MCNEIL REAL ESTATE FUND XIV LTD, 10-K405, 1998-03-30

MCNEIL REAL ESTATE FUND XIV LTD
10-K405, 1998-03-30
OPERATORS OF NONRESIDENTIAL BUILDINGS

Previous: CORNERSTONE PROPERTIES INC, 10-K405, 1998-03-30

Next: GENERAL MUNICIPAL MONEY MARKET FUND INC, 485APOS, 1998-03-30

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K405

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

For the fiscal year ended December 31, 1997
------------------------------------------------

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

For the transition period from ______________ to_____________

Commission file number 0-12915
---------

McNEIL REAL ESTATE FUND XIV, LTD.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)

California 94-2822299
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

13760 Noel Road, Suite 600, LB70, Dallas, Texas, 75240
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip code)

Registrant's telephone number, including area code (972) 448-5800
---------------------------

Securities registered pursuant to Section 12(b) of the Act: None
- ---------------------------------------------------------- -------------------

Securities registered pursuant to Section 12(g) of the Act: Limited partnership
units
- ---------------------------------------------------------- -------------------

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

85,662 of the registrant's 86,534 limited partnership units are held by
non-affiliates of this registrant. The aggregate market value of units held by
non-affiliates is not determinable since there is no public trading market for
limited partnership units and transfers of units are subject to certain
restrictions.

Documents Incorporated by Reference: See Item 14, Page 37.

TOTAL OF 40 PAGES
<PAGE>
PART I

ITEM 1. BUSINESS
- ------- --------

ORGANIZATION
- ------------

McNeil Real Estate Fund XIV, Ltd. (the "Partnership") was organized April 30,
1982 as a limited partnership under the provisions of the California Uniform
Limited Partnership Act. The general partner of the Partnership is McNeil
Partners, L.P. (the "General Partner"), a Delaware limited partnership, an
affiliate of Robert A. McNeil ("McNeil"). The Partnership is governed by an
amended and restated partnership agreement of limited partnership dated
September 20, 1991, as amended (the "Amended Partnership Agreement"). Prior to
September 20, 1991, Pacific Investors Corporation (the prior "Corporate General
Partner"), a wholly-owned subsidiary of Southmark Corporation ("Southmark"), and
McNeil were the general partners of the Partnership, which was governed by an
agreement of limited partnership dated April 30, 1982 (the "Original Partnership
Agreement"). The principal place of business for the Partnership and the General
Partner is 13760 Noel Road, Suite 600, LB70, Dallas, Texas, 75240.

On February 14, 1983, a Registration Statement on Form S-11 was declared
effective by the Securities and Exchange Commission whereby the Partnership
offered for sale $35,000,000 of limited partnership units ("Units"), with the
General Partners' right to increase the offering up to $50,000,000. The Units
represent equity interests in the Partnership and entitle the holders thereof to
participate in certain allocations and distributions of the Partnership. The
sale of Units closed on September 17, 1984, with 86,101 Units sold at $500 each,
or gross proceeds of $43,050,500 to the Partnership, including the original
general partners' purchase of 200 Units for $100,000. In 1992, 483 Units were
issued to the General Partner in payment of the fixed portion of the Management
Incentive Distribution ("MID"). In 1993, 30 Units were relinquished. An
additional 20 Units were relinquished in 1994, leaving 86,534 Units outstanding
at December 31, 1997.

SOUTHMARK BANKRUPTCY AND CHANGE IN GENERAL PARTNER
- --------------------------------------------------

On July 14, 1989, Southmark filed a voluntary petition for reorganization under
Chapter 11 of the U.S. Bankruptcy Code. Neither the Partnership, McNeil nor the
Corporate General Partner were included in the filing. Southmark's
reorganization plan became effective August 10, 1990. Under the plan, most of
Southmark's assets, including Southmark's interests in the Corporate General
Partner, were sold or liquidated for the benefit of creditors.

In accordance with Southmark's reorganization plan, on October 12, 1990,
Southmark, McNeil and various of their affiliates entered into an asset purchase
agreement providing for, among other things, the transfer of control to McNeil
or his affiliates of 34 limited partnerships (including the Partnership) in the
Southmark portfolio.

<PAGE>
On February 14, 1991, pursuant to the asset purchase agreement as amended on
that date: (a) an affiliate of McNeil purchased the Corporate General Partner's
economic interest in the Partnership; (b) McNeil became the managing general
partner of the Partnership pursuant to an agreement with the Corporate General
Partner that delegated management authority to McNeil; and (c) McNeil Real
Estate Management, Inc. ("McREMI"), an affiliate of McNeil, acquired the assets
relating to the property management and partnership administrative business of
Southmark and its affiliates and commenced management of the Partnership's
properties pursuant to an assignment of the existing property management
agreements from the Southmark affiliates.

On September 20, 1991, the limited partners approved a restructuring proposal
that provided for (i) the replacement of the Corporate General Partner and
McNeil with the General Partner; (ii) the adoption of the Amended Partnership
Agreement, which substantially alters the provisions of the Original Partnership
Agreement relating to, among other things, compensation, reimbursement of
expenses, and voting rights; and (iii) the approval of a new property management
agreement with McREMI, the Partnership's property manager.

The Amended Partnership Agreement provides for the MID to replace all other
forms of general partner compensation other than property management fees and
reimbursements of certain costs. Additional Units may be issued in connection
with the payment of the MID pursuant to the Amended Partnership Agreement. See
Item 8 - Note 2 "Transactions with Affiliates." For a discussion of the
methodology for calculating and distributing the MID, see Item 13 - Certain
Relationships and Related Transactions.

Settlement of Claims:

The Partnership filed claims with the United States Bankruptcy Court for the
Northern District of Texas, Dallas Division (the "Bankruptcy Court") against
Southmark for damages relating to improper overcharges, breach of contract and
breach of fiduciary duty. The Partnership settled these claims in 1991, and such
settlement was approved by the Bankruptcy Court.

An Order Granting Motion to Distribute Funds to Class 8 Claimants dated April
14, 1995 was issued by the Bankruptcy Court. In accordance with the Order, in
May 1995, the Partnership received in full satisfaction of its claims, $30,118
in cash, and common and preferred stock in the reorganized Southmark. The cash
and stock represent the Partnership's pro-rata share of Southmark assets
available for Class 8 Claimants. The Partnership sold the Southmark common and
preferred stock in May 1995, for $9,723 which, when combined with the cash
proceeds from Southmark, resulted in a gain on legal settlement of $39,841.

CURRENT OPERATIONS
- ------------------

General:

The Partnership is engaged in diversified real estate activities, including the
ownership, operation and management of residential and retail real estate and
other real estate related assets. At December 31, 1997, the Partnership owned
five income-producing properties as described in Item 2 - Properties.

<PAGE>
The Partnership does not directly employ any personnel. The General Partner
conducts the business of the Partnership directly and through its affiliates.
The Partnership is managed by the General Partner. In accordance with the
Amended Partnership Agreement, the Partnership reimburses affiliates of the
General Partner for certain expenses incurred by the affiliates in connection
with the management of the Partnership. See Item 8 - Note 2 - "Transactions With
Affiliates."

The business of the Partnership to date has involved only one industry segment.
See Item 8 - Financial Statements and Supplementary Data. The Partnership has no
foreign operations. The business of the Partnership is not seasonal.

Business Plan:

Pursuant to the Partnership's previously announced liquidation plans, the
Partnership has recently retained PaineWebber, Incorporated as its exclusive
financial advisor to explore alternatives to maximize the value of the
Partnership. The alternatives being considered by the Partnership include,
without limitation, a transaction in which limited partnership interests in the
Partnership are converted into cash. The General Partner of the Partnership or
entities or persons affiliated with the General Partner will not be involved as
a purchaser in any of the transactions contemplated above. Any transaction will
be subject to certain conditions including (i) approval by the limited partners
of the Partnership, and (ii) receipt of an opinion from an independent financial
advisory firm as to the fairness of the consideration received by the
Partnership pursuant to such transaction. Finally, there can be no assurance
that any transaction will be consummated, or as to the terms thereof.

On October 1, 1996, the Partnership placed Redwood Plaza on the market for sale.

Competitive Conditions:

Since the principal business of the Partnership is to own and operate real
estate, the Partnership is subject to all of the risks incident to ownership of
real estate and interests therein, many of which relate to the illiquidity of
this type of investment. These risks include changes in general or local
economic conditions, changes in supply or demand for competing properties in an
area, changes in interest rates and availability of permanent mortgage funds
which may render the sale or refinancing of a property difficult or
unattractive, changes in real estate and zoning laws, increases in real property
tax rates and Federal or local economic or rent controls. The illiquidity of
real estate investments generally impairs the ability of the Partnership to
respond promptly to changed circumstances. The Partnership competes with
numerous established companies, private investors (including foreign investors),
real estate investment trusts, limited partnerships and other entities (many of
which have greater resources than the Partnership) in connection with the sale,
financing and leasing of properties. The impact of these risks on the
Partnership, including losses from operations and foreclosures of the
Partnership's properties, is described in Item 7 - Management's Discussion and
Analysis of Financial Condition and Results of Operations. See Item 2 -
Properties for a discussion of competitive conditions at the Partnership's
properties.

<PAGE>
Forward-Looking Information:

Within this document, certain statements are made as to the expected occupancy
trends, financial condition, results of operations, and cash flows of the
Partnership for periods after December 31, 1997. All of these statements are
forward-looking statements made pursuant to the safe harbor provisions of the
Private Securities Litigation Reform Act of 1995. These statements are not
historical and involve risks and uncertainties. The Partnership's actual
occupancy trends, financial condition, results of operations, and cash flows for
future periods may differ materially due to several factors. These factors
include, but are not limited to, the Partnership's ability to control costs,
make necessary capital improvements, negotiate sales or refinancings of its
properties and respond to changing economic and competitive factors.

Environmental Matters:

The environmental laws of the Federal government and of certain state and local
governments impose liability on current property owners for the clean-up of
hazardous and toxic substances discharged on the property. This liability may be
imposed without regard to the timing, cause or person responsible for the
release of such substances onto the property. The Partnership could be subject
to such liability in the event that it owns properties having such environmental
problems. The Partnership has no knowledge of any pending claims or proceedings
regarding such environmental problems.

Other Information:

In August 1995, High River Limited Partnership, a Delaware limited partnership
controlled by Carl C. Icahn ("High River") made an unsolicited tender offer to
purchase from holders of Units up to approximately 45% of the outstanding Units
of the Partnership for a purchase price of $95 per Unit. In September 1996, High
River made another unsolicited tender offer to purchase any and all of the
outstanding Units of the Partnership for a purchase price of $95 per Unit. In
addition, High River made unsolicited tender offers for certain other
partnerships controlled by the General Partner. The Partnership recommended that
the limited partners reject the tender offers made with respect to the
Partnership and not tender their Units. The General Partner believes that as of
January 31, 1998, High River has purchased approximately 12.3% of the
outstanding Units pursuant to the tender offers. In addition, all litigation
filed by High River, Mr. Icahn and his affiliates in connection with the tender
offers has been dismissed without prejudice.

Management has begun to review its information technology infrastructure to
identify any systems that could be affected by the year 2000 problem. The year
2000 problem is the result of computer programs being written using two digits
rather than four to define the applicable year. Any programs that have
time-sensitive software may recognize a date using "00" as the year 1900 rather
than the year 2000. This could result in major systems failure or
miscalculations. The information systems used by the Partnership for financial
reporting and significant accounting functions were made year 2000 compliant
during recent systems conversions. The Partnership is in the process of
evaluating the computer systems at the various properties. The Partnership also
intends to communicate with suppliers, financial institutions and others to
coordinate year 2000 issues. Management believes that the remediation of any
outstanding year 2000 conversion issues will not have a material or adverse
effect on the Partnership's operations.

