<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, 1997

                             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.

NAPICO is a wholly owned subsidiary of Casden Investment Corporation ("CIC"),
which is wholly owned by Alan I. Casden. 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 eighteen local limited partnerships
as of December 31, 1997. 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, HUD has determined not to renew 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. As a result, existing HAP Contracts that are renewed in
the future on projects insured by the FHA will not provide sufficient cash flow
to permit owners of properties to meet the debt service requirements of these
existing FHA-insured mortgages. 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 (the "MAHRAA"), which was adopted
in October 1997, provides for the restructuring of mortgage loans insured by
the FHA with respect to properties subject to HAP Contracts that have been
renewed under the new policy. The restructured loans will be held by the
current lender or another lender. Under MAHRAA, an FHA-insured mortgage loan
can be restructured to reduce the annual debt service on such loan. There can
be no assurance that the Partnership will be permitted to restructure its
mortgage indebtedness pursuant to the new HUD rules implementing MAHRAA or that
the Partnership would choose to restructure such mortgage indebtedness if it
were eligible to participate in the MAHRAA program. It should be noted that
there are uncertainties as to 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.
Accordingly, the General Partners are unable to predict with certainty their
impact on the Partnership's future cash flow.






<PAGE>   3
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.

During 1997, all of the projects in which REAL had invested were substantially
rented. The following is a schedule of the status as of December 31, 1997, 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, 1997



<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> 
Bedford House                                  48                     48/  0                   48                  100%
Falmouth, KY

Belleville Manor                               32                     32/  0                   31                   97%
Marion, KY

Bethel Towers                                 146                     93/ 53                  145                   99%
Detroit, MI

Cherry Hill Place                             186                    186/  0                  180                   97%
Inkster, MI

Chidester Place                               151                     151/ 0                  140                   93%
Ypsilanti, MI

Clinton Apts.                                  32                     32/  0                   25                   78%
Clinton, KY

East Central Twrs                             166                    166/  0                  156                   94%
Fort Wayne, IN

Gadsden Towers (Daugette Towers)              101                    101/  0                  101                  100%
Gadsden, AL

Norristown Housing                            175                    175/  0                  175                  100%
for the Elderly
Norristown, PA

Northwood Village                              72                     72/  0                   72                  100%
Emporia, VA
</TABLE>



<PAGE>   4

            SCHEDULE OF PROJECTS OWNED BY LOCAL LIMITED PARTNERSHIPS
                         IN WHICH REAL HAS AN INVESTMENT
                                DECEMBER 31, 1997
                                   (CONTINUED)



<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> 
Park View Apts.                     97                    97/  0                   97                  100%
Sacramento, CA

Ridgeview Estates                   32                     0/ 32                   30                   94%
Lewisburg, W. VA.

Ridgewood/LaLoma                    75                    75/  0                   75                  100%
Sacramento, CA

Riverside Towers                   200                   200/  0                  200                  100%
Medford, MA

Van Nuys Bldg.                     299                   299/  0                  296                   99%
Los Angeles, CA

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                   75                   99%
Williamson, W. VA
                                ------                  --------                -----                -----

                                 1,969                  1852/117                1,924                   98%
                                ======                  ========                =====
</TABLE>




<PAGE>   5


ITEM 2.        PROPERTIES:

Through its investments in local limited partnerships, REAL holds interests in
various multi-family rental properties. See Item 1 and Schedule for information
pertaining to these properties.


ITEM 3.        LEGAL PROCEEDINGS:

As of December 31, 1997, REAL's Corporate General Partner was a plaintiff or
defendant in several lawsuits. None of these suits were related to REAL.


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

Not applicable.


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, 1997, there were 1,108
registered holders of units in REAL. Distributions have not been made from the
inception of the Partnership to December 31, 1997. 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.



<PAGE>   6

ITEM 6.        SELECTED FINANCIAL DATA:



<TABLE>
<CAPTION>
                                                      Year Ended December 31,
                               -------------------------------------------------------------------
                                   1997         1996          1995           1994          1993
                               -----------   -----------   -----------   -----------   -----------
<S>                            <C>           <C>           <C>           <C>           <C>         
Loss from Operations           $  (622,278)  $  (490,373)  $  (490,021)  $  (462,078)  $  (483,950)

Distributions from Limited
   Partnerships Recognized
   as Income                       587,078       465,403     1,373,243       321,584       590,286

Equity in Income of
   Limited Partnerships
   and Amortization of
   Acquisition Costs              (204,940)      177,874       384,476       226,840       317,720
                               -----------   -----------   -----------   -----------   -----------

Net Income (Loss)              $  (240,140)  $   152,904   $ 1,267,698   $    86,346   $   424,056
                               ===========   ===========   ===========   ===========   ===========

Net Income (Loss) per limited
   Partnership Interest        $       (15)  $         9   $        77   $         5   $        26
                               ===========   ===========   ===========   ===========   ===========



Total assets                   $ 1,864,839   $ 2,863,973   $ 2,715,836   $ 2,491,676   $ 2,318,253
                               ===========   ===========   ===========   ===========   ===========

Investments in Limited
   Partnerships                $ 1,319,976   $ 2,486,997   $ 2,191,335   $ 1,843,340   $ 1,643,500
                               ===========   ===========   ===========   ===========   ===========

Accrued Fees and Expenses
   Due General Partner         $   181,333   $ 1,021,677   $ 1,014,337   $ 1,396,997   $ 1,989,657
                               ===========   ===========   ===========   ===========   ===========
</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.

