MCNEIL REAL ESTATE FUND XX L P, 10-K405, 1999-03-31

MCNEIL REAL ESTATE FUND XX L P
10-K405, 1999-03-31
REAL ESTATE

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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, 1998
----------------------------------------------

[ ] 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]

49,507.5 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, 1998.

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 has been engaged in the servicing of mortgage loans, including
equity and revenue participation loans, and the ownership, operation and
management of revenue-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 and later
sold the property in August 1997. In 1998, the Partnership's mortgage loan
investments secured by Idlewood and Lakeland nursing homes and the Partnership's
mortgage loan investments affiliate secured by Fort Meigs Plaza were repaid in
full by the respective borrowers. At December 31, 1998, the Partnership operated
one revenue-producing property as described in Item 2 - Properties.

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.

<PAGE>
Business Plan:

As previously announced, the Partnership has retained PaineWebber, Incorporated
("PaineWebber") as its exclusive financial advisor to explore alternatives to
maximize the value of the Partnership, including, without limitation, a
transaction in which limited partnership interests in the Partnership are
converted into cash. The Partnership, through PaineWebber, provided financial
and other information to interested parties as part of an auction process and
until early March 1999 was conducting discussions with one bidder in an attempt
to reach a definitive agreement with respect to a sale transaction. In early
March 1999, because the Partnership had been unable to conclude negotiations for
a transaction with such bidder, the Partnership terminated such discussions and
commenced discussions with respect to a sale transaction with another
well-financed bidder who had been involved in the original auction process.
During the last full week of March, the Partnership entered into a 45 day
exclusivity agreement with such party. It is possible that the General Partner
and its affiliates will receive non-cash consideration for their ownership
interests in connection with any such transaction. There can be no assurance
regarding whether any such agreement will be reached nor the terms thereof.

Competitive Conditions:

Since the principal business of the Partnership is to own and operate real
estate acquired through foreclosure, 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 to respond promptly to changed circumstances. The Partnership
competes with numerous established companies, private investors (including
foreign investors), real estate investment trusts, limited partnerships and
other entities (many of which have greater resources than the Partnership) in
connection with the sale, financing and leasing of properties. The impact of
these risks on the Partnership, including losses from operations and foreclosure
of the Partnership's property, 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 the Partnership's
property.

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, 1998. 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 the sale or refinancing of its
property and respond to changing economic and competitive factors.

<PAGE>
Environmental Matters:

Environmental laws create potential liabilities that may affect property owners.
The environmental laws of Federal and certain state governments, for example,
impose liability on current and certain past owners of property from which there
is a release or threat of release of hazardous substances. This liability
includes costs of investigation and remediation of the hazardous substances and
natural resource damages. Liability for costs of investigation and remediation
is strict and may be imposed irrespective of whether the property owner was at
fault, although there are a number of defenses. Both governments and third
parties may seek recoveries under these laws.

Third parties also may seek recovery under the common law for damages to their
property or person, against owners of property from which there has been a
release of hazardous and other substances.

The presence of contamination or the failure to remediate contaminations may
adversely affect the owner's ability to sell or lease real estate or to borrow
using the real estate as collateral.

Various buildings at properties do or may contain building materials that are
the subject of various regulatory programs intended to protect human health.
Such building materials include, for example, asbestos, lead-based paint, and
lead plumbing components. The Company has implemented programs to deal with the
presence of those materials, which include, as appropriate, reduction of
potential exposure situations. The Company does not believe that the costs of
such programs are likely to have a material adverse effect. Failure to implement
such programs can result in regulatory violations or liability claims resulting
from alleged exposure to such materials.

In connection with the proposed sale transaction as more fully described above,
Phase I environmental site assessments have been completed for each property
owned by the Partnership. Such environmental assessments performed on the
properties have not revealed any environmental liability that the Partnership
believes would have a material adverse effect on the Partnership's business,
assets, or results of operations. The Partnership has not been notified by any
governmental authority of any non-compliance, liability or other claim in
connection with any of its properties. There can be no assurances, however, that
environmental liabilities have not developed since such environmental
assessments were prepared, or that future uses or conditions (including, without
limitation, changes in applicable environmental laws and regulations) will not
result in imposition of environmental liability.

Other Information:

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 February 1, 1999, High River has purchased 13.1% 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.
<PAGE>
ITEM 2. PROPERTY
- ------- --------

The following table sets forth the real estate investment of the Partnership at
December 31, 1998. The buildings and the land on which the property is located
are owned by the Partnership in fee, 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 Investment" and Schedule III - Real Estate Investment
and Accumulated Depreciation. In the opinion of management, the property is
adequately covered by insurance.

<TABLE>
<CAPTION>
Net Basis 1998 Date
Property Description of Property Debt Property Taxes Acquired
- -------- ----------- ----------- ---- -------------- --------

Sterling Springs Apartments
<S> <C> <C> <C> <C> <C>
Austin, TX 172 units $ 2,848,199 $ 2,613,312 $ 142,490 7/90
========== ========== ========
</TABLE>

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

The following table sets forth the property's occupancy rate and rent per square
foot for the last five years:

<TABLE>
<CAPTION>
1998 1997 1996 1995 1994
------------- ------------- -------------- ------------- -------

Sterling Springs
<S> <C> <C> <C> <C> <C>
Occupancy Rate............ 97% 97% 91% 99% 95%
Rent Per Square Foot...... $9.94 $9.50 $9.28 $9.10 $8.37
</TABLE>

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.

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

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

Sterling Springs is a 172-unit garden-style apartment community located in the
southwest area of Austin, Texas. A large number of competing apartment units
were built over the past several years. Additional construction is projected for
1999, including a 440-unit community directly across the street from the
property. Sterling Springs' occupancy rate and rental rates are competitive with
apartment communities in the area, however occupancy rates are expected to
decline in 1999 as more apartment communities are built. The Partnership
anticipates average occupancy will be in the low to mid 90% range in 1999 by
upgrading vacant units and offering discounts and concessions to attract and
maintain tenants.

ITEM 3. LEGAL PROCEEDINGS
- ------- -----------------

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

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

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

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

Defendants filed a demurrer to the consolidated and amended complaint and a
motion to strike on February 14, 1997, seeking to dismiss the consolidated and
amended complaint in all respects. A hearing on Defendant's demurrer and motion
to strike was held on May 5, 1997. The Court granted Defendants' demurrer,
dismissing the consolidated and amended complaint with leave to amend. On
October 31, 1997, the Plaintiffs filed a second consolidated and amended
complaint. The case was stayed pending settlement discussions. A Stipulation of
Settlement dated September 15, 1998 has been signed by the parties. Preliminary
Court approval was received on October 6, 1998. A hearing for Final Approval of
Settlement, initially scheduled for December 17, 1998, has been continued to May
25, 1999.