<PAGE>
ITEM 2. PROPERTIES
- ------- ----------

The following table sets forth the real estate investment portfolio of the
Partnership at December 31, 1997. The buildings and the land on which they are
located are owned by the Partnership in fee, subject in each case to a first
lien deed of trust as set forth more fully in Item 8 - Note 5 - "Mortgage Notes
Payable." See also Item 8 - Note 4 - "Real Estate Investments" and Item 8 -
Schedule III - "Real Estate Investments and Accumulated Depreciation and
Amortization." In the opinion of management, the properties are adequately
covered by insurance.

<TABLE>
<CAPTION>
Net Basis 1997 Date
Property Description of Property Debt Property Tax Acquired
- -------- ----------- ----------- ---- ------------ --------

Real Estate Investments:
<S> <C> <C> <C> <C> <C>
Embarcadero
Club (1) Apartments
College Park, GA 404 units $ 6,390,646 $ 7,594,425 $ 134,662 09/84

Tanglewood
Village (2) Apartments
Carson City, NV 130 units 3,154,949 2,704,333 41,074 06/86

Thunder Hollow (3)
Bensalem Apartments
Township, PA 301 units 7,267,411 9,340,509 282,252 11/84

Windrock (4) Apartments
El Paso, TX 150 units 3,438,184 3,387,741 101,200 10/84
------------- ------------- ----------

$ 20,251,190 $ 23,027,008 $ 559,188
============= ============= ==========

Asset Held for Sale:

Redwood Plaza Retail Center
Salt Lake City, UT 87,186 sq. ft. $ 1,932,910 $ 864,004 $ 55,948 06/84
============= ============= ==========
</TABLE>

- -----------------------------------------
Total: Apartments - 985 units
Retail centers - 87,186 sq. ft.

(1) Embarcadero Club Apartments is owned by Embarcadero Associates which
is wholly-owned by the Partnership and the General Partner.

(2) Tanglewood Village Apartments is owned by Tanglewood Fund XIV
Associates, L.P. which is wholly-owned by the Partnership and the
General Partner.

<PAGE>
(3) Thunder Hollow Apartments is owned by Thunder Hollow Fund XIV Limited
Partnership which is wholly-owned by the Partnership.

(4) Windrock Apartments is owned by Windrock Fund XIV, L.P. which is
wholly-owned by the Partnership.

The following table sets forth the properties' occupancy rate and rent per
square foot for each of the last five years:

<TABLE>
<CAPTION>
1997 1996 1995 1994 1993
------------- ------------- -------------- ------------- ----------

Real Estate Investments:
<S> <C> <C> <C> <C> <C>
Embarcadero Club
Occupancy Rate............ 99% 97% 99% 98% 88%
Rent Per Square Foot...... $7.54 $7.10 $6.89 $6.46 $6.12

Tanglewood Village
Occupancy Rate............ 95% 97% 98% 97% 99%
Rent Per Square Foot...... $7.47 $7.36 $7.35 $7.00 $6.64

Thunder Hollow
Occupancy Rate............ 97% 99% 97% 99% 100%
Rent Per Square Foot...... $8.44 $8.15 $7.76 $7.53 $7.18

Windrock
Occupancy Rate............ 96% 93% 75% 83% 91%
Rent Per Square Foot...... $5.57 $5.02 $5.01 $5.33 $5.11

Asset Held for Sale:

Redwood Plaza
Occupancy Rate............ 100% 100% 100% 98% 76%
Rent Per Square Foot...... $7.45 $7.13 $7.04 $6.33 $5.28
</TABLE>

Occupancy rate represents all units leased divided by the total number of units
for residential properties and square footage leased divided by total square
footage for retail properties as of December 31 of the given year. Rent per
square foot represents all revenue, except interest, derived from the property's
operations divided by the leasable square footage of the property.

<PAGE>
Competitive Conditions
- ----------------------

Real Estate Investments:

Embarcadero Club Apartments
- ---------------------------

The area surrounding Embarcadero Club Apartments has rebounded from the 1991
Eastern Airlines bankruptcy. Embarcadero Club is 2.5 miles from Atlanta's
Hartsfield International Airport. Area occupancy rates have improved to 95%, and
the occupancy rate at Embarcadero Club generally is two to three percentage
points above the market average. Embarcadero Club competes with both low end and
high end properties, but good location and stable management have allowed the
property to successfully hold its competitive niche. Renovations in excess of
$1,300,000 in the past few years have added significantly to the property's
competitiveness. No new construction is planned for the area.

Tanglewood Village Apartments
- -----------------------------

Tanglewood Village Apartments rental rates have increased ahead of its Carson
City competition due to the addition of a new swimming pool, renovation of the
clubhouse, and a unique floor plan mix. Occupancy rates for both the Carson City
area and Tanglewood Village average a strong 95%. Tanglewood Village has shown
strong earnings growth the past two years due to capital improvements. However,
the low cost of home ownership in the Carson City area, relative to the rental
market, will make it difficult to increase rents in the near future.

Thunder Hollow Apartments
- -------------------------

Thunder Hollow Apartments has been able to increase rental rates to a higher
level than its competitors and still maintain occupancy rates at the local
market's 96% average occupancy rate. The property has some of the largest floor
plans in its market, an especially attractive feature for tenants with children.
There has been no new multi-family development in the market for several years.
Competition is limited in this market, but further increases in rental rates may
be difficult to achieve due to the predominantly blue collar demographics of the
area and an overbuilt single family home market.

Windrock Apartments
- -------------------

The 1997 occupancy rate at Windrock Apartments exceeded the 92% market average
for the first time in several years. Furthermore, only minimal multi-family
construction is planned for El Paso during 1998. The local economy remains
closely tied to Mexico's economy, which has been volatile. High unemployment and
relatively inexpensive single family housing will limit rental rate increases.
Windrock offers some unusually large floor plans in a secluded setting, but lack
of washer/dryer connections and limited parking space have been handicaps for
the property as it competes with newer properties with full amenity packages.

<PAGE>
Asset Held for Sale:

Redwood Plaza
- -------------

The area surrounding Redwood Plaza is transforming from a middle to low income
area to a growing commercial district. Local businesses, such as McDonnell
Douglas, Litton Industries and Unisys, as well as one of the property's tenants,
the Utah Motor Vehicle Division, provide strong lunch time traffic to the
property. The Motor Vehicle Division is one of only three offices in the Salt
Lake Valley where motorists may renew their licenses. Occupancy is projected to
remain strong during 1998. The Partnership and one of the property's anchor
tenants are negotiating a plan to expand the anchor's space by expanding into
space occupied by two other tenants and by constructing an additional 15,838
square feet of space. If the Partnership and the anchor tenant agree on an
expansion plan, the terms of the anchor tenant's lease will likely be modified,
and the Partnership will likely be responsible for capital repairs to the
property's facade and parking lot.

The following schedule shows lease expirations for the Partnership's commercial
property for 1998 through 2007:

<TABLE>
<CAPTION>
Number of Annual % of Gross
Expirations Square Feet Rent Annual Rent
----------- ----------- ----------- -----------
Asset Held for Sale:
<C> <C> <C> <C> <C>
Redwood Plaza
1998 7 15,884 $ 100,653 18%
1999 3 4,856 36,242 7%
2000 2 28,313 86,938 16%
2001 1 3,040 55,630 10%
2002 0 - - -
2003 1 20,100 203,613 37%
2004 1 14,993 63,270 12%
2005 0 - - -
2006 0 - - -
2007 0 - - -

</TABLE>

No residential tenant leases 10% or more of the available rental space. The
following schedule reflects information on commercial tenants occupying 10% or
more of the leasable square feet for each property:

<TABLE>
<CAPTION>
Nature of
Business Square Footage Lease
Use Leased Annual Rent Expiration
-------------- ----------- ----------
Asset Held for Sale:

Redwood Plaza
<S> <C> <C> <C>
Grocery Store 24,873 $ 55,964 2000
Government Office 20,100 203,613 2003
Discount Store 14,993 63,270 2004
</TABLE>
<PAGE>
ITEM 3. LEGAL PROCEEDINGS
- ------- -----------------

The Partnership is not party to, nor are any of the Partnership's properties the
subject of, any material pending legal proceedings, other than ordinary, routine
litigation incidental to the Partnership's business, except for the following:

James F. Schofield, Gerald C. Gillett, Donna S. Gillett, Jeffrey Homburger,
Elizabeth Jung, Robert Lewis, and Warren Heller et al. v. McNeil Partners L.P.,
McNeil Investors, Inc., McNeil Real Estate Management, Inc., Robert A. McNeil,
Carole J. McNeil, McNeil Pacific Investors Fund 1972, Ltd., McNeil Real Estate
Fund IX, Ltd., McNeil Real Estate Fund X, Ltd., McNeil Real Estate Fund XI,
Ltd., McNeil Real Estate Fund XII, Ltd., McNeil Real Estate Fund XIV, Ltd.,
McNeil Real Estate Fund XV, Ltd., McNeil Real Estate Fund XX, L.P., McNeil Real
Estate Fund XXI, L.P., McNeil Real Estate Fund XXII, L.P., McNeil Real Estate
Fund XXIV, L.P., McNeil Real Estate Fund XXV, L.P., McNeil Real Estate Fund
XXVI, L.P., and McNeil Real Estate Fund XXVII, L.P., et al. - Superior Court of
the State of California for the County of Los Angeles, Case No. BC133799 (Class
and Derivative Action Complaint).

The action involves purported class and derivative actions brought by limited
partners of each of the fourteen limited partnerships that were named as nominal
defendants as listed above (the "Partnerships"). Plaintiffs allege that McNeil
Investors, Inc., its affiliate McNeil Real Estate Management, Inc. and three of
their senior officers and/or directors (collectively, the "Defendants") breached
their fiduciary duties and certain obligations under the respective Amended
Partnership Agreement. Plaintiffs allege that Defendants have rendered such
Units highly illiquid and artificially depressed the prices that are available
for Units on the resale market. Plaintiffs also allege that Defendants engaged
in a course of conduct to prevent the acquisition of Units by an affiliate of
Carl Icahn by disseminating purportedly false, misleading and inadequate
information. Plaintiffs further allege that Defendants acted to advance their
own personal interests at the expense of the Partnerships' public unit holders
by failing to sell Partnership properties and failing to make distributions to
unitholders.

On December 16, 1996, the Plaintiffs filed a consolidated and amended complaint.
Plaintiffs are suing for breach of fiduciary duty, breach of contract and an
accounting, alleging, among other things, that the management fees paid to the
McNeil affiliates over the last six years are excessive, that these fees should
be reduced retroactively and that the respective Amended Partnership Agreements
governing the Partnerships are invalid.

Defendants filed a demurrer to the consolidated and amended complaint and a
motion to strike on February 14, 1997, seeking to dismiss the consolidated and
amended complaint in all respects. A hearing on Defendant's demurrer and motion
to strike was held on May 5, 1997. The Court granted Defendants' demurrer,
dismissing the consolidated and amended complaint with leave to amend. On
October 31, 1997, the Plaintiffs filed a second consolidated and amended
complaint. Defendants must move, answer or otherwise respond to the second
consolidated and amended complaint by June 30, 1998.

For a discussion of the Southmark bankruptcy, see Item 1 - Business.

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

None.