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, 1997, the Partnership has investments in 18 limited
partnerships, all of which own housing projects that were substantially all
rented. 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 is 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. The Partnership has a positive investment balance in only two local
limited partnerships.

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 $226,000, $420,000 and $380,000 for the years ended December
31, 1997, 1996 and 1995, 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 $(204,940), $177,874 and $384,476 for the years ended December 31,
1997, 1996 and 1995, respectively. Both local partnerships with positive
investment balances generated income to the Partnership in 1996 and 1995.
However, one of the local partnerships which generated income to the Partnership
of $230,000 and $203,000 in 1996 and 1995, respectively, 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, which reduced the investment balance in that partnership. It
allowed the Partnership to pay down the accrued fees and expenses due general
partner, which were $181,333 and $1,021,677 at December 31, 1997 and 1996,
respectively. In




<PAGE>   8

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 cumulative amount of the
unrecognized equity in losses of certain limited partnerships was approximately
$11,931,591 and $12,317,000 as of December 31, 1997 and 1996, respectively.

Distributions from the local limited partnerships in which the Partnership did
not have a positive investment balance were $587,078, $465,403 and $1,373,243
for the years ended December 31, 1997, 1996 and 1995, respectively. These
amounts were recognized as income on the accompanying statements of operations,
in accordance with the equity method of accounting. The increase in
distributions from local partnerships in 1995 relates to the Partnership's
investment in Van Nuys Associates. In 1994, the Partnership received a cash
distribution from Van Nuys Associates in the amount of $672,626. The
distribution was in part the result of a settlement for rent subsidy payments
from prior periods awarded to a group of property owners (including Van Nuys
Associates) who participated in a lawsuit against the U.S. Department of Housing
and Urban Development ("HUD"). HUD demanded the return of a substantial portion
of these funds based on the 9th Circuit Court's decision to overturn the
injunctions granted against HUD. As a result, the distribution was recorded as a
liability at December 31, 1994. Van Nuys Associates engaged Alexander
Consultants Inc. ("ACI") to review the demand by HUD and perform an independent
accounting of the amounts due pursuant to the 9th Circuit Court's decision.
Based on ACI's findings, HUD agreed that the local partnership would be required
to pay HUD only $489,039, over the remaining seven year term of the Housing
Assistance Payments Contract. Since the Partnership does not have an obligation
to return the distribution and the Partnership's investment account in Van Nuys
Associates has been reduced to zero, the distribution of $672,626 was recognized
as income in 1995. This accounts for the significant increase in 1995 in
distributions from limited partnerships recognized as income.

As of December 31, 1997, 1996 and 1995, the Partnership has cash and cash
equivalents of $544,863, $376,976 and $250,570, 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 $16,000, $16,000 and $8,800 in interest income for the years ended
December 31, 1997, 1996 and 1995, 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. Should the Partnership
complete the sale of interests, its obligations may be reduced and a
distribution of cash may be disbursed to the partners.

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 have not
changed during each of the three years in the period ended December 31, 1997,
management fees have remained constant at $407,340 for each of these years.

Under recent adopted law and policy, HUD has determined not to renew 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. As a result, existing HAP Contracts that are renewed in
the future on projects insured by the FHA will not provide sufficient cash flow
to permit owners of properties to meet the debt service requirements of these
existing FHA-insured mortgages. 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 (the "MAHRAA"), which was adopted
in October 1997, provides for the restructuring of mortgage loans insured by
the FHA with respect to 


<PAGE>   9

properties subject to HAP Contracts that have been renewed under the new policy.
The restructured loans will be held by the current lender or another lender.
Under MAHRAA, an FHA-insured mortgage loan can be restructured to reduce the
annual debt service on such loan. There can be no assurance that the Partnership
will be permitted to restructure its mortgage indebtedness pursuant to the new
HUD rules implementing MAHRAA or that the Partnership would choose to
restructure such mortgage indebtedness if it were eligible to participate in the
MAHRAA program. It should be noted that there are uncertainties as to 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. Accordingly, the General Partners are unable to
predict with certainty their impact on the Partnership's future cash flow.

