MCNEIL REAL ESTATE FUND XX L P, 10-K405, 1997-03-27

MCNEIL REAL ESTATE FUND XX L P
10-K405, 1997-03-27
REAL ESTATE

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<PAGE>

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, 1996
------------------------------------------------

[ ] 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 0-14007
--------

McNEIL REAL ESTATE FUND XX, L.P.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)

California 33-0050225
- --------------------------------------------------------------------------------
(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]

49,507 of the registrant's 49,512 outstanding limited partnership units are held
by non-affiliates. 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 34

TOTAL OF 36 PAGES
<PAGE>
PART I
ITEM 1. BUSINESS
- ------- --------

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

McNeil Real Estate Fund XX, L.P. (the "Partnership"), formerly known as
Southmark Income Investors, Ltd., was organized on July 19, 1984 as a limited
partnership under the provisions of the California Revised Limited Partnership
Act to invest in, hold, manage and dispose of mortgage loans, real estate and
real estate-related investments. 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 General Partner was elected at
a meeting of limited partners on March 30, 1992, at which time an amended and
restated partnership agreement (the "Amended Partnership Agreement") was
adopted. Prior to March 30, 1992, the general partner of the Partnership was
Southmark Investment Group, Inc. (the "Original General Partner"), a Nevada
corporation and a wholly-owned subsidiary of Southmark Corporation
("Southmark"). The principal place of business for the Partnership and the
General Partner is 13760 Noel Road, Suite 600, LB70, Dallas, Texas, 75240.

On September 28, 1984, the Partnership registered with the Securities and
Exchange Commission under the Securities Act of 1933 (File No. 2-92376) and
commenced a public offering for the sale of $30,000,000 of limited partnership
units ("Units"). 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 27,
1985, with 49,528 Units sold at $500 each, or gross proceeds (net of discounts
of $57,546) of $24,706,454 to the Partnership. In 1994 and 1993, 12 and 4 Units
were relinquished, respectively, leaving 49,512 Units outstanding at December
31, 1996.

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, the General
Partner nor the Original General Partner were included in the filing.
Southmark's reorganization plan became effective August 10, 1990. Under the
plan, most of Southmark's assets, which included Southmark's interests in the
Original General Partner, were sold or liquidated for the benefit of creditors.

In accordance with Southmark's reorganization plan, Southmark, McNeil and
various of their affiliates entered into an asset purchase agreement on October
12, 1990, 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.

On February 14, 1991, pursuant to the asset purchase agreement as amended on
that date, 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.

<PAGE>
On March 30, 1992, the limited partners approved a restructuring proposal that
provided for (i) the replacement of the Original General Partner with a new
general partner, McNeil Partners, L.P.; (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; (iii) the approval of an amended
property management agreement with McREMI, the Partnership's property manager;
and (iv) the approval to change the Partnership's name to McNeil Real Estate
Fund XX, L.P. Under the Amended Partnership Agreement, the Partnership began
accruing an asset management fee, retroactive to February 14, 1991, which is
payable to the General Partner. For a discussion of the methodology for
calculating the asset management fee, see Item 13 Certain Relationships and
Related Transactions. The proposals approved at the March 30, 1992 meeting were
implemented as of that date.

Concurrent with the approval of the restructuring, the General Partner acquired
from Southmark and its affiliates, for aggregate consideration of $5,441, the
general partner interest of the Original General Partner. The General Partner
and its affiliates own in the aggregate less than 1% of the Units.

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

General:

The Partnership is engaged in the servicing of mortgage loans, including equity
and revenue participation loans, and the ownership, operation and management of
income-producing properties acquired through foreclosure. In July 1990, the
Partnership foreclosed on Park Spring Apartments (renamed Sterling Springs
Apartments) in settlement of the related mortgage loan. In September 1991, the
Partnership foreclosed on Holiday Inn - Jacksonville (renamed Cherokee Inn) in
partial settlement of the related mortgage loan and later sold the property in
January 1993. In May 1993, the Partnership foreclosed on 1130 Sacramento
Condominiums in settlement of the related mortgage loan. At December 31, 1996,
the Partnership operated two income-producing properties as described in Item 2
Properties, and serviced three mortgage loan investments.

The Partnership does not directly employ any personnel. The General Partner
conducts the business of the Partnership directly and through its affiliates.
The Partnership reimburses affiliates of the General Partner for such services
rendered in accordance with the Amended Partnership Agreement. 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:

The Partnership determined to evaluate market and other economic conditions to
establish the optimum time to commence an orderly liquidation of the
Partnership's assets in accordance with the terms of the Amended Partnership
Agreement. Taking such conditions as well as other pertinent information into
account, the Partnership has determined to begin orderly liquidation of all its
assets. Although there can be no assurance as to the timing of the liquidation
due to real estate market conditions, the general difficulty of disposing of

<PAGE>
real estate, and other general economic factors, it is anticipated that such
liquidation would result in the dissolution of the Partnership followed by a
liquidating distribution to the limited partners by December 1998. Until such
time as the Partnership's assets are liquidated, the Partnership's plan of
operations is to preserve or increase the net operating income of its assets
whenever possible, while at the same time making whatever capital expenditures
are reasonable under the circumstances in order to preserve and enhance the
value of the Partnership's assets.

Competitive Conditions:

Since the principal business of the Partnership is to own and operate real
estate acquired through foreclosure and to service mortgage loans secured by
real estate investments, the Partnership is subject to certain of the risks
incidental 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 and its borrowers to respond promptly to changed circumstances. The
Partnership and its borrowers compete 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 and its borrowers) 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 the competitive conditions at each of the Partnership's
properties.

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, 1996. 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, collect payments on mortgage loan investments and respond to
changing economic and competitive factors.

Other Information:

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.
<PAGE>
In August 1995, High River Limited Partnership ("High River"), a Delaware
limited partnership controlled by Carl C. Icahn, announced that it had commenced
an unsolicited tender to purchase from holders of Units up to approximately 45%
of the outstanding Units of the Partnership for a purchase price of $100 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 $170.38 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, 1997, High River has purchased approximately 13%
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.

ITEM 2. PROPERTIES
- ------- ----------

The following table sets forth the real estate investment portfolio of the
Partnership at December 31, 1996. All of the buildings and the land on which
they are located are owned by the Partnership in fee. 1130 Sacramento
Condominiums is unencumbered by mortgage indebtedness. Sterling Springs
Apartments is subject to a first lien deed of trust as set forth more fully in
Item 8 - Note 7 - "Mortgage Note Payable." See also Item 8 - Note 4 "Real Estate
Investments" and Schedule III - Real Estate Investments and Accumulated
Depreciation. In the opinion of management, the properties are adequately
covered by insurance.

<TABLE>
<CAPTION>
Net Basis 1996 Date
Property Description of Property Debt Property Taxes Acquired
- -------- ----------- -------------- ------------- -------------- --------
<S> <C> <C> <C> <C> <C>
1130 Sacramento Condominiums
San Francisco, CA 4 units $ 2,402,198 $ - $ 38,396 5/93

Sterling Springs Apartments
Austin, TX (1) 172 units 3,055,389 2,715,909 132,201 7/90
----------- ----------- ----------
$ 5,457,587 $ 2,715,909 $ 170,597
============ ============ ===========
</TABLE>
- --------------------------------
Total: Condominiums - 4 units
Apartments - 172 units

(1) Sterling Springs Apartments is owned by Sterling Springs Fund XX Limited
Partnership, which is wholly-owned by the Partnership.

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

<TABLE>
<CAPTION>
1996 1995 1994 1993 1992
------------- ------------- -------------- ------------- ----------
<S> <C> <C> <C>
1130 Sacramento (1)
Occupancy Rate............ 100% 100% 75% N/A N/A
Rent Per Square Foot...... $25.12 $25.96 $13.91 N/A N/A

Sterling Springs
Occupancy Rate............ 91% 99% 95% 98% 97%
Rent Per Square Foot...... $9.28 $9.10 $ 8.37 $7.62 $6.76
</TABLE>

(1) Construction on 1130 Sacramento Condominiums was completed in January 1994.

