEDDER & SILVERMAN]



REPORT OF INDEPENDENT ACCOUNTANTS


To the Partners of
Cherry Hill Limited Dividend
Housing Association:

We have audited the accompanying balance sheet of Cherry Hill Limited Dividend
Housing Association (a Michigan limited partnership), MSHDA Development No. 559,
as of December 31, 1998 and the related statements of profit and loss, partners'
equity, and cash flows for the year then ended. These financial
statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Cherry Hill Limited Dividend
Housing Association as of December 31, 1998 and the results of its
operations and its cash flows for the year then ended in conformity with
generally accepted accounting principles.

We have previously audited and expressed an unqualified opinion on the basic
financial statements of Cherry Hill Limited Dividend Housing Association for the
years 1990 through 1994. The supplemental data included on page 14, relating to
the years 1990 through 1995, is fairly stated, in all material respects, in
relation to the basic financial statements form which it has been derived. The
data on page 14 for the years 1980 through 1989 was not audited by us and,
accordingly, we do not express an opinion on such data. That data was audited
by other auditors who have ceased operations and whose report, dated January
17, 1990, stated that such information was fairly stated, in all material
respects, in relation to the basic financial statements taken as a whole.


/s/ REZNICK FEDDER SILVERMAN

Atlanta, Georgia
January 29, 1999







                                       1
<PAGE>   17
                         [ERNST & YOUNG LLP LETTERHEAD]
                        



                         Report of Independent Auditors


Partners
Emporia Limited

We have  audited the accompanying balance sheets of Emporia Limited (a Virginia
Limited Partnership) as of December 31, 1997 and 1996, and the related
statements of operations, changes in partners' equity (deficit), and cash flows
for the years then ended. These financial statements are the responsibility of
the Partnership's management. Our responsibility is to express an opinion on
these financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Emporia Limited at December
31, 1997 and 1996, and the results of its operations and its cash flows for the
years then ended in conformity with generally accepted accounting principles.

In accordance with Government Auditing Standards, we have issued a report dated
January 23, 1998, on our consideration of Emporia Limited's internal control
structure and a report dated January 23, 1998, on its compliance with laws and
regulations.


                                                /s/ ERNST & YOUNG LLP


Winston-Salem, North Carolina
January 23, 1998





<PAGE>   18
                         [ERNST & YOUNG LLP LETTERHEAD]

                         Report of Independent Auditors

Partners
Emporia Limited

We have audited the accompanying balance sheets of Emporia Limited (a Virginia
Limited Partnership) as of December 31, 1996 and 1995, and the related
statements of operations, changes in partners' (deficit) equity, and cash flows
for the years then ended. These financial statements are the responsibility of
the Partnership's management. Our responsibility is to express an opinion on
these financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Emporia Limited at December
31, 1996 and 1995, and the results of its operations and its cash flows for the
years then ended in conformity with generally accepted accounting principles.

In accordance with Government Auditing Standards, we have issued a report dated
January 24, 1997, on our consideration of Emporia Limited's internal control
structure and a report dated January 24, 1997, on its compliance with laws and
regulations.

                                                     /s/ ERNST & YOUNG L.L.P.


Winston-Salem, North Carolina
January 24, 1997

<PAGE>   19
                         REAL ESTATE ASSOCIATES LIMITED
                       (A CALIFORNIA LIMITED PARTNERSHIP)

                                 BALANCE SHEETS
                           DECEMBER 31, 1998 AND 1997

                                     ASSETS

<TABLE>
<CAPTION>
                                                             1998                1997
                                                         -----------         -----------
<S>                                                      <C>                 <C>        
INVESTMENTS IN LIMITED PARTNERSHIPS (Note 2)             $   530,241         $ 1,319,976

CASH AND CASH EQUIVALENTS (Note 1)                           540,568             544,863

CASH DUE FROM ESCROW (Note 2)                              3,900,000                  --
                                                         -----------         -----------

          TOTAL ASSETS                                   $ 4,970,809         $ 1,864,839
                                                         ===========         ===========


                        LIABILITIES AND PARTNERS' EQUITY

LIABILITIES:
     Accounts payable                                    $   116,255         $    89,279
     Accrued fees and expenses due
         general partner (Notes 3)                                --             181,333
                                                         -----------         -----------

                                                             116,255             270,612
                                                         -----------         -----------


COMMITMENTS AND CONTINGENCIES (Notes 3 and 4)

PARTNERS' EQUITY (DEFICIENCY):
    General partners                                         (78,524)           (111,127)
    Limited partners                                       4,933,078           1,705,354
                                                         -----------         -----------

                                                           4,854,554           1,594,227
                                                         -----------         -----------

           TOTAL LIABILITIES AND PARTNERS' EQUITY        $ 4,970,809         $ 1,864,839
                                                         ===========         ===========
</TABLE>




   The accompanying notes are an integral part of these financial statements.
<PAGE>   20
                         REAL ESTATE ASSOCIATES LIMITED
                       (A CALIFORNIA LIMITED PARTNERSHIP)

                            STATEMENTS OF OPERATIONS

              FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996




<TABLE>
<CAPTION>
                                                           1998               1997               1996
                                                       -----------        -----------        -----------
<S>                                                    <C>                <C>                <C>        
INTEREST AND OTHER INCOME                              $    13,917        $    22,277        $    17,526
                                                       -----------        -----------        -----------

OPERATING EXPENSES:
      Legal and accounting                                  74,602             54,950             52,552
      Management fees - general partner (Note 3)           407,340            407,340            407,340
      Administrative  (Note 3)                             320,345            182,265             48,007
                                                       -----------        -----------        -----------

              Total operating expenses                     802,287            644,555            507,899
                                                       -----------        -----------        -----------

LOSS FROM OPERATIONS                                      (788,370)          (622,278)          (490,373)

GAIN ON SALE OF LIMITED PARTNERSHIP
       INTERESTS (Note 2)                                3,798,734                 --                 --

DISTRIBUTIONS FROM LIMITED
      PARTNERSHIPS RECOGNIZED AS
      INCOME (Note 2)                                      997,836            587,078            465,403

EQUITY IN (LOSS) INCOME OF LIMITED
      PARTNERSHIPS AND AMORTIZATION
      OF ACQUISITION COSTS (Note 2)                       (747,873)          (204,940)           177,874
                                                       -----------        -----------        -----------