Because McNeil Real Estate Fund XXIII, L.P., Hearth Hollow Associates, McNeil
Midwest Properties I, L.P. and Regency North Associates, L.P. would be part of
the transaction contemplated in the settlement and Plaintiffs claim that an
effort should be made to sell the McNeil Partnerships, Plaintiffs have included
allegations with respect to McNeil Real Estate Fund XXIII, L.P., Hearth Hollow
Associates, McNeil Midwest Properties I, L.P. and Regency North Associates, L.P.
in the third consolidated and amended complaint.

Plaintiff's counsel intends to seek an order awarding attorney's fees and
reimbursements of their out-of-pocket expenses. The amount of such award is
undeterminable until final approval is received from the court. Fees and
expenses shall be allocated amongst the Partnerships on a pro rata basis, based
upon tangible asset value of each such partnership, less total liabilities,
calculated in accordance with the Amended Partnership Agreements for the quarter
most recently ended.

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 4,185 as of February 1, 1999

<PAGE>
(C) In 1998, the Partnership distributed $7,232,590 to the limited
partners, $5,562,896 of which was cash proceeds from the payoff of
the Idlewood Nursing Home mortgage loan investment and the Fort Meigs
Plaza mortgage loan investment - affiliate. The remaining $1,669,694
was cash from operations. The Partnership distributed $3,249,987 to
the limited partners in 1997, of which $1,750,000 was cash proceeds
from the sale of 1130 Sacramento Condominiums and the remaining
$1,499,987 was cash from operations. No distributions were paid to
the General Partner in 1998 or 1997. During the last week of March
1999, the Partnership distributed approximately $1,500,200 to the
limited partners of record as of March 1, 1999. 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."

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.

Statements of Years Ended December 31,
Operations 1998 1997 1996 1995 1994
- ------------------ ------------- ------------- -------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Rental revenue............... $ 1,290,193 $ 1,279,458 $ 1,413,050 $ 1,405,346 $ 1,172,233
Interest income.............. 516,148 539,573 524,791 568,970 591,791
Gain on extinguishment of
mortgage loan
investment................ 1,025,833 - - - -
Gain on disposition of real
estate ................... - 1,962,280 - - -
Net income................... 1,258,637 2,239,792 116,736 64,116 88,909

Net income per limited
partnership unit.......... $ 25.17 $ 44.78 $ 2.33 $ 1.28 $ 1.78
============ ============ =========== ============ ============

Distributions per limited
partnership unit.......... $ 146.08 $ 65.64 $ 24.24 $ 5.05 $ 5.05
============ ============ =========== ============ ============

As of December 31,
Balance Sheets 1998 1997 1996 1995 1994
- ------------------ ------------- ------------- -------------- ------------- -------------

Real estate investments, net... $ 2,848,199 $ 2,983,609 $ 5,457,587 $ 5,726,377 $ 5,938,194
Mortgage loan investments,
net......................... - 6,868,788 4,138,453 4,271,336 4,418,306
Total assets................... 6,225,467 12,112,244 13,189,106 14,345,949 14,484,111
Mortgage note payable, net..... 2,613,312 2,666,814 2,715,909 2,760,961 2,802,303
Partners' equity............... 3,012,266 8,986,219 9,996,414 11,079,628 11,265,513

</TABLE>

<PAGE>
See Item 7 - Management's Discussion and Analysis of Financial Condition and
Results of Operations. In May 1993, the Partnership foreclosed on 1130
Sacramento Condominiums in settlement of the mortgage loan secured by the
property and later sold the property in August 1997.

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
revenue-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 and later sold the property in August
1997.

In August 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. The
first lien mortgage note secured by Fort Meigs Plaza, which was owned by an
unaffiliated lender, matured in December 1997. In order to prevent foreclosure
of the property by the first lienholder and to protect its second lien interest
in the property, the Partnership purchased the first lien in December 1997. The
first and second lien mortgage loan investments - affiliate secured by Fort
Meigs Plaza matured in March 1998 and September 1997, respectively, and were
repaid in April 1998 when the property was sold.

The Partnership's mortgage loan investments secured by Idlewood and Lakeland
nursing homes were repaid in full by the respective borrowers in 1998.

At December 31, 1998, the Partnership operated one revenue-producing property
which was acquired through foreclosure.

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

1998 compared to 1997

Revenue

Total revenue decreased by $949,137 in 1998 as compared to 1997. The decrease
was mainly due to a gain on disposition of real estate recognized in 1997,
partially offset by a gain on extinguishment of mortgage loan investment in
1998, as discussed below.

<PAGE>
In 1998, rental revenue increased slightly by $10,735 as compared to 1997.
Rental revenue at Sterling Springs Apartments increased in 1998 due to an
increase in rental rates and a decrease in discounts and concessions given to
tenants. This increase was partially offset by a decrease in rental revenue due
to the sale of 1130 Sacramento Condominiums in 1997. 1130 Sacramento contributed
approximately $90,400 of the rental revenue in 1997.

Interest income on mortgage loan investments decreased by $99,151 in 1998 as
compared to 1997. The decrease was due to the Lakeland Nursing Home mortgage
loan investment being paid off by the borrower in August 1998. Although the
Idlewood Nursing Home mortgage loan investment was also paid off in 1998, no
interest was accrued on this loan in 1998 or 1997.

In 1993, the Partnership acquired a second lien loan on a property owned by an
affiliate. The Partnership purchased the first lien loan on this property in
December 1997. Both loans were repaid by the affiliate borrower in April 1998.
Interest income on mortgage loan investments - affiliate increased by $30,834 in
1998 as compared to 1997. Interest in 1997 included interest on the second lien
only and 1998 includes interest on both the first and second lien loans.

Other interest income increased by $44,892 in 1998 as compared to the same
period in 1997. The increase was the result of an increase in cash available for
short-term investment due to payoff of the Partnership's mortgage loan
investments and mortgage loan investments - affiliate during the second and
third quarters of 1998.

In the second quarter of 1998, the Partnership recognized a $1,025,833 gain on
extinguishment of mortgage loan investment related to the payoff of the Idlewood
Nursing Home loan. The gain represents the cash payoff received in excess of the
book value of the mortgage loan investment.

On August 1, 1997, the Partnership sold one of four units of 1130 Sacramento
Condominiums to an unaffiliated purchaser. The remaining three units were sold
to the same purchaser on August 28, 1997. The cash purchase price for all four
units was $4,700,000. The Partnership recognized a gain on disposition of real
estate of $1,962,280 as more fully discussed in Item 8, Note 4 - "Real Estate
Investment."

Expenses:

Total expenses increased by $32,018 in 1998 as compared to 1997. The increase
was mainly due to an increase in general and administrative expenses, partially
offset by an approximately $81,000 decrease in expenses due to the sale of 1130
Sacramento in 1997, as discussed below.