Occupancy rate represents all units leased divided by the total number of units
of the property 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.

Competitive conditions:

1130 Sacramento
- ---------------

1130 Sacramento is an eight-story residential condominium containing four units.
The property is located in the prestigious Nob Hill area of San Francisco,
California. As construction of the property was completed in January 1994 and
the property is in excellent condition, no capital expenditures are anticipated
in 1997. Due to the high rental rates, this property appeals to a very small
market. However, all units were leased throughout 1996 and the Partnership will
attempt to keep all units leased during 1997.

Sterling Springs
- ----------------

Sterling Springs is a garden-style apartment community located in the southwest
area of Austin, Texas. A large number of competing apartment units were built in
the past three years and additional development is projected for 1997. Occupancy
decreased in 1996 and management expects to maintain occupancy in the low 90%
range in 1997. Planned rental rate increases in 1997 should allow the property
to slightly increase rental revenue.

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:

<PAGE>
Partnership's former auditors, Ernst & Young, for negligence and fraud in
failing to detect and/or report overcharges of fees/expenses by Southmark,
the former general partner. The former auditors initially asserted
counterclaims against the Affiliated Partnerships based on alleged
fraudulent misrepresentations made to the auditors by the former management
of the Affiliated Partnerships (Southmark) in the form of client
representation letters executed and delivered to the auditors by Southmark
management. The counterclaims sought recovery of attorneys' fees and costs
incurred in defending this action. The counterclaims were later dismissed
on appeal, as discussed below.

The trial court granted summary judgment against the Affiliated
Partnerships based on the statute of limitations; however, on appeal, the
Dallas Court of Appeals reversed the trial court and remanded for trial the
Affiliated Partnerships' fraud claims against Ernst & Young. The Texas
Supreme Court denied Ernst & Young's application for writ of error on
January 11, 1996. Shortly before trial, the district court judge once again
granted summary judgment against the Affiliated Partnerships on December 2,
1996. The Partnership is continuing to pursue vigorously its claims against
Ernst & Young; however, the final outcome of this litigation cannot be
determined at this time.

2) Martha Hess, et al. v. Southmark Equity Partners II, Ltd., Southmark Income
Investors, Ltd. (presently known as McNeil Real Estate Fund XX, L.P.),
Southmark Equity Partners, Ltd., Southmark Realty Partners III, Ltd., and
Southmark Realty Partners II, Ltd., et al. ("Hess"); Kotowski v. Southmark
Equity Partners, Ltd. and Donald Arceri v. Southmark Income Investors, Ltd.
The Hess case was filed on May 20, 1988, by Martha Hess, individually and
on behalf of a putative class of those similarly situated. The original,
first, second and third amended complaints in Hess sought rescission,
pursuant to the Illinois Securities Act, of over $2.7 million of principal
invested in five Southmark (now McNeil) partnerships, and other relief
including damages for breach of fiduciary duty and violation of the
Illinois Consumer Fraud and Deceptive Business Practices Act. The original,
first, second and third amended complaints in Hess were dismissed against
the defendant-group because the Appellate Court held that they were not the
proper subject of a class action complaint. Hess was, thereafter, amended a
fourth time to state causes of action against unrelated partnership
entities. Hess went to judgment against that entity and the judgment, along
with the prior dismissals of the class action, was appealed. The claims
against the Partnership were dismissed by the Appellate Court.

3) 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).

<PAGE>
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 (as defined in this Section 3,
the "Partnerships"). Plaintiffs allege that McNeil Investors, Inc., its
affiliate McNeil Real Estate Management, Inc. and three of their senior
officers and/or directors (as defined in this Section 3, collectively, the
"Defendants") breached their fiduciary duties and certain obligations under
the respective amended partnership agreements. 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. On January 7, 1997, the Court ordered consolidation with three
other similar actions listed below.

The Partnerships filed a demurrer to the complaint and a motion to strike
on February 14, 1997, seeking to dismiss the complaint in all respects. The
demurrer is pending. The Partnerships deny that there is any merit to
Plaintiff's allegations and intend to vigorously defend this action.

4) Alfred Napoletano v. McNeil Partners, L.P., McNeil Investors, Inc., Robert
A. McNeil, Carole J. McNeil, McNeil Pacific Investors Fund 1972, Ltd.,
McNeil Real Estate Fund V, Ltd., McNeil Real Estate Fund IX, Ltd., McNeil
Real Estate Fund X, Ltd., McNeil Real Estate Fund XI, Ltd., McNeil Real
Estate Fund XIV, Ltd., McNeil Real Estate Fund XV, Ltd., McNeil Real Estate
Fund XX, L.P., McNeil Real Estate Fund XXIV, L.P., McNeil Real Estate Fund
XXV, L.P. - Superior Court of the State of California, County of Los
Angeles, Case No. BC133849 (Class Action Complaint). On January 7, 1997,
this action was consolidated by court order with Scholfield, et al.,
referenced above.

5) Warren Heller v. McNeil Partners, L.P., McNeil Investors, Inc., Robert A.
McNeil, Carole J. McNeil, McNeil Pacific Investors Fund 1972, Ltd., McNeil
Real Estate Fund V, Ltd., McNeil Real Estate Fund IX, Ltd., McNeil Real
Estate Fund X, Ltd., McNeil Real Estate Fund XI, Ltd., McNeil Real Estate
Fund XIV, Ltd., McNeil Real Estate Fund XV, Ltd., McNeil Real Estate Fund
XX, L.P., McNeil Real Estate Fund XXIV, L.P., McNeil Real Estate Fund XXV,
L.P. - Superior Court of the State of California, County of Los Angeles,
Case No. BC133957 (Class Action Complaint). On January 7, 1997, this action
was consolidated by court order with Scholfield, et al., referenced above.

6) Robert Lewis v. McNeil Partners, L.P., McNeil Investors, Inc., Robert
A. McNeil et al. - In the District Court of Dallas County, Texas, A-14th
Judicial District, Cause No. 95-08535 (Class Action) - Plaintiff, Robert
Lewis, is a limited partner with McNeil Pacific Investors Fund 1972, Ltd.,
McNeil Real Estate Fund X, Ltd. and McNeil Real Estate Fund XV, Ltd.
<PAGE>
On April 11, 1996, the action was dismissed without prejudice in
anticipation of consolidation with other class action complaints. On
January 7, 1997, this action was consolidated by court order with
Schofield, et al, referenced above.

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

None.

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 4,886 as of January 31, 1997

(C) Distributions paid to limited partners totaled $1,199,950 in 1996 and
$250,001 in 1995 from cash from operations. No distributions were
paid to the General Partner in 1996 or 1995. See Item 7 Management's
Discussion and Analysis of Financial Condition and Results of
Operations, and Item 8 Note 1 - "Organization and Summary of
Significant Accounting Policies - Distributions."