NET INCOME (LOSS)                                      $ 3,260,327        $  (240,140)       $   152,904
                                                       ===========        ===========        ===========

NET (LOSS) INCOME PER LIMITED
      PARTNERSHIP INTEREST (Note 1)                    $       198        $       (15)       $         9
                                                       ===========        ===========        ===========
</TABLE>




   The accompanying notes are an integral part of these financial statements.
<PAGE>   21
                         REAL ESTATE ASSOCIATES LIMITED
                       (A CALIFORNIA LIMITED PARTNERSHIP)

                   STATEMENTS OF PARTNERS' EQUITY (DEFICIENCY)
              FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996




<TABLE>
<CAPTION>
                                   General            Limited
                                  Partners            Partners            Total
                                 -----------        -----------        -----------
<S>                              <C>                <C>                <C>        
EQUITY (DEFICIENCY),
       January 1, 1996           $  (110,255)       $ 1,791,718        $ 1,681,463

       Net income for 1996             1,529            151,375            152,904
                                 -----------        -----------        -----------

EQUITY (DEFICIENCY),
       December 31, 1996            (108,726)         1,943,093          1,834,367

       Net loss for 1997              (2,401)          (237,739)          (240,140)
                                 -----------        -----------        -----------

EQUITY (DEFICIENCY),
       December 31, 1997            (111,127)         1,705,354          1,594,227

       Net income for 1998            32,603          3,227,724          3,260,327
                                 -----------        -----------        -----------

EQUITY (DEFICIENCY),
       December 31, 1998         $   (78,524)       $ 4,933,078        $ 4,854,554
                                 ===========        ===========        ===========
</TABLE>




   The accompanying notes are an integral part of these financial statements.
<PAGE>   22
                         REAL ESTATE ASSOCIATES LIMITED
                       (A CALIFORNIA LIMITED PARTNERSHIP)

                            STATEMENTS OF CASH FLOWS
              FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996



<TABLE>
<CAPTION>
                                                                              1998              1997              1996
                                                                          -----------       -----------       -----------
<S>                                                                       <C>               <C>               <C>        
CASH FLOWS FROM OPERATING ACTIVITIES:
       Net income (loss)                                                  $ 3,260,327       $  (240,140)      $   152,904
       Adjustments to reconcile net income (loss) to net
         cash provided by (used in) operating activities:
           Equity in loss (income) of limited partnerships
                and amortization of acquisition costs                         747,873           204,940          (177,874)
            Gain on sale of partnership interests                          (3,798,734)
            (Decrease) increase in accrued fees
               and expenses due general partner                              (181,333)         (840,344)            7,340
           Increase (decrease) in accounts payable                             26,976            81,350           (12,107)
           Decrease in receivables from limited partnerships                       --                --           148,931
                                                                          -----------       -----------       -----------

                Net cash provided by (used in)
                   operating activities                                        55,109          (794,194)          119,194
                                                                          -----------       -----------       -----------

CASH FLOWS FROM INVESTING ACTIVITIES:
       Costs related to sale of partnership interests                        (101,266)
       Decrease in short term investments                                          --                --           125,000
       Distributions from limited partnership
           recognized as return of capital                                     47,594           974,165            36,482
       Capital contribution to limited partnerships                            (5,732)          (12,084)         (154,270)
                                                                          -----------       -----------       -----------

                 Net cash (used in) provided by investing activities          (59,404)          962,081             7,212
                                                                          -----------       -----------       -----------


NET (DECREASE) INCREASE IN CASH
    CASH EQUIVALENTS                                                           (4,295)          167,887           126,406

CASH AND CASH EQUIVALENTS,
       beginning of year                                                      544,863           376,976           250,570
                                                                          -----------       -----------       -----------

CASH AND CASH EQUIVALENTS,
       end of year                                                        $   540,568       $   544,863       $   376,976
                                                                          ===========       ===========       ===========
</TABLE>




   The accompanying notes are an integral part of these financial statements.
<PAGE>   23
                         REAL ESTATE ASSOCIATES LIMITED
                       (a California limited partnership)

                          NOTES TO FINANCIAL STATEMENTS
                                DECEMBER 31, 1998


1.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         Organization

         Real Estate Associates Limited (the "Partnership") was formed under the
         California Limited Partnership Act on September 15, 1977. The
         Partnership was formed to invest in other limited partnerships which
         own and operate primarily federal, state and local government-assisted
         housing projects. The general partners are National Partnership
         Investments Corp. (NAPICO), the Corporate General Partner, and Charles
         H. Boxenbaum, Chief Executive Officer of NAPICO.

         Prior to December 30, 1998, NAPICO was a wholly owned subsidiary of
         Casden Investment Corporation ("CIC"), which is wholly owned by Alan I.
         Casden. On December 30, 1998, Casden Properties Operating Partnership,
         L.P. (the "Operating Partnership"), a majority owned subsidiary of
         Casden Properties Inc., a real estate investment trust organized by
         Alan I. Casden, purchased a 95.25% economic interest in NAPICO.

         The Partnership issued 16,505 units of limited partnership interests
         through a public offering. The general partners have a 1 percent
         interest in the profits and losses of the Partnership. The limited
         partners have the remaining 99 percent interest which is allocated in
         proportion to their respective individual investments.

         The Partnership shall be dissolved only upon the expiration of 53
         complete calendar years (December 31, 2031) from the date of the
         formation of the Partnership or the occurrence of various other events
         as specified in the terms of the Partnership agreement.

         Upon total or partial liquidation of the Partnership or the disposition
         or partial disposition of a project or project interest and
         distribution of the proceeds, the general partners will be entitled to
         a liquidation fee as stipulated in the Partnership agreement. The
         limited partners will have a priority return equal to their invested
         capital attributable to the project(s) or project interest(s) sold and
         shall have received an amount from the sale of the project(s) or
         project interest(s) sufficient to pay state and federal income taxes,
         if any, calculated at the maximum rate then in effect. The general
         partners' liquidation fee may accrue but shall not be paid until the
         limited partners have received distributions equal to 100 percent of
         their capital contributions.

         On December 30, 1998, the Partnership sold its interests in 8 local
         limited partnerships for $3,900,000 to the Operating Partnership. In
         addition, on September 30, 1998, the Partnership's interest in one
         local limited partnership was redeemed for $589,915.