As a result of the foregoing, the Partnership is undergoing 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 $119,589 for the year ended December 31, 1997.

A real estate investment trust ("REIT") organized by an affiliate of NAPICO
has advised the Partnership that it intends to make a proposal to purchase from
the Partnership certain of the limited partnership interests held for
investment by the Partnership.

The REIT proposes to purchase such limited partner interests for cash, which it
plans to raise in connection with a private placement of its equity securities.
The purchase is subject to, among other things, (i) consummation of such
private placement by the REIT; (ii) the purchase of the general partner
interests in the local limited partnerships by the REIT; (iii) the approval of
HUD and certain state housing finance agencies; (iv) the consent of the limited
partners to the sale of the local limited partnership interests held for
investment by REAL; and (v) the consummation of a minimum number of
purchase transactions with other Casden affiliated partnerships. As of March
31, 1998, the REIT had completed buy-out negotiations with a majority of the
general partners of the local limited partnerships.

A proxy is contemplated to be 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 transaction.

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 $54,950, $52,552 and $53,400 for the years ended December 31, 1997,
1996 and 1995, respectively. Administrative expenses were $182,265, $48,007 and
$49,416 for the years ended December 31, 1997, 1996 and 1995, respectively.
Included in administrative expenses are reimbursements to NAPICO for certain
expenses, which totalled $24,279, $22,039 and $20,617 for the years ended
December 31, 1997, 1996 and 1995, respectively. In addition, included in
administrative expenses in 1997 is $119,589 in expenses, approximately $76,000
of which is included in accounts payable at December 31, 1997, related to the
aforementioned proposed third-party review of the properties owned by local 
partnership.

The results of operations of the local limited partnerships were fairly constant
during the years ended December 31, 1996, 1995 and 1994. 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.

Total revenue for the 18 local partnerships has remained fairly constant, and
was $16,935,000, $16,955,000 and $16,566,000 for the years ended December 31,
1997, 1996 and 1995, respectively. The fluctuations in total rental revenue are
primarily accounted for by the changes in revenue for Van Nuys Associates, one
of the 
<PAGE>   10

limited partnerships in which the Partnership has an investment. Revenue for Van
Nuys Associates was $3,455,082, $3,446,000 and $3,162,000 in 1997, 1996 and
1995, respectively. In 1993, Van Nuys Associates was awarded, as a result of
litigation with HUD, a $309,000 retroactive housing assistance payment from HUD,
which was received and recognized as income in 1993. The award was reversed upon
appeal by HUD in 1995, and revenue was reduced by $365,000 in 1995 to reflect
the settlement amount due HUD.

Total expenses for the 18 local partnerships remained fairly consistent, and
were $16,637,000, $16,384,000 and $16,246,000 for the years ended December 31,
1997, 1996 and 1995, respectively. Expenses increased in 1997 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 1997, 1996 and 1995
aggregated $298,000, $571,000 and $320,000, respectively. The income allocated
to the Partnership was $226,000, $420,000 and $380,000 for 1997, 1996 and 1995,
respectively. Net income was lower in 1995 than in 1996 as a result of the
aforementioned settlement for retroactive housing assistance payments from HUD
relating to Van Nuys Associates. Net income was lower in 1997 than in 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 IN 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, 1997



<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, 1997 and 1996, and
the related statements of operations, partners' equity (deficiency) and cash
flows for each of the three years in the period ended December 31, 1997. Our
audits also included the financial statement schedules listed in the index on
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 10 percent and 4 percent of
total assets as of December 31, 1997 and 1996, respectively, and the equity in
income of these limited partnerships represent 5 percent, 17 percent and 8
percent of the total net (loss) income of the Partnership for the years ended
December 31, 1997, 1996 and 1995, 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, 1997
and 1996, and the results of its operations and its cash flows for each of the
three years in the period ended December 31, 1997 in conformity with generally
accepted accounting principles. Also, in our opinion, 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, 1998

<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



                         [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, 1995 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, 1995 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, 1996 on our consideration of Cherry Hill Limited Dividend
Housing Association's internal control structure and a report dated February 1,
1996 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>   17



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/ COOPERS & LYBRAND L.L.P.