<PAGE>

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 1996 1995 1994 1993 1992
- ------------------ ------------- ------------- -------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Rental and room revenues..... $ 1,413,050 $ 1,405,346 $ 1,172,233 $ 962,172 $ 1,801,891
Interest income.............. 524,791 568,970 591,791 817,243 684,934
Gain on sale of real estate . - - - 458,221 -
Provision for loss on
mortgage loan investment.... - - - - (792,013)
Income (loss) before extra-
ordinary item............... 116,736 64,116 88,909 954,172 (904,350)
Extraordinary item, net...... - - - 251,203 -
Net income (loss)............ 116,736 64,116 88,909 1,205,375 (904,350)

Net income (loss) per limited
partnership unit:
Income (loss) before extra-
ordinary item............... $ 2.33 $ 1.28 $ 1.78 $ 19.07 $ (17.54)
Extraordinary item, net...... - - - 5.02 -
------------ ------------ ------------- ------------ ------------
Net income (loss)............ $ 2.33 $ 1.28 $ 1.78 $ 24.09 $ (17.54)
============ ============ ============= ============ ============
Distributions per limited
partnership unit............ $ 24.24 $ 5.05 $ 5.05 $ 57.01 $ -
============ ============ ============= ============ ============

As of December 31,
Balance Sheets 1996 1995 1994 1993 1992
- ------------------ ------------- ------------- -------------- ------------- -------------

Real estate investments, net... $ 5,457,587 $ 5,726,377 $ 5,938,194 $ 5,979,165 $ 3,146,905
Assets held for sale, net...... - - - - 1,768,153
Mortgage loan investments, net. 4,138,453 4,271,336 4,418,306 4,371,457 7,571,671
Total assets................... 13,189,106 14,345,949 14,484,111 14,665,413 14,046,630
Mortgage note payable, net..... 2,715,909 2,760,961 2,802,303 2,840,237 -
Partners' equity............... 9,996,414 11,079,628 11,265,513 11,426,537 13,044,660
</TABLE>

See Item 7 - Management's Discussion and Analysis of Financial Condition and
Results of Operations. In September 1991, the Partnership foreclosed on Holiday
Inn - Jacksonville (renamed Cherokee Inn) in Jacksonville, Texas, in partial
settlement of the mortgage loan secured by the property and later sold the
property in January 1993. In May 1993, the Partnership foreclosed on 1130
Sacramento Condominiums in settlement of the mortgage loan secured by the
property.

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

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

The Partnership was formed to engage in the business of making and servicing
mortgage loans and acquiring, operating and ultimately disposing of
income-producing real properties. In July 1990, the Partnership foreclosed on
Park Springs Apartments (renamed Sterling Springs Apartments) in Austin, Texas,
in settlement of the mortgage loan secured by the property. In September 1991,
the Partnership foreclosed on Holiday Inn - Jacksonville (renamed Cherokee Inn)
in Jacksonville, Texas, in partial settlement of the mortgage loan secured by
the property and later sold the property in January 1993. In May 1993, the
Partnership foreclosed on 1130 Sacramento Condominiums in settlement of the
mortgage loan secured by the property.

At December 31, 1996, the Partnership serviced three mortgage loan investments
totaling $4,138,453 and operated two income-producing properties. Both
properties were acquired through foreclosure. In June 1993, the Partnership
acquired a mortgage note payable secured by Sterling Springs Apartments.

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

1996 compared to 1995

Revenue:

Total revenue decreased by $19,412 in 1996 as compared to 1995. The decrease was
mainly due to a decrease in other interest income, partially offset by property
tax refunds received in 1996, as discussed below.

Other interest income decreased by $41,030 in 1996 in relation to 1995. The
decrease was primarily the result of a lower average amount of cash available
for short-term investment due to an increase in the amount of cash distributions
paid to limited partners in the first and third quarters of 1996.

In 1996, the Partnership received $17,063 in refunds of prior years' property
taxes for 1130 Sacramento. The assessed taxable value of the property was
reduced by taxing authorities as a result of an appeal filed on behalf of the
property.

Expenses:

Total expenses decreased by $72,032 in 1996 as compared to 1995. The decrease
was mainly due to a decrease in property taxes, utilities and general and
administrative-affiliates, partially offset by an increase in repairs and
maintenance, as discussed below.

Property taxes decreased by $9,464 in 1996 as compared to 1995 due to a
reduction in the assessed taxable value of 1130 Sacramento Condominiums, as
previously discussed.

<PAGE>

Repairs and maintenance expense increased by $18,895 in 1996 in relation to
1995. The increase was mainly due to increased cleaning and decorating costs
incurred at Sterling Springs Apartments due to a higher rate of turnover of
units in 1996. In addition, the Partnership expended approximately $4,000 to
repair a water main break at the property in 1996.

1996 utilities expense decreased by $9,739 as compared to 1995. Water usage was
higher at Sterling Springs Apartments in 1995 as a result of several minor water
leaks at the property.

General and administrative-affiliates decreased by $76,003 in 1996 as compared
to 1995. The decrease was mainly due to a decrease in overhead expenses
allocated to the Partnership by McREMI.

1995 compared to 1994

Revenue:

Total revenue increased by $210,292 in 1995 as compared to 1994. The increase
was due to an increase in rental revenue and other interest income, partially
offset by a decrease in interest income on mortgage loan investments, as
discussed below.

Rental revenue for 1995 increased by $233,113 in relation to 1994. The increase
was partially due to an increase in rental rates at Sterling Springs Apartments
in February 1995. Also contributing to the increase in rental revenue was the
increase in occupancy at 1130 Sacramento Condominiums. Although construction of
the building was completed in January 1994, two of the four units were not
leased until the third quarter of 1994.

Interest income on mortgage loan investments decreased by $91,321 in 1995 as
compared to 1994 due to the modification of the Idlewood Nursing Home mortgage
loan investment in February 1995 (See Item 8 - Note 5 "Mortgage Loan
Investments"). In accordance with Statement of Financial Accounting Standards
No. 114 "Accounting by Creditors for Impairment of a Loan" ("SFAS 114"), which
the Partnership adopted in 1994, the Partnership has ceased accruing interest on
the loan and all payments received are recorded as a reduction of principal.

Other interest income earned on short-term investments of cash and cash
equivalents increased by $68,500 in 1995, as compared to 1994. The increase was
mainly due to an increase in interest rates earned on invested cash.

Expenses:

Total expenses for 1995 increased by $235,085 as compared to 1994. The increase
was mainly due to an increase in general and administrative expenses, as
discussed below.

Property taxes in 1995 increased by $20,541 in relation to 1994, mainly due to
an increase in the assessed taxable value of both of the Partnership's
properties by taxing authorities.

Repairs and maintenance expense decreased by $17,939 in 1995 as compared to
1994. The decrease was mainly due to a greater amount of costs incurred at 1130
Sacramento in 1994 for repairs resulting from damage caused by a broken water
pipe.

<PAGE>
Property management fees - affiliates increased by $9,188 in 1995, in relation
to 1994, due to an increase in gross rental receipts, on which the fees are
based, at 1130 Sacramento Condominiums and Sterling Springs Apartments.

Utilities expense increased in 1995 by $11,480 in relation to 1994. The increase
was mainly due to an increase in water usage at Sterling Springs Apartments in
1995 as a result of several minor water leaks.

General and administrative expenses increased by $177,742 in 1995 as compared to
1994. The increase was mainly due to the Partnership incurring approximately
$190,000 of costs relating to evaluation and dissemination of information
regarding an unsolicited tender offer as discussed in Item 1 - Business.

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

The Partnership generated $453,978 through operating activities in 1996 as
compared to $437,492 in 1995 and $447,851 in 1994.

The Partnership expended $73,183, $118,615 and $265,844 for capital improvements
to its properties in 1996, 1995 and 1994, respectively. 1995 includes cost
incurred for a retaining wall and a fence at Sterling Springs Apartments. 1994
includes improvements to 1130 Sacramento Condominiums for which construction was
completed early in 1994.

In 1996 and 1995, the Partnership collected $132,883 and $146,970, respectively,
of principal on mortgage loan investments as compared to $35,718 collected in
1994. As previously discussed, in accordance with SFAS 114, all payments
received from the borrower on the Idlewood Nursing Home mortgage loan investment
were recorded as a reduction of principal in 1996 and 1995. The Partnership also
collected a $25,941 fee in 1995 for extending the maturity of the Lakeland
Nursing Home mortgage loan investment.

The Partnership distributed $1,199,950, $250,001 and $249,933 to the limited
partners in 1996, 1995 and 1994, respectively, from cash from operations.

Short-term liquidity:

At December 31, 1996, the Partnership held cash and cash equivalents of
$3,188,257. This balance provides a reasonable level of working capital for the
Partnership's immediate needs in operating its properties.