         Use of Estimates

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

                                        5

<PAGE>   24
                         REAL ESTATE ASSOCIATES LIMITED
                       (a California limited partnership)

                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)
                                DECEMBER 31, 1998


1.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

         Method of Accounting for Investments in Limited Partnerships

         The investments in limited partnerships are accounted for on the equity
         method. Acquisition, selection and other costs related to the
         acquisition of the projects are capitalized to the investment account
         and are being amortized on a straight line basis over the estimated
         lives of the underlying assets, which is generally 30 years.

         Net Income Per Limited Partnership Interest

         Net income per limited partnership interest was computed by dividing
         the limited partners' share of net income by the number of limited
         partnership interests outstanding during the year. The number of
         limited partnership interests was 16,505 for all years presented.

         Cash and Cash Equivalents

         Cash and cash equivalents consist of cash and bank certificates of
         deposit with an original maturity of three months or less. The
         Partnership has its cash and cash equivalents on deposit primarily with
         two high credit quality financial institutions. Such cash and cash
         equivalents are in excess of the FDIC insurance limit.

         Impairment of Long-Lived Assets

         The Partnership reviews long-lived assets to determine if there has
         been any permanent impairment whenever events or changes in
         circumstances indicate that the carrying amount of the asset may not be
         recoverable. If the sum of the expected future cash flows is less than
         the carrying amount of the assets, the Partnership recognizes an
         impairment loss. During 1998, the partnership recognized an impairment
         loss of approximately $898,000, related to certain investments in local
         limited partnerships, which has been included in equity in loss of
         limited partnerships.

2.       INVESTMENTS IN LIMITED PARTNERSHIPS

         The Partnership holds limited partnership interests in 9 limited
         partnerships as of December 31, 1998, after selling its interests in 8
         limited partnerships and having its interest in one limited partnership
         redeemed. The limited partnerships owned as of December 31, 1998,
         residential low income rental projects consisting of 657 apartment
         units. The mortgage loans of these projects are payable to or insured
         by various governmental agencies.

         The Partnership, as a limited partner, is entitled to between 50
         percent and 99 percent of the profits and losses in the limited
         partnerships.

         Equity in losses of limited partnerships are recognized in the
         financial statements until the limited partnership investment account
         is reduced to a zero balance. Losses incurred after the limited
         partnership investment account is reduced to zero are not recognized.
         The cumulative amount of the unrecognized

                                        6

<PAGE>   25
                         REAL ESTATE ASSOCIATES LIMITED
                       (a California limited partnership)

                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)
                                DECEMBER 31, 1998


2.       INVESTMENTS IN LIMITED PARTNERSHIPS (CONTINUED)

         equity in losses of certain limited partnerships was in the aggregate
         approximately $3,738,223 and $11,931,591 as of December 31, 1998 and
         1997, respectively.

         Distributions from the limited partnerships are accounted for as a
         return of capital until the investment balance is reduced to zero.
         Subsequent distributions received are recognized as income.

         The following is a summary of the investments in limited partnerships
         and reconciliation to the limited partnership accounts:

<TABLE>
<CAPTION>
                                                                           1998                1997 
                                                                       -----------         -----------
<S>                                                                    <C>                 <C>        
         Investment balance, beginning of year                         $ 1,319,976         $ 2,486,997
         Capital contribution                                                5,732              12,084
         Equity in loss of limited partnerships                           (745,087)           (202,154)
         Amortization of capitalized acquisition costs and fees             (2,786)             (2,786)
         Cash distributions recognized as return of capital                (47,594)           (974,165)
                                                                       -----------         -----------

         Investment balance, end of year                               $   530,241         $ 1,319,976
                                                                       ===========         ===========
</TABLE>

         The difference between the investment per the accompanying balance
         sheets at December 31, 1998 and 1997, and the deficiency per the
         limited partnerships' combined financial statements is due primarily to
         cumulative unrecognized equity in losses of certain limited
         partnerships, costs capitalized to the investment account and
         cumulative distributions recognized as income and impairment losses.

         Selected financial information from the combined financial statements
         of the limited partnerships, at December 31, 1998 and 1997 and for each
         of the three years in the period is as follows:

                                 Balance Sheets

<TABLE>
<CAPTION>
                                                               1998             1997 
                                                             --------         --------
                                                                  (in thousands)
<S>                                                          <C>              <C>     
         Land and buildings, net                             $ 11,970         $ 33,338
                                                             ========         ========

         Total assets                                        $ 18,861         $ 46,549
                                                             ========         ========

         Mortgages payable                                   $ 24,570         $ 63,212
                                                             ========         ========

         Total liabilities                                   $ 25,991         $ 68,216
                                                             ========         ========

         Deficiency of Real Estate Associates Limited        $ (5,501)        $(17,108)
                                                             ========         ========

         Deficiency of other partners                        $ (1,629)        $ (4,559)
                                                             ========         ========
</TABLE>


                                        7

<PAGE>   26
                         REAL ESTATE ASSOCIATES LIMITED
                       (a California limited partnership)

                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)
                                DECEMBER 31, 1998


2.      INVESTMENTS IN LIMITED PARTNERSHIPS (CONTINUED)

                            Statements of Operations

<TABLE>
<CAPTION>
                                                        1998           1997           1996 
                                                       -------        -------        -------
                                                                  (in thousands)
<S>                                                     <C>            <C>            <C>    
        Total revenues                                 $16,857        $16,935        $16,955
                                                       =======        =======        =======

        Interest expense                               $ 4,550        $ 4,533        $ 4,935
                                                       =======        =======        =======

        Depreciation and amortization                  $ 2,691        $ 2,653        $ 2,610
                                                       =======        =======        =======

        Total expenses                                 $16,190        $16,637        $16,384
                                                       =======        =======        =======

        Net income                                     $   667        $   298        $   571
                                                       =======        =======        =======

        Net income allocable to the Partnership        $   540        $   226        $   420
                                                       =======        =======        =======
</TABLE>

        Prior to the sale of certain partnership interests on December 30, 1998,
        an affiliate of NAPICO was the general partner in five of the limited
        partnerships included above, and another affiliate receives property
        management fees of approximately 5 to 6 percent of the revenue from
        three of these partnerships. The affiliate received property management
        fees of $184,843, $210,908 and $206,629 in 1998, 1997 and 1996,
        respectively. The following sets forth significant data for the
        partnerships, in which an affiliate of NAPICO was the general partner
        prior to the sale referred to above, reflected in the accompanying
        financial statements using the equity method of accounting:

<TABLE>
<CAPTION>
                                                             1998             1997             1996 
                                                            --------         --------         --------
                                                                           (in thousands)
<S>                                                         <C>              <C>              <C>
        Total assets                                        $    404         $ 16,309
                                                            ========         ========

        Total liabilities                                   $  1,064         $ 25,275
                                                            ========         ========

        Deficiency of Real Estate Associates Limited        $   (757)        $ (8,598)
                                                            ========         ========

        Equity (deficiency) of other partners               $     97         $   (369)
                                                            ========         ========

        Total revenue                                       $  4,215         $  4,215         $  4,205
                                                            ========         ========         ========

        Net loss                                            $   (548)        $   (346)        $   (454)
                                                            ========         ========         ========
</TABLE>

        Subsequent to the sale of certain partnership interests, an affiliate of
        NAPICO is the general partner in one of the limited partnerships, and
        its property is managed by another affiliate.


