Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
Rental income for the twelve months ended December 31, 1996 was $3,400,522 as compared to $3,341,405 and $3,201,931 for the comparable periods ended December 31, 1995 and December 31, 1994, respectively. Income from property operations for the twelve months ended December 31, 1996 was $1,402,132 as compared to $1,267,198 and $1,224,640 for the comparable periods ended December 31, 1995 and Deecmber 31, 1994. The increase in income from property operations was a result of the implementation of several rental rate increases over the past two years which offset a slight decrease in the occupancy rate. Depreciation expense decreased 9.7% or $67,957 from 1995 to 1996. This decrease is a result of the appliance and equipment fixed assets purchased in 1988 have reached their maximum depreciable lives. Utility expenses decreased by 13.2% or $31,483 from 1995 to 1996. This decrease is attributable to a water utility credit received in early 1996 from the city of Durham, North Carolina for an overbilling to the Springfield Apartments in 1995. Operating payroll costs increased $50,237 or approximately 20% from 1994 and 1995. The increase in payroll costs at the Oakwood Village Apartments is primarily responsible for this increase. During 1995, a full-time assistant community director was hired for this property. In addition, incentive compensation increased by $8,048 at both properties in 1995. The increase in other operating cost of $17,825 from 1994 to 1995 is solely attributable to the higher costs of providing property and liability insurance coverage at both properties.
Interest income increased from $18,255 for the twelve months ended December 31, 1994 to $46,530 for the comparable period in 1995. This increase resulted from higher rates of interest paid on investments during the current year, and an increase in cash and cash equivalents held by the Partnership. A small parcel of Oakwood Village land was sold during 1995 to DeKalb County for a road widening project. The land, which sold for $72,795 and had a cost basis of $6,853, netted a $65,942 gain for the Partnership.
Interest expense increased from $1,540,953 for the twelve months ended December 31, 1995 to $1,581,264 for the twelve months ended December 31, 1996. This increase in interest expense is a result of increases to the principal loan balance. The loan balance increases because interest accrues and is added to the loan balance for the Oakwood Village First Purchase Money Mortgage.
Net loss for the twleve months ended December 31, 1996 was $150,117 or $15.16 per Limited Partnership Unit outstanding as compared to a loss of $179,145 or $18.09 per Limited Partnership Unit for the comparable period ended December 31, 1995 and $273,540 or $27.62 per Limited Partnership Unit for the comparable period ended December 31, 1994. The primary source of funds in 1997 will accumulate from rental operations and investment earnings.
Cash distributios of $746,634, $723,116, and $664,418, were paid to limited partners and cash distributions of $39,296, $38,058, and $26,302 were paid to the general partners in 1996, 1995, and 1994 respectively.
Liquidity and Capital Resources
In management's opinion, working capital reserves and liquidity are sufficient to meet the short-term operating need of the Partnership. Long-term capital resources will be necessary to cover the mortgage balloon payments of $8,779,077 in 1997 and $8,825,000 in 1998. In management's opinion, proposed sources of funding to meet these long-term obligations will include either a debt refinancing or property sale.
Cash provided by operating activities increased by $27,880 from 1995 to 1996 The increase resulted primarily from a smaller net loss in 1996 and an increase in unearned rents from 1995 to 1996 which offset cash used to reduce accounts payable and pay the 1997 insurance premiums.
Cash used by investing activities totaled $95,756 for 1996 as compared to $1,835 for 1995. Fixed asset additions totaled $95,756 and $74,630 for 1996 and 1995 respectively. A small parcel of Oakwood Village Apartments land was sold for 472,795 during 1995 to DeKalb County for a road widening project. The sale proceeds of the land parcel decreased cash used by investing activities.
An increase in payments of notes payable in 1995 is the reason for the decrease in cash used by financing activities. $35,000 of the Oakwood Village land sale proceeds discussed above was used to make a principal paydown on the Oakwood Village purchase money first mortgage in 1995.
Item 8.