In 1997, operations of Sterling Springs Apartments and 1130 Sacramento
Condominiums are expected to provide sufficient positive cash flow for normal
operations. Management will perform routine repairs and maintenance on the
properties to preserve and enhance their value and competitiveness in the
market. The Partnership has budgeted approximately $123,000 on capital
improvements to its properties in 1997, which are expected to be funded from
operations of the properties.

For 1997, management expects that cash from operations of its properties and
principal and interest collections on the mortgage loan investments, along with
the present balance of cash and cash equivalents held, will allow the
Partnership to meet its obligations as they come due.

The Partnership distributed $749,994 to the limited partners in February 1997.

<PAGE>

Long-term liquidity:

Only one property, Sterling Springs Apartments, is encumbered with mortgage
debt. The mortgage on this property is not due until 2003.

In the event that the Partnership acquires ownership of other properties through
foreclosure, the cash and cash equivalent balances presently held will provide a
source for the maintenance and improvement of the properties. Because the timing
and number of properties which may be foreclosed is uncertain, there is no
assurance that the balances presently held will be sufficient for needed capital
improvements. At present, there are no commitments nor any known needs for
improvements to the properties securing the Partnership's loans. The Partnership
has no existing lines of credit from outside sources.

Another possible source of funds is the sale of the Partnership's mortgage loan
investments or properties securing the Partnership's mortgage loans. Such sales
are possibilities only, and since the Partnership does not control the
properties securing its loans, sales of those properties may occur only if
initiated by the borrower or in the event of foreclosure by the Partnership.
There is no assurance that any sales can be contracted or closed to coincide
with the Partnership's future cash needs. For the long term, the Partnership
will remain dependent on operations of the properties it owns or of the
properties securing its loans as the primary source of debt repayment, until the
properties can be sold.

<PAGE>

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Page
Number
------

INDEX TO FINANCIAL STATEMENTS
- -----------------------------

Financial Statements:
<S> <C>
Report of Independent Public Accountants....................................... 14

Balance Sheets at December 31, 1996 and 1995................................... 15

Statements of Operations for each of the three years in the period
ended December 31, 1996..................................................... 16

Statements of Partners' Equity (Deficit) for each of the three years in the
period ended December 31, 1996.............................................. 17

Statements of Cash Flows for each of the three years in the period
ended December 31, 1996..................................................... 18

Notes to Financial Statements.................................................. 20

Financial Statement Schedule -

Schedule III - Real Estate Investments and Accumulated
Depreciation............................................................. 29

</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 XX, L.P.:

We have audited the accompanying balance sheets of McNeil Real Estate Fund XX,
L.P. (a California limited partnership) as of December 31, 1996 and 1995, and
the related statements of operations, partners' equity (deficit) and cash flows
for each of the three years in the period ended December 31, 1996. 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 XX,
L.P. as of December 31, 1996 and 1995, and the results of its operations and its
cash flows for each of the three years in the period ended December 31, 1996, in
conformity with generally accepted accounting principles.

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. This 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 10, 1997

<PAGE>
McNEIL REAL ESTATE FUND XX, L.P.

BALANCE SHEETS

<TABLE>
<CAPTION>
December 31,
------------------------------------
1996 1995
---------------- --------------
ASSETS
- ------

Real estate investments:
<S> <C> <C>
Land..................................................... $ 699,697 $ 699,697
Buildings and improvements............................... 6,192,970 6,119,787
-------------- -------------
6,892,667 6,819,484
Less: Accumulated depreciation.......................... (1,435,080) (1,093,107)
--------------- -------------
5,457,587 5,726,377

Mortgage loan investments, net of allowance of
$792,013 at December 31, 1996 and 1995................... 3,404,553 3,537,436
Mortgage loan investment - affiliate........................ 733,900 733,900
Cash and cash equivalents 3,188,257 3,927,223
Cash segregated for security deposits....................... 54,950 59,869
Interest and other accounts receivable...................... 74,629 77,480
Escrow deposits............................................. 153,977 144,844
Deferred borrowing costs, net of accumulated
amortization of $45,275 and $31,264 at
December 31, 1996 and 1995, respectively................. 116,219 130,230
Prepaid expenses and other assets........................... 5,034 8,590
-------------- -------------
$ 13,189,106 $ 14,345,949
============== =============

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

Mortgage note payable, net.................................. $ 2,715,909 $ 2,760,961
Accounts payable and other accrued expenses................. 97,230 120,293
Accrued property taxes...................................... 130,957 123,530
Payable to affiliates - General Partner..................... 40,962 32,849
Deferred revenue............................................ 163,852 170,475
Security deposits and deferred rental income................ 43,782 58,213
-------------- -------------
3,192,692 3,266,321
-------------- -------------

Partners' equity (deficit):
Limited partners - 60,000 limited partnership units
authorized; 49,512 limited partnership units issued
and outstanding at December 31, 1996 and 1995.......... 10,315,277 11,399,658
General Partner.......................................... (318,863) (320,030)
-------------- -------------
9,996,414 11,079,628
-------------- -------------
$ 13,189,106 $ 14,345,949
============== =============
</TABLE>

See accompanying notes to financial statements.

<PAGE>

McNEIL REAL ESTATE FUND XX, L.P.

STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
For the Years Ended December 31,
----------------------------------------------------
1996 1995 1994
-------------- -------------- ---------------
Revenue:
<S> <C> <C> <C>
Rental revenues......................... $ 1,413,050 $ 1,405,346 $ 1,172,233
Interest income on mortgage loan
investments........................... 283,010 286,327 377,648
Interest income on mortgage loan
investment - affiliate................ 61,556 61,388 61,388
Other interest income................... 180,225 221,255 152,755
Property tax refund..................... 17,063 - -
------------- ------------- --------------
Total revenue......................... 1,954,904 1,974,316 1,764,024
------------- ------------- --------------

Expenses:
Interest................................ 249,920 252,774 255,375
Depreciation............................ 341,973 330,432 306,815
Property taxes.......................... 170,597 180,061 159,520
Personnel costs......................... 142,069 150,765 150,255
Repairs and maintenance................. 134,645 115,750 133,689
Property management fees - affiliates... 67,381 66,477 57,289
Utilities............................... 83,481 93,220 81,740
Other property operating expenses....... 88,756 87,896 93,820
General and administrative.............. 249,898 247,374 69,632
General and administrative - affiliates. 309,448 385,451 366,980
------------- ------------- --------------
Total expenses........................ 1,838,168 1,910,200 1,675,115
------------- ------------- --------------

Net income................................. $ 116,736 $ 64,116 $ 88,909
============= ============= ==============

Net income allocable to limited
partners................................ $ 115,569 $ 63,475 $ 88,020
Net income allocable to General
Partner................................. 1,167 641 889
------------- ------------- --------------
Net income................................. $ 116,736 $ 64,116 $ 88,909
============= ============= ==============

Net income per limited partnership unit.... $ 2.33 $ 1.28 $ 1.78
============= ============= ==============

Distributions per limited
partnership unit........................ $ 24.24 $ 5.05 $ 5.05
============= ============= ==============
</TABLE>
See accompanying notes to financial statements.
<PAGE>

McNEIL REAL ESTATE FUND XX, L.P.

STATEMENTS OF PARTNERS' EQUITY (DEFICIT)

For the Years Ended December 31, 1996, 1995 and 1994

<TABLE>
<CAPTION>
Total
General Limited Partners'
Partner Partners Equity
---------------- ---------------- -----------------
<S> <C> <C> <C>
Balance at December 31, 1993.............. $ (321,560) $ 11,748,097 $ 11,426,537

Net income................................ 889 88,020 88,909

Distributions............................. - (249,933) (249,933)
-------------- -------------- --------------

Balance at December 31, 1994.............. (320,671) 11,586,184 11,265,513

Net income................................ 641 63,475 64,116

Distributions............................. - (250,001) (250,001)
-------------- -------------- --------------

Balance at December 31, 1995.............. (320,030) 11,399,658 11,079,628

Net income................................ 1,167 115,569 116,736

Distributions............................. - (1,199,950) (1,199,950)
-------------- -------------- --------------

Balance at December 31, 1996.............. $ (318,863) $ 10,315,277 $ 9,996,414
============== ============== ==============
</TABLE>

See accompanying notes to financial statements.

