SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549

FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended: December 31, 1997

Commission file number: 0-305

Name of registrant: NATIONAL PROPERTIES CORPORATION
I.R.S. Employer Identification Number: 42-0860581
Address: 4500 Merle Hay Road, Des Moines, Iowa 50310
telephone number: (515) 278-1132

Securities registered pursuant to Section 12(g) of the Act:

Common Stock, Par Value $1.00 (Title of Class)

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 (or for such shorter period
that the Registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.

Yes __X__ No _____

State the aggregate market value of the voting stock held by non-affiliates
of the Registrant. The aggregate market value shall be computed by the
reference to the price at which the stock was sold, or the average bid and
asked prices of such stock as of a specified date within 60 days prior to
the date of filing.

$5,612,519 as of March 2, 1998

Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the latest practicable date.

Common Stock, Par Value $1.00 - March 2, 1998 - 424,866 Shares

DOCUMENTS INCORPORATED BY REFERENCE

Proxy Statement for the 1998 annual meeting of Stockholders See Part III

PART I

Item 1. Business

(a) General Development of Business. The Registrant,
organized under the Iowa Business Corporation Act, is engaged
principally in the development of commercial real estate for
lease to tenants under net lease arrangements. The Registrant
also derives revenues from its portfolio of investment
securities.

On March 4, 1997, the Registrant executed contracts to purchase and leaseback
two convenience stores located in the Atlanta, Georgia area at a cost of
approximately $1,500,000 each. The closing on one store was October 15, 1997.
Closing on the second store was completed on February 13, 1998 at a cost of
$1,480,000 and was financed with funds drawn on the Registrant's credit lines.

On October 10, 1997, the Registrant sold its convenience store property in
Lincoln, Nebraska for $261,043, net of selling expenses and on October 15,
1997, a convenience store building located in Gainesville, Georgia (an
Atlanta, Georgia suburb) was acquired in a qualified IRC Section 1031 Exchange
for $1,500,000. The cash balance of $1,238,957 to complete the exchange was
drawn on the Registrant's long-term line of credit.

(b) Financial Information About Industry Segments. The
Registrant operates in a single industry segment.

Real Estate Held For Investment

The Registrant seeks to acquire or develop improved real estate properties
suitable for lease to commercial tenants. It is the Registrant's policy to
invest in properties that are fully leased to a single tenant which is
responsible for payment of real estate taxes, insurance, utilities and
repairs. Under such circumstances, the Registrant has limited management
responsibilities for such properties once they are constructed and leased. In
most cases properties are constructed by the tenant and conveyed to the
Registrant under a sale and leaseback arrangement. It is not the policy of
the Registrant to invest in multiple tenant office buildings or residential
facilities. Primary factors considered by the Registrant in developing a
property for lease are the use to be made of the property, its location, the
nature and credit standing of the tenant, the rental income to be derived
under the lease, and the ability of the Registrant to utilize the property or
dispose of it upon termination of the lease.

All of the investment properties now owned by the Registrant are located in
Arizona, Georgia, Iowa, Kansas, Missouri, Nebraska, Oklahoma, and Texas. The
Registrant has placed no limitations, however, on the locations in which it is
willing to develop properties in the future.

The commercial real estate acquired by the Registrant is normally purchased
with funds drawn on the Registrants lines of credit. In most cases, the
Registrant gives careful consideration to the rate of return which it will
receive from an investment based on the original cost thereof to the
Registrant without regard to possible mortgage financing. While the rate of
return varies, it has ranged generally from 10% to 13%.

Real estate investments acquired or developed by the Registrant are not held
for resale, but are held as long-term investments. The Registrant may,
however, dispose of properties depending upon the circumstances then existing.

Virtually all of the Registrant's development activity is handled by its
President, including lease negotiations, site acquisitions, construction
activities, and financing.

The real estate investment activity engaged in by the Registrant is highly
competitive, with numerous investors seeking to develop properties for lease
to qualified tenants. These competitors include numerous major national
financial institutions with resources and abilities to attract tenants which
are far greater than those of the Registrant; as well as many other types of
full-time and part-time real estate investors.

At December 31, 1997, the Registrant owned 39 leased properties having an
aggregate cost of $27,426,345. The rental income for 1997 on these leased
properties amounted to $3,491,764. Seven of the properties are leased to two
restaurant operators and account for 18.5% of rental income; four telephone
service center buildings and one Goodyear Tire Service Center building account
for 10.5% of rental income; eighteen QuikTrip Convenience stores and one
related office building account for 49.8% of rental income; three nurseries
(garden centers) account for 13.5% and three 7-Eleven Convenience stores, one
motel land lease and three office buildings account for the balance of 6.2%.
In addition to the foregoing, other properties, held for future development,
generated rental income of $54,545 in 1997.