                                        8

<PAGE>   27
                         REAL ESTATE ASSOCIATES LIMITED
                       (a California limited partnership)

                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)
                                DECEMBER 31, 1998


2.      INVESTMENTS IN LIMITED PARTNERSHIPS (CONTINUED)

        Under recent adopted law and policy, the United States Department of
        Housing and Urban Development ("HUD") has determined not to renew the
        Housing Assistance Payment ("HAP") Contracts on a long term basis on the
        existing terms. In connection with renewals of the HAP Contracts under
        such new law and policy, the amount of rental assistance payments under
        renewed HAP Contracts will be based on market rentals instead of above
        market rentals, which was generally the case under existing HAP
        Contracts. The payments under the renewed HAP Contracts are not expected
        to be in an amount that would provide sufficient cash flow to permit
        owners of properties subject to HAP Contracts to meet the debt service
        requirements of existing loans insured by the Federal Housing
        Administration of HUD ("FHA") unless such mortgage loans are
        restructured. In order to address the reduction in payments under HAP
        Contracts as a result of this new policy, the Multi-family Assisted
        Housing Reform and Affordability Act of 1997 ( "MAHRAA"), which was
        adopted in October 1997, provides for the restructuring of mortgage
        loans insured by the FHA with respect to properties subject to the
        Section 8 program. Under MAHRAA, an FHA-insured mortgage loan can be
        restructured into a first mortgage loan which will be amortized on a
        current basis and a low interest second mortgage loan payable to FHA
        which will only be payable on maturity of the first mortgage loan. This
        restructuring results in a reduction in annual debt service payable by
        the owner of the FHA-insured mortgage loan and is expected to result in
        an insurance payment from FHA to the holder of the FHA-insured loan due
        to the reduction in the principal amount. MAHRAA also phases out
        project-based subsidies on selected properties serving families not
        located in rental markets with limited supply, converting such subsidies
        to a tenant-based subsidy.

        MAHRAA provides that properties begin the restructuring process in
        federal fiscal year 1999 (beginning October 1, 1998). On September 11,
        1998, HUD issued interim regulations implementing MAHRAA and final
        regulations are expected to be issued in 1999. With respect to the local
        limited partnerships' expiring HAP Contracts, it is expected that the
        HAP payments will be reduced or terminated pursuant to the terms of
        MAHRAA.

        When the HAP Contracts are subject to renewal, there can be no assurance
        that the local limited partnerships in which the Partnership has an
        investment will be permitted to restructure its mortgage indebtedness
        under MAHRAA. In addition, the economic impact on the Partnership of the
        combination of the reduced payments under the HAP Contracts and the
        restructuring of the existing FHA-insured mortgage loans under MAHRAA is
        uncertain.

        As a result of the foregoing, the Partnership in 1997 undertook an
        extensive review of disposition, refinancing or re-engineering
        alternatives for the properties in which the limited partnerships have
        invested and are subject to HUD mortgage and rental subsidy programs.
        The Partnership has incurred expenses in connection with this review by
        various third party professionals, including accounting, legal,
        valuation, structural and engineering costs, which amounted to $253,214
        and $119,589 for the years ended December 31, 1998 and 1997,
        respectively, and are included in general and administrative expenses.



                                        9

<PAGE>   28
                         REAL ESTATE ASSOCIATES LIMITED
                       (a California limited partnership)

                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)
                                DECEMBER 31, 1998


2.      INVESTMENTS IN LIMITED PARTNERSHIPS (CONTINUED)

        On December 30, 1998, the Partnership sold its limited partnership
        interests in 8 local limited partnerships to the Operating Partnership.
        The sale resulted in cash proceeds to the Partnership of $3,900,000 and
        a net gain of $3,798,734, after deducting selling costs. The cash
        proceeds were held in escrow at December 31, 1998 and were collected
        subsequent to year-end. In March 1999, the Partnership made cash
        distributions of $3,861,000 to the limited partners and $39,000 to the
        general partners, primarily using proceeds from the sale of the
        partnership interests.

        The Operating Partnership purchased such limited partner interests for
        cash, which it raised in connection with a private placement of its
        equity securities. The purchase was subject to, among other things, (i)
        the purchase of the general partner interests in the local limited
        partnerships by the Operating Partnership; (ii) the approval of HUD and
        certain state housing finance agencies; and (iii) the consent of the
        limited partners to the sale of the local limited partnership interests
        held for investment by the Partnership.

        In August 1998, a consent solicitation statement was sent to the limited
        partners setting forth the terms and conditions of the purchase of the
        limited partners' interests held for investment by the Partnership,
        together with certain amendments to the Partnership Agreement and other
        disclosures of various conflicts of interest in connection with the
        proposed transaction. Prior to the sale of the partnership interests,
        the consents of the limited partners to the sale and amendments to the
        Partnership Agreement were obtained.

 3.     FEES AND EXPENSES DUE GENERAL PARTNER

        Under the terms of the Restated Certificate and Agreement of Limited
        Partnership, the Partnership is obligated to NAPICO for an annual
        management fee equal to .5 percent of the original invested assets of
        the limited partnerships. Invested assets is defined as the costs of
        acquiring project interests, including the proportionate amount of the
        mortgage loans related to the Partnership's interest in the capital
        accounts of the respective partnerships. At December 31, 1998 and 1997,
        management fees due NAPICO were $0 and $181,333, respectively.

        The Partnership reimburses NAPICO for certain expenses. The
        reimbursement to NAPICO was $24,276, $24,279 and $22,039 in 1998, 1997
        and 1996, respectively, and is included in administrative expenses.