In 1998, property taxes and repairs and maintenance expense decreased by
$18,661 and $26,643, respectively, mainly due to the sale of 1130 Sacramento
in 1997.

Other property operating expenses decreased by $16,964 in 1998 as compared to
1997. The decrease was mainly due to a $10,000 deductible paid by the
Partnership in 1997 for two minor tenant claims settled by the Partnership's
insurance carrier. The remaining decrease was attributable to 1130 Sacramento,
which was sold in 1997.

General and administrative expenses increased by $136,774 in 1998 as compared to
1997. The increase was mainly due to costs incurred to explore alternatives to
maximize the value of the Partnership (see Liquidity and Capital Resources).

<PAGE>
General and administrative expenses - affiliates decreased by $43,505 in 1998 as
compared to 1997. The decrease was due to a decline in the tangible asset value
of the Partnership, on which the fees are based, due to the payoff of the
Partnership's mortgage loan investments and mortgage loan investments -
affiliate in 1998 and the sale of 1130 Sacramento in 1997.

1997 compared to 1996

Revenue:

Total revenue increased by $1,826,407 in 1997 as compared to 1996. The increase
was mainly due to a gain on the sale of 1130 Sacramento, partially offset by a
decrease in rental revenue as discussed below.

Rental revenue decreased by $133,592 in 1997 in relation to 1996, mainly due to
the decrease in rental revenue at 1130 Sacramento Condominiums. One of the four
condominium units was vacated in April 1997 and was sold at the beginning of
August 1997. The remaining three units were sold at the end of August 1997.

As further discussed in Item 8 - Note 6 - "Mortgage Loan Investments -
Affiliate," in 1993, the Partnership acquired a second lien loan on a property
owned by an affiliate. The Partnership purchased the first lien loan on this
property in December 1997. The purchase of the first lien at the end of 1997
resulted in a $15,824 increase in interest income on mortgage loan investments -
affiliate in 1997 as compared to 1996.

In 1996, the Partnership received $17,063 in refunds of prior years' property
taxes for 1130 Sacramento Condominiums. The assessed taxable value of the
property was reduced by taxing authorities as a result of an appeal filed on
behalf of the property. No such refund was received in 1997.

Expenses:

Total expenses decreased by $296,649 in 1997 as compared to 1996. The decrease
was mainly due to a decrease in depreciation expense, general and administrative
expenses and general and administrative - affiliates, as discussed below.

Depreciation expense in 1997 decreased by $96,814 in relation to 1996. The
decrease was due to 1130 Sacramento Condominiums being classified as an asset
held for sale by the Partnership effective April 15, 1997. In accordance with
the Financial Accounting Standards Board's Statement of Financial Accounting
Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of," the Partnership ceased recording
depreciation on the asset at the time it was placed on the market for sale.

<PAGE>
General and administrative expenses decreased by $135,923 in 1997 as compared to
1996. The decrease was mainly due to a decrease in costs incurred relating to
evaluation and dissemination of information regarding an unsolicited tender
offer. This decrease was partially offset by approximately $26,000 of costs
incurred for investor services, which were paid to an unrelated third party in
1997. In 1996, such costs were paid to an affiliate of the General Partner and
were included in general and administrative - affiliates on the Statements of
Operations.

In 1997, general and administrative - affiliates decreased by $46,690 as
compared to 1996. The decrease was mainly due to a decrease in overhead expenses
allocated to the Partnership by McREMI due to investor services being performed
by an unrelated third party in 1997, as discussed above. In addition, there was
a decrease in asset management fees due to a decline in the tangible asset value
of the Partnership, on which the fees are based.

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

The Partnership generated $765,353 through operating activities in 1998
as compared to $487,912 in 1997 and $453,978 in 1996.

The Partnership expended $98,849, $178,235 and $73,183 for capital improvements
to its properties in 1998, 1997 and 1996, respectively. 1997 includes costs
incurred for exterior carpentry and painting at Sterling Springs Apartments.

In 1997, the Partnership received $4,493,834 of proceeds from the sale of 1130
Sacramento Condominiums. $2,996,176 of the proceeds was used to purchase a first
lien mortgage loan investment secured by a property owned by an affiliate. The
Partnership made this investment to protect its second lien interest in this
property.

The Partnership distributed $7,232,590 to the limited partners in 1998, of which
$5,562,896 was cash proceeds from the payoff of the Idlewood Nursing Home
mortgage loan investment and the Fort Meigs Plaza mortgage loan investment -
affiliate. The remaining $1,669,694 was cash from operations. The Partnership
distributed $3,249,987 to the limited partners in 1997, of which $1,750,000 was
cash proceeds from the sale of 1130 Sacramento Condominiums and the remaining
$1,499,987 was cash from operations. In 1996, the Partnership distributed
$1,199,950 to the limited partners from cash from operations.

Short-term liquidity:

At December 31, 1998, the Partnership held cash and cash equivalents of
$3,070,785. This balance provides a reasonable level of working capital for the
Partnership's immediate needs in operating its property.

In 1999, operation of Sterling Springs Apartments is expected to provide
sufficient positive cash flow for normal operations. Management will perform
routine repairs and maintenance on the property to preserve and enhance its
value and competitiveness in the market. The Partnership has budgeted
approximately $74,000 for capital improvements to Sterling Springs in 1999,
which is expected to be funded from operations of the property.

<PAGE>
Additional efforts to maintain and improve Partnership liquidity have included
continued attention to property management activities. The objective has been to
obtain maximum occupancy rates while holding expenses to levels necessary to
maximize cash flows. The Partnership has made capital expenditures on its
property where improvements were expected to increase the competitiveness and
marketability of the property.

Under the terms of its Amended Partnership Agreement, the Partnership pays a
disposition fee to an affiliate of the General Partner equaling up to 3% of the
gross sales price for brokerage services performed in connection with the sale
of the Partnership's properties, provided, however, that in no event shall all
real estate commissions (including the disposition fee) paid to all persons
exceed the amount customarily charged in similar arms-length transactions. The
fee is due and payable at the time the sale closes. The Partnership incurred
$124,500 of such fees during 1997 in connection with the sale of 1130 Sacramento
Condominiums. This amount represents 2.65% of the gross sales price. These fees
were paid by the Partnership subsequent to December 31, 1998 and are included in
payable to affiliates on the Balance Sheets at December 31, 1998 and 1997.

During the last week of March 1999, the Partnership distributed approximately
$1,500,200 to the limited partners of record as of March 1, 1999.

Long-term liquidity:

The Partnership's property, Sterling Springs Apartments, is encumbered with
mortgage debt. The mortgage is not due until 2003.