Item 8. Financial Statements and Supplementary Data
FOUNDATION REALTY FUND, LTD. (A Florida Limited Partnership)
Part I - Financial Information Page No.
Independent Auditor's Report 7
Balance Sheets as of December 31, 1996 and December 31, 1995 8
Statements of Operations - For the Years Ended December 31, 1996, 1995 and 1994 9
Statements of Partners' Equity - For the Years Ended December 31, 1996, 1995 and 1994 10
Statements of Cash Flows - For the Years Ended December 31, 1996 1995 and 1994 11
Notes to Financial Statements 12-15
Financial Statement Schedules:
Schedule V - Land, Buildings and Equipment 20
Schedule VI - Accumulated Depreciation of Buildings and Equipment 20
All other schedules have been omitted as not required, not applicable, or the information required to be shown therein is included in the financial statements and related notes.
To the Partners of Foundation Realty Fund, Ltd.
We have audited the accompanying balance sheets of Foundation Realty Fund, Ltd. (a Florida Limited Partnership) as of December 31, 1996 and 1995, and the related statements of operations, partners' equity and cash flows for each of the three years in the period ended December 31, 1996. These financial statements are the responsibility of the partnership's management. Our responsibility is to express an opinion of these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. These 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 also 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 Foundation Realty Fund, Ltd. as of December 31, 1996 and 1995 and the results of its operations and its cash flows for each of the three years in the period ended December 31, 1996 in conformity with generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the basic financial statements taken as a whole. The schedules listed under Item 14 are presented for purposes of complying with the Securities and Exchange Commission's rules and are not part of the basic financial statements. These schedules have been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, fairly state in all material respects the financial data required to be set forth therein in relation to the basic financial statements taken as a whole.
SPENCE,MARSTON,BUNCH,MORRIS & CO. Certified Public Accountants
Clearwater, Florida February 10, 1997
FOUNDATION REALTY FUND, LTD. (A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS December 31, 1996
NOTE 1 - ORGANIZATION:
Foundation Realty Fund, Ltd. (the "Partnership"), a Florida Limited Partnership, was formed April 14, 1987 under the laws of Florida. Operations commenced on January 12, 1988. The Partnership operates two apartment properties. The Partnership will terminate on December 31, 2020, or sooner, in accordance with the terms of the Limited Partnerhip Agreement. The partnership has received Limited and General Partner capital contributions of $9,407,000 and $1,000 respectively. J. Robert Love, an individual, and RJ Properties, Inc., a majority owned subsidiary of Raymond James Financial, Inc. are the General Partners and manage and controlthe business of the Partnership.
Operating profits and losses are allocated 95% to the limited partners and 5% to the general partners. Cash from operations will be shared 95% by the limited partners and 5% by the general partners; however, distributions to the general partners are subordinated to certain preferred returns to the limited partners. Profit and loss and cash distributions from sales of properties will be allocated as formulated in the Limited Partnership Agreement.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES:
Basis of Accounting
The Partnership utilizes the accrual basis of accounting wherby revenues are recognized when earned and expenses are recognized as obligation are incurred.
Cash and Cash Equivalents
It is the Partnership's policy to include short-term investments with an original maturity of three months or less in cash and cash equivalents. These short-term investments are comprised of money market funds, and repurchase agreements.
Restricted Cash