<PAGE>
McNEIL REAL ESTATE FUND XX, L.P.

STATEMENTS OF CASH FLOWS

Increase (Decrease) in Cash and Cash Equivalents

<TABLE>
<CAPTION>
For the Years Ended December 31,
-----------------------------------------------------
1996 1995 1994
--------------- --------------- ----------------
Cash flows from operating activities:
<S> <C> <C> <C>
Cash received from tenants.............. $ 1,422,803 $ 1,391,600 $ 1,176,330
Cash paid to suppliers.................. (723,975) (648,603) (501,931)
Cash paid to affiliates................. (368,716) (438,528) (432,820)
Interest received....................... 456,845 502,270 543,085
Interest received from affiliates....... 48,886 48,886 48,886
Interest paid........................... (228,625) (232,736) (236,526)
Property taxes paid..................... (50,954) (56,530) (47,305)
Property taxes escrowed................. (119,349) (128,867) (101,868)
Property tax refund received............ 17,063 - -
------------- ------------- --------------
Net cash provided by operating activities.. 453,978 437,492 447,851
------------- ------------- --------------

Cash flows from investing activities:
Additions to real estate
investments........................... (73,183) (118,615) (265,844)
Collection of principal on
mortgage loan investments............. 132,883 146,970 35,718
Loan extension fee received............. - 25,941 -
------------- ------------- --------------
Net cash provided by (used in)
investing activities.................... 59,700 54,296 (230,126)
------------- ------------- --------------

Cash flows from financing activities:
Principal payments on mortgage note
payable............................... (52,694) (48,584) (44,793)
Distributions paid...................... (1,199,950) (250,001) (249,933)
-------------- ------------- ---------------
Net cash used in financing activities...... (1,252,644) (298,585) (294,726)
-------------- -------------- ---------------

Net increase (decrease) in cash and
cash equivalents........................ (738,966) 193,203 (77,001)

Cash and cash equivalents at
beginning of year....................... 3,927,223 3,734,020 3,811,021
------------- ------------- --------------

Cash and cash equivalents at end
of year................................. $ 3,188,257 $ 3,927,223 $ 3,734,020
============= ============= ==============
</TABLE>

See accompanying notes to financial statements.

<PAGE>
McNEIL REAL ESTATE FUND XX, L.P.

STATEMENTS OF CASH FLOWS

Reconciliation of Net Income to Net Cash Provided by
Operating Activities

For the Years Ended December 31,
----------------------------------------------------
1996 1995 1994
-------------- -------------- ---------------
<S> <C> <C> <C>
Net income................................. $ 116,736 $ 64,116 $ 88,909
------------- ------------- --------------

Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation............................ 341,973 330,432 306,815
Amortization of deferred borrowing
costs................................. 14,011 13,127 12,295
Amortization of discount on
mortgage note payable................. 7,642 7,242 6,859
Accrued interest added to mortgage
loan investments...................... - - (82,567)
Amortization of deferred revenue........ (6,623) (5,519) -
Changes in assets and liabilities:
Cash segregated for security
deposits........................... 4,919 (3,389) (19,116)
Interest and other accounts
receivable.......................... 2,851 (27,236) 85,145
Escrow deposits....................... (9,133) (16,202) 33,443
Prepaid expenses and other
assets.............................. 3,556 6,278 (1,588)
Accounts payable and other
accrued expenses.................... (23,063) 40,567 3,286
Accrued property taxes................ 7,427 11,314 2,563
Payable to affiliates - General
Partner............................. 8,113 13,400 (8,551)
Security deposits and deferred
rental income....................... (14,431) 3,362 20,358
------------- ------------- --------------

Total adjustments..................... 337,242 373,376 358,942
------------- ------------- --------------

Net cash provided by operating activities.. $ 453,978 $ 437,492 $ 447,851
============= ============= ==============
</TABLE>

See accompanying notes to financial statements.

<PAGE>
McNEIL REAL ESTATE FUND XX, L.P.

NOTES TO FINANCIAL STATEMENTS

December 31, 1996

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

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

McNeil Real Estate Fund XX, L.P. (the "Partnership"), formerly known as
Southmark Income Investors, Ltd., was organized on July 19, 1984 as a limited
partnership under the provisions of the California Revised Limited Partnership
Act to invest in, hold, manage and dispose of mortgage loans, real estate and
real estate-related investments. 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 General Partner was elected at
a meeting of limited partners on March 30, 1992, at which time an amended and
restated partnership agreement (the "Amended Partnership Agreement") was
adopted. The principal place of business for the Partnership and the General
Partner is 13760 Noel Road, Suite 600, LB70, Dallas, Texas, 75240.

The Partnership is engaged in the servicing of mortgage loans, including equity
and revenue participation loans, and the ownership, operation and management of
income-producing properties acquired through foreclosure. In July 1990, the
Partnership foreclosed on Park Spring Apartments (renamed Sterling Springs
Apartments) in settlement of the related mortgage loan. In May 1993, the
Partnership foreclosed on 1130 Sacramento Condominiums in settlement of the
related mortgage loan. The Partnership determined to evaluate market and other
economic conditions to establish the optimum time to commence an orderly
liquidation of the Partnership's assets in accordance with the terms of the
Amended Partnership Agreement. At December 31, 1996, the Partnership operated
two income-producing properties as described in Note 4 - "Real Estate
Investments," and serviced three mortgage loan investments as described in Note
5 - "Mortgage Loan Investments" and Note 6 - "Mortgage Loan Investment -
Affiliate."

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.

The Partnership's financial statements consolidate the accounts of Sterling
Springs Fund XX Limited Partnership. This single asset tier partnership was
formed to accommodate the refinancing of Sterling Springs Apartments. The
Partnership is the limited partner and wholly-owns the corporation that is the
general partner of the tier partnership. The Partnership retains effective
control of the tier partnership.

<PAGE>
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
recoverable amount.

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.

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.

Mortgage Loan Investments
- -------------------------

Mortgage loan investments are recorded at their original basis, net of any
allowance for impairment. Interest income is recognized as it is earned.
Interest accrual is ceased at such time as management determines collection is
doubtful.

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

Cash and cash equivalents include cash on hand and cash on deposit in 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 its mortgage indebtedness agreement. 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 the effective interest method over
the term of the related mortgage note payable. Amortization of deferred
borrowing costs is included in interest expense on the Statements of Operations.

<PAGE>
Discount on Mortgage Note Payable
- ---------------------------------

The discount on the mortgage note payable is being amortized over the remaining
term of the related mortgage note using the effective interest method.
Amortization of the discount on the mortgage note payable is included in
interest expense on the Statements of Operations.

Rental Revenues
- ---------------

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

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
- -------------------------------------

Under the terms of the Amended Partnership Agreement, net income and net losses
(except from a terminating disposition) are allocated 99% to the limited
partners and 1% to the General Partner.

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 1996, 1995 and 1994 have been made
in accordance with these provisions.

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

Under the terms of the Amended Partnership Agreement, operating cash flow and
cash from sales or refinancings are distributed 100% to the limited partners as
further defined in the Amended Partnership Agreement. Terminating dispositions
are to be made in accordance with the partners' positive capital account
balances. Distributions may be restricted or suspended in circumstances where
the General Partner determines that such action is in the best interest of the
Partnership.

The Partnership distributed $1,199,950, $250,001 and $249,933 of cash from
operations in 1996, 1995 and 1994, respectively. No distributions were paid to
the General Partner in 1996, 1995 or 1994.

The Partnership distributed $749,994 to the limited partners in February 1997
from cash from operations.