Detroit, Michigan
February 1, 1996
















                                       2
<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, 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>   19
                         [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>   20

                         REAL ESTATE ASSOCIATES LIMITED
                       (A CALIFORNIA LIMITED PARTNERSHIP)

                                 BALANCE SHEETS
                           DECEMBER 31, 1997 AND 1996



<TABLE>
<CAPTION>
                                     ASSETS

                                                        1997          1996
                                                    -----------   -----------
<S>                                                 <C>           <C>        
INVESTMENTS IN LIMITED PARTNERSHIPS (Note 2)        $ 1,319,976   $ 2,486,997

CASH AND CASH EQUIVALENTS (Note 1)                      544,863       376,976
                                                    -----------   -----------

     TOTAL ASSETS                                   $ 1,864,839   $ 2,863,973
                                                    ===========   ===========


                        LIABILITIES AND PARTNERS' EQUITY

     LIABILITIES:
Accounts payable (Note 3)                           $    89,279   $     7,929
Accrued fees and expenses due
general partner (Notes 3 and 6)                         181,333     1,021,677
                                                    -----------   -----------

                                                        270,612     1,029,606
                                                    -----------   -----------


COMMITMENTS AND CONTINGENCIES (Notes 3 and 4)

PARTNERS' EQUITY (DEFICIENCY):
 General partners                                      (111,127)     (108,726)
 Limited partners                                     1,705,354     1,943,093
                                                    -----------   -----------

                                                      1,594,227     1,834,367
                                                    -----------   -----------

TOTAL LIABILITIES AND PARTNERS' EQUITY              $ 1,864,839   $ 2,863,973
                                                    ===========   ===========
</TABLE>




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

<PAGE>   21

                         RESIDENTIAL ASSOCIATES LIMITED
                       (A CALIFORNIA LIMITED PARTNERSHIP)

                            STATEMENTS OF OPERATIONS

              FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995




<TABLE>
<CAPTION>
                                                     1997          1996          1995
                                                  -----------   -----------   -----------
<S>                                               <C>           <C>           <C>        
INTEREST AND OTHER INCOME                         $    22,277   $    17,526   $    20,135
                                                  -----------   -----------   -----------

OPERATING EXPENSES:
      Legal and accounting                             54,950        52,552        53,400
      Management fees - general partner (Note 3)      407,340       407,340       407,340
      Administrative  (Note 3)                        182,265        48,007        49,416
                                                  -----------   -----------   -----------

                  Total operating expenses            644,555       507,899       510,156
                                                  -----------   -----------   -----------

LOSS FROM OPERATIONS                                 (622,278)     (490,373)     (490,021)

DISTRIBUTIONS FROM LIMITED
      PARTNERSHIPS RECOGNIZED AS
      INCOME (Note 2)                                 587,078       465,403     1,373,243

EQUITY IN (LOSS) INCOME OF LIMITED
      PARTNERSHIPS AND AMORTIZATION
      OF ACQUISITION COSTS (Note 2)                  (204,940)      177,874       384,476
                                                  -----------   -----------   -----------

NET (LOSS) INCOME                                 $  (240,140)  $   152,904   $ 1,267,698
                                                  ===========   ===========   ===========

NET (LOSS) INCOME PER LIMITED
      PARTNERSHIP INTEREST (Note 1)               $       (15)  $         9   $        77
                                                  ===========   ===========   ===========
</TABLE>





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



<PAGE>   22

                         REAL ESTATE ASSOCIATES LIMITED
                       (A CALIFORNIA LIMITED PARTNERSHIP)

                   STATEMENTS OF PARTNERS' EQUITY (DEFICIENCY)
              FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995



<TABLE>
<CAPTION>
                                        General        Limited
                                       Partners        Partners        Total
                                      -----------    -----------    -----------
<S>                                   <C>            <C>            <C>        
EQUITY (DEFICIENCY),
             January 1, 1995          $  (122,932)   $   536,697    $   413,765

      Net income for 1995                  12,677      1,255,021      1,267,698
                                      -----------    -----------    -----------

EQUITY (DEFICIENCY),
           December 31, 1995             (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
                                      ===========    ===========    ===========
</TABLE>




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




<PAGE>   23

                         REAL ESTATE ASSOCIATES LIMITED
                       (A CALIFORNIA LIMITED PARTNERSHIP)

                            STATEMENTS OF CASH FLOWS
              FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995


<TABLE>
<CAPTION>
                                                            1997           1996         1995
                                                         -----------   -----------   -----------
<S>                                                     <C>            <C>           <C>      
CASH FLOWS FROM OPERATING ACTIVITIES:
        Net (loss) income                                $  (240,140)  $   152,904   $ 1,267,698
        Adjustments to reconcile net income to net cash
        provided by (used in) operating activities:
        Equity in (loss) income of limited partnerships
        and amortization of acquisition costs                204,940      (177,874)     (384,476)
        Increase (decrease) in accrued fees and
        expenses due general partner                        (840,344)        7,340      (382,660)
        Increase (decrease) in accounts payable               81,350       (12,107)       11,749
        Decrease in deferred distribution                       --            --        (672,627)
        Increase (decrease) in receivables from
        limited partnerships                                    --         148,931       (32,306)
                                                         -----------   -----------   -----------

        Net cash provided by (used in)
        operating activities                                (794,194)      119,194      (192,622)
                                                         -----------   -----------   -----------