While the outlook for maintenance of adequate levels of liquidity is favorable,
should operations deteriorate and present cash resources be insufficient for
current needs, the Partnership would require other sources of working capital.
Possible actions to resolve cash deficiencies include refinancings, deferral of
capital expenditures on the Partnership's property except where improvements are
expected to increase the competitiveness and marketability of the property,
arranging financing from affiliates or the ultimate sale of the property.

<PAGE>
YEAR 2000 DISCLOSURE
- --------------------

State of readiness
- ------------------

The year 2000 problem is the result of computer programs being written using two
digits rather than four to define the applicable year. Any programs that have
time-sensitive software may recognize a date using "00" as the year 1900 rather
than the year 2000. This could result in major systems failure or
miscalculations.

Management has assessed its information technology ("IT") infrastructure to
identify any systems that could be affected by the year 2000 problem. The IT
used by the Partnership for financial reporting and significant accounting
functions was made year 2000 compliant during recent systems conversions. The
software utilized for these functions are licensed by third party vendors who
have warranted that their systems are year 2000 compliant.

Management is in the process of evaluating the mechanical and embedded
technological systems at the various properties. Management has inventoried all
such systems and queried suppliers, vendors and manufacturers to determine year
2000 compliance. Management will complete assessment of findings by May 1, 1999.
In circumstances of non-compliance management will work with the vendor to
remedy the problem or seek alternative suppliers who will be in compliance.
Management believes that the remediation of any outstanding year 2000 conversion
issues will not have a material or adverse effect on the Partnership's
operations. However, no estimates can be made as to the potential adverse impact
resulting from the failure of third party service providers and vendors to be
year 2000 compliant.

Cost
- ----

The cost of IT and embedded technology systems testing and upgrades is not
expected to be material to the Partnership. Because all the IT systems have been
upgraded over the last three years, all such systems were compliant, or made
compliant at no additional cost by third party vendors. Management anticipates
the costs of assessing, testing, and if necessary replacing embedded technology
components will be less than $50,000. Such costs will be funded from operations
of the Partnership.

Risks
- -----

Ultimately, the potential impact of the year 2000 issue will depend not only on
the corrective measures the Partnership undertakes, but also on the way in which
the year 2000 issue is addressed by government agencies and entities that
provide services or supplies to the Partnership. Management has not determined
the most likely worst case scenario to the Partnership. As management studies
the findings of its property systems assessment and testing, management will
develop a better understanding of what would be the worst case scenario.
Management believes that progress on all areas is proceeding and that the
Partnership will experience no adverse effect as a result of the year 2000
issue. However, there is no assurance that this will be the case.

<PAGE>
Contingency plans
- -----------------

Management is developing contingency plans to address potential year 2000
non-compliance of IT and embedded technology systems. Management believes that
failure of any IT system could have an adverse impact on operations. However,
management believes that alternative systems are available that could be
utilized to minimize such impact. Management believes that any failure in the
embedded technology systems could have an adverse impact on that property's
performance. Management will assess these risks and develop plans to mitigate
possible failures by June, 1999.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
- -------- ----------------------------------------------------------

Not Applicable.

<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
- ------- -------------------------------------------

<TABLE>
<CAPTION>
Page
Number
--------
INDEX TO FINANCIAL STATEMENTS
- -----------------------------

Financial Statements:

<S> <C>
Report of Independent Public Accountants....................................... 14

Balance Sheets at December 31, 1998 and 1997................................... 15

Statements of Operations for each of the three years in the period
ended December 31, 1998..................................................... 16

Statements of Partners' Equity (Deficit) for each of the three years in the
period ended December 31, 1998.............................................. 17

Statements of Cash Flows for each of the three years in the period
ended December 31, 1998..................................................... 18

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

Financial Statement Schedule -

Schedule III - Real Estate Investment 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, 1998 and 1997, and
the related statements of operations, partners' equity (deficit) and cash flows
for each of the three years in the period ended December 31, 1998. 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, 1998 and 1997, and the results of its operations and its
cash flows for each of the three years in the period ended December 31, 1998, in
conformity with generally accepted accounting principles.

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 19, 1999

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

BALANCE SHEETS

<TABLE>
<CAPTION>
December 31,
---------------------------------
1998 1997
------------ ------------

ASSETS
- ------

Real estate investment:
<S> <C> <C>
Land .......................................................... $ 392,000 $ 392,000
Buildings and improvements .................................... 3,981,407 3,882,558
------------ ------------
4,373,407 4,274,558
Less: Accumulated depreciation ............................... (1,525,208) (1,290,949)
------------ ------------
2,848,199 2,983,609

Mortgage loan investments, net of allowance of
$792,013 at December 31, 1997 ................................. -- 3,268,712
Mortgage loan investments - affiliate, net of allowance of
$130,000 at December 31, 1997 ................................. -- 3,600,076
Cash and cash equivalents ........................................ 3,070,785 1,824,293
Cash segregated for security deposits ............................ 28,773 27,405
Interest and other accounts receivable ........................... 6,603 140,025
Escrow deposits .................................................. 180,267 162,652
Deferred borrowing costs, net of accumulated
amortization of $76,154 and $60,222 at
December 31, 1998 and 1997, respectively ...................... 85,340 101,272
Prepaid expenses and other assets ................................ 5,500 4,200
------------ ------------
$ 6,225,467 $ 12,112,244
============ ============

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

Mortgage note payable, net ....................................... $ 2,613,312 $ 2,666,814
Accounts payable and other accrued expenses ...................... 52,848 61,994
Accrued property taxes ........................................... 142,490 137,050
Payable to affiliates ............................................ 376,849 203,444
Deferred revenue ................................................. -- 27,229
Security deposits and deferred rental revenue .................... 27,702 29,494
------------ ------------
3,213,201 3,126,025
------------ ------------

Partners' equity (deficit):
Limited partners - 60,000 limited partnership units
authorized; 49,512 limited partnership units issued
and outstanding at December 31, 1998 and 1997 ............... 3,296,145 9,282,684
General Partner ............................................... (283,879) (296,465)
------------ ------------
3,012,266 8,986,219
------------ ------------
$ 6,225,467 $ 12,112,244
============ ============
</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,
----------------------------------------------
1998 1997 1996
---------- ---------- ----------

Revenue:
<S> <C> <C> <C>
Rental revenue ........................... $1,290,193 $1,279,458 $1,413,050
Interest income on mortgage loan
investments ............................ 180,872 280,023 283,010
Interest income on mortgage loan
investments - affiliate ................ 108,214 77,380 61,556
Other interest income .................... 227,062 182,170 180,225
Gain on extinguishment of mortgage
loan investment ........................ 1,025,833 -- --
Gain on disposition of real estate ....... -- 1,962,280 --
Property tax refund ...................... -- -- 17,063
---------- ---------- ----------
Total revenue .......................... 2,832,174 3,781,311 1,954,904
---------- ---------- ----------