<PAGE>
PART II

ITEM 5. MARKET FOR THE REGISTRANT'S UNITS OF LIMITED PARTNERSHIP AND
- ------- ------------------------------------------------------------
RELATED SECURITY HOLDER MATTERS
-------------------------------

(A) There is no established public trading market for limited
partnership units, nor is one expected to develop.

(B) Title of Class Number of Record Unit Holders

Limited partnership units 3,838 as of January 31, 1998

(C) The Partnership paid distributions totaling $6,146,222 ($71.02
per Unit) to the limited partners in 1997. No distributions were
paid to the limited partners during 1996 or 1995. In the last week
of March 1998, the Partnership distributed $500,000 to limited
partners of record as of March 1, 1998. The Partnership accrued
distributions of $564,834, $618,786 and $601,583 for the benefit of
the General Partner for the years ended December 31, 1997, 1996 and
1995, respectively. These distributions are the MID pursuant to the
Amended Partnership Agreement. In 1995, the Partnership suspended
payment of MID. The Partnership paid $1,774,877 and $500,000 of MID
to the General Partner in 1997 and 1996, respectively. See Item 8 -
Note 2 - "Transactions with Affiliates." See also Item 7 -
Management's Discussion and Analysis of Financial Condition and
Results of Operations for a discussion of the likelihood that the
Partnership will continue distributions to limited partners.

ITEM 6. SELECTED FINANCIAL DATA
- ------- -----------------------

The following table sets forth a summary of certain financial data for the
Partnership. This summary should be read in conjunction with the Partnership's
financial statements and notes thereto appearing in Item 8 - Financial
Statements and Supplementary Data.

<TABLE>
<CAPTION>
Statements of Years Ended December 31,
Operations 1997 1996 1995 1994 1993
- ------------------ ------------- ------------- -------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Rental revenue................ $ 8,996,989 $ 9,429,880 $ 9,188,439 $ 8,899,488 $ 8,881,991
Gain on legal settlement...... - - 39,841 - -
Gain on involuntary
conversion................. - - - 51,588 -
Gain on disposition of
real estate................ 3,081,755 - - - 627,902
Total revenue................. 12,289,725 9,536,634 9,350,464 8,988,225 9,539,165
Net income (loss)............. 3,328,774 (119,302) (331,176) (300,760) (626,596)

Net income (loss) per
limited partnership unit... $ 3.02 $ (1.36) $ (3.79) $ (3.44) $ (7.17)
=========== ============ ============ ============ ============

Distributions per limited
partnership unit........... $ 71.02 $ - $ - $ - $ -
=========== ============ ============= ============ ============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
As of December 31,
Balance Sheets 1997 1996 1995 1994 1993
- -------------- ------------- ------------- -------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Real estate investments,
net........................ $ 20,251,190 $ 21,656,966 $ 30,950,884 $ 31,396,082 $ 32,248,606
Assets held for sale.......... 1,932,910 7,942,855 - - -
Total assets.................. 26,325,605 34,188,885 35,275,343 35,214,866 35,514,281
Mortgage notes payable,
net........................ 23,891,012 27,423,689 27,871,969 27,161,556 27,520,265
Partners' equity.............. 1,099,044 4,481,326 5,219,414 6,152,173 7,026,841

</TABLE>
See Item 7 - Management's Discussion and Analysis of Financial Condition and
Results of Operations. The Partnership sold Country Hills Plaza, Midvale Plaza
and Ridgewood Park Apartments on April 8, 1997, September 24, 1997, and June 15,
1993, respectively.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
- ------- -----------------------------------------------------------
AND RESULTS OF OPERATIONS
-------------------------

FINANCIAL CONDITION
- -------------------

The Partnership was formed to acquire, operate and ultimately dispose of a
portfolio of income-producing real properties. At the end of 1997, the
Partnership owned four apartment properties and one retail shopping center. The
retail shopping center is on the market for sale. All of the Partnership's
properties are subject to mortgage notes.

The Partnership sold Country Hills Plaza and Midvale Plaza on April 8, 1997 and
September 24, 1997, respectively. The Partnership distributed the net proceeds
from the sale of these two properties to the limited partners. Redwood Plaza,
the Partnership' sole remaining commercial property, remains on the market for
sale.

RESULTS OF OPERATIONS
- ---------------------

1997 compared to 1996

Revenue:

Rental revenue for the year ended December 31, 1997 decreased $432,891 or 4.6%
from rental revenue earned for 1996. Excluding rental revenue derived from
Country Hills Plaza and Midvale Plaza for both 1997 and 1996, rental revenue
increased $375,765 or 4.7% in 1997 compared to 1996.

<PAGE>
Rental revenue increased at all of the Partnership's remaining properties.
Increased occupancy at Windrock Apartments led to a 10.9% increase in rental
revenue at the El Paso property. Increased rental rates provided rental revenue
increases ranging from 3.5% to 6.1% at Embarcadero Club Apartments, Thunder
Hollow Apartments and Redwood Plaza. Rental revenues increased approximately
1.5% at Tanglewood Village Apartments as an increase in rental rates was
partially offset by increased vacancy losses.

Interest revenue nearly doubled in 1997 compared to 1996. Increased interest
income was the result of increasing amounts of cash and cash equivalents the
Partnership was able to invest in interest-bearing accounts.

The sale of Country Hills Plaza on April 8, 1997 provided a $2,208,359 one-time
gain on sale of real estate. An additional gain of $873,396 was realized with
the September 24, 1997 sale of Midvale Plaza.

Expenses:

Partnership expenses decreased $694,985 or 7.2% for the year ended December 31,
1997 as compared to the same period of 1996. Expenses decreased primarily
because of the sale of Country Hills Plaza on April 8, 1997, and the sale of
Midvale Plaza on September 24, 1997. After excluding expenses related to Country
Hills Plaza and Midvale Plaza, the Partnership's expenses decreased $26,310 or
0.3% for 1997 as compared to 1996. General and administrative expenses and
general and administrative expenses paid to affiliates decreased, while property
taxes increased.

General and administrative expenses decreased 60.4% for 1997 as compared to
1996. In 1996, the Partnership incurred costs to evaluate and disseminate
information regarding an unsolicited tender offer. Similar costs were not
incurred in 1997. The decrease was partially offset by charges for investor
services, which beginning in 1997, were provided by a third party vendor instead
of by affiliates of the General Partner. The switch of investor service expenses
from affiliates to a third party vendor also accounts for most of the 15.5%
decrease in general and administrative expenses paid to affiliates. Also
contributing to the decrease in general and administrative expenses paid to
affiliates was a decrease in partnership administrative reimbursements due to
the sale of Country Hills Plaza in April 1997, and also the sale of Midvale
Plaza in September 1997.

Property taxes on the Partnership's remaining properties increased $51,293 or
9.1% in 1997 as compared to 1996. Increased assessments on Thunder Hollow
Apartments contributed to a 7.7% increase in property taxes at the Pennsylvania
property. Property taxes at Embarcadero Club Apartments in 1996 were reduced by
a one-time credit for an adjustment for prior year's property taxes. No such
adjustment was made in 1997.

Other property operating expenses increased $89,104 or 17.2% in 1997 as compared
to 1996. All of the increase in other property operating expenses is due to
increased bad-debt write-offs incurred at Country Hills Plaza and Midvale Plaza.
An evaluation of the receivables after the sale of the two properties indicated
that the Partnership was unlikely to collect approximately $89,916 of
receivables due from a single tenant that entered into bankruptcy proceedings,
and who occupied space at both properties.

<PAGE>
1996 compared to 1995

Revenue:

Thunder Hollow Apartments and Embarcadero Club Apartments accounted for most of
the Partnership's $241,441 or 2.6% increase in rental revenue in 1996 compared
to 1995. Base rental rates were increased at both properties. Vacancy losses
reduced the effect of the rental rate increases at Embarcadero Club, but
improving occupancy boosted the effect of the increases at Thunder Hollow
Apartments. Although Tanglewood Village Apartments increased base rental rates,
the increase was wholly offset by increased vacancy losses, leading to unchanged
rental revenue in 1996 compared to 1995. Rental revenue earned at Windrock
Apartments improved throughout 1996. Windrock Apartments began 1996 with an
occupancy rate of 75%, and increased occupancy to 93% at the end of 1996.
For the year, rental revenue rates and occupancy were unchanged from 1995.

All three of the Partnership's Utah retail shopping centers ended 1996 100%
leased. Good locations and a strong Utah economy have enabled the three
properties to continue to provide positive cash flow for the Partnership. A
decrease in expense recoveries from tenants led to a 0.9% decrease in rental
revenue at Country Hills. Redwood Plaza increased its rental revenue 1.4%
principally through increased rental rates on its newer leases. Midvale Plaza's
anchor tenant, a home supply store, vacated its space in June 1995. The anchor
tenant subsequently assigned its lease to a new tenant, a retail second hand
store, that has occupied 55% of the anchor tenant space. The remaining space
remains vacant, but under lease. For the year, Midvale Plaza increased rental
revenue 2.3% mostly through an increase in contingent rentals based on the sales
activity of the property's tenants.

Expenses:

Partnership expenses decreased $25,704 or 0.3% in 1996 compared to 1995. On a
combined basis, the Partnership reported a significant increases in repairs and
maintenance expense and in general and administrative expenses, and significant
decreases in other property operating expenses and general and administrative
expenses paid to affiliates.

Repairs and maintenance expenses increased $106,875 or 10.3% in 1996 compared to
1995. The increase was concentrated at the Partnership's residential properties.
Under the Partnership's capitalization policy, most expenditures for floor
covering replacements were capitalized in 1995. However, such expenditures were
generally expensed in 1996 because the level of such expenditures was not great
enough to qualify for capitalization. Floor covering expenses increased $48,563
in 1996 compared to 1995. Also a factor in the increase in repairs and
maintenance was a $60,628 increase in snow removal expenses and other
storm-related clean up expenses incurred at Thunder Hollow Apartments.

General and administrative expenses increased $37,061 or 19% in 1996 compared to
1995. The Partnership incurred increased costs associated with the fees charged
by professionals such as appraisers, auditors and other consultants, as well a
7.9% increase in expenses associated with an unsolicited tender offer.

Other property operating expenses decreased $62,728 or 10.8% in 1996 compared to
1995. The Partnership incurred decreased expenses for property insurance and for
costs associated with credit and collection activities. These decreases were
concentrated at the Partnership's residential properties.

<PAGE>
General and administrative expenses paid to affiliates decreased 21.3% in 1996
compared to 1995. The decrease was mainly due to a decrease in overhead expenses
allocated to the Partnership by McREMI. Such reimbursements are paid in
accordance with the Partnership's Amended Partnership Agreement.

LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------

Cash flow from operating activities decreased 1.5% in 1997 compared to 1996. The
decrease is due to the sale of Country Hills Plaza and Midvale Plaza during the
course of 1997. Operating cash flow from the Partnership's remaining properties
increased almost enough to offset the loss of the two properties during the
course of 1997.

The Partnership invested $668,126 in capital improvements in 1997, in addition
to the $834,036 and $1,743,497 invested in 1996 and 1995, respectively. The
Partnership has budgeted an additional $625,000 for capital improvements in
1998. The capital improvements budgeted for 1998 are expected to be funded from
cash flow from operations.

In 1997 and 1996, the Partnership's improving cash position allowed the
Partnership to resume MID payments to the General Partner. MID payments had been
suspended since the beginning of 1994 to increase the cash reserves of the
Partnership. $500,000 of MID was paid to the General Partner during 1996, and an
additional $1,774,877 of MID was paid during 1997. $90,326 of MID remains
accrued but unpaid at the end of 1997. The Partnership anticipates further MID
payments in 1998 if the Partnership's properties continue to perform as
anticipated.