4.      CONTINGENCIES

        On August 27, 1998, two investors holding an aggregate of eight units of
        limited partnership interests in Real Estate Associates Limited III (an
        affiliated partnership in which NAPICO is the managing general partner)
        and two investors holding an aggregate of five units of limited
        partnership interest in Real Estate Associates Limited VI (another
        affiliated partnership in which NAPICO is the managing general partner)
        commenced an action in the United States District Court for the Central
        District of California against the Partnership, NAPICO and certain other
        affiliated entities. The complaint alleges that the defendants breached
        their fiduciary duty to the limited partners of certain NAPICO managed
        partnerships and made

                                       10

<PAGE>   29
                         REAL ESTATE ASSOCIATES LIMITED
                       (a California limited partnership)

                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)
                                DECEMBER 31, 1998


4.      CONTINGENCIES (CONTINUED)

        materially false and misleading statements in the consent solicitation
        statements sent to the limited partners of such partnerships relating to
        approval of the transfer of partnership interests in limited
        partnerships, owning certain of the properties, to the Operating
        Partnership. The plaintiffs seek preliminary and permanent injunctive
        relief and other equitable relief, as well as compensatory and punitive
        damages. The managing general partner of such NAPICO managed
        partnerships and the other defendants believe that the plaintiffs'
        claims are without merit and intend to contest the action vigorously.

        The corporate general partner of the Partnership is a plaintiff in
        various lawsuits and has also been named a defendant in other lawsuits
        arising from transactions in the ordinary course of business. In the
        opinion of management and the corporate general partner, the claims will
        not result in any material liability to the Partnership.

        The Partnership has assessed the potential impact of the Year 2000
        computer systems issue on its operations. The Partnership believes that
        no significant actions are required to be taken by the Partnership to
        address the issue and that the impact of the Year 2000 computer systems
        issue will not materially affect the Partnership's future operating
        results or financial condition.

5.      INCOME TAXES

        No provision has been made for income taxes in the accompanying
        financial statements since such taxes, if any, are the liability of the
        individual partners. The major differences in tax and financial
        reporting result from the use of different bases and depreciation
        methods for the properties held by the limited partnerships. Differences
        in tax and financial reporting also arise as losses are not recognized
        for financial reporting purposes when the investment balance has been
        reduced to zero.

6.      FAIR VALUE OF FINANCIAL INSTRUMENTS

        Statement of Financial Accounting Standards No. 107, "Disclosure about
        Fair Value of Financial Instruments," requires disclosure of fair value
        information about financial instruments, when it is practicable to
        estimate that value. The operations generated by the investee limited
        partnerships, which account for the Partnership's primary source of
        revenues, are subject to various government rules, regulations and
        restrictions which make it impracticable to estimate the fair value of
        accrued fees and expenses due general partner. The carrying amount of
        other assets and liabilities reported on the balance sheets that require
        such disclosure approximates fair value due to their short-term
        maturity.


                                       11

<PAGE>   30
                         REAL ESTATE ASSOCIATES LIMITED
                       (a California limited partnership)

                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)
                                DECEMBER 31, 1998

7.      FOURTH QUARTER ADJUSTMENT

        The Partnership's policy is to record its equity in the income of
        limited partnerships on a quarterly basis, using estimated financial
        information furnished by the various local operating general partners.
        The equity in income of limited partnerships reflected in the
        accompanying annual financial statements is based primarily upon audited
        financial statements of the investee limited partnerships. The
        difference of approximately $961,773, between the estimated nine-month
        equity in income and the actual 1998 year end equity in loss has been
        recorded in the fourth quarter.


                                       12

<PAGE>   31
                                                                        SCHEDULE

                         REAL ESTATE ASSOCIATES LIMITED
                       INVESTMENTS IN LIMITED PARTNERSHIPS
                  YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996

<TABLE>
<CAPTION>
                                                                         Year Ended December 31, 1998
                                            ---------------------------------------------------------------------------------
                                                                                  Cash            Equity
                                              Balance          Capital          Distri-             In            Balance
                                              January          Contri-          butions           Income          December
Limited Partnerships                          1, 1998          butions          Received          (Loss)          31, 1998
--------------------                        -------------    -------------    -------------    -------------    -------------
<S>                                         <C>              <C>              <C>              <C>              <C>          
Bedford House *                             $                $                $                $                $

Belleville Manor Apts.

Benroe, Ltd. (Wedgewood)                                             2,752                            (2,752)

Bethel Towers, Ltd.

Cherry Hill, Ltd.                                 985,631                           (38,113)        (417,277)         530,241
Dividend Housing Assn.

Chidester Place, Ltd. *
Dividend Housing Assn.

Clinton Apts., Ltd.

East Central Towers Associates *

Emporia, Ltd. (Northwood)                         334,345                            (9,481)        (324,864)               0

Gadsden Towers, Ltd. *

LaLoma Assoc., Ltd.

Parkview Associates *

Pennsylvania Assoc. (Norristown) *

Riverside Towers Associates **

Roebern, Ltd. (Ridgeview) *                                          2,980                            (2,980)               0

Van Nuys Associates *

West Lafayette, Ltd.

Williamson Towers, Ltd.                                                                                          
                                            -------------    -------------    -------------    -------------    -------------
                                            $   1,319,976    $       5,732    $     (47,594)   $    (747,873)   $     530,241
                                            =============    =============    =============    =============    =============
</TABLE>


 * Sold to the Operating Partnership in 1998
** The interest was redeemed by the local limited partnership in 1998.
<PAGE>   32
                                                                        SCHEDULE
                                                                     (CONTINUED)

                         REAL ESTATE ASSOCIATES LIMITED
                       INVESTMENTS IN LIMITED PARTNERSHIPS
                  YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996

<TABLE>
<CAPTION>
                                                                       Year Ended December 31, 1997
                                            ---------------------------------------------------------------------------------
                                                                                  Cash            Equity
                                              Balance          Capital          Distri-             In            Balance
                                              January          Contri-          butions           Income          December
Limited Partnerships                          1, 1997          butions          Received          (Loss)          31, 1997
--------------------                        -------------    -------------    -------------    -------------    -------------
<S>                                         <C>              <C>              <C>              <C>              <C>          
Bedford House                               $                $                $                $                $

Belleville Manor Apts.

Benroe, Ltd. (Wedgewood)

Bethel Towers, Ltd.