Cash and cash equivalents include $108,773 at December 31, 1996 and $46,756 at December 31, 1995 of cash held in escrow for the payment of real estate taxes. Cash and cash equivalents also include $93,797 at December 31, 1996 and $95,630 at December 31, 1995 of tenant security deposits held in escrow account.
Income Taxes
No provision for income taxes has been made in these financial statements, as income taxes are a liability of the partners rather than of the Partnership.
Concentrations of Credit Risk
Financial instruments which potentially subject the partnership to concentrations of credit risk consist principally of cash investments in high credit quality financial institutions.
Depreciation
The apartment buildings are being depreciated over 35 years using the straight-line method. Furniture and fixtures are being depreciated over eight years using the straight-line method.
Reclassifications
Certain accounts in the prior year financial statements have been reclassed for comparison purposes to conform with the presentation in the current year financial statements.
Risks and Uncertainties
The preparation of financial statements in conformity with generally accepted accounting principles requires the use of estimates that affect certain reported amounts and disclosures. These estimates are based on management's knowledge and experience. Accordingly, actual results could differ from these estimates.
NOTE 3 COMPENSATION, REIMBURSEMENTS, AND ACCRUALS TO THE GENERAL PARTNERS AND AFFILIATES:
The General Partners and affiliates are entitled to the following types of compensation and reimbursement for costs and expenses incurred for the Partnership for the years ended December 31:
1996 1995 1994
Property Management Fees $ 173,690 $ 171,294 $ 162,372 General & Administrative Costs 3,970 2,740 930
NOTE 4 - LEASES AND APARTMENT PROPERTIES:
The Partnership owns apartment complexes leased to residents under short-term operating leases. A summary of the apartment properties is as follows:
December 31, 1996 December 31, 1995
Land $ 3,141,510 $ 3,141,510 Buildings 17,298,118 17,298,118 Furniture & Fixtures 1,770,273 1,674,517
Apartment Properties at Cost 22,209,901 22,114,145
Less: Accumulated Depreciation (5,759,354) (5,129,893) $ 16,450,547 $ 16,984,252
NOTE 5 - TAXABLE INCOME:
The Partnership's taxable income differs from financial income primarily due to depreciation which is recorded under the Modified Accelerated Cost Recovery System (MACRS). The following is a reconciliation between net loss as reported and partnership loss for tax purposes:
1996 1995 1994 Net loss per financial statements $150,117 $179,145 $273,540 Tax depreciation in excess of financial depreciation 45,473 20,228 83,168
Partnership loss for tax purposes $195,590 $199,373 $356,708
NOTE 6 - NOTES PAYABLE:
The notes payable at December 31, 1996 and 1995 consist of the following:
1996 1995 Oakwood Village Purchase money first mortgage, interest accrues monthly at 9.25% and is added to principal. Final payment of $6,491,902 (including $3,926,902 of accrued interest) is due 9/29/97. The outstanding balance includes $3,496,519 of deferred interest in 1996 and $2,963,481 in 1995. $6,061,519 $5,528,481
Purchase money second mortgage at 9% payable monthly installments including principal and interest of $20,518 through 9/29/97. Final principal payment of $2,280,435 is due 9/29/97. 2,310,046 2,346,554
Springfield Purchase money first mortgage payable in monthly installments of interest only until 9/1/98 when the loan matures. Rate from 10/1/91 through 9/1/98 is 9.50%. 8,825,000 8,825,000 $17,196,565 $16,700,035
The aggregate amount of principal and deferred interest payments due in the years after December 31, 1996 are:
1997 $ 8,371,565 1998 8,825,000 $17,196,565
NOTE 7 - EXTRAORDINARY GAIN:
On September 21, 1995, .16 acre of the Oakwood Village Apartment's land was condemned by DeKalb County, Georgia for a road widening project. The Partnership received $72,795 for the condemed land parcel. The land, which had a basis of $6,853, resulted in an extraordinary gain of $65,942.
NOTE 8 - SUBSEQUENT EVENT:
On February 17, 1997, the Partnership paid distributions of $188,140 to the limited partners and $9,902 to the general partners.
Item 9.