As discussed above, two of the Partnership's properties, Country Hills Plaza and
Midvale Plaza were sold during 1997. The sale of these two properties provided
$6,146,226 of cash proceeds to the Partnership, after repayment of the mortgage
notes associated with the two properties. The net cash proceeds from the sale of
the two properties was distributed to the limited partners in two installments
in September 1997 and December 1997. During the last week of March 1998, the
Partnership distributed an additional $500,000 to limited partners of record as
of March 1, 1998. The $500,000 distribution was funded from cash reserves of the
Partnership.

Short Term Liquidity:

The Partnership expended considerable resources over the past several years to
restore its properties to good operating condition. These expenditures have been
necessary to maintain the competitive position of the Partnership's aging
properties in each of their markets. The capital improvements made during the
three years have enabled the Partnership to increase its rental revenues and
reduce certain of its repairs and maintenance expenses. For 1998, the
Partnership has budgeted an additional $625,000 of capital improvements to its
real estate investments. Budgeted capital improvements for 1998 will be funded
from property operations.

<PAGE>
At December 31, 1997, the Partnership held cash and cash equivalents of
$1,292,615. The General Partner considers this level of cash reserves to be
adequate to meet the Partnership's operating needs. The General Partner resumed
MID payments during 1996, and anticipates additional MID payments will be made
in 1998 if the Partnership's properties continue to perform as projected. The
General Partner believes that anticipated operating results for 1998 will be
sufficient to fund the Partnership's budgeted capital improvements for 1998 and
to repay the current portion of the Partnership's mortgage notes.

The Partnership's remaining commercial property, Redwood Plaza, is on the market
for sale. Although the General Partner expects to successfully sell Redwood
Plaza, there is no guarantee that the Partnership will be able to conclude a
sale of Redwood Plaza for an amount sufficient to retire the related mortgage
note and provide cash proceeds to the Partnership. The Partnership anticipates
that any proceeds from the sale of Redwood Plaza, after repayment of the related
mortgage note, will be distributed to the limited partners.

Long Term Liquidity:

For the long-term, property operations will remain the primary source of funds.
In this regard, the General Partner expects that the capital improvements made
by the Partnership over the past few years will yield improved cash flow from
property operations in the future. If the Partnership's cash position
deteriorates, the General Partner may elect to defer certain of the capital
improvements, except where improvements are expected to increase the
competitiveness or marketability of the Partnership's properties.

On October 1, 1996, the Partnership placed Redwood Plaza on the market for sale.

Income Allocations and Distributions:

Terms of the Amended Partnership Agreement specify that net losses for financial
reporting purposes are allocated 99% to the limited partners and 1% to the
General Partner. Net income for financial reporting purposes is allocated to the
General Partner in an amount equal to the greater of (a) 1% of net income or (b)
the cumulative amount of the contingent portion of the MID paid for which no
income allocation has previously been made; any remaining net income is
allocated to the limited partners. Therefore, for the years in the periods ended
December 31, 1997, 1996 and 1995, net income of $3,067,248 and net losses of
$1,193 and $3,312, respectively, were allocated to the General Partner. The
limited partners received allocated net income of $261,526 and net losses of
$118,109 and $327,864 for the years ended December 31, 1997, 1996 and 1995,
respectively.

<PAGE>

Distributions to Unit holders had been suspended since 1986 as part of
management's policy of maintaining adequate cash reserves. In 1997, however, the
Partnership distributed $6,146,222 to the limited partners. During the last week
of March 1998, the Partnership distributed an additional $500,000 to limited
partners of record as of March 1, 1998. The General Partner will continue to
monitor the cash reserves and working capital needs of the Partnership to
determine when cash flows will support additional distributions to the Unit
holders. The Partnership paid $1,774,877 and $500,000 of MID to the General
Partner during 1997 and 1996, respectively. No MID was paid during 1995. The
Partnership anticipates making additional MID payments during 1998 if the
Partnership's properties continue to perform as projected.

<PAGE>

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
- ------- -------------------------------------------

Page
Number
------
INDEX TO FINANCIAL STATEMENTS
- -----------------------------
Financial Statements:

<S> <C>
Report of Independent Public Accountants....................................... 16

Balance Sheets at December 31, 1997 and 1996................................... 17

Statements of Operations for each of the three years in the period
ended December 31, 1997..................................................... 18

Statements of Partners' Equity (Deficit) for each of the three years
in the period ended December 31, 1997....................................... 19

Statements of Cash Flows for each of the three years in the period
ended December 31, 1997..................................................... 20

Notes to Financial Statements.................................................. 22

Financial Statement Schedule:

Schedule III - Real Estate Investments and Accumulated
Depreciation and Amortization............................................ 32
</TABLE>

All other schedules are omitted because they are not applicable or the required
information is shown in the financial statements or notes thereto.

<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Partners of
McNeil Real Estate Fund XIV, Ltd.:

We have audited the accompanying balance sheets of McNeil Real Estate Fund XIV,
Ltd. (a California limited partnership) as of December 31, 1997 and 1996, and
the related statements of operations, partners' equity (deficit) and cash flows
for each of the three years in the period ended December 31, 1997. These
financial statements and the schedule referred to below are the responsibility
of the Partnership's management. Our responsibility is to express an opinion on
these financial statements and the schedule based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of McNeil Real Estate Fund XIV,
Ltd. 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.

Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule listed in the index to
financial statements is presented for purposes of complying with the Securities
and Exchange Commission's rules and is not part of the basic financial
statements. The schedule has been subjected to the auditing procedures applied
in our audits of the basic financial statements and, in our opinion, fairly
states in all material respects the financial data required to be set forth
therein in relation to the basic financial statements taken as a whole.

/s/ Arthur Andersen LLP

Dallas, Texas
March 20, 1998

<PAGE>
McNEIL REAL ESTATE FUND XIV, LTD.

BALANCE SHEETS

<TABLE>
<CAPTION>
December 31,
------------------------------------
1997 1996
---------------- --------------
ASSETS
- ------
<S> <C> <C>
Real estate investments:
Land..................................................... $ 4,663,828 $ 4,663,828
Building and improvements................................ 36,220,158 35,944,879
-------------- -------------
40,883,986 40,608,707
Less: Accumulated depreciation.......................... (20,632,796) (18,951,741)
-------------- -------------
20,251,190 21,656,966

Assets held for sale........................................ 1,932,910 7,942,855

Cash and cash equivalents................................... 1,292,615 1,903,902
Cash segregated for security deposits....................... 431,148 399,366
Accounts receivable......................................... 663,087 385,721
Prepaid expenses and other assets........................... 141,281 173,908
Escrow deposits............................................. 664,294 681,430
Deferred borrowing costs, net of accumulated
amortization of $441,912 and $346,255 at
December 31, 1997 and 1996, respectively................. 949,080 1,044,737
-------------- -------------

$ 26,325,605 $ 34,188,885
============== =============

LIABILITIES AND PARTNERS' EQUITY (DEFICIT)
- ------------------------------------------

Mortgage notes payable, net................................. $ 23,891,012 $ 27,423,689
Accounts payable............................................ 69,128 103,747
Accrued interest............................................ 164,766 197,124
Accrued property taxes...................................... 101,200 100,981
Other accrued expenses...................................... 73,912 82,329
Payable to affiliates - General Partner..................... 211,757 1,388,371
Deferred gain on involuntary conversions.................... 346,114 -
Security deposits and deferred rental revenue............... 368,672 411,318
-------------- -------------
25,226,561 29,707,559
-------------- -------------

Partners' equity (deficit):
Limited partners - 100,000 limited partnership units
authorized; 86,534 limited partnership units issued
and outstanding at December 31, 1997 and 1996.......... 1,763,445 7,648,141
General Partner.......................................... (664,401) (3,166,815)
-------------- -------------
1,099,044 4,481,326
-------------- -------------

$ 26,325,605 $ 34,188,885
============== =============
</TABLE>
See accompanying notes to financial statements.
<PAGE>
McNEIL REAL ESTATE FUND XIV, LTD.

STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For the Years Ended December 31,
----------------------------------------------------
1997 1996 1995
-------------- -------------- ---------------
<S> <C> <C> <C>
Revenue:
Rental revenue.......................... $ 8,996,989 $ 9,429,880 $ 9,188,439
Interest................................ 210,981 106,754 122,184
Gain on legal settlement................ - - 39,841
Gain on sales of real estate............ 3,081,755 - -
------------- ------------- --------------
Total revenue......................... 12,289,725 9,536,634 9,350,464
------------- ------------- --------------

Expenses:
Interest................................ 2,400,690 2,682,467 2,694,731
Depreciation and amortization........... 1,882,343 2,185,099 2,171,607
Property taxes.......................... 670,709 713,729 719,183
Personnel expenses...................... 946,896 925,738 984,852
Repairs and maintenance................. 1,148,956 1,145,081 1,038,206
Utilities............................... 514,372 495,851 469,550
Property management fees -
affiliates............................ 451,074 465,738 456,139
Other property operating expenses....... 606,017 516,913 579,641
General and administrative.............. 92,005 232,097 195,036
General and administrative -
affiliates............................ 247,889 293,223 372,695
------------- ------------- --------------
Total expenses........................ 8,960,951 9,655,936 9,681,640
------------- ------------- --------------

Net income (loss).......................... $ 3,328,774 $ (119,302) $ (331,176)
============= ============= ==============

Net income (loss) allocated to
limited partners........................ $ 261,526 $ (118,109) $ (327,864)
Net income (loss) allocated to
General Partner......................... 3,067,248 (1,193) (3,312)
------------- ------------- --------------

Net income (loss).......................... $ 3,328,774 $ (119,302) $ (331,176)
============= ============= ==============

Net income (loss) per limited
partnership unit......................... $ 3.02 $ (1.36) $ (3.79)
============= ============= ==============

Distributions per limited partnership
unit.................................... $ 71.02 $ - $ -
============= ============= ==============
</TABLE>
See accompanying notes to financial statements.
<PAGE>
McNEIL REAL ESTATE FUND XIV, LTD.

STATEMENTS OF PARTNERS' EQUITY (DEFICIT)

For the Years Ended December 31, 1997, 1996 and 1995

<TABLE>
<CAPTION>
Total
General Limited Partners'
Partner Partners Equity
---------------- ---------------- ----------------
<S> <C> <C> <C>
Balance at December 31, 1994.............. $ (1,941,941) $ 8,094,114 $ 6,152,173

Net loss.................................. (3,312) (327,864) (331,176)

Management Incentive Distribution......... (601,583) - (601,583)
-------------- -------------- --------------

Balance at December 31, 1995.............. (2,546,836) 7,766,250 5,219,414

Net loss.................................. (1,193) (118,109) (119,302)

Management Incentive Distribution......... (618,786) - (618,786)
-------------- -------------- --------------

Balance at December 31, 1996.............. (3,166,815) 7,648,141 4,481,326

Net income................................ 3,067,248 261,526 3,328,774

Management Incentive Distribution......... (564,834) - (564,834)

Distributions to limited partners......... - (6,146,222) (6,146,222)
-------------- --------------- --------------

Balance at December 31, 1997.............. $ (664,401) $ 1,763,445 $ 1,099,044
============== ============== ==============
</TABLE>

See accompanying notes to financial statements.
<PAGE>

McNEIL REAL ESTATE FUND XIV, LTD.