CASH FLOWS FROM INVESTING ACTIVITIES:
        Decrease in short term investments                      --         125,000          --
        Distributions from limited partnership
        recognized as return of capital                      974,165        36,482        36,481
        Capital contribution to limited partnerships         (12,084)     (154,270)         --
                                                         -----------   -----------   -----------

        Net cash provided by investing
               activities                                    962,081         7,212        36,481
                                                         -----------   -----------   -----------


NET INCREASE (DECREASE) IN CASH
    CASH EQUIVALENTS                                         167,887       126,406      (156,141)

CASH AND CASH EQUIVALENTS,
        beginning of year                                    376,976       250,570       406,711
                                                         -----------   -----------   -----------

CASH AND CASH EQUIVALENTS,
              end of year                                $   544,863   $   376,976   $   250,570
                                                         ===========   ===========   ===========
</TABLE>



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




<PAGE>   24

                         REAL ESTATE ASSOCIATES LIMITED
                       (a California limited partnership)

                          NOTES TO FINANCIAL STATEMENTS
                                DECEMBER 31, 1997


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), a wholly owned
           subsidiary of Casden Investment Corp., the corporate general partner,
           and Charles H. Boxenbaum, CEO of 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.

           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.

           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.




                                       5

<PAGE>   25

                         REAL ESTATE ASSOCIATES LIMITED
                       (a California limited partnership)

                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)
                                DECEMBER 31, 1997



1.         SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

           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.

2.         INVESTMENTS IN LIMITED PARTNERSHIPS

           The Partnership holds limited partnership interests in 18 limited
           partnerships. The limited partnerships own residential low income
           rental projects consisting of 1,969 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 equity in losses of certain
           limited partnerships was in aggregate approximately $11,931,591 and
           $12,317,000 as of December 31, 1997 and 1996, 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.





                                       6
<PAGE>   26


                         REAL ESTATE ASSOCIATES LIMITED
                       (a California limited partnership)

                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)
                                DECEMBER 31, 1997


2.         INVESTMENTS IN LIMITED PARTNERSHIPS (CONTINUED)

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


<TABLE>
<CAPTION>
                                                                       1997           1996
<S>                                                                <C>           <C>        
           Investment balance, beginning of year                   $ 2,486,997   $ 2,191,335
           Capital contribution                                         12,084       154,270
           Equity in (loss) income of limited partnerships            (202,154)      180,660
           Amortization of capitalized acquisition costs and fees       (2,786)       (2,786)
           Cash distributions recognized as return of capital         (974,165)      (36,482)
                                                                   -----------   -----------

           Investment balance, end of year                         $ 1,319,976   $ 2,486,997
                                                                   ===========   ===========
</TABLE>


           The difference between the investment per the accompanying balance
           sheets at December 31, 1997 and 1996, 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.

           Selected financial information from the combined financial statements
           of the limited partnerships at December 31, 1997 and 1996 and for
           each of three years in the period ended December 31, 1997 is as
           follows:

<TABLE>
<CAPTION>
                                 Balance Sheets
                                                           1997       1996
                                                            (in thousands)
<S>                                                      <C>        <C>     
           Land and buildings, net                       $ 33,338   $ 34,996
                                                         ========   ========

           Total assets                                  $ 46,549   $ 49,128
                                                         ========   ========

           Mortgages payable                             $ 63,212   $ 66,196
                                                         ========   ========

           Total liabilities                             $ 68,216   $ 68,748
                                                         ========   ========

           Deficiency of Real Estate Associates Limited  $(17,108)  $(15,743)
                                                         ========   ========

           Deficiency of other partners                  $ (4,559)  $ (3,877)
                                                         ========   ========
</TABLE>


                                       7
<PAGE>   27

                         REAL ESTATE ASSOCIATES LIMITED
                       (a California limited partnership)

                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)
                                DECEMBER 31, 1997






2.         INVESTMENTS IN LIMITED PARTNERSHIPS (CONTINUED)

                            Statements of Operations


<TABLE>
<CAPTION>
                                                       1997     1996       1995
                                                     -------   -------   -------
                                                         (in thousands)
<S>                                                <C>      <C>      <C>    
           Total revenues                            $16,935   $16,955   $16,566
                                                     =======   =======   =======

           Interest expense                          $ 4,533   $ 4,935   $ 4,774
                                                     =======   =======   =======

           Depreciation and amortization             $ 2,653   $ 2,610   $ 2,679
                                                     =======   =======   =======

           Total expenses                            $16,637   $16,384   $16,246
                                                     =======   =======   =======

           Net income                                $   298   $   571   $   320
                                                     =======   =======   =======

           Net income allocable to the Partnership   $   226   $   420   $   380
                                                     =======   =======   =======
</TABLE>


           NAPICO, or one of its affiliates, is 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 $210,908, $206,629 and $215,133 in 1997,
           1996 and 1995, respectively. The following sets forth significant
           data for the partnerships, in which an affiliate of NAPICO was the
           general partner, reflected in the accompanying financial statements
           using the equity method of accounting:



<TABLE>
<CAPTION>
                                                            1997        1996        1995
                                                          --------    --------    --------
                                                                  (in thousands)
<S>                                                       <C>         <C>         <C>     
           Total assets                                   $ 16,309    $ 17,025
                                                          ========    ========

           Total liabilities                              $ 25,275    $ 25,477
                                                          ========    ========

           Deficiency of Real Estate Associates Limited   $ (8,598)   $ (8,111)
                                                          ========    ========

           Deficiency of other partners                   $   (369)   $   (341)
                                                          ========    ========

           Total revenue                                  $  4,215    $  4,205    $  3,922
                                                          ========    ========    ========

           Net loss                                       $   (346)   $   (454)   $   (768)
                                                          ========    ========    ========
</TABLE>


          In certain cases, the Partnership is making contributions to fund
deficits at the limited partnerships.





                                       8

<PAGE>   28


                         REAL ESTATE ASSOCIATES LIMITED
                       (a California limited partnership)

                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)
                                DECEMBER 31, 1997


2.         INVESTMENTS IN LIMITED PARTNERSHIPS (CONTINUED)

           Under recent adopted law and policy, HUD has determined not to renew
           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.
           As a result, existing HAP Contracts that are renewed in the future on
           projects insured by the FHA will not provide sufficient cash flow to
           permit owners of properties to meet the debt service requirements of
           these existing FHA-insured mortgages. 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 (the "MAHRAA"), which was adopted in October 1997,
           provides for the restructuring of mortgage loans insured by the FHA
           with respect to properties subject to HAP Contracts that have been
           renewed under the new policy. The restructured loans will be held by
           the current lender or another lender. Under MAHRAA, an FHA-insured
           mortgage loan can be restructured to reduce the annual debt service
           on such loan. There can be no assurance that the Partnership will be
           permitted to restructure its mortgage indebtedness pursuant to the
           new HUD rules implementing MAHRAA or that the Partnership would
           choose to restructure such mortgage indebtedness if it were eligible
           to participate in the MAHRAA program. It should be noted that there
           are uncertainties as to 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. Accordingly, the General Partners are unable to predict with
           certainty their impact on the Partnership's future cash flow.

           As a result of the foregoing, the Partnership is undergoing 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 $119,589 for the year ended December 31, 1997.

           A real estate investment trust ("REIT") organized by an affiliate of
           NAPICO has advised the Partnership that it intends to make a proposal
           to purchase from the Partnership certain of the limited partnership
           interests held for investment by the Partnership.

           The REIT proposes to purchase such limited partner interests for
           cash, which it plans to raise in connection with a private placement
           of its equity securities. The purchase is subject to, among other
           things, (i) consummation of such private placement by the REIT; (ii)
           the purchase of the general partner interests in the local limited
           partnerships by the REIT; (iii) the approval of HUD and certain state
           housing finance agencies; (iv) the consent of the limited partners to
           the sale of the local limited partnership interests held for
           investment by REAL; and (v) the consummation of a minimum number
           of purchase transactions with other Casden affiliated partnerships.
           As of March 31, 1998, the REIT had completed buy-out negotiations
           with a majority of the general partners of the local limited
           partnerships.

           A proxy is contemplated to be 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
           transaction.




                                       9

<PAGE>   29

                         REAL ESTATE ASSOCIATES LIMITED
                       (a California limited partnership)

                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)
                                DECEMBER 31, 1997
  
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.

           As of December 31, 1997, the fees and expenses due NAPICO exceeded
           the Partnership's cash. NAPICO, during the forthcoming year, will not
           demand payment of amounts due in excess of such cash or such that the
           Partnership would not have sufficient operating cash; however, the
           Partnership will remain liable for all such amounts.

           The Partnership reimburses NAPICO for certain expenses. The
           reimbursement to NAPICO was $24,279, $22,039 and $20,617 in 1997,
           1996 and 1995, respectively, and is included in operating expenses.

4.         CONTINGENCIES

           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.



                                       10

<PAGE>   30

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 loss of limited partnerships reflected in the
           accompanying annual financial statements is based primarily upon
           audited financial statements of the investee limited partnerships.
           The decrease of approximately $455,000, between the estimated
           nine-month equity in income and the actual 1997 year end equity in
           loss has been recorded in the fourth quarter.






                                       11
<PAGE>   31

                                                                        SCHEDULE

                         REAL ESTATE ASSOCIATES LIMITED
                       INVESTMENTS IN LIMITED PARTNERSHIPS
                  YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995


<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)

  Van Nuys Assoc.

  West Lafayette, Ltd. 

  Williamson Towers, Ltd. 