Cherry Hill, Ltd.                               2,222,749                          (964,684)        (272,434)         985,631
Dividend Housing Assn.

Chidester Place, Ltd.
Dividend Housing Assn.

Clinton Apts., Ltd.

East Central Towers Associates

Emporia, Ltd. (Northwood)                         264,248                            (9,481)          79,578          334,345

Gadsden Towers, Ltd.

LaLoma Assoc., Ltd.

Parkview Assoc.

Pennsylvania Assoc. (Norristown)

Riverside Towers Assoc.

Roebern, Ltd. (Ridgeview)                                           12,084                           (12,084)               0

Van Nuys Assoc.

West Lafayette, Ltd.

Williamson Towers, Ltd.
                                            -------------    -------------    -------------    -------------    -------------
                                            $   2,486,997    $      12,084    $    (974,165)   $    (204,940)   $   1,319,976
                                            =============    =============    =============    =============    =============
</TABLE>

<PAGE>   33
                                                                        SCHEDULE
                                                                     (CONTINUED)

                         REAL ESTATE ASSOCIATES LIMITED
                       INVESTMENT IN LIMITED PARTNERSHIPS
                  YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996

<TABLE>
<CAPTION>
                                                                       Year Ended December 31, 1996
                                               ------------------------------------------------------------------------------
                                                                                    Cash
                                                Balance            Capital         Distri-          Equity          Balance
                                                January            Contri-         butions            in            December
Limited Partnerships                            1, 1996            butions        Received       Income/(Loss)      31, 1996
--------------------                           ----------         --------       ----------      -------------     ----------
<S>                                            <C>                <C>            <C>             <C>               <C>       
Bedford House, Ltd.                            $                  $              $                 $               $

Belleville Manor Apts. Ltd.

Benroe, Ltd. (Wedgewood)                                            55,392                           (55,392)

Bethel Towers, Ltd.

Cherry Hill, Ltd.
Dividend Housing Assn.                          2,019,420                           (27,000)         230,330        2,222,750

Chidester Place, Ltd.
Dividend Housing Assn.

Clinton Apts., Ltd.

East Central Towers
 Associates

Emporia Ltd. (Northwood)                          171,915                            (9,482)         101,814          264,247

Gadsden Towers, Ltd.

LaLoma Assoc., Ltd.

Parkview Assoc.,

Pennsylvania Assoc.
(Norristown)

Riverside Towers Assoc.

Roebern, Ltd.
(Ridgeview)                                                         72,878                           (72,878)

Van Nuys Assoc.

West Lafayette, Ltd.                                                26,000                           (26,000)

Williamson Towers, Ltd.                                                                                                    
                                               ----------         --------       ----------        ---------       ----------
                                               $2,191,335         $154,270       $  (36,482)       $ 177,874       $2,486,997
                                               ==========         ========       ==========        =========       ==========
</TABLE>

<PAGE>   34
                                                                        SCHEDULE
                                                                     (Continued)


                         REAL ESTATE ASSOCIATES LIMITED
          INVESTMENT IN, EQUITY IN EARNINGS OF, AND DIVIDENDS RECEIVED
                        FROM AFFILIATES AND OTHER PERSONS
                  YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996


NOTES:  1.  Equity in income (losses) of the limited partnerships represents the
            Partnership's allocable share of the net results of operations from
            the limited partnerships for the year.  Equity in losses of the 
            limited partnerships will be recognized until the investment balance
            is reduced to zero or a negative balance equal to further 
            commitments by the Partnership.

        2.  Cash distributions from the limited partnerships are treated as a 
            return of the investment and reduce the investment balance until 
            such time as the investment is reduced to zero or a negative balance
            equal to further commitments by the Partnership. Distributions 
            subsequently received are recognized as income.




<PAGE>   35
                                                                    SCHEDULE III
                                                                     (Continued)

                         REAL ESTATE ASSOCIATES LIMITED
              REAL ESTATE AND ACCUMULATED DEPRECIATION OF PROPERTY
                       HELD BY LOCAL LIMITED PARTNERSHIPS
                          IN WHICH REAL HAS INVESTMENTS
                                DECEMBER 31, 1998


NOTES:  1.  Each local limited partnership has developed, owns and operates the
            housing project. Substantially all project costs, including 
            construction period interest expense, were capitalized by the 
            limited partnerships.

        2.  Depreciation is provided for by various methods over the estimated 
            useful lives of the Projects. The estimated composite useful lives
            of the buildings are from 25 to 40 years.

        3.  Investments in property and equipment:

<TABLE>
<CAPTION>
                                                                   Buildings,
                                                                  Furnishings
                                                                      And
                                                 Land              Equipment              Total
                                             ------------         ------------         ------------
<S>                                          <C>                  <C>                  <C>         
Balance at January 1, 1996                   $  2,742,096         $ 82,749,248         $ 85,491,344

Net additions (deletions) during 1996            (158,662)             778,322              619,660
                                             ------------         ------------         ------------

Balance at December 31, 1996                    2,583,434           83,527,570           86,111,004

Net additions during 1997                              --              905,364              905,364
                                             ------------         ------------         ------------

Balance at December 31, 1997                    2,583,434           84,432,934           87,016,368

Sales of properties during 1998                (1,491,081)         (50,145,939)         (51,637,020)

Net additions during 1998                         428,161               65,283              493,444
                                             ------------         ------------         ------------

Balance at December 31, 1998                 $  1,520,514         $ 34,352,278         $ 35,872,792
                                             ============         ============         ============
</TABLE>



<PAGE>   36
                                                                    SCHEDULE III
                                                                     (Continued)


                         REAL ESTATE ASSOCIATES LIMITED
              REAL ESTATE AND ACCUMULATED DEPRECIATION OF PROPERTY
                       HELD BY LOCAL LIMITED PARTNERSHIPS
                          IN WHICH REAL HAS INVESTMENTS
                                DECEMBER 31, 1998



<TABLE>
<CAPTION>
                                               Buildings,
                                              Furnishings
                                                  And
                                               Equipment
                                             -------------
Accumulated Depreciation:
-------------------------
<S>                                          <C>         
Balance at January 1, 1996                   $ 48,627,920

Net additions during 1996                       2,486,680
                                             ------------

Balance at December 31, 1996                   51,114,600

Net additions during 1997                       2,563,992
                                             ------------

Balance at December 31, 1997                   53,678,592

Sales of properties during 1998               (32,118,237)

Net additions during 1998                       2,342,189
                                             ------------

Balance at December 31, 1998                 $ 23,902,544
                                             ============
</TABLE>



<PAGE>   37
PART III.