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

Net income per limited partnership unit ("Unit") is computed by dividing net
income allocated to the limited partners by the weighted average number of Units
outstanding. Per Unit information has been computed based on 49,512 average
Units outstanding during 1996, 1995 and 1994.

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

The Partnership pays property management fees equal to 5% of the gross rental
receipts for its properties to McNeil Real Estate Management, Inc. ("McREMI"),
an affiliate of the General Partner, for providing property management services
and leasing services.

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

Under the terms of the Amended Partnership Agreement, the Partnership is paying
an asset management fee to the General Partner. Through 1999, the asset
management fee is calculated as 1% of the Partnership's tangible asset value.
Tangible asset value is determined by using the greater of (i) an amount
calculated by applying a capitalization rate of 9 percent to the annualized net
operating income of each property, (ii) a value of $10,000 per apartment unit or
(iii) on 1130 Sacramento, the net book value of the property is used 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 items. The fee
percentage decreases subsequent to 1999.

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

<TABLE>
<CAPTION>
For the Years Ended December 31,
----------------------------------------------------
1996 1995 1994
-------------- -------------- ---------------
<S> <C> <C> <C>
Property management fees................... $ 67,381 $ 66,477 $ 57,289
Charged to general and
administrative - affiliates:
Partnership administration.............. 145,203 211,700 199,786
Asset management fee.................... 164,245 173,751 167,194
------------- ------------- --------------
$ 376,829 $ 451,928 $ 424,269
============= ============= ==============
</TABLE>

Payable to affiliates - General Partner at December 31, 1996 and 1995 consisted
primarily of unpaid property management fees, Partnership general and
administrative expenses and asset management fees and are due and payable from
current operations.

<PAGE>

NOTE 3 - TAXABLE INCOME
- -----------------------

McNeil Real Estate Fund XX, L.P. 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 $7,486,117 in 1996,
$6,954,599 in 1995 and $6,434,406 in 1994.

NOTE 4 - REAL ESTATE INVESTMENTS
- --------------------------------

The basis and accumulated depreciation of the Partnership's real estate
investments at December 31, 1996 and 1995 are set forth in the following tables:

<TABLE>
<CAPTION>
Buildings and Accumulated Net Book
1996 Land Improvements Depreciation Value
---- -------------- -------------- --------------- -------------
<S> <C> <C> <C> <C>
1130 Sacramento
San Francisco, CA $ 307,697 $ 2,468,101 $ (373,600) $ 2,402,198
Sterling Springs
Austin, TX 392,000 3,724,869 (1,061,480) 3,055,389
------------- ------------- ------------- -------------

$ 699,697 $ 6,192,970 $ (1,435,080) $ 5,457,587
============= ============= ============= =============

Buildings and Accumulated Net Book
1995 Land Improvements Depreciation Value
---- -------------- ------------ --------------- --------------

1130 Sacramento $ 307,697 $ 2,468,101 $ (248,111) $ 2,527,687
Sterling Springs 392,000 3,651,686 (844,996) 3,198,690
------------- ------------- ------------- -------------

$ 699,697 $ 6,119,787 $ (1,093,107) $ 5,726,377
============= ============= ============= ============
</TABLE>

<PAGE>

NOTE 5 - MORTGAGE LOAN INVESTMENTS
- ----------------------------------

The following sets forth the Partnership's mortgage loan investments to
unaffiliated borrowers at December 31, 1996 and 1995. The mortgage loan
investments are secured by the related real estate.

<TABLE>
<CAPTION>
Mortgage Annual Monthly
Lien Interest Payments/ December 31,
Property Position Rates % Maturity 1996 1995
- -------- -------- ------- ---------------- ------------ ------------
<S> <C> <C> <C> <C>
Idlewood Nursing
Home (a) First 8.50 (a) 2/98 $ 1,904,260 $ 2,013,820
Allowance for
impairment (792,013) (792,013)
---------- ----------
1,112,247 1,221,807
---------- ----------
Lakeland Nursing
Home (b) First 12.00 $24,995 2/98 2,292,306 2,315,629
---------- ----------

Total $ 3,404,553 $ 3,537,436
========== ==========
</TABLE>

(a) The Partnership owns an 83% participation interest in the Idlewood
Nursing Home mortgage loan investment. In January 1991, the borrowing
partnership became unable to make all payments required under the
original mortgage loan agreement. Since that time, the mortgage loan
agreement has been modified four times such that the maturity date was
extended and the interest rate was decreased. On February 27, 1995, the
loan was modified such that payments on the loan are due equal to the net
cash flow from operations of the property, with a minimum amount due of
$9,130 per month.

As a result of the borrowing partnership's inability to make the required
payments, the Partnership recorded a $792,013 provision for loss in 1992
to reduce the carrying value of the mortgage loan investment to the
estimated recoverable amount of the collateral. The Partnership ceased
accruing interest on the loan in 1994. The general partner of the
borrowing partnership has personally guaranteed 10% of the total loan
amount. In accordance with Statement of Financial Accounting Standards
No. 114, "Accounting by Creditors for Impairment of a Loan" ("SFAS 114"),
which the Partnership adopted in 1994, the loan is not recorded as an
in-substance foreclosure at December 31, 1996 and 1995.

<PAGE>

In accordance with SFAS 114, a measure of the impairment of the Idlewood
loan has been made based on the present value of expected future cash
flows required under the February 1995 modification. This measure
indicates an impairment less than the total allowance previously
recorded. Due to the uncertainties surrounding this mortgage loan
investment and its ultimate realizability given its history of numerous
modifications, none of the previously recorded allowance will be reversed
until the underlying property has demonstrated its ability to meet the
required principal and interest payments. All payments received on the
loan in 1996 and 1995 were recorded as a reduction of principal in
accordance with SFAS 114.

(b) The Partnership owns a 90% participation interest in the Lakeland Nursing
Home mortgage loan. Monthly payments include principal and interest. The
general partner of the borrowing partnership personally guaranteed 25% of
the total loan amount.

Based on market lending rates for mortgage loan investments with similar terms,
risks and average maturities, the fair value of mortgage loan investments was
approximately $4,514,000 at December 31, 1996 and $4,413,000 at December 31,
1995.

A summary of activity for mortgage loan investments for each of the three years
in the period ended December 31, 1996 is as follows:

<TABLE>
<CAPTION>
For the Years Ended December 31,
-----------------------------------------------------
1996 1995 1994
--------------- -------------- ----------------
<S> <C> <C> <C>
Balance at beginning of year............... $ 3,537,436 $ 3,684,406 $ 3,637,557
Accrued interest added to principal........ - - 82,567
Collection of principal.................... (132,883) (146,970) (35,718)
------------- ------------- --------------
Balance at end of year..................... $ 3,404,553 $ 3,537,436 $ 3,684,406
============= ============= ==============
</TABLE>

<PAGE>

NOTE 6 - MORTGAGE LOAN INVESTMENT - AFFILIATE
- ---------------------------------------------

The following sets forth the Partnership's mortgage loan investment to an
affiliated borrower at December 31, 1996 and 1995:

<TABLE>
<CAPTION>
Mortgage Annual Monthly
Lien Interest Payments/ December 31,
Property Position (a) Rates % Maturity 1994 1995
- -------- ------------ ---------- ---------------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Fort Meigs Shopping
Center Second 8.25 (b) $4,074 (b) 4/97 $ 733,900 $ 733,900
========== =========
</TABLE>

(a) The mortgage loan is non-recourse to the borrower.

(b) Although interest on the loan accrues at 8.25%, interest only payments
at 6.66% are payable monthly.

On August 24, 1992, pursuant to a lawsuit settlement, a mortgage loan
investment, which was secured by a property owned by an affiliate of the General
Partner, was transferred to the Partnership. In June 1993, a new loan agreement
was executed; and the affiliate substituted a second lien on another of its
properties, Fort Meigs Plaza Shopping Center, as the collateral on the loan.