Expenses:
Interest ................................. 243,328 246,782 249,920
Depreciation ............................. 234,259 245,159 341,973
Property taxes ........................... 142,490 161,151 170,597
Personnel costs .......................... 158,653 144,376 142,069
Repairs and maintenance .................. 103,831 130,474 134,645
Property management fees -
affiliates ............................. 61,789 63,072 67,381
Utilities ................................ 83,795 81,418 83,481
Other property operating expenses ........ 75,390 92,354 88,756
General and administrative ............... 250,749 113,975 249,898
General and administrative -
affiliates ............................. 219,253 262,758 309,448
---------- ---------- ----------
Total expenses ......................... 1,573,537 1,541,519 1,838,168
---------- ---------- ----------

Net income .................................. $1,258,637 $2,239,792 $ 116,736
========== ========== ==========

Net income allocable to limited
partners ................................. $1,246,051 $2,217,394 $ 115,569
Net income allocable to General
Partner .................................. 12,586 22,398 1,167
---------- ---------- ----------
Net income .................................. $1,258,637 $2,239,792 $ 116,736
========== ========== ==========

Net income per limited partnership
unit ..................................... $ 25.17 $ 44.78 $ 2.33
========== ========== ==========

Distributions per limited
partnership unit ......................... $ 146.08 $ 65.64 $ 24.24
========== ========== ==========
</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, 1998, 1997 and 1996

Total
General Limited Partners'
Partner Partners Equity
------------- ------------- -------------
<S> <C> <C> <C>
Balance at December 31, 1995 ............ $ (320,030) $ 11,399,658 $ 11,079,628

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

Distributions to limited partners........ -- (1,199,950) (1,199,950)
------------ ------------ ------------

Balance at December 31, 1996 ............ (318,863) 10,315,277 9,996,414

Net income .............................. 22,398 2,217,394 2,239,792

Distributions to limited partners ....... -- (3,249,987) (3,249,987)
------------ ------------ ------------

Balance at December 31, 1997 ............ (296,465) 9,282,684 8,986,219

Net income .............................. 12,586 1,246,051 1,258,637

Distributions to limited partners ....... -- (7,232,590) (7,232,590)
------------ ------------ ------------

Balance at December 31, 1998 ............ $ (283,879) $ 3,296,145 $ 3,012,266
============ ============ ============

</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,
----------------------------------------------------
1998 1997 1996
------------ ------------ ------------

Cash flows from operating activities:
<S> <C> <C> <C>
Cash received from tenants ................ $ 1,324,552 $ 1,259,654 $ 1,422,803
Cash paid to suppliers .................... (686,225) (607,269) (723,975)
Cash paid to affiliates ................... (107,637) (287,848) (368,716)
Interest received ......................... 423,419 455,833 456,845
Interest received from affiliate .......... 184,958 48,886 48,886
Interest paid ............................. (219,330) (224,165) (228,625)
Property taxes paid ....................... (281) (24,101) (50,954)
Property taxes escrowed ................... (154,103) (133,078) (119,349)
Property tax refund received .............. -- -- 17,063
----------- ----------- -----------
Net cash provided by operating
activities ................................ 765,353 487,912 453,978
----------- ----------- -----------

Cash flows from investing activities:
Additions to real estate
investments ............................. (98,849) (178,235) (73,183)
Collection of principal on
mortgage loan investments ............... 53,364 135,841 132,883
Proceeds from payoff of mortgage
loan investments ........................ 4,241,181 -- --
Collection of principal on mortgage
loan investments - affiliate ............ 9,126 -- --
Proceeds from payoff of mortgage
loan investments - affiliate ............ 3,570,896
Purchase of mortgage loan
investment - affiliate .................. -- (2,996,176) --
Proceeds from disposition of real
estate .................................. -- 4,493,834 --
----------- ----------- -----------
Net cash provided by investing
activities .............................. 7,775,718 1,455,264 59,700
----------- ----------- -----------

Cash flows from financing activities:
Principal payments on mortgage
note payable ............................ (61,989) (57,153) (52,694)
Distributions to limited partners ......... (7,232,590) (3,249,987) (1,199,950)
----------- ----------- -----------
Net cash used in financing activities ........ (7,294,579) (3,307,140) (1,252,644)
----------- ----------- -----------

Net increase (decrease) in cash and
cash equivalents .......................... 1,246,492 (1,363,964) (738,966)

Cash and cash equivalents at
beginning of year ......................... 1,824,293 3,188,257 3,927,223
----------- ----------- -----------

Cash and cash equivalents at end
of year ................................... $ 3,070,785 $ 1,824,293 $ 3,188,257
=========== =========== ===========
</TABLE>

See discussion of non-cash investing activities in Note 6 - "Mortgage Loan
Investments - Affiliate."

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,
---------------------------------------------------
1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
Net income .................................... $ 1,258,637 $ 2,239,792 $ 116,736
----------- ----------- -----------

Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation ............................... 234,259 245,159 341,973
Amortization of deferred borrowing
costs .................................... 15,932 14,947 14,011
Amortization of discount on mortgage
note payable ............................. 8,487 8,058 7,642
Amortization of deferred revenue ........... (7,175) (6,623) (6,623)
Gain on extinguishment of mortgage
loan investment .......................... (1,025,833) -- --
Gain on disposition of real estate ......... -- (1,962,280) --
Changes in assets and liabilities:
Cash segregated for security
deposits .............................. (1,368) 27,545 4,919
Interest and other accounts
receivable ............................. 133,422 (65,396) 2,851
Escrow deposits .......................... (17,615) (8,675) (9,133)
Prepaid expenses and other
assets ................................. (1,300) 834 3,556
Accounts payable and other
accrued expenses ....................... (9,146) (35,236) (23,063)
Accrued property taxes ................... 5,440 6,093 7,427
Payable to affiliates .................... 173,405 37,982 8,113
Security deposits and deferred
rental revenue ......................... (1,792) (14,288) (14,431)
----------- ----------- -----------

Total adjustments ........................ (493,284) (1,751,880) 337,242
----------- ----------- -----------

Net cash provided by operating
activities ................................. $ 765,353 $ 487,912 $ 453,978
=========== =========== ===========

</TABLE>

See accompanying notes to financial statements.
<PAGE>
McNEIL REAL ESTATE FUND XX, L.P.

NOTES TO FINANCIAL STATEMENTS

December 31, 1998

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 has been engaged in the servicing of mortgage loans, including
equity and revenue participation loans, and the ownership, operation and
management of revenue-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. In 1998, the Partnership's mortgage loan investments
secured by Idlewood and Lakeland nursing homes and the Partnership's mortgage
loan investment - affiliate secured by Fort Meigs Plaza were repaid in full by
the respective borrowers. At December 31, 1998, the Partnership operated one
revenue-producing property as described in Note 4 - "Real Estate Investment."

<PAGE>
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.