STATEMENTS OF CASH FLOWS

Increase (Decrease) in Cash and Cash Equivalents

<TABLE>
<CAPTION>
For the Years Ended December 31,
-----------------------------------------------------
1997 1996 1995
--------------- --------------- ----------------
<S> <C> <C> <C>
Cash flows from operating activities:
Cash received from tenants.............. $ 8,962,254 $ 9,395,118 $ 9,215,001
Cash paid to suppliers.................. (3,253,015) (3,182,745) (3,400,938)
Cash paid to affiliates................. (665,534) (744,666) (1,166,657)
Interest received....................... 210,981 106,754 122,184
Interest paid........................... (2,246,442) (2,450,431) (2,477,133)
Property taxes paid..................... (635,937) (715,239) (704,400)
Cash received from legal
settlement............................ - - 39,841
------------- ------------- --------------
Net cash provided by operating
activities.............................. 2,372,307 2,408,791 1,627,898
------------- ------------- --------------

Cash flows from investing activities:
Additions to real estate
investments........................... (668,126) (834,036) (1,743,497)
Proceeds from sales of real estate...... 9,868,596 - -
Insurance proceeds from gain on
involuntary conversion................ - - 17,088
------------- ------------- --------------
Net cash provided by (used in)
investing activities.................... 9,200,470 (834,036) (1,726,409)
------------- ------------- --------------

Cash flows from financing activities:
Principal payments on mortgage
notes payable......................... (540,595) (588,801) (536,941)
Retirement of mortgage notes
payable............................... (3,722,370) - -
Deferred borrowing costs paid........... - - (107,525)
Net proceeds from refinancing of
mortgage notes payable................ - - 1,115,767
Management incentive distribution
paid.................................. (1,774,877) (500,000) -
Distributions to limited partners....... (6,146,222) - -
------------- ------------- --------------
Net cash provided by (used in)
financing activities.................... (12,184,064) (1,088,801) 471,301
------------- ------------- --------------

Net increase (decrease) in cash
and cash equivalents.................. (611,287) 485,954 372,790

Cash and cash equivalents at
beginning of year..................... 1,903,902 1,417,948 1,045,158
------------- ------------- --------------

Cash and cash equivalents at end
of year............................... $ 1,292,615 $ 1,903,902 $ 1,417,948
============= ============= ==============
</TABLE>

See discussion of noncash investing and financing activities in Note 6 - "Sale
of Real Estate" and Note 8 - "Gain on Involuntary Conversion."

See accompanying notes to financial statements.
<PAGE>
McNEIL REAL ESTATE FUND XIV, LTD.

STATEMENTS OF CASH FLOWS

Reconciliation of Net Income (Loss) to Net Cash Provided by
Operating Activities

<TABLE>
<CAPTION>
For the Years Ended December 31,
----------------------------------------------------
1997 1996 1995
-------------- ----------------- --------------
<S> <C> <C> <C>
Net income (loss).......................... $ 3,328,774 $ (119,302) $ (331,176)
------------- --------------- ------------

Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Depreciation and amortization........... 1,882,343 2,185,099 2,171,607
Amortization of deferred
borrowing costs....................... 95,657 95,658 88,026
Amortization of discounts on
mortgage notes payable................ 90,949 140,521 131,587
Gain on sales of real estate............ (3,081,755) - -
Changes in assets and liabilities:
Cash segregated for security
deposits............................ (31,782) (29,269) 2,060
Accounts receivable................... 137,088 (34,898) 43,462
Prepaid expenses and other
assets.............................. 18,289 26,666 29,947
Escrow deposits....................... 17,136 163,192 (188,855)
Accounts payable...................... (34,619) (62,687) 11,363
Accrued property taxes................ 219 104 15,997
Accrued interest...................... (32,358) (4,143) (2,015)
Other accrued expenses................ (8,417) 2,604 (1,880)
Payable to affiliates - General
Partner............................. 33,429 14,295 (337,823)
Security deposits and deferred
rental revenue...................... (42,646) 30,951 (4,402)
-------------- ------------- --------------
Total adjustments................. 956,467 2,528,093 1,959,074
------------- ------------- --------------

Net cash provided by operating
activities.............................. $ 2,372,307 $ 2,408,791 $ 1,627,898
============= ============= ==============
</TABLE>

See accompanying notes to financial statements.
<PAGE>
McNEIL REAL ESTATE FUND XIV, LTD.

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 1997

NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- ---------------------------------------------------------------------

Organization
- ------------

The Partnership is engaged in diversified real estate activities, including the
ownership, operation and management of residential and commercial real estate
and other real estate related assets. At December 31, 1997, the Partnership
owned five income-producing properties as described in Note 4 - Real Estate
Investments.

On October 1, 1996, the Partnership placed Redwood Plaza on the market for sale.

Basis of Presentation
- ---------------------

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

<PAGE>
The Partnership's financial statements include the accounts of the following
listed tier partnerships. These single asset tier partnerships were formed to
accommodate the refinancings of the related properties. The ownership interest
of the Partnership and the General Partner in each tier is detailed on the
following page. The Partnership retains effective control of each tier
partnership. The General Partner's minority interest is not presented as it is
either negative or immaterial.

% of Ownership Interest
Tier Partnership Partnership General Partner
---------------- ----------- ---------------

Limited partnerships:
Tanglewood Fund XIV Associates, L.P...... 99% 1%
Thunder Hollow Fund XIV Limited
Partnership (a)........................ 100 -
Windrock Fund XIV, L.P. (a).............. 100 -

General partnerships:
Embarcadero Associates................... 99 1

(a) The general partner of these partnerships is a corporation whose stock is
100% owned by the Partnership.

Real Estate Investments
- -----------------------

Real estate investments are generally stated at the lower of depreciated cost or
fair value. Real estate investments are reviewed for impairment whenever events
or changes in circumstances indicate that their carrying amounts may not be
recoverable. When the carrying value of a property exceeds the sum of all
estimated future cash flows, an impairment loss is recognized. At such time, a
write-down is recorded to reduce the basis of the property to its estimated fair
value.

The Partnership's method of accounting for real estate investments is in
accordance with Statement of Financial Accounting Standards No. 121, "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
Of" ("SFAS 121"), which the Partnership adopted effective January 1, 1996. The
adoption of SFAS 121 did not have a material impact on the accompanying
financial statements.

Improvements and betterments are capitalized and expensed through depreciation
charges. Repairs and maintenance are charged to operations as incurred.

Assets Held for Sale
- --------------------

Assets held for sale are stated at the lower of depreciated cost or fair value
less costs to sell. Depreciation on these assets ceases at the time they are
placed on the market for sale.

<PAGE>
Depreciation
- ------------

Buildings and improvements are depreciated using the straight-line method over
the estimated useful lives of the assets, ranging from 5 to 25 years. Tenant
improvements are amortized over the terms of the related tenant leases using the
straight-line method.

Cash and Cash Equivalents
- -------------------------

Cash and cash equivalents include cash on hand and cash on deposit with
financial institutions with original maturities of three months or less.
Carrying amounts for cash and cash equivalents approximate fair value.

Escrow Deposits
- ---------------

The Partnership is required to maintain escrow accounts in accordance with the
terms of various mortgage agreements. These escrow accounts are controlled by
the mortgagee and are used for payment of property taxes, hazard insurance,
capital improvements and/or property replacements. Carrying amounts for escrow
deposits approximate fair value.

Deferred Borrowing Costs
- ------------------------

Loan fees and other related costs incurred to obtain long-term financing on real
property are capitalized and amortized using a method that approximates the
effective interest method over the terms of the related mortgage notes.
Amortization of deferred borrowing costs is included in interest expense on the
Statements of Operations.

Discounts on Mortgage Notes Payable
- -----------------------------------

Discounts on mortgage notes payable are amortized over the remaining terms of
the related mortgage notes using the effective interest method. Amortization of
discounts on mortgage notes is included in interest expense on the Statements of
Operations.

Rental Revenue
- --------------

The Partnership leases its residential properties under short-term operating
leases. Lease terms generally are less than one year in duration. Rental income
is recognized as earned.

The Partnership leases its commercial properties under non-cancelable operating
leases. Certain leases provide concessions and/or periods of escalating or free
rent. Rental income is recognized on a straight-line basis over the term of the
related lease. The excess of rental income recognized over the contractual
rental payments is recorded as accrued rent receivable and is included in
accounts receivable on the Balance Sheets.

<PAGE>
Income Taxes
- ------------

No provision for Federal income taxes is necessary in the financial statements
of the Partnership because, as a partnership, it is not subject to Federal
income tax and the tax effect of its activities accrues to the partners.

Allocation of Net Income and Net Loss
- -------------------------------------

Net losses of the Partnership for both financial statement and income tax
reporting purposes are allocated 99% to the limited partners and 1% to the
General Partner.

Net income of the Partnership for both financial statement and income tax
reporting purposes is allocated to the General Partner in an amount equal to the
greater of (a) 1% of net income or (b) the cumulative amount paid for the
Management Incentive Distribution ("MID") for which no income allocation has
previously been made (see Note 2 - "Transactions with Affiliates"). Any
remaining net income is allocated to the limited partners.

Federal income tax law provides that the allocation of loss to a partner will
not be recognized unless the allocation is in accordance with a partner's
interest in the partnership or the allocation has substantial economic effect.
Internal Revenue Code Section 704(b) and accompanying Treasury Regulations
establish criteria for allocation of partnership deductions attributable to
debt. The Partnership's tax allocations for 1997, 1996 and 1995 have been made
in accordance with these provisions.

Distributions
- -------------

Pursuant to the Amended Partnership Agreement and at the discretion of the
General Partner, distributions during each taxable year shall be made as
follows:

(a) First, to the General Partner, in an amount equal to the MID
(see Note 2 - "Transactions with Affiliates"); and

(b) any remaining distributable cash, as defined, shall be distributed 100%
to the limited partners.

The Partnership paid distributions of $6,146,222 to the limited partners in
1997. No distributions were paid to the limited partners in 1996 or 1995. The
Partnership paid or accrued distributions of $564,834, $618,786 and $601,583 for
the benefit of the General Partner for the MID in 1997, 1996 and 1995,
respectively. These distributions are the MID pursuant to the Amended
Partnership Agreement. The General Partner has waived the collection terms of
reimbursable expenses and MID, and has elected for the Partnership to pay
limited partner distributions before the payment of such amounts. The
Partnership plans to distribute approximately $500,000 to the limited partners
in March 1998.

<PAGE>
Net Loss Per Limited Partnership Unit
- -------------------------------------

Net loss per limited partnership unit ("Units") is computed by dividing net loss
allocated to the limited partners by the weighted average number of Units
outstanding. Per Unit information has been computed based on 86,534 Units
outstanding in 1997, 1996 and 1995.

NOTE 2 - TRANSACTIONS WITH AFFILIATES
- -------------------------------------

The Partnership pays property management fees equal to 5% of the Partnership's
gross rental receipts to McNeil Real Estate Management, Inc. ("McREMI"), an
affiliate of the General Partner, for providing property management services for
the Partnership's residential and commercial properties and leasing services for
its residential properties. McREMI may choose to perform leasing services for
the Partnership's commercial properties, in which case McREMI will receive a
property management fee equal to 3% of the gross rental receipts of the
Partnership's commercial properties plus a commission for performing leasing
services equal to the prevailing market rate for such services in the area where
the property is located.

The Partnership reimburses McREMI for its costs, including overhead, of
administering the Partnership's affairs.

Under terms of the Amended Partnership Agreement, the Partnership is paying MID
to the General Partner. The maximum MID is calculated as 1% of the tangible
asset value of the Partnership. The maximum MID percentage decreases subsequent
to 1999. Tangible asset value is determined by using the greater of (i) an
amount calculated by applying a capitalization rate of 9% to the annualized net
operating income of each property or (ii) a value of $10,000 per apartment unit
for residential property and $50 per gross square foot for commercial property
to arrive at the property tangible asset value. The property tangible asset
value is then added to the book value of all other assets excluding intangible
assets.