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT:

REAL ESTATE ASSOCIATES LIMITED (the "Partnership") has no directors or executive
officers of its own.

Prior to December 30, 1998, NAPICO was a wholly owned subsidiary of Casden
Investment Corporation ("CIC"), which is wholly owned by Alan I. Casden. On
December 30, 1998, Casden Properties Operating Partnership, L.P., (the
"Operating Partnership") a majority owned subsidiary of Casden Properties Inc.,
a real estate investment trust organized by Alan I. Casden, purchased a 95.25%
economic interest in NAPICO. The following biographical information is presented
for the directors and executive officers of NAPICO with principal responsibility
for the Partnership's affairs.

CHARLES H. BOXENBAUM, 69, Chairman of the Board of Directors and Chief Executive
Officer of NAPICO.

Mr. Boxenbaum has been associated with NAPICO since its inception. He has been
active in the real estate industry since 1960, and prior to joining NAPICO was a
real estate broker with the Beverly Hills firm of Carl Rhodes Company.

Mr. Boxenbaum has been a guest lecturer at national and state realty
conventions, certified properties exchanger's seminars, Los Angeles Town Hall,
National Association of Home Builders, International Council of Shopping
Centers, Society of Conventional Appraisers, California Real Estate Association,
National Institute of Real Estate Brokers, Appraisal Institute, various mortgage
banking seminars, and the North American Property Forum held in London, England.
In 1963, he was the winner of the Snyder Award, the highest annual award offered
by the National Association of Real Estate Boards for Best Exchange. He is one
of the founders and a past director of the First Los Angeles Bank, organized in
November 1974. Mr. Boxenbaum was a member of the Board of Directors of the
National Housing Council. Mr. Boxenbaum received his Bachelor of Arts degree
from the University of Chicago.

BRUCE E. NELSON, 47, President and a director of NAPICO.

Mr. Nelson joined NAPICO in 1980 and became President in February 1989. He is
responsible for the operations of all NAPICO sponsored limited partnerships.
Prior to that he was primarily responsible for the securities aspects of the
publicly offered real estate investment programs. Mr. Nelson is also involved in
the identification, analysis, and negotiation of real estate investments.

From February 1979 to October 1980, Mr. Nelson held the position of Associate
General Counsel at Western Consulting Group, Inc., private residential and
commercial real estate syndicators. Prior to that time, Mr. Nelson was engaged
in the private practice of law in Los Angeles. Mr. Nelson received his Bachelor
of Arts degree from the University of Wisconsin and is a graduate of the
University of Colorado School of Law. He is a member of the State Bar of
California and is a licensed real estate broker in California and Texas.

ALAN I. CASDEN, 53, Chairman of Casden Properties Inc. and The Casden Company,
an affiliate of Casden Properties (formerly CoastFed Properties), a director and
member of the audit committee of NAPICO, and chairman of the Executive Committee
of NAPICO.

Mr. Casden is Chairman of the Board, Chief Executive Officer and sole
shareholder of The Casden Company and Casden Investment Company. He also became
the Chairman of the Board of Casden Properties Inc. in 1998. Previously, he was
the president and chairman of Mayer Group, Inc., which he joined in 1975. He is
also chairman of Mayer Management, Inc., a real estate management firm. Mr.
Casden has been involved in approximately $3 billion of real estate financings
and sales and has been responsible for the development and construction of more
than 12,000 apartment units and 5,000 single-family homes and condominiums.


<PAGE>   38
Mr. Casden is a member of the American Institute of Certified Public Accountants
and of the California Society of Certified Public Accountants. Mr. Casden is a
member of the advisory board of the National Multi-Family Housing Conference,
the Multi-Family Housing Council, and the President's Council of the California
Building Industry Association. He also serves on the advisory board to the
School of Accounting of the University of Southern California. He holds a
Bachelor of Science degree and a Masters in Business Administration degree from
the University of Southern California.

HENRY C. CASDEN, 55, President, Chief Operating Officer and Secretary of The
Casden Company and a director and secretary of NAPICO.

Mr. Casden has been President and Chief Operating Officer of The Casden Company,
as well as a director of NAPICO since February 1988. He became secretary of both
companies in late 1994. He also became the President of Casden Properties Inc.
in 1998. From 1982 to 1988, Mr. Casden was of counsel and a partner in the Los
Angeles law firm of Troy, Casden & Gould. From 1978 to 1981, he was of counsel
and a partner in the Los Angeles law firm of Loeb & Loeb. From 1972 to 1978, Mr.
Casden was a member of the Beverly Hills law firm of Fink & Casden, Professional
Corporation.

Mr. Casden received his Bachelor of Arts degree from the University of
California at Los Angeles, and is a graduate of the University of San Diego Law
School. Mr. Casden is a member of the State Bar of California and has numerous
professional affiliations.

PAUL PATIERNO, 42, Chief Financial Officer.

Mr. Patierno joined NAPICO in 1998 and is responsible for its financial affairs,
as well as the limited partnerships sponsored by it. From 1995 until joining
NAPICO in September 1998, Mr. Patierno was a senior manager in the affordable
housing group of Altschuler, Melvoin and Glasser LLP, a national public
accounting firm. From 1990 to 1995, he practiced public accounting with a firm
specializing in real estate syndication. Mr. Patierno received his bachelor of
science degree in accounting from California State University at Northridge, and
is a member of the American Institute of Certified Public Accountants and the
California Society of Certified Public Accountants.

PATRICIA W. TOY, 69, Senior Vice President - Communications and Assistant
Secretary.

Mrs. Toy joined NAPICO in 1977, following her receipt of an MBA from the
Graduate School of Management, UCLA. From 1952 to 1956, Mrs. Toy served as a
U.S. Naval Officer in communications and personnel assignments. She holds a
Bachelor of Arts Degree from the University of Nebraska.

MARK L. WALTHER, 38, Executive Vice President, General Counsel and Assistant
Secretary.

Mr. Walther joined NAPICO in 1987 and is responsible for the legal affairs of
the NAPICO sponsored limited partnerships. Prior to joining NAPICO, Mr. Walther
worked in the San Francisco law firm of Browne and Kahn which specialized in
construction litigation. Mr. Walther received his Bachelor of Arts Degree in
Political Science from the University of California, Santa Barbara and is a
graduate of the University of California, Davis, School of Law. He is a member
of the State Bar of Hawaii.