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



<PAGE>   32

                         REAL ESTATE ASSOCIATES LIMITED
                       INVESTMENT IN LIMITED PARTNERSHIPS
                  YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995


<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. 

  Bernroe, 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>   33

                                                           SCHEDULE (CONTINUED)

                         REAL ESTATE ASSOCIATES LIMITED
                       INVESTMENT IN LIMITED PARTNERSHIPS
                  YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995


<TABLE>
<CAPTION>
                                                    Year Ended December 31, 1995
                                ---------------------------------------------------------------------
                                                                Cash
                                  Balance       Capital        Distri-        Equity       Balance
                                  January       Contri-        butions         in          December
Limited Partnerships              1, 1995       butions        Received    Income/(Loss)   31, 1995
                                ===========   ===========    ===========   =============  ===========

<S>                             <C>           <C>            <C>            <C>           <C>
  Bedford House, Ltd.           $             $              $              $             $

  Belleville Manor Apts. Ltd. 

  Bernroe, Ltd. (Wedgewood)

  Bethel Towers, Ltd. 

  Cherry Hill, Ltd. 
  Dividend Housing Assn.          1,843,340                      (27,000)       203,080     2,019,420

  Chidester Place, Ltd. 
  Dividend Housing Assn.

  Clinton Apts., Ltd. 

  East Central Towers
   Associates

  Emporia Ltd. (Northwood)               --                       (9,481)       181,396       171,915

  Gadsden Towers, Ltd. 

  LaLoma Assoc., Ltd. 

  Parkview Assoc.

  Pennsylvania Assoc.
  (Norristown)

  Riverside Towers Assoc.

  Roebern, Ltd. 
  (Ridgeview)

  Van Nuys Assoc.

  West Lafayette, Ltd. 
                                ===========   ===========    ===========    ===========   ===========
  Williamson Towers, Ltd. 
                                $ 1,843,340   $      --      $   (36,481)   $   384,476   $ 2,191,335
                                ===========   ===========    ===========    ===========   ===========
</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, 1997, 1996 AND 1995


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
                         REAL ESTATE ASSOCIATES LIMITED            SCHEDULE III
                    REAL ESTATE AND ACCUMULATED DEPRECIATION
                 OF PROPERTY HELD BY LOCAL LIMITED PARTNERSHIPS
                         IN WHICH REAL HAS INVESTMENTS
                               DECEMBER 31, 1997

<TABLE>
<CAPTION>
                                                               Buildings, Furnishings
                                                               & Equipment - Initial
                                                                Cost to Partnership
                              Number    Outstanding             and Amount Carried
                                of       Mortgage                   at Close of                     Accumulated    Construction
Partnership/Location         Units         Loan         Land            Year            Total       Depreciation      Period
--------------------         ------     -----------     ----   ---------------------    -----       ------------   ------------
<S>                           <C>       <C>            <C>       <C>                  <C>           <C>            <C>
The Bedford House, Ltd.         48      $1,105,974     $22,055      $1,263,745        $1,285,800     $   893,953     1978-1979
 Pendleton Co, KY
Belleville Manor, Ltd.          32         568,162          --         723,136           723,136         436,865     1978-1979
 Benton, KY
Bethel Towers, Ltd.            146       3,258,013      67,400       4,042,766         4,110,166       2,950,664     (A)
 Detroit, MI
Cherry Hill, Ltd.              186       5,734,129     448,460       7,745,027         8,193,487       4,415,018     1978-1980
Dividend Housing Assn.
 Southfield, MI
Chidester Place, Ltd.          151       3,435,000     180,130       4,642,500         4,822,630       3,077,747     1979-1980
 Ypsilanti, MI
Clinton Apts. Ltd.              32         367,450          --         656,049           656,049         517,472     1977-1980
 Calvert City, KY
East Central Twrs. Ass.        166       3,915,753      37,600       4,862,486         4,900,086       2,816,351     1979-1980
 Fort Wayne, IN
Gadsden Towers, Ltd.           101       1,966,934      51,700       3,122,317         3,174,017       2,580,952     1978-1980
 Knoxville, TN
Pennsylvania Assoc.            175       5,529,604      49,400       8,158,908         8,208,308       5,876,867     1978-1980
 (Norristown)
 Montgomery Co., PA
Emporia, Ltd. (Northwood)       72       1,300,765      39,500       2,361,505         2,401,005       1,784,818     1978-1980
 Greensville Co., VA
Parkview Assoc., Ltd.           97       3,247,742     424,196       3,528,490         3,952,686       2,745,275     1979-1980
 Sacramento, CA
Roebern, Ltd. (Ridgeview)       32         663,814      26,000       1,005,309         1,031,309         818,560     1978-1979
 Columbus, OH
LaLoma Assoc., Ltd.             75       2,346,189     226,729       2,649,689         2,876,418       2,023,299     1979-1980
 Sacramento, CA
Riverside Towers, Assoc.       200       7,496,265     230,264      10,782,186        11,012,450       7,344,958     1979-1980
 Medford, MA
Van Nuys Assoc.                299      18,159,396     700,000      23,375,878        24,075,878      11,801,571     1980-1983
 Los Angeles, CA
Bernroe, Ltd. (Wedgewood)       32         652,439      45,000       1,035,966         1,080,966         849,169     1978-1979
 Columbus, OH
West Lafayette, Ltd.            49         966,410      35,000       1,255,470         1,290,470         953,846     1979-1980
 West Lafayette, OH
Williamson Towers, Ltd.         76       2,497,594          --       3,221,507         3,221,507       1,791,207     1979-1981
 Minroe Co. WV
                             -----     -----------  ----------     -----------       -----------     ----------- 
TOTAL                        1,969     $63,211,633  $2,583,434     $84,432,934       $87,016,368     $53,678,592
                             =====     ===========  ==========     ===========       ===========     =========== 
</TABLE>