The MID will be paid to the extent of the lesser of the Partnership's excess
cash flow, as defined, or net operating income, as defined (the "Entitlement
Amount"), and may be paid (i) in cash, unless there is insufficient cash to pay
the distribution in which event any unpaid portion not taken in Units will be
deferred and is payable, without interest, from the first available cash and/or
(ii) in Units. A maximum of 50% of the MID may be paid in Units. The number of
Units issued in payment of the MID is based on the greater of $50 per Unit or
the net tangible asset value, as defined, per Unit. During 1997, 1996 and 1995,
no Units were issued as payment for the MID.

During 1991, the Partnership amended its capitalization policy and began
capitalizing certain costs of improvements and betterments which, under policies
of prior management, had been expensed when incurred. The purpose of the
amendment was to more properly recognize items which were capital in nature. The
effect of the amendment standing alone was evaluated at the time the change was
made and determined not to be material to the financial statements of the
Partnership in 1991, nor was it expected to be material in any future year.
However, the amendment does have a material effect on the calculation of the

<PAGE>
Entitlement Amount which determines the amount of MID earned. Capital
improvements are excluded from cash flow, as defined. The majority of base
period cash flow was measured under the previous capitalization policy, while
incentive period cash flow is determined using the amended policy. Under the
amended policy, more items are capitalized, and cash flow increases. The
amendment of the capitalization policy did not materially affect the MID for
1997, 1996 or 1995 as the Entitlement Amount was sufficient to pay the MID
notwithstanding the amendment of the capitalization policy.

Any amount of MID that is paid to the General Partner in Units will be treated
as if cash is distributed to the General Partner and is then contributed to the
Partnership by the General Partner. The MID represents a return of equity to the
General Partner for increasing cash flow, as defined, and accordingly is treated
as a distribution.

Compensation and reimbursements paid or accrued for the benefit of the General
Partner and its affiliates are as follows:

For the Years Ended December 31,
-----------------------------------
1997 1996 1995
--------- --------- ---------

Property management fees -
affiliates........................... $ 451,074 $ 465,738 $ 456,139
Charged to general and
administrative - affiliates:
Partnership administration........... 247,889 293,223 372,695
-------- -------- --------

$ 698,963 $ 758,961 $ 828,834
======== ======== ========

Charged to General Partner's deficit:
Management Incentive Distribution $ 564,834 $ 618,786 $ 601,583
======== ======== ========

Payable to affiliates - General Partner at December 31, 1997 and 1996 consists
of reimbursable costs, property management fees and MID that are due and payable
from current operations. The General Partner has waived the collection terms of
reimbursable expenses and MID, and has elected for the Partnership to pay
limited partner distributions before the payment of such amounts.

NOTE 3 - TAXABLE LOSS
- ---------------------

McNeil Real Estate Fund XIV, Ltd. is a partnership and is not subject to Federal
and state income taxes. Accordingly, no recognition has been given to income
taxes in the accompanying financial statements of the Partnership since the
income or loss of the Partnership is to be included in the tax returns of the
individual partners. The tax returns of the Partnership are subject to
examination by Federal and state taxing authorities. If such examinations result
in adjustments to distributive shares of taxable income or loss, the tax
liability of the partners could be adjusted accordingly.

The Partnership's net assets and liabilities for tax purposes exceeded the net
assets and liabilities for financial reporting purposes by $2,059,398,
$1,802,969 and $1,331,413 in 1997, 1996 and 1995, respectively.

<PAGE>
NOTE 4 - REAL ESTATE INVESTMENTS
- --------------------------------

The basis and accumulated depreciation of the Partnership's real estate
investments at December 31, 1997 and 1996 are set forth in the following tables:

<TABLE>
<CAPTION>
Buildings and Accumulated Net Book
1997 Land Improvements Depreciation Value
---- -------------- ------------ ------------ ---------------
<S> <C> <C> <C> <C>
Embarcadero Club
College Park, GA $ 1,216,712 $ 12,552,561 $ (7,378,627) $ 6,390,646
Tanglewood Village
Carson City, NV 705,859 5,131,625 (2,682,535) 3,154,949
Thunder Hollow
Bensalem Township, PA 1,837,539 12,744,793 (7,314,921) 7,267,411
Windrock
El Paso, TX 903,718 5,791,179 (3,256,713) 3,438,184
------------- ------------- ------------- -------------

$ 4,663,828 $ 36,220,158 $ (20,632,796) $ 20,251,190
============= ============= ============= =============

Buildings and Accumulated Net Book
1996 (a) Land Improvements Depreciation Value
-------- -------------- ------------ ------------ ---------------

Embarcadero Club $ 1,216,712 $ 12,312,055 $ (6,803,966) $ 6,724,801
Tanglewood Village 705,859 5,031,895 (2,395,364) 3,342,390
Thunder Hollow 1,837,539 12,883,353 (6,815,730) 7,905,162
Windrock 903,718 5,717,576 (2,936,681) 3,684,613
------------- ------------- ------------- -------------

$ 4,663,828 $ 35,944,879 $ (18,951,741) $ 21,656,966
============= ============= ============= =============
</TABLE>

(a) On October 1, 1996, the General Partner placed Country Hills Plaza,
Midvale Plaza and Redwood Plaza on the market for sale. All three
properties were classified as assets held for sale at December 31, 1996.
The net book values of Country Hills Plaza, Midvale Plaza and Redwood
Plaza at December 31, 1996 were $3,787,273, $2,229,912 and $1,925,670,
respectively. The Partnership sold Country Hills Plaza on April 8, 1997.
Midvale Plaza was sold September 24, 1997. Redwood Plaza, located in Salt
Lake City, Utah, remains classified as an asset held for sale at December
31, 1997. The net book value of Redwood Plaza at December 31, 1997 was
$1,932,910.

Included in the Partnership's Statements of Operations are results of operations
for the assets held for sale. Results of operations for assets held for sale
amounted to $440,868, $459,447 and $297,444 for 1997, 1996 and 1995,
respectively. Results of operations are operating revenues less operating
expenses including and interest expense and depreciation and amortization.

<PAGE>
The Partnership leases its commercial property under various non-cancelable
operating leases. Future minimum rents to be received for the property, which is
classified as an asset held for sale as of December 31, 1997, are as follows:

1998............................... $ 469,292
1999............................... 437,463
2000............................... 400,124
2001............................... 313,242
2002............................... 266,883
Thereafter......................... 173,321
---------
$2,060,325
=========

Future minimum rents do not include contingent rents based on sales volume of
tenants. Contingent rents amounted to $2,591, $2,462 and $3,489 for the years
ended December 31, 1997, 1996 and 1995, respectively. Future minimum rents also
do not include expense reimbursements for common area maintenance, property
taxes, and other expenses. These expense reimbursements amounted to $206,243,
$349,600 and $370,814 for the years ended December 31, 1997, 1996 and 1995,
respectively. These contingent rents and expense reimbursements, which are
comprised of amounts generated by assets held for sale, are included in rental
revenue on the Statements of Operations.

The Partnership's real estate investments and asset held for sale are encumbered
by mortgage notes as discussed in Note 5 - "Mortgage Notes Payable."

NOTE 5 - MORTGAGE NOTES PAYABLE
- -------------------------------

The following table sets forth the mortgage notes of the Partnership at December
31, 1997 and 1996. All mortgage notes are secured by the related real estate
investments or assets held for sale:

<TABLE>
<CAPTION>
Mortgage Annual Monthly
Lien Interest Payments/ December 31,
Property Position (a) Rates % Maturity Date (d) 1997 1996
- -------- ------------- ------- ----------------- --------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Country Hills Plaza First 9.000 $ 24,742 07/04 $ - $ 2,255,102
Discount (b) - (411,154)
------------ -------------
- 1,843,948
------------ -------------

Embarcadero Club First 7.875 57,280 12/23 7,594,425 7,680,034
------------ -------------

Midvale Plaza First 9.500 20,589 09/06 - 1,566,962
Discount (b) - (268,881)
------------ -------------
- 1,298,081
------------ -------------
</TABLE>

<PAGE>
<TABLE>
<CAPTION>
Mortgage Annual Monthly
Lien Interest Payments/ December 31,
Property Position (a) Rates % Maturity Date (d) 1997 1996
- -------- ------------- ------- ----------------- --------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Redwood Plaza First 9.875 $14,660 06/06 $ 1,009,255 $ 1,081,583
Discount (b) (145,251) (168,601)
------------ -------------
864,004 912,982
------------ -------------

Tanglewood Village First 6.750 20,176 11/18 2,704,333 2,761,777
------------ -------------

Thunder Hollow (c) First 8.150 82,131 07/03 (d) 9,526,308 9,726,634
Discount (b) (185,799) (212,702)
------------ -------------
9,340,509 9,513,932
------------ -------------

Windrock First 9.440 28,859 04/02 (d) 3,387,741 3,412,935
------------ -------------

$ 23,891,012 $ 27,423,689
============ =============
</TABLE>

(a) The debt is non-recourse to the Partnership.

(b) The discount on the Thunder Hollow mortgage note is based on an effective
interest rate of 8.62%. All other discounts are based on effective
interest rates ranging from 12% to 14.4%.

(c) Financing was obtained under the terms of a Real Estate Mortgage
Investment Conduit financing. The mortgage note may not be prepaid in
whole or part before July 1998. Any prepayments made during the sixth or
seventh loan years are subject to a Yield Maintenance premium, as
defined.

(d) Balloon payments on the mortgage notes are due as follows:

Property Balloon Payment Date
-------- --------------- ----

Windrock $ 3,249,832 04/02
Thunder Hollow 8,080,794 07/03

<PAGE>
Scheduled principal maturities of the mortgage notes under existing agreements,
before consideration of discounts of $331,050, are as follows:

1998 ...................... $ 478,695
1999 ...................... 519,886
2000 ...................... 564,669
2001....................... 613,361
2002....................... 3,885,549
Thereafter ................ 18,159,902
------------
$ 24,222,062
===========

Based on borrowing rates currently available to the Partnership for mortgage
loans with similar terms and average maturities, the fair value of the
Partnership's mortgage notes payable was approximately $24,889,000 and
$27,340,000 at December 31, 1997 and 1996, respectively.

NOTE 6 - SALES OF REAL ESTATE
- -----------------------------

On April 8, 1997, the Partnership sold Country Hills Plaza to an unaffiliated
purchaser for a cash sales price of $6,610,000. Cash proceeds from the sale, as
well as the gain on sale are detailed below.

<TABLE>
<CAPTION>
Gain on Sale Cash Proceeds
---------------- ---------------

<S> <C> <C>
Cash sales price....................................... $ 6,610,000 $ 6,610,000

Selling costs.......................................... (185,304) (185,304)
Mortgage discount written off.......................... (397,561)
Straight-line rent receivables written off............. (26,828)
Basis of real estate sold.............................. (3,791,948)
--------------

Gain on sale of real estate............................ $ 2,208,359
============== -------------

Proceeds from sale of real estate...................... 6,424,696
Retirement of mortgage note payable.................... (2,231,440)
-------------

Net cash proceeds...................................... $ 4,193,256
=============
</TABLE>

<PAGE>
On September 24, 1997, the Partnership sold Midvale Plaza to an unaffiliated
purchaser for a cash sales price of $3,500,000. Cash proceeds from the sale, as
well as the gain on sale are detailed below.