Related to the initial transfer, the Partnership recorded a deferred gain for
the proportion of the non-cash assets received as compared to total assets
received pursuant to the lawsuit settlement. This deferred gain is being
amortized as principal payments are received on the mortgage loan investment.
The deferred gain totaled $150,054 at December 31, 1996 and 1995.

Based on market lending rates for mortgage loan investments with similar terms,
risks and average maturities, the fair value of the mortgage loan
investment-affiliate was approximately $690,000 at December 31, 1996 and
$723,000 at December 31, 1995.

<PAGE>

NOTE 7 - MORTGAGE NOTE PAYABLE
- ------------------------------

The following sets forth the mortgage note payable of the Partnership at
December 31, 1996 and 1995. The mortgage note payable is secured by the related
real estate investment.

Mortgage Annual Monthly
Lien Interest Payments/ December 31,
Property Position (a) Rate % Maturity 1996 1995
- -------- ------------ ------- ---------------- -------------- ---------------
<S> <C> <C> <C> <C> <C>
Sterling Springs
Apartments (c) First 8.15 $23,443 7/03 $ 2,776,313 $ 2,829,007
Discount (b) (60,404) (68,046)
------------- -------------
$ 2,715,909 $ 2,760,961
============= ==============
</TABLE>

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

(b) The mortgage loan was discounted to an effective rate of 8.62%.

(c) Financing was obtained in June 1993 under the terms of a Real Estate
Mortgage Investment Conduit financing. The 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.

Scheduled principal maturities of the mortgage note payable under existing
terms, excluding a discount of $60,404, are as follows:

1997 $ 57,153
1998 61,989
1999 67,234
2000 72,923
2001 79,093
Thereafter 2,437,921
------------
Total $ 2,776,313
============

Based on borrowing rates currently available to the Partnership for a mortgage
loan with similar terms and average maturities, the fair value of the mortgage
note payable was approximately $2,674,000 at December 31, 1996 and $2,772,000 at
December 31, 1995.

<PAGE>

NOTE 8 - 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:

1) HCW Pension Real Estate Fund, Ltd. et al. v. Ernst & Young, BDO Seidman et
al. (Case #92-06560-A). This suit was filed on behalf of the Partnership
and other affiliated partnerships (as defined in this Section 1, the
"Affiliated Partnerships") on May 26, 1992, in the 14th Judicial District
Court of Dallas County. The petition sought recovery against the
Partnership's former auditors, Ernst & Young, for negligence and fraud in
failing to detect and/or report overcharges of fees/expenses by Southmark,
the former general partner. The former auditors initially asserted
counterclaims against the Affiliated Partnerships based on alleged
fraudulent misrepresentations made to the auditors by the former management
of the Affiliated Partnerships (Southmark) in the form of client
representation letters executed and delivered to the auditors by Southmark
management. The counterclaims sought recovery of attorneys' fees and costs
incurred in defending this action. The counterclaims were later dismissed
on appeal, as discussed below.

<PAGE>

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 (as defined in this Section 3,
the "Partnerships"). Plaintiffs allege that McNeil Investors, Inc., its
affiliate McNeil Real Estate Management, Inc. and three of their senior
officers and/or directors (as defined in this Section 3, collectively, the
"Defendants") breached their fiduciary duties and certain obligations under
the respective amended partnership agreements. 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.

<PAGE>

On April 11, 1996, the action was dismissed without prejudice in
anticipation of consolidation with other class action complaints. On
January 7, 1997, this action was consolidated by court order with
Schofield, et al., referenced above.

7) McNeil Pacific Investors Fund 1972, Ltd., McNeil Real Estate Fund V, Ltd.,
McNeil Real Estate Fund IX, Ltd., McNeil Real Estate Fund X, Ltd., McNeil
Real Estate Fund XI, Ltd., McNeil Real Estate Fund XIV, Ltd., McNeil Real
Estate Fund XV, Ltd., McNeil Real Estate Fund XX, L.P., McNeil Real Estate
Fund XXIV, L.P., and McNeil Real Estate Fund XXV, L.P. v. High River
Limited Partnership, Riverdale Investors Corp., Carl C. Icahn, and Unicorn
Associates Corporation - United States District Court for the Central
District of California, Case No. 96-5680SVW.

On August 12, 1996, High River Limited Partnership ("High River"), a
partnership controlled by Carl C. Icahn, sent a letter to the partnerships
referenced above demanding lists of the names, current residences or
business addresses and certain other information concerning the unitholders
of such partnerships. On August 19, 1996, these partnerships commenced the
above action seeking, among other things, to declare that such partnerships
are not required to provide High River with a current list of unitholders
on the grounds that the defendants commenced a tender offer in violation of
the federal securities laws by filing certain Schedule 13D Amendments on
August 5, 1996.

On October 16, 1996, the presiding judge denied the partnerships' requests
for a permanent and preliminary injunction to enjoin High River's tender
offers and granted the defendants' request for an order directing the
partnerships to turn over current lists of unitholders to High River
forthwith. On October 24, 1996, the partnerships delivered the unitholder
lists to High River. The judge's decision resolved all the issues in the
action.

<PAGE>

McNEIL REAL ESTATE FUND XX, LTD.
SCHEDULE III
REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION
December 31, 1996
<TABLE>
<CAPTION>
Cumulative Costs
Initial Cost Write-down Capitalized
Related Buildings and and Permanent Subsequent
Description Encumbrances Land Improvements Impairment To Acquisition
- ----------- --------------- --------------- --------------- ------------ ---------------
<S> <C> <C> <C> <C> <C>
1130 Sacramento
Condominiums
San Francisco, CA $ - $ 307,697 $ 1,866,696 $ - $ 601,405

Sterling Springs
Apartments
Austin, TX 2,715,909 392,000 2,908,000 - 816,869
-------------- -------------- -------------- ------------ -------------

$ 2,715,909 $ 699,697 $ 4,774,696 $ - $ 1,418,274
============== ============== ============== ============ =============
</TABLE>

See accompanying notes to Schedule III.

<PAGE>

McNEIL REAL ESTATE FUND XX, LTD.
SCHEDULE III
REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION
December 31, 1996

<TABLE>
<CAPTION>
Gross Amount at
Which Carried at Close of Period Accumulated
Buildings and Depreciation
Description Land Improvements Total (a) and Amortization
- ------------ -------------- ------------- ---------------- ----------------
<S> <C> <C> <C> <C>
1130 Sacramento
Condominiums
San Francisco, CA $ 307,697 $ 2,468,101 $ 2,775,798 $ (373,600)

Sterling Springs
Apartments
Austin, TX 392,000 3,724,869 4,116,869 (1,061,480)
------------- ------------- --------------- -------------

$ 699,697 $ 6,192,970 $ 6,892,667 $ (1,435,080)
============= ============= =============== ==============

</TABLE>

(a) For Federal income tax purposes, the properties are depreciated over lives
ranging from 7 to 27.5 years using ACRS or MACRS methods. The aggregate
cost of real estate investments for Federal income tax purposes was
approximately $7,240,820 and accumulated depreciation was $689,373 at
December 31, 1996.

See accompanying notes to Schedule III.

<PAGE>

McNEIL REAL ESTATE FUND XX, LTD.
SCHEDULE III
REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION
December 31, 1996

Date of Date Depreciable
Description Construction Acquired lives (years)
- ------------ ------------- -------- -------------
<S> <C> <C> <C>
1130 Sacramento
Condominiums
San Francisco, CA 1992 5/93 5-25

Sterling Springs
Apartments
Austin, TX 1985 7/90 5-25

</TABLE>

See accompanying notes to Schedule III.

<PAGE>
McNEIL REAL ESTATE FUND XX, L.P.