Adoption of Recent Accounting Pronouncements
- --------------------------------------------

The Partnership has adopted Statement of Financial Accounting Standards No. 131,
"Disclosures About Segments of an Enterprise and Related Information ("SFAS
131"). SFAS 131 requires an enterprise to report financial information about its
reportable operating segments, which are defined as components of a business for
which separate financial information is evaluated regularly by the chief
decision maker in allocating resources and assessing performance. The
Partnership does not prepare such information for internal use, since it
analyzes the performance of and allocates resources for each property
individually. The Partnership's management has determined that it operates one
line of business and it would be impracticable to report segment information.
Therefore, the adoption of SFAS 131 has no impact on the Partnership's financial
statements.

Real Estate Investment
- ----------------------

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

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.

<PAGE>
Mortgage Loan Investments
- -------------------------

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

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 property 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.

<PAGE>
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 1998, 1997 and 1996 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.

In 1998, the Partnership distributed $7,232,590 to the limited partners,
$5,562,896 of which was cash proceeds from the payoff of the Idlewood Nursing
Home mortgage loan investment and the Fort Meigs Plaza mortgage loan investment
- - affiliate. The remaining $1,669,694 was cash from operations. The Partnership
distributed $3,249,987 to the limited partners in 1997, of which $1,750,000 was
cash proceeds from the sale of 1130 Sacramento Condominiums and the remaining
$1,499,987 was cash from operations. The Partnership distributed $1,199,950 to
the limited partners in 1996 from cash from operations. No distributions were
paid to the General Partner in 1998, 1997 or 1996. During the last week of March
1999, the Partnership distributed approximately $1,500,200 to the limited
partners of record as of March 1, 1999.

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 1998, 1997 and 1996.

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.

<PAGE>
Under the terms of its Amended Partnership Agreement, the Partnership pays a
disposition fee to an affiliate of the General Partner equaling up to 3% of the
gross sales price for brokerage services performed in connection with the sale
of the Partnership's properties, provided, however, that in no event shall all
real estate commissions (including the disposition fee) paid to all persons
exceed the amount customarily charged in similar arms-length transactions. The
fee is due and payable at the time the sale closes. The Partnership incurred
$124,500 of such fees during 1997 in connection with the sale of 1130 Sacramento
Condominiums. This amount represents 2.65% of the gross sales price. These fees
were paid by the Partnership subsequent to December 31, 1998 and are included in
payable to affiliates on the Balance Sheets at December 31, 1998 and 1997.

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, or (ii) a value of $10,000 per apartment
unit. The property tangible asset value is then added to the book value of all
other assets excluding intangible items. The fee percentage decreases to .75% in
2000, .50% in 2001 and .25% thereafter.

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,
----------------------------------------
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Property management fees ................ $ 61,789 $ 63,072 $ 67,381
Charged to gain on disposition
of real estate:
Disposition fee ...................... -- 124,500 --
Charged to general and
administrative - affiliates:
Partnership administration ........... 107,358 111,839 145,203
Asset management fee ................. 111,895 150,919 164,245
-------- -------- --------
$281,042 $450,330 $376,829
======== ======== ========
</TABLE>

Payable to affiliates at December 31, 1998 and 1997 consisted primarily of
unpaid property management fees, a disposition fee, Partnership general and
administrative expenses and asset management fees and is due and payable from
current operations.

<PAGE>
NOTE 3 - TAXABLE INCOME (LOSS)
- ------------------------------

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 $4,657,987 in 1998,
$7,573,698 in 1997 and $7,486,117 in 1996.

NOTE 4 - REAL ESTATE INVESTMENT
- -------------------------------

The basis and accumulated depreciation of the Partnership's real estate
investment at December 31, 1998 and 1997 are set forth in the following tables:

<TABLE>
<CAPTION>
Buildings and Accumulated Net Book
1998 Land Improvements Depreciation Value
---- ---------- ------------- ------------- ----------

Sterling Springs
<S> <C> <C> <C> <C>
Austin, TX $ 392,000 $ 3,981,407 $ (1,525,208) $ 2,848,199
========= =========== =========== ==========

Buildings and Accumulated Net Book
1997 Land Improvements Depreciation Value
---- ---------- ------------- ------------ ----------

Sterling Springs $ 392,000 $ 3,882,558 $ (1,290,949) $ 2,983,609
========= =========== =========== ==========
</TABLE>

<PAGE>
On August 1, 1997, the Partnership sold one of four units of 1130 Sacramento
Condominiums, located in San Francisco, California, to an unaffiliated
purchaser. The remaining three units were sold to the same purchaser on August
28, 1997. The cash purchase price for all four units was $4,700,000. Cash
proceeds and the gain on disposition of real estate are detailed below:

Gain on Sale Cash Proceeds
------------ -------------

Cash sales price......................... $ 4,700,000 $ 4,700,000
Selling costs............................ (330,666) (206,166)
-----------

Net cash proceeds........................ $ 4,493,834
===========

Carrying value........................... (2,407,054)
-----------

Gain on disposition of real estate....... $ 1,962,280
===========

As discussed in Note 2 - "Transactions With Affiliates," the Partnership
incurred a $124,500 disposition fee payable to an affiliate of the General
Partner in connection with the sale of 1130 Sacramento. This fee reduced the
amount of the gain on disposition of real estate and is included in selling
costs above. However, as the fee was not paid until subsequent to December 31,
1998, it did not reduce the amount of net cash proceeds from the sale. The net
cash proceeds from the sale of 1130 Sacramento are $4,369,334 after payment of
the disposition fee.

<PAGE>
NOTE 5 - MORTGAGE LOAN INVESTMENTS
- ----------------------------------

The following sets forth the Partnership's mortgage loan investments to
unaffiliated borrowers at December 31, 1998 and 1997. The mortgage loan
investments were secured by the related real estate.

<TABLE>
<CAPTION>
Mortgage Annual Monthly
Lien Interest Payments/ December 31,
Property Position Rates % Maturity 1998 1997
- -------- -------- ------- ---------------- -------------- ---------------

Idlewood Nursing
<S> <C> <C> <C> <C> <C>
Home (a) First 8.50 (a) 2/98 $ - $ 1,794,700
Allowance for impairment - (792,013)
------------- -------------
- 1,002,687
------------- -------------
Lakeland Nursing
Home (b) First 12.00 $24,9952/99 - 2,266,025
------------- -------------

Total $ - $ 3,268,712
============= =============
</TABLE>

(a) The Partnership owned 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 was modified four times such that the maturity date was
extended and the interest rate was decreased. The loan modification in
effect during 1998 and 1997 required that payments be made on the loan
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 loan was not recorded as an
in-substance foreclosure at December 31, 1997.

A measure of the impairment of the Idlewood loan was made based on the
present value of expected future cash flows required under a February
1995 modification. This measure indicated 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 was reversed until the underlying property was sold. All
payments received on the loan in 1998 and 1997 were recorded as a
reduction of principal.