<TABLE>
<CAPTION>
Gain on Sale Cash Proceeds
---------------- --------------

<S> <C> <C>
Cash sales price....................................... $ 3,500,000 $ 3,500,000

Selling costs.......................................... (56,100) (56,100)
Mortgage discount written off.......................... (241,778)
Straight-line rent receivables written off............. (85,197)
Prepaid leasing commission written off................. (14,338)
Basis of real estate sold.............................. (2,229,191)
--------------

Gain on sale of real estate............................ $ 873,396
============== -------------

Proceeds from sale of real estate...................... 3,443,900
Retirement of mortgage note payable.................... (1,490,930)
-------------

Net cash proceeds...................................... $ 1,952,970
=============

</TABLE>

NOTE 7 - REFINANCING OF MORTGAGE NOTE PAYABLE
- ---------------------------------------------

On March 13, 1995, the Partnership refinanced the Windrock mortgage note. The
new mortgage note, in the amount of $3,450,000, bears interest at 9.44% per
annum, and requires monthly principal and interest payments of $28,859. The
maturity date of the new mortgage note is April 1, 2002. Cash proceeds from the
refinancing transaction shown below:

New loan proceeds .......................... $ 3,450,000
Existing first lien retired ................ (1,894,233)
Existing second lien retired ............... (440,000)
-----------

Cash proceeds from refinancing ............. $ 1,115,767
===========

The Partnership incurred $107,525 of deferred borrowing costs related to the
refinancing of the Windrock mortgage note. The Partnership was also required to
use $184,172 of the refinancing proceeds to fund various escrow accounts for the
payment of property taxes, hazard insurance and capital improvements.

<PAGE>
NOTE 8 - GAIN ON INVOLUNTARY CONVERSION
- ---------------------------------------

On July 18, 1997, a fire caused $49,498 of damage to two units of Embarcadero
Club Apartments. Subsequent to year end, the Partnership received $39,498 of
insurance reimbursements to cover the repair and restoration costs to
Embarcadero Club Apartments. The excess of the insurance reimbursements received
over the basis of the property damaged was recorded as a $17,998 deferred gain
on involuntary conversion on the Partnership's December 31, 1997 Balance Sheet.
The gain on involuntary conversion will be recognized in 1998, the period in
which the Partnership received the insurance proceeds.

On November 14, 1997, a fire caused $496,981 of damage to eight units of Thunder
Hollow Apartments. The Partnership expects to receive approximately $487,000 of
insurance reimbursements to cover the repair and restoration costs to Thunder
Hollow Apartments. The excess of the expected insurance reimbursements to be
received over the basis of the property damaged was recorded as a $328,116
deferred gain on involuntary conversion on the Partnership's December 31, 1997
Balance Sheet. The gain on involuntary conversion will be recognized when the
insurance reimbursements are received.

NOTE 9 - LEGAL PROCEEDINGS
- --------------------------

<PAGE>
On December 16, 1996, the Plaintiffs filed a consolidated and amended complaint.
Plaintiffs are suing for breach of fiduciary duty, breach of contract and an
accounting, alleging, among other things, that the management fees paid to the
McNeil affiliates over the last six years are excessive, that these fees should
be reduced retroactively and that the respective Amended Partnership Agreements
governing the Partnerships are invalid.

<PAGE>
McNEIL REAL ESTATE FUND XIV, LTD.
SCHEDULE III
REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION AND AMORTIZATION
December 31, 1997

<TABLE>
<CAPTION>
Costs
Initial Cost (b) Cumulative Capitalized
Related (b) Buildings and Write-down for Subsequent
Description Encumbrances Land Improvements Impairment (d) To Acquisition
- ----------- ---------------- --------------- --------------- --------------- ----------------
APARTMENTS:
<S> <C> <C> <C> <C> <C>
Embarcadero Club
College Park, GA $ 7,594,425 $ 1,216,712 $ 10,081,573 $ - $ 2,470,988

Tanglewood Village
Carson City, NV 2,704,333 705,859 4,004,394 - 1,127,231

Thunder Hollow
Bensalem
Township, PA 9,340,509 1,837,539 10,412,721 - 2,332,072

Windrock
El Paso, TX 3,387,741 903,718 4,490,001 (97,632) 1,398,810
-------------- -------------- -------------- ------------ -------------

$ 23,027,008 $ 4,663,828 $ 28,988,689 $ (97,632) $ 7,329,101
============== ============== ============== ============ =============

ASSET HELD FOR SALE (c):

Redwood Plaza
Salt Lake City, UT $ 864,004
=============

</TABLE>

(b) The initial cost and encumbrances reflect the present value of future loan
payments discounted, if appropriate, at a rate estimated to be the
prevailing interest rate at the date of acquisition or refinancing.

(c) The asset held for sale is carried at the lower of depreciated cost or fair
value less costs to sell. Historical cost, net of accumulated depreciation
and amortization and write-downs, becomes the new cost basis when the asset
is classified as "held for sale." Depreciation ceases at the time the asset
is placed on the market for sale.

(d) The carrying value of Windrock Apartments was written down by $97,632 for
impairment in 1991.

See accompanying notes to Schedule III.
<PAGE>
McNEIL REAL ESTATE FUND XIV, LTD.
SCHEDULE III
REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION AND AMORTIZATION
December 31, 1997

<TABLE>
<CAPTION>
Gross Amount at
Which Carried at Close of Period Accumulated
Buildings and Depreciation
Description Land Improvements Total (a) and Amortization
- ----------- ---- ------------- -------- ----------------
APARTMENTS:
<S> <C> <C> <C> <C>
Embarcadero Club
College Park, GA $ 1,216,712 $ 12,552,561 $ 13,769,273 $ (7,378,627)

Tanglewood Village
Carson City, NV 705,859 5,131,625 5,837,484 (2,682,535)

Thunder Hollow
Bensalem
Township, PA 1,837,539 12,744,793 14,582,332 (7,314,921)

Windrock
El Paso, TX 903,718 5,791,179 6,694,897 (3,256,713)
------------- ------------- --------------- --------------

$ 4,663,828 $ 36,220,158 $ 40,883,986 $ (20,632,796)
============= ============= =============== ==============

ASSET HELD FOR SALE (c):

Redwood Plaza
Salt Lake City, UT $ 1,932,910
===============
</TABLE>

(a) For Federal income tax purposes, the properties are depreciated over lives
ranging from 5-27.5 years using ACRS or MACRS methods. The aggregate cost
of the real estate investments and the asset held for sale for Federal
income tax purposes was $42,040,592 and accumulated depreciation was
$24,271,001 at December 31, 1997.

See accompanying notes to Schedule III.
<PAGE>
McNEIL REAL ESTATE FUND XIV, LTD.
SCHEDULE III
REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION AND AMORTIZATION
December 31, 1997

Date of Date Depreciable
Description Construction Acquired lives (years)
- ----------- ------------ -------- -------------

APARTMENTS:
<S> <C> <C> <C>
Embarcadero Club
College Park, GA 1970/74 09/84 5-25

Tanglewood Village
Carson City, NV 1979 06/86 5-25

Thunder Hollow
Bensalem
Township, PA 1973 11/84 5-25

Windrock
El Paso, TX 1971 10/84 5-25

ASSET HELD FOR SALE (c):

Redwood Plaza
Salt Lake City, UT 1976 06/84

</TABLE>

See accompanying notes to Schedule III.

<PAGE>
McNEIL REAL ESTATE FUND XIV, LTD.

Notes to Schedule III

Real Estate Investments and Accumulated Depreciation and Amortization

A summary of activity for the Partnership's real estate investments and
accumulated depreciation and amortization is as follows:

<TABLE>
<CAPTION>
For the Years Ended December 31,
----------------------------------------------------
1997 1996 1995
-------------- -------------- ---------------
Real estate investments:
<S> <C> <C> <C>
Balance at beginning of year............... $ 40,608,707 $ 52,787,046 $ 51,070,722

Improvements............................... 656,932 771,475 1,743,497

Replacements............................... (381,653) - (27,173)

Reclassification of assets held
for sale................................ - (12,949,814) -
------------- ------------- --------------

Balance at end of year..................... $ 40,883,986 $ 40,608,707 $ 52,787,046
============= ============= ==============

Accumulated depreciation and amortization:

Balance at beginning of year............... $ 18,951,741 $ 21,836,162 $ 19,674,640

Depreciation and amortization.............. 1,882,343 2,185,099 2,171,607

Replacements............................... (201,288) - (10,085)

Reclassification of assets held
for sale................................ - (5,069,520) -
------------- ------------- --------------

Balance at end of year..................... $ 20,632,796 $ 18,951,741 $ 21,836,162
============= ============= ==============

Assets held for sale:

Balance at beginning of year............... $ 7,942,855 $ - $ -

Reclassification of assets held
for sale............................... - 7,880,294 -

Improvements............................... 11,194 62,561 -

Sale of assets held for sale............... (6,021,139) - -
------------- ------------- --------------

Balance at end of year..................... $ 1,932,910 $ 7,942,855 $ -
============= ============= ==============
</TABLE>

<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
- ------- -----------------------------------------------------------
AND FINANCIAL DISCLOSURE
------------------------

None.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
- -------- --------------------------------------------------

Neither the Partnership nor the General Partner has any directors or executive
officers. The names and ages of, as well as the positions held by, the officers
and directors of McNeil Investors, Inc., the general partner of the General
Partner, are as follows:

<TABLE>
<CAPTION>
Other Principal Occupations and Other
Name and Position Age Directorships During the Past 5 Years
- ----------------- --- -------------------------------------
<S> <C> <C>
Robert A. McNeil, 77 Mr. McNeil is also Chairman of the
Chairman of the Board and Director of McNeil Real Estate
Board and Director Management, Inc. ("McREMI") which is an
affiliate of the General Partner. He has
held the foregoing positions since the
formation of such entity in 1990. Mr.
McNeil received his B.A. degree from
Stanford University in 1942 and his
L.L.B. degree from Stanford Law School
in 1948. He is a member of the State Bar
of California and has been involved in
real estate acquisitions, mortgage
financing and real estate syndications
since 1960. From 1986 until active
operations of McREMI and McNeil
Partners, L.P. began in February 1991,
Mr. McNeil was a private investor. Mr.
McNeil has been a member of the
International Board of Directors of the
Salk Institute, which promotes research
in improvements in health care.

Carole J. McNeil 54 Mrs. McNeil is Co-Chairman, with
Co-Chairman of the husband Robert A. McNeil, of McNeil
Board Investors, Inc. Mrs. McNeil has twenty
years of real estate experience, most
recently as a private investor from 1986
to 1993. In 1982, she founded Ivory &
Associates, a commercial real estate
brokerage firm in San Francisco, CA.
Prior to that, she was a commercial real
estate agent and analyst with Marcus and
Millichap in San Francisco. In 1978,
Mrs. McNeil established the Escrow
Training Company, California's first
accredited commercial training program
for title company escrow officers and
real estate agents needing college
credits to qualify for brokerage
licenses. She began in real estate as
Manager and Marketing Director of Title
Insurance and Trust in Marin County, CA.
Mrs. McNeil serves on the International
Board of Directors of the Salk
Institute.