NAPICO and several of its officers, directors and affiliates, including Charles
H. Boxenbaum, Bruce E. Nelson and Alan I. Casden, consented to the entry, on
June 25, 1997, of an administrative cease and desist order by the U.S.
Securities and Exchange Commission (the "Commission"), without admitting or
denying any of the findings made by the Commission. The Commission found that
NAPICO and others had violated certain federal securities laws in connection
with transactions unrelated to the Partnership. The Commission's order did not
impose any cost, burden or penalty on any partnership managed by NAPICO and does
not impact NAPICO's ability to serve as the Partnership's Managing General
Partner.


<PAGE>   39
ITEM 11. MANAGEMENT REMUNERATION AND TRANSACTIONS:

Real Estate Associates Limited has no officers, employees, or directors.
However, under the terms of the Restated Certificate and Agreement of Limited
Partnership, the Partnership is obligated to pay the Corporate General Partner
an annual management fee. The annual management fee is approximately equal to .5
percent of the invested assets, including the Partnership's allocable share of
the mortgages related to real estate properties held by local limited
partnerships. The fee is earned beginning in the month the Partnership makes its
initial contribution to the limited partnership. In addition, the Partnership
reimburses the Corporate General Partner for certain expenses.

An affiliate of the Corporate General Partner is responsible for the on-site
property management for certain properties owned by the limited partnerships in
which the Partnership has invested.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT:

(a)      Security Ownership of Certain Beneficial Owners

         The general partners own all of the outstanding general partnership
         interests of REAL; no person is known to own beneficially in excess of
         5 percent of the outstanding limited partnership interests.

(b)      None of the officers or directors of the Corporate General Partner own
         directly or beneficially any limited partnership interests in REAL.


ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS:

The Partnership has no officers, directors or employees of its own. All of its
affairs are managed by the Corporate General Partner, National Partnership
Investments Corp. The Partnership is obligated to NAPICO for an annual
management fee equal to .4 percent of the original invested assets of the
limited partnerships. Invested assets is defined as the costs of acquiring
project interests, including the proportionate amount of the mortgage loans
related to the Partnership's interest in the capital accounts of the respective
partnerships. The management fee was $407,340 for each of the three years in the
period ended December 31, 1998.

The Partnership reimburses NAPICO for certain expenses. The reimbursement to
NAPICO was $24,276, $24,279 and $22,039 in 1998, 1997 and 1996, respectively,
and is included in operating expenses.

Prior to the sale of certain partnership interests on December 30, 1998, an
affiliate of NAPICO was the general partner in five of the limited partnerships
in which the Partnership had an investment, and another affiliate received
property management fees of approximately 5 to 6 percent of the revenue from
three of these partnerships. The affiliate received property management fees of
$184,844, $210,908 and $206,629 in 1998, 1997 and 1996, respectively.

On December 30, 1998, the Partnership sold its limited partnership interests in
8 local limited partnerships to the Operating Partnership. The sale resulted in
cash proceeds to the Partnership of $3,900,000 and a net gain of $3,798,734,
after deducting the selling costs. The cash proceeds were held in escrow at
December 31, 1998 and were collected subsequent to year-end. In March 1999, the
Partnership made a cash distribution of $3,861,000 to the limited partners and
$39,000 to the general partners, primarily using proceeds from the sale of the
partnership interests.

The Operating Partnership purchased such limited partner interests for cash,
which it raised in connection with a private placement of its equity securities.
The purchase was subject to, among other things, (i) the purchase


<PAGE>   40
of the general partner interests in the local limited partnerships by the REIT;
(ii) the approval of HUD and certain state housing finance agencies; and (iii)
the consent of the limited partners to the sale of the local limited partnership
interests held for investment by the Partnership

In August 1998, a consent solicitation statement was sent to the limited
partners setting forth the terms and conditions of the purchase of the limited
partners' interests held for investment by the Partnership, together with
certain amendments to the Partnership Agreement and other disclosures of various
conflicts of interest in connection with the proposed transaction. Prior to the
sale of the partnership interests, the consents of the limited partners to the
sale and amendments to the Partnership Agreement were obtained.


PART IV.

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K:

FINANCIAL STATEMENTS

Report of Independent Public Accountants.

Balance Sheets as of December 31, 1998 and 1997.

Statements of Operations for the years ended December 31, 1998, 1997 and 1996.

Statements of Partners' Equity (Deficiency) for the years ended December 31,
1998, 1997 and 1996.

Statements of Cash Flows for the years ended December 31, 1998, 1997 and 1996.

Notes to Financial Statements.

FINANCIAL STATEMENT SCHEDULES
APPLICABLE TO REAL ESTATE ASSOCIATES LIMITED AND THE LIMITED PARTNERSHIPS IN
WHICH REAL ESTATE ASSOCIATES LIMITED HAS INVESTMENTS:

Schedule - Investments in Limited Partnerships, December 31, 1998, 1997 and
1996.

Schedule III - Real estate and accumulated depreciation, December 31, 1998.

The remaining schedules are omitted because the required information is included
in the financial statements and notes thereto as they are not applicable or not
required.

EXHIBITS

(3)      Articles of incorporation and bylaws: The registrant is not
         incorporated. The Partnership Agreement was filed with Form S-11
         Registration # 260561 incorporated herein by reference.

(10)     Material contracts: The registrant is not party to any material
         contracts, other than the Restated Certificate and Agreement of Limited
         Partnership dated September 15, 1979 previously filed and which is
         hereby incorporated by reference.

REPORTS ON FORM 8-K

No reports on Form 8-K were filed during the year ended December 31, 1998.


<PAGE>   41
                                   SIGNATURES


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


REAL ESTATE ASSOCIATES LIMITED

By: NATIONAL PARTNERSHIP INVESTMENTS CORP.
    General Partner


/s/ CHARLES H. BOXENBAUM
------------------------------------------
Charles H. Boxenbaum
Chairman of the Board of Directors
and Chief Executive Officer



/s/ BRUCE E. NELSON
------------------------------------------
Bruce E. Nelson
Director and President



/s/ ALAN I. CASDEN
------------------------------------------
Alan I. Casden
Director



/s/ HENRY C. CASDEN
------------------------------------------
Henry C. Casden
Director



/s/ PAUL PATIERNO
------------------------------------------
Paul Patierno
Chief Financial Officer