<PAGE>
The mortgage loan investment matured in February 1998. The Partnership
and the borrower entered into an agreement whereby the borrower paid the
Partnership $2.4 million in settlement of both principal and interest due
on the mortgage note in May 1998. Since the Partnership owned an 83%
participation interest in the note, $408,000 of the $2.4 million
settlement was paid to the owner of the remaining 17% of the note. As a
result of this transaction, the Partnership recognized a gain on
extinguishment of mortgage loan investment as follows:

Net proceeds from payoff of mortgage loan investment..... $1,992,000
Net book value of mortgage loan investment............... (966,167)
---------
Gain on extinguishment of mortgage loan investment....... $1,025,833
=========

(b) On August 20, 1998, the Partnership received $2,541,572 as payment in
full for both principal and interest receivable on the mortgage loan
investment secured by Lakeland Nursing Home. Since the Partnership owned
a 90% participation interest in the note, $254,157 of the payoff was paid
to the owner of the remaining 10% of the note. Of the $2,287,415 net
proceeds received, $2,249,181 was applied to the principal balance of the
loan and the remaining $38,234 was applied to accrued interest
receivable.

A summary of activity for mortgage loan investments for each of the three years
in the period ended December 31, 1998 is as follows:

<TABLE>
<CAPTION>
For the Years Ended December 31,
----------------------------------------------------
1998 1997 1996
------------ ------------ ------------

<S> <C> <C> <C>
Balance at beginning of year........ $ 3,268,712 $ 3,404,553 $ 3,537,436
Collection of principal ............ (53,364) (135,841) (132,883)
Proceeds from payoff ............... (4,241,181) -- --
Gain recognized .................... 1,025,833 -- --
----------- ----------- -----------
Balance at end of year ............. $ -- $ 3,268,712 $ 3,404,553
=========== =========== ===========
</TABLE>

<PAGE>
NOTE 6 - MORTGAGE LOAN INVESTMENTS - AFFILIATE
- -----------------------------------------------

The following sets forth the Partnership's mortgage loan investments to an
affiliated borrower at December 31, 1998 and 1997:

<TABLE>
<CAPTION>
Mortgage Annual Monthly
Lien Interest Payments/ December 31,
Property Position (a) Rates % Maturity 1998 1997
- -------- ------------ ----------- ---------------- -------------- --------

Fort Meigs Plaza
<S> <C> <C> <C> <C> <C>
Shopping Center First 12.81 $ 33,333 3/98 $ -- $ 2,996,176
------------- -----------

Second 8.25 (b) $4,074 (b) 9/97 -- 733,900
Allowance -- (130,000)
------------- -----------
-- 603,900
------------- -----------

Total $ -- $ 3,600,076
============= ===========
</TABLE>

(a) The mortgage loans were non-recourse to the borrower.

(b) Although interest on the loan accrued at 8.25%, interest only payments
equal to an effective interest rate of 6.66% were payable monthly. All
accrued interest was due at maturity.

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, McNeil Real Estate Fund XXI, L.P. ("Fund XXI"), was transferred to the
Partnership. In June 1993, a new loan agreement was executed; and Fund XXI
substituted a second lien on another of its properties, Fort Meigs Plaza
Shopping Center, as the collateral on the loan. The first lien mortgage note
secured by Fort Meigs Plaza, which was owned by an unaffiliated lender, matured
in December 1997. In order to prevent foreclosure of the property by the first
lienholder and to protect its second lien interest in the property, the
Partnership purchased the first lien in December 1997 for $2,996,176 and
extended the maturity of the loan to March 1998.

Related to the initial transfer, the Partnership recorded a deferred gain for
the portion of the non-cash assets received as compared to total assets received
pursuant to the lawsuit settlement. This deferred gain was being amortized as
principal payments were received on the mortgage loan investment. The
Partnership reduced the deferred gain by $130,000 in 1997, representing the
estimated uncollectible amount of the mortgage loan investment, as discussed
below. The deferred gain totaled $20,054 at December 31, 1997.

<PAGE>
On April 20, 1998, Fort Meigs Plaza was sold to a non-affiliate for a gross
sales price of $3.8 million. The Partnership received $3,615,353 as payment in
full for both principal and interest receivable on the loans, which represents
the available cash proceeds from the sale of the property. The cash proceeds
from the sale were not sufficient to allow the Partnership to collect the entire
balance of the mortgage loan investments or to recognize the entire balance of
deferred revenue. The Partnership ceased accruing interest on the loans in 1998
when it became apparent that the entire balance of the loans was not
collectible. The Partnership recognized interest income on mortgage loan
investments - affiliate of $108,214 in 1998. An additional $27,465 of
uncollectible interest was not recognized by the Partnership in 1998.

A summary of activity for mortgage loan investments - affiliate for each of the
three years in the period ended December 31, 1998 is as follows:

<TABLE>
<CAPTION>
For the Years Ended December 31,
---------------------------------------------------
1998 1997 1996
----------- ------------ -----------
<S> <C> <C> <C>
Balance at beginning of year........ $ 3,600,076 $ 733,900 $ 733,900
Purchase of first lien ............. -- 2,996,176 --
Collection of principal ............ (9,126) -- --
Proceeds from payoff ............... (3,570,896) -- --
Deferred gain ...................... (20,054) (130,000) --
----------- ----------- -----------
Balance at end of year ............. $ -- $ 3,600,076 $ 733,900
=========== =========== ===========
</TABLE>

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

The following sets forth the mortgage note payable of the Partnership at
December 31, 1998 and 1997. The mortgage note payable is secured by the related
real estate investment.

<TABLE>
<CAPTION>
Mortgage Annual Monthly
Lien Interest Payments/ December 31,
Property Position (a) Rate % Maturity 1998 1997
- -------- ------------ ------- ---------------- -------------- -------------

Sterling Springs
<S> <C> <C> <C> <C> <C> <C>
Apartments (c) First 8.15 $23,443 7/03 $ 2,657,171 $ 2,719,160
Discount (b) (43,859) (52,346)
------------- -----------
$ 2,613,312 $ 2,666,814
============= ===========
</TABLE>

<PAGE>
(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. Principal prepayments made before
July 2000 are subject to a Yield Maintenance premium, as defined.

Scheduled principal maturities of the mortgage note payable under existing
terms, excluding a discount of $43,859, are as follows:

1999 $ 67,234
2000 72,923
2001 79,093
2002 85,786
2003 2,352,135
------------
Total $ 2,657,171
============

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 $2,661,000 at December 31, 1998 and $2,768,000 at
December 31, 1997.

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:

<PAGE>
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.