</TABLE>

<PAGE>
<TABLE>
<CAPTION>
Other Principal Occupations and Other
Name and Position Age Directorships During the Past 5 Years
- ----------------- --- -------------------------------------
<S> <C> <C>
Ron K. Taylor 40 Mr. Taylor is the President and Chief
President and Chief Executive Officer of McNeil Real Estate
Executive Officer Management which is an affiliate of the
General Partner. Mr. Taylor has been in
this capacity since the resignation of
Donald K. Reed on March 4, 1997. Prior
to assuming his current
responsibilities, Mr. Taylor served as a
Senior Vice President of McREMI. Mr.
Taylor has been in this capacity since
McREMI commenced operations in 1991.
Prior to joining McREMI, Mr. Taylor
served as an Executive Vice President
for a national syndication/property
management firm. In this capacity, Mr.
Taylor had the responsibility for the
management and leasing of a 21,000,000
square foot portfolio of commercial
properties. Mr. Taylor has been actively
involved in the real estate industry
since 1983.
</TABLE>

Each director shall serve until his successor shall have been duly elected and
qualified.

ITEM 11. EXECUTIVE COMPENSATION
- -------- ----------------------

No direct compensation was paid or payable by the Partnership to directors or
officers (since it does not have any directors or officers) for the year ended
December 31, 1997, nor was any direct compensation paid or payable by the
Partnership to directors or officers of the general partner of the General
Partner for the year ended December 31, 1997. The Partnership has no plans to
pay any such remuneration to any directors or officers of the general partner of
the General Partner in the future.

See Item 13 - Certain Relationships and Related Transactions for amounts of
compensation and reimbursements paid by the Partnership to the General Partner
and its affiliates.

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

(A) Security ownership of certain beneficial owners.

No individual or group, as defined by Section 13(d)(3) of the Securities
Exchange Act of 1934, known to the Partnership is the beneficial owner of
more than 5% of the Partnership's securities except for the following:

High River Limited Partnership, 100 S. Bedford Road, Mount Kisco, New
York, 10549, which owns 10,631 (12.3%) of the Partnership's Units as of
January 31, 1998.
<PAGE>
(B) Security ownership of management.

As of January 31, 1998, the General Partner and its affiliates own 872 of
the Partnership's Units, which is approximately 1% of the 86,534
outstanding Units.

None.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- -------- ----------------------------------------------

Under terms of the Amended Partnership Agreement, the Partnership is paying a
MID to the General Partner. The maximum MID is calculated as 1% of the tangible
asset value of the Partnership. The maximum MID percentage decreases subsequent
to 1999. Tangible asset value is determined by using the greater of (i) an
amount calculated by applying a capitalization rate of 9% to the annualized net
operating income of each property or (ii) a value of $10,000 per apartment unit
for residential property and $50 per gross square foot for commercial property
to arrive at the property tangible asset value. The property tangible asset
value is then added to the book value of all other assets excluding intangible
assets.

The MID will be paid to the extent of the lesser of the Partnership's excess
cash flow, as defined, or net operating income (the "Entitlement Amount"), and
may be paid (i) in cash, unless there is insufficient cash to pay the
distribution, in which event any unpaid portion not taken in Units will be
deferred and is payable, without interest, from the first available cash and/or
(ii) in Units. A maximum of 50% of the MID may be paid in Units. The number of
Units issued in payment of the MID is based on the greater of $50 per Unit or
the net tangible asset value, as defined, per Unit. For the year ended December
31, 1997, the Partnership accrued MID in the amount of $564,834.

The Partnership pays property management fees equal to 5% of gross rental
receipts of the Partnership's properties to McREMI, an affiliate of the General
Partner, for providing property management services for the Partnership's
residential and commercial properties and leasing services for the Partnership's
residential properties. The Partnership reimburses McREMI for its costs,
including overhead, of administering the Partnership's affairs. For the year
ended December 31, 1997, the Partnership accrued $698,963 of property management
fees and reimbursements.

See Item 1 - Business, Item 7 - Management's Discussion and Analysis of
Financial Condition and Results of Operations, and Item 8 - Note 2 -
"Transactions with Affiliates."

<PAGE>
PART IV

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

See accompanying Index to Financial Statements at Item 8 - Financial Statements
and Supplementary Data.

(A) Exhibits

<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------

<S> <C>
3. Partnership Agreement dated April
30, 1982, and amended September 15,
1982, October 13, 1982, and February
1, 1983. (1)

3.1 Amended and Restated Limited
Partnership Agreement dated
September 20, 1991. (3)

3.2 Amendment No. 1 to the Amended and
Restated Partnership Agreement of
McNeil Real Estate Fund XIV, Ltd.,
dated to be effective as of July 31,
1993. (5)

3.3 Amendment No. 2 to the Amended and
Restated Partnership Agreement of
McNeil Real Estate Fund XIV, Ltd.,
dated March 8, 1994. (5)

10.1 Security Deed Note, dated November
16, 1988, between Embarcadero
Associates and American Mortgages,
Inc. (1)

10.2 Property Management Agreement, dated
September 12, 1991, between McNeil
Real Estate Fund XIV, Ltd. and
McNeil Real Estate Management, Inc.
(3)

10.3 Property Management Agreement, dated
September 12, 1991, between
Embarcadero Associates and McNeil
Real Estate Management, Inc. (3)

</TABLE>

<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<S> <C>
10.4 Property Management Agreement, dated
September 12, 1991, between
Tanglewood Village Associates and
McNeil Real Estate Management, Inc.
(3)

10.5 Termination Agreement, dated
September 20, 1991, between McNeil
Real Estate Fund XIV, Ltd. and
McNeil Real Estate Management, Inc.
(3)

10.6 Termination Agreement, dated
September 20, 1991, between
Embarcadero Associates and McNeil
Real Estate Management, Inc. (3)

10.7 Termination Agreement, dated
September 20, 1991, between
Tanglewood Village Associates and
McNeil Real Estate Management, Inc.
(3)

10.8 Asset Management Agreement, dated
September 20, 1991, between McNeil
Real Estate Fund XIV, Ltd. and
McNeil Partners, L.P. (3)

10.9 Assignment and Assumption Agreement
Relating to McNeil Real Estate Fund
XIV, Ltd., dated September 20, 1991,
between McNeil Partners, L.P. and
Pacific Investors Corporation. (3)

10.10 Assignment and Assumption Agreement
Relating to Embarcadero Associates,
dated September 20, 1991, between
McNeil Partners, L.P. and Pacific
Investors Corporation. (3)

10.11 Assignment and Assumption Agreement
Relating to Tanglewood Village
Associates, dated September 20,
1991, between McNeil Partners, L.P.
and Pacific Investors Corporation.
(3)
</TABLE>

<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------

<S> <C>

10.12 Amendment to Certificate of Limited
Partnership filed September 25,
1991, with the Secretary of State of
the State of California. (3)

10.14 Amendment of Property Management
Agreement dated March 5, 1993
between McNeil Real Estate Fund XIV,
Ltd. and McNeil Real Estate
Management, Inc. (2)

10.15 Loan Agreement dated June 24, 1993
between Lexington Mortgage Company
and McNeil Real Estate Fund XIV,
Ltd., et. al. (4)

10.16 Master Property Management Agree-
ment, dated as of June 24, 1993,
between McNeil Real Estate
Management, Inc. and Thunder Hollow
Fund XIV, Ltd. (5)

10.17 Multifamily Note dated March 13,
1995 between Washington Mortgage
Financial Group, Ltd. and Windrock
Fund XIV, L.P. (6)

10.18 Property Management Agreement dated
February 2, 1995 between Windrock
Fund XIV, L.P. and McNeil Real
Estate Management, Inc. (6)

10.19 Promissory Note, dated May 22, 1976,
between Price Rentals, Inc. and
Aetna Life Insurance Company. (6)

10.22 Deed of Trust Note, dated October
1, 1993, between Tanglewood Fund XIV
Associates Limited Partnership and
Love Funding Corporation. (6)

11. Statement regarding computation of
Net Income (Loss) per Limited
Partnership Unit (see Item 8 - Note
1 - "Organization and Summary of
Significant Accounting Policies").
</TABLE>

<PAGE>
Exhibit
Number Description
-------- -----------
22. Following is a list of subsidiaries of the
Partnership:

<TABLE>
<CAPTION>
Names Under
Jurisdiction of Which It Is
Name of Subsidiary Incorporation Doing Business
------------------ --------------- --------------
<S> <C> <C>
Embarcadero Associates Georgia None

Tanglewood Fund XIV
Associates, L.P. Nevada None

Thunder Hollow Fund XIV
Limited Partnership Delaware None

Windrock Fund XIV, L.P. Texas None
</TABLE>

27. Financial Data Schedule for the year
ended December 31, 1997.

The Partnership has omitted instruments with respect to
long-term debt where the total amount of securities
authorized thereunder does not exceed 10% of the total assets
of the Partnership. The Partnership agrees to furnish a copy
of each such instrument to the Commission upon request.
<TABLE>
<CAPTION>

<S> <C>
(1) Incorporated by reference to the
Annual Report of McNeil Real Estate
Fund XIV, Ltd., on Form 10-K for the
period ended December 31, 1990, as
filed on March 29, 1991.

(2) Incorporated by reference to the
Annual Report of McNeil Real Estate
Fund XIV, Ltd., (Commission file
number 0-12915) on Form 10-K for the
period ended December 31, 1992, as
filed with the Securities and
Exchange Commission on March 30,
1993.

</TABLE>

<S> <C>

(3) Incorporated by reference to the
Annual Report of McNeil Real Estate
Fund XIV, Ltd. (Commission file
number 0-12915) for the period ended
December 31, 1991, as filed with the
Securities and Exchange Commission
on March 30, 1992.

(4) Incorporated by reference to the
Annual Report of McNeil Real Estate
Fund XI, Ltd. (Commission file
number 0-9783), on Form 10-K for the
period ended December 31, 1993, as
filed with the Securities and
Exchange Commission on March 30,
1994.

(5) Incorporated by reference to the
Annual Report of McNeil Real Estate
Fund XIV, Ltd. (Commission file
number 0-12915) for the period ended
December 31, 1993, as filed with the
Securities and Exchange Commission
on March 30, 1994.

(6) Incorporated by reference to the
Annual Report of McNeil Real Estate
Fund XIV, Ltd. (Commission file
number 0-12915) for the period ended
December 31, 1994, as filed with the
Securities and Exchange Commission
on March 30, 1995.
</TABLE>

(B) Reports on Form 8-K. There were no reports on Form 8-K for the
quarter ended December 31, 1997.

<PAGE>
McNEIL REAL ESTATE FUND XIV, LTD.
A Limited Partnership

SIGNATURE PAGE

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.

McNEIL REAL ESTATE FUND XIV, LTD.

By: McNeil Partners, L.P., General Partner

By: McNeil Investors, Inc., General Partner

March 30, 1998 By: /s/ Robert A. McNeil
- -------------- --------------------------------------
Date Robert A. McNeil
Chairman of the Board and Director
(Principal Executive Officer)

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

March 30, 1998 By: /s/ Ron K. Taylor
- -------------- --------------------------------------
Date Ron K. Taylor
President and Director of McNeil
Investors, Inc.
(Principal Financial Officer)

March 30, 1998 By: /s/ Brandon K. Flaming
- -------------- --------------------------------------
Date Brandon K. Flaming
Vice President of McNeil
Investors, Inc.
(Principal Accounting Officer)

<ARTICLE> 5

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 1,292,615
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 40,883,986
<DEPRECIATION> (20,632,796)
<TOTAL-ASSETS> 26,325,605
<CURRENT-LIABILITIES> 0
<BONDS> 23,891,012
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 26,325,605
<SALES> 8,996,989
<TOTAL-REVENUES> 12,289,725
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 6,560,261
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,400,690
<INCOME-PRETAX> 3,328,774
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,328,774
<EPS-PRIMARY> 0
<EPS-DILUTED> 0

</TABLE>