Item 9. Disagreements on Accounting and Financial Disclosures
Not applicable.
Item 10.

Item 10. Directors and Executive Officers of the Registrant
The Partnership has no directors or officers.
Item 11.

Item 11. Executive Compensation
The Partnership has no directors or officers.
Item 12.

Item 12. Security Ownership of Certain Beneficial Owners & Management
The Registrant is a Limited Partnership and therefore does not have voting shares of stock. To the knowledge of the Partnership, no person owns a record or benificially, more than 5% of the Partnership's outstanding units.
Item 13.

Item 13. Certain Relationships and Related Transactions
The General Partners and affiliates are entitled to the following types of compensation and reimbursements for costs and expenses:
Total Incurred by the Partnership for the period ended December 31, 1996 1995 1994
Property management fees are paid to the General Partners for services performed in connection with, among other things, the day to day management to the Limited Partnership's properties. As compensation for management services they perform, the General Partners are paid a monthly fee equal to 5% of the monthly gross receipts from residential property. These fees are included in the Statement of Operations. $173,690 $171,294 $162,372
Affiliates of the General Partners are reimbursed for general and administrative expenses of the partnership on an accountable basis. This expense is included in the Statement of Operations. Direct costs are paid by the Partnership. 3,970 2,740 930
The General Partners receive 5% of cash frpm operations subject to certain subordination agreements. In addition, the General Partners are allocated 5% of all tax items. 39,296 38,058 26,302
PART 4
Item 14.

Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
A. 1. Financial Statements - see accompanying index to financial statements, Item 8.
2. Financial Statements Schedules - see accompanying index to financial statements, Item 8.
3. Exhibit Index -
Table Number Page 1.1 Form of Soliciting Dealer Agreement * 1.2 Form of Escrow Agreement between Foundation Realty Fund, Ltd. and Southeast Bank, NA * 2 Plan of acquisition, organization, arrangement, liquidation or succession ** 3.1 The form of Partnership Agreement of the Partnership * 3.2 Articles of Incorporation of RJ Properties, Inc. * 3.2.1 By-laws of RJ Properties, Inc. * 3.3 Certificate of Limited Partnership of Foundation Realty Fund,Ltd. * 4 Instruments defining the rights of security holders including debentures ** 5.1 Summary of appraisal of Oakwood Village Apartments ** 8.1 Tax opinion and consent of Schifino, Fleischer & Neal, P.A. * 9 Voting Trust Agreement ** 10.1 Oakwood Village Apartments Real Estate Acquisition Contract and Exhibits thereto * 11 Computation of per share earnings ** 12 Computation of ratios ** 13 Annual report to security holders ** 18 Letter re: change in accounting principles ** 19 Previously unfiled documents ** 22 Subsidiaries of the Registrant ** 23 Published report regarding matters submitted to vote of security holders ** 24 Consents of experts and counsel 24.1 The consent of Spence, Marston & Bunch * 24.2 The consent of Charles Smallwood, CPA * 24.3 The consent of Schifino, Fleischer & Neal, PA to all references made to them in the Prospectus included as part of the Registration Statement of Foundation Realty Fund, Ltd., and all amendments thereto, is included in their opinions filed as Exhibit 8.1 to the Registration Statement * 25 Power of Attorney ** 28.1 Table 6 (Acquisition of Properties by Program) of Appendix 2 to Industry Guide 5, Preparation of Registration Statements Relating to Interests in Real Estate Limited Partnerships * 29 Information from reports furnished to state insurance regulatory authorities **
* Included with Form S-11, Registration No. 33-13849, previously filed with the Securities and Exchange Commission.
** Exhibits were omitted as not required, not applicable or the information required to be shown therein is included elsewhere in this report.
B. Reports filed on Form 8-K - None
C. Exhibits filed with this Report - None
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the report has been signed by the following persons on behalf of the Registrant and in the capacities and on the date indicated.
FOUNDATION REALTY FUND, LTD. (A Florida Limited Partnership) (Registrant)
By: RJ PROPERTIES, INC. a General Partner
Date: March 10, 1997 By: J.Robert Love President (Signature) Date: March 10, 1997 By: Alan G. Lee Secretary (Signature)
Pursuant to the requirements of Section 13 or 15(d) of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned duly authorized.
FOUNDATION REALTY FUND, LTD. (A Florida Limited Partnership) (Registrant)
By: RJ PROPERTIES, INC. a General Partner
Date: March 10, 1997 By: J. Robert Love President (Signature) Date: March 10, 1997 By: Alan G. Lee Secretary (Signature)