NOTE 9 - COMMITMENTS AND CONTINGENCIES
- --------------------------------------

<PAGE>
Third parties also may seek recovery under the common law for damages to their
property or person, against owners of property from which there has been a
release of hazardous and other substances.

The presence of contamination or the failure to remediate contaminations may
adversely affect the owner's ability to sell or lease real estate or to borrow
using the real estate as collateral.

In connection with the proposed sale transaction as more fully described in Note
1 - "Organization and Summary of Significant Accounting Policies", Phase I
environmental site assessments have been completed for each property owned by
the Partnership. Such environmental assessments performed on the properties have
not revealed any environmental liability that the Partnership believes would
have a material adverse effect on the Partnership's business, assets, or results
of operations. The Partnership has not been notified by any governmental
authority of any non-compliance, liability or other claim in connection with any
of its properties. There can be no assurances, however, that environmental
liabilities have not developed since such environmental assessments were
prepared, or that future uses or conditions (including, without limitation,
changes in applicable environmental laws and regulations) will not result in
imposition of environmental liability.

<PAGE>
McNEIL REAL ESTATE FUND XX, L.P.
SCHEDULE III
REAL ESTATE INVESTMENT AND ACCUMULATED DEPRECIATION
December 31, 1998

<TABLE>
<CAPTION>
Costs
Initial Cost Cumulative Capitalized
Related Buildings and Write-down for Subsequent
Description Encumbrances Land Improvements Impairment To Acquisition

Sterling Springs
Apartments
<S> <C> <C> <C> <C> <C>
Austin, TX $2,613,312 $ 392,000 $ 2,908,000 $ - $ 1,073,407
========= ========== ============= ============= =============
</TABLE>

See accompanying notes to Schedule III.
<PAGE>
McNEIL REAL ESTATE FUND XX, L.P.
SCHEDULE III
REAL ESTATE INVESTMENT AND ACCUMULATED DEPRECIATION
December 31, 1998

<TABLE>
<CAPTION>
Gross Amount at
Which Carried at Close of Period Accumulated
Buildings and Depreciation
Description Land Improvements Total (a) and Amortization
- ------------ ----- ------------- --------- ----------------

Sterling Springs
Apartments
<S> <C> <C> <C> <C>
Austin, TX $ 392,000 $ 3,981,407 $ 4,373,407 $ (1,525,208)
=========== =========== ============ ============
</TABLE>

(a) For Federal income tax purposes, the property is 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
$4,330,914 and accumulated depreciation was $893,134 at December 31, 1998.

See accompanying notes to Schedule III.

<PAGE>
McNEIL REAL ESTATE FUND XX, L.P.
SCHEDULE III
REAL ESTATE INVESTMENT AND ACCUMULATED DEPRECIATION
December 31, 1998

Date of Date Depreciable
Description Construction Acquired Lives (Years)
- ----------- ------------ -------- -------------

Sterling Springs
Apartments
<S> <C> <C> <C>
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 Investment 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,
---------------------------------------------------
1998 1997 1996
----------- ------------ ------------

Real estate investments:

<S> <C> <C> <C>
Balance at beginning of year ............ $ 4,274,558 $ 6,892,667 $ 6,819,484

Disposition of real estate .............. -- (2,796,344) --

Improvements ............................ 98,849 178,235 73,183
----------- ----------- -----------

Balance at end of year .................. $ 4,373,407 $ 4,274,558 $ 6,892,667
=========== =========== ===========

Accumulated depreciation:

Balance at beginning of year ............ $ 1,290,949 $ 1,435,080 $ 1,093,107

Disposition of real estate .............. -- (389,290) --

Depreciation ............................ 234,259 245,159 341,973
----------- ----------- -----------

Balance at end of year .................. $ 1,525,208 $ 1,290,949 $ 1,435,080
=========== =========== ===========

</TABLE>

<PAGE>

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
- ------- ---------------------------------------------------------------
FINANCIAL DISCLOSURES.
----------------------
None.

PART III

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

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

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

Robert A. McNeil, 78 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 an 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.

<PAGE>
Carole J. McNeil 55 Mrs. McNeil is Co-Chairman, with husband
Co-Chairman of the Robert A. McNeil, of McNeil Investors,
Board 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 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.

Ron K. Taylor 41 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.

<PAGE>
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, 1998, 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, 1998. The Partnership has no plans to
pay any such remuneration to any directors or officers of the general partner of
the General Partner in the future.

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

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

(A) Security ownership of certain beneficial owners.

No individual or group, as defined by Section 13(d)(3) of the Securities
Exchange Act of 1934, was known by the Partnership to own more than 5%
of the Units, other than High River Limited Partnership which owns 6,486
Units (13.1% of the outstanding Units) and MacKenzie Patterson, Inc.
which owns 2,984 Units (6.03% of the outstanding Units) at February 1,
1999. The business address for High River Limited Partnership is 100
South Bedford Road, Mount Kisco, New York 10549. The business address
for MacKenzie Patterson, Inc. is 1640 School Street, #100, Moraga,
California 94556.

(B) Security ownership of management.

Affiliates of 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 at February 1, 1999.

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, or (ii) a value of $10,000 per apartment unit. The property tangible
asset value is then added to the book value of all other assets excluding
intangible items. The fee percentage decreases to .75% in 2000, .50% in 2001 and
.25% thereafter. For the year ended December 31, 1998, the Partnership paid or
accrued $111,895 of such asset management fees.

<PAGE>
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, 1998, the Partnership paid or accrued
$169,147 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>
PART IV

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

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

(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).

10.10 Loan Agreement dated June 23,
1993, between Lexington Mortgage
Company and McNeil Real Estate Fund
XX, L.P., et al. (1)

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). (2)

10.14 Property Management Agreement dated
March 30, 1992, between McNeil Real
Estate Fund XX, L.P. and McNeil Real
Estate Management, Inc. (3)

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.
(3)

11. Statement regarding computation of
net income per limited partnership
unit (see Item 8 - Note 1 -
"Organization and Summary of
Significant Accounting Policies").

<PAGE>
22. Following is a list of subsidiaries
of the Partnership:

Names Under
Jurisdiction Which It Is
Name of Subsidiary Incorporation Doing Business
------------------ -------------- --------------

Sterling Springs Fund XX
Limited Partnership Delaware None

(1) 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.

(2) 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.

(3) 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.

(B) Reports on Form 8-K. There were no reports on Form 8-K filed during
the quarter ended December 31, 1998.

<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 31, 1999 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 31, 1999 By: /s/ Ron K. Taylor
- -------------- ----------------------------------------------
Date Ron K. Taylor
President and Director of McNeil
Investors, Inc.
(Principal Financial Officer)

March 31, 1999 By: /s/ Carol A. Fahs
- -------------- ----------------------------------------------
Date Carol A. Fahs
Vice President of McNeil Investors, Inc.
(Principal Accounting Officer)

<ARTICLE> 5

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