        (A) This project was complete when REAL entered the Partnership.
<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, 1997


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, 1995             $ 2,719,613   $81,895,708  $84,615,321

Net additions during 1995                   22,483       853,540      876,023
                                       -----------   -----------  -----------

Balance at December 31, 1995             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
                                       ===========   ===========  ===========
</TABLE>



<PAGE>   37

                                                                    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, 1997



<TABLE>
<CAPTION>
                                                                      Buildings,
                                                                     Furnishings
                                                                         And
                                                                     Equipment
                                                                     -----------
<S>                                                                  <C>        
Accumulated Depreciation:
                                                                    
Balance at January 1, 1995                                           $46,016,433

Net additions during 1995                                              2,611,487
                                                                     -----------

Balance at December 31, 1995                                          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
                                                                     ===========
</TABLE>





<PAGE>   38

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.

National Partnership Investment Corp. ("NAPICO" or "the Managing General
Partner") is a wholly-owned subsidiary of Casden Investment Corporation, an
affiliate of The Casden Company. 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, 68, 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, 46, 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, 52, Chairman of 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. Prior to that,
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>   39


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, 54, 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. 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.

BOB SCHAFER, 56, Senior Vice President of Finance

Mr. Schafer joined NAPICO in 1984 and is the Corporate Controller responsible
for the financial reporting function of the Company. Prior to this, he was a
Group and Division Controller at Bergen Brunswig for over eight years,
Controller at a Flintkote subsidiary for over four years, and Assistant
Controller at an electronics subsidiary of General Electric for two years. Mr.
Schafer is a member of the California Society of Certified Public Accountants.
He holds a Bachelor of Science degree in accounting from Woodbury University,
Los Angeles.

PATRICIA W. TOY, 68, 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, 37, 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>   40


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, 1997.

The Partnership reimburses NAPICO for certain expenses. The reimbursement to
NAPICO was $24,279, $22,039 and $20,617 in 1997, 1996 and 1995, respectively,
and is included in operating expenses.

An affiliate of NAPICO is the general partner in five of the limited
partnerships in which the Partnership has an investment, 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 $210,908, $206,629 and $215,133 in 1997, 1996 and 1995, respectively.

A real estate investment trust ("REIT") organized by an affiliate of NAPICO 
has advised the Partnership that it intends to make a proposal to purchase 
from the Partnership certain of the limited partnership interests held for
investment by the Partnership.

The REIT proposes to purchase such limited partner interests for cash, which it
plans to raise in connection with a private placement of its equity securities.
The purchase is subject to, among other things, (i) consummation of such private
placement by the REIT; (ii) the purchase of the general partner interests in the
local limited partnerships by the REIT; (iii) the approval of HUD and certain
state housing finance agencies; (iv) the consent of the limited partners to the
sale of the local limited partnership interests held for investment by REAL; and
(v) the consummation of a minimum number of purchase transactions with other
Casden affiliated partnerships. As of March 31, 1998, the REIT had completed
buy-out negotiations with a majority of the general partners of the local
limited partnerships.

A proxy is contemplated to be 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 transaction.
<PAGE>   41

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, 1997 and 1996.

Statements of Operations for the years ended December 31, 1997, 1996 and 1995.

Statements of Partners' Equity (Deficiency) for the years ended December 31,
1997, 1996 and 1995.

Statements of Cash Flows for the years ended December 31, 1997, 1996 and 1995.

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, 1997, 1996 and
1995.

Schedule III - Real estate and accumulated depreciation, December 31, 1997.

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, 1997.



<PAGE>   42



                                   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
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Charles H. Boxenbaum
Chairman of the Board of Directors
and Chief Executive Officer


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


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


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


/s/ BOB E. SCHAFER
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Bob E. Schafer
Senior Vice President of Finance