Notes to Schedule III
Real Estate Investments and Accumulated Depreciation

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

<TABLE>
<CAPTION>
For the Years Ended December 31,
----------------------------------------------------
1996 1995 1994
-------------- -------------- ---------------
Real estate investments:

<S> <C> <C> <C>
Balance at beginning of year............... $ 6,819,484 $ 6,700,869 $ 6,435,025

Improvements............................... 73,183 118,615 265,844
------------- ------------- --------------

Balance at end of year..................... $ 6,892,667 $ 6,819,484 $ 6,700,869
============= ============= ==============

Accumulated depreciation:

Balance at beginning of year............... $ 1,093,107 $ 762,675 $ 455,860

Depreciation............................... 341,973 330,432 306,815
------------- ------------- --------------

Balance at end of year..................... $ 1,435,080 $ 1,093,107 $ 762,675
============= ============= ==============

</TABLE>

<PAGE>
PART III

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
- ------- ---------------------------------------------------------------
FINANCIAL DISCLOSURES.
----------------------

None.

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:

Other Principal Occupations and Other
Name and Position Age Directorships During the Past 5 Years
- ----------------- --- -------------------------------------

Robert A. McNeil, 76 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 financing since the late
1940's and in real estate acquisitions,
syndications and dispositions 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 is a member
of the International Board of Directors
of the Salk Institute, which promotes
research in improvements in health care.

Carole J. McNeil 53 Mrs. McNeil is Co-Chairman, with
Co-Chairman of the Board husband Robert A. McNeil, of McNeil
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 associate with the Madison
Company and, earlier, a commercial sales
associate and analyst with Marcus and
Millichap in San Francisco. In 1978,
Mrs. McNeil established the Escrow
Training Centers, 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.

<PAGE>

Other Principal Occupations and Other
Name and Position Age Directorships during the Past 5 Years
- ----------------- --- -------------------------------------

Ron K. Taylor 39 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.

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, 1996, 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, 1996. 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.

<PAGE>

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

(A) Security ownership of certain beneficial owners.

No individual or group, as defined by Section 13(d)(3) of the Securities
Exchange Act of 1934, was known by the Partnership to own more than 5%
of the Units, other than High River Limited Partnership which owns
6,445.372 Units at January 31, 1997 (approximately 13.018% of the
outstanding Units). The business address for High River Limited
Partnership is 100 South Bedford Road, Mount Kisco, New York 10549.

(B) Security ownership of management.

The General Partner and the officers and directors of its general
partner collectively own 4.5 Units, which is less than 1% of Units
outstanding.

None.

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

The amendments to the Partnership compensation structure included in the Amended
Partnership Agreement provide for an asset management fee to replace all other
forms of general partner compensation other than property management fees and
reimbursements of certain costs. Through 1999, the asset management fee is
calculated as 1% of the Partnership's tangible asset value. Tangible asset value
is determined by using the greater of (i) an amount calculated by applying a
capitalization rate of 9 percent to the annualized net operating income of each
property, (ii) a value of $10,000 per apartment unit or (iii) on 1130
Sacramento, the net book value of the property is used 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 items. The fee percentage
decreases subsequent to 1999. For the year ended December 31, 1996, the
Partnership paid or accrued $164,245 of such asset management fees.

The Partnership pays property management fees equal to 5% of the gross rental
receipts of its properties to McREMI, an affiliate of the General Partner, for
providing property management services. Additionally, the Partnership reimburses
McREMI for its costs, including overhead, of administering the Partnership's
affairs. For the year ended December 31, 1996, the Partnership paid or accrued
$212,584 of such 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>

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

See accompanying Index to Financial Statements at Item 8.

(A) Exhibits

Exhibit
Number Description
------- -----------

4. Amended and Restated Limited
Partnership Agreement dated March
30, 1992 (incorporated by reference
to the Current Report of the
registrant on Form 8-K dated March
30, 1992, as filed on April 10,
1992).

10.3 Portfolio Services Agreement dated
February 14, 1991, between Southmark
Income Investors, Ltd. and McNeil
Real Estate Management, Inc. (1)

10.5 Promissory Note dated October 30,
1985, between Lakeland Associates,
Ltd. and Paris Savings and Loan
Association relating to Lakeland
Nursing Home. (1)

10.6 Loan Participation Agreement dated
September 4, 1986, between Southmark
Income Investors, Ltd. and Paris
Savings and Loan Association
relating to Lakeland Nursing Home.
(1)

10.7 Promissory Note dated February 28,
1986, between Idlewood Associates,
Ltd. and Southern Heritage Life
Insurance Company relating to
Idlewood Nursing Home. (1)

10.8 Loan Participation Agreement dated
September 4, 1986, between Southmark
Income Investors, Ltd. and Paris
Savings and Loan Association
relating to Idlewood Nursing Home.
(1)

10.10 Loan Agreement dated June 23, 1993,
between Lexington Mortgage Company
and McNeil Real Estate Fund XX,
L.P., et al. (3)

<PAGE>
Exhibit
Number Description
------- -----------

10.11 Property Management Agreement dated
June 24, 1993, between McNeil Real
Estate Management, Inc. and Sterling
Springs Fund XX Limited Partnership
(filed without schedules). (4)

10.12 Revolving Credit Agreement dated
August 6, 1992, between McNeil
Partners, L.P. and various selected
partnerships, including the
registrant. (4)

10.14 Property Management Agreement dated
March 30, 1992, between McNeil Real
Estate Fund XX, L.P. and McNeil Real
Estate Management, Inc. (2)

10.15 Amendment of Property Management
Agreement dated March 5, 1993, by
McNeil Real Estate Fund XX, L.P. and
McNeil Real Estate Management, Inc.
(2)

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

22. Following is a list of subsidiaries
of the Partnership:

<TABLE>
<CAPTION>
Names Under
Jurisdiction Which It Is
Name of Subsidiary Incorporation Doing Business
------------------ ------------- --------------

<S> <C> <C> <C>
Sterling Springs Fund XX
Limited Partnership Delaware None
</TABLE>

(1) Incorporated by reference to the
Quarterly Report of the registrant
on Form 10-Q for the period ended
March 31, 1991, as filed on May 14,
1991.

<PAGE>
Exhibit
Number Description
------- -----------

(2) Incorporated by reference to the
Annual Report of the registrant on
Form 10-K for the period ended
December 31, 1992, as filed on March
30, 1993.

(3) Incorporated by reference to the
Annual Report of McNeil Real Estate
Fund XI, Ltd. (File No. 0-9783) on
Form 10-K for the period ended
December 31, 1993, as filed on March
30, 1994.

(4) Incorporated by reference to the
Annual Report of the registrant on
Form 10-K for the period ended
December 31, 1993, as filed on March
30, 1994.

(B) There were no reports on Form 8-K filed by the Partnership during the
quarter ended December 31, 1996.

<PAGE>

McNEIL REAL ESTATE FUND XX, L.P.
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 XX, L.P.

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

By: McNeil Investors, Inc., General Partner

March 27, 1997 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 27, 1997 By: /s/ Ron K. Taylor
- -------------- ----------------------------------------
Date Ron K. Taylor
President and Director of McNeil
Investors, Inc.
(Principal Financial Officer)

March 27, 1997 By: /s/ Carol A. Fahs
- -------------- ----------------------------------------
Date Carol A. Fahs
Vice President of McNeil Investors, Inc.
(Principal Accounting Officer)

<ARTICLE> 5

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 3,188,257
<SECURITIES> 0
<RECEIVABLES> 74,629
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 6,892,667
<DEPRECIATION> (1,435,080)
<TOTAL-ASSETS> 13,189,106
<CURRENT-LIABILITIES> 0
<BONDS> 2,715,909
<COMMON> 0
0
0
<OTHER-SE> 9,996,414
<TOTAL-LIABILITY-AND-EQUITY> 13,189,106
<SALES> 1,413,050
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,588,248
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 249,920
<INCOME-PRETAX> 116,736
<INCOME-TAX> 0
<INCOME-CONTINUING> 116,736
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 116,736
<EPS-PRIMARY> 0
<EPS-DILUTED> 0

</TABLE>