As of December 31, 1997, the tenants of all 39 leased properties were in
compliance with the terms of their respective leases. However, Sunbelt
Nursery Group, Inc., which operates approximately 60 retail nurseries (Garden
Centers), including three owned by the Registrant, has incurred substantial
losses over the last two years and has reported a loss of approximately
$4,500,000 for the first six months of their current fiscal year ended
December 28, 1997. The three stores owned by the Registrant generate annual
rental income of approximately $455,000 of which $78,000 on one of the nursery
properties is guaranteed by a third party. Sunbelt has taken significant
steps to restore profitability, and has succeeded in narrowing its losses in
the current year. However, in the event Sunbelt determines that a Chapter 11
Reorganization is necessary, the Registrant may incur a substantial reduction
in future lease rental income.

Other Investments

The Registrant has a portion of its assets invested in marketable securities
which had a market value of $2,148,283 as of December 31, 1997.

Employees

The Registrant currently employs 6 persons; 3 full-time employees and
3 part-time employees.

Item 2
Properties (Dec. 31, 1997) Land Bldgs. & Accumulated Rental Lease Renewal
Mortgage Int.
Cost Improve. Depreciation Income 1997 Expires Options
Balance Rate
--------- ---------- ------------ ----------- ------- -------- ----
- ------ ------

A. DAYS INN-LAND LEASE Newton, Ia. 82,500 - - 26,048 2006 4-10 Yr.
- -
--------- ---------- ------------ ----------- ----
- ------
B. RESTAURANT PROPERTIES
Perkins 'Cake & Steak Des Moines, Ia. 137,000 343,365 289,571 68,316 2001 1-5 Yr
- -
Perkins 'Cake & Steak Des Moines, Ia. 140,000 341,602 286,946 73,612 2002 1-5 Yr
- -
Perkins 'Cake & Steak Des Moines, Ia. 200,000 373,192 373,192 71,893 2002 2-5 Yr.
- -
Perkins 'Cake & Steak Newton, Ia. 112,500 485,181 436,663 84,424 1999 2-5 Yr.
- -
Perkins 'Cake & Steak Des Moines, Ia. 243,166 498,675 448,807 105,192 2000 2-5 Yr.
- -
Carl's Jr. Restaurant a Chandler, AZ. 168,000 772,000 579,000 114,778 2005 3-5 Yr.
- -
Carl's Jr. Restaurant a Tucson, AZ. 90,000 738,000 474,535 128,757 2005 6-5 Yr.
- -
--------- ---------- ------------ ----------- ----
- ------
Total 1,090,666 3,552,015 2,888,714 646,972 -
--------- ---------- ------------ ----------- ----
- ------
C. SERVICE CENTERS
Northwestern Bell Decorah, Ia. 20,000 191,102 131,860 22,966 1999 1-5 Yr.
- -
Northwestern Bell Cedar Rapids, Ia. 37,000 397,394 253,156 84,000 2001 1-5 Yr.
- -
Continental Tel. Co. Chariton, Ia. 8,364 541,755 386,452 70,641 2000 - )
- -
Continental Tel. Co. Fayette, Ia. 6,322 428,685 305,790 56,190 2000 - )
246,194 9.984
Goodyear Service Ctr. Wichita, KS. 100,000 978,725 265,420 132,000 2004 4-5 Yr.
- -
--------- ---------- ------------ ----------- ----
- ------
Total 171,686 2,537,661 1,342,683 365,797
246,194
--------- ---------- ------------ ----------- ----
- ------

D. CONVENIENCE STORES
QuikTrip a Des Moines, Ia. 144,664 691,878 250,524 110,882 2010 2-5 Yr.
- -
QuikTrip & Off. Bldg. Des Moines, Ia. 215,000 672,000 486,080 103,680 1999 2-5 Yr.
- -
QuikTrip Des Moines, Ia. 50,000 185,000 161,104 47,051 2000 2-5 Yr.
- -
QuikTrip Des Moines, Ia. 60,000 200,000 200,000 44,057 2002 1-5 Yr.
- -
QuikTrip Des Moines, Ia. 50,240 265,360 234,401 43,305 2004 2-5 Yr.
- -
QuikTrip Wichita, KS. 53,500 436,637 107,154 58,081 2009 4-5 Yr.
- -
QuikTrip Norcross, Ga. 103,000 765,000 177,587 102,858 2014 4-5 Yr.
- -
QuikTrip Wichita, KS. 60,000 514,000 123,072 67,445 2010 4-5 Yr.
- -
QuikTrip Tulsa, OK. 155,000 1,340,000 313,761 175,662 2010 4-5 Yr.
- -
QuikTrip a Des Moines, Ia. 84,500 557,500 123,524 75,435 2010 4-5 Yr.
- -
QuikTrip a Johnston, Ia. 48,502 476,160 82,519 73,574 2012 4-5 Yr.
- -
QuikTrip a St. Louis, Mo. 152,000 1,575,433 277,572 231,780 2017 4-5 Yr.
- -
QuikTrip a Des Moines, Ia. 183,095 900,000 122,634 108,183 2013 4-5 Yr.
- -
QuikTrip Norcross, Ga. 92,500 834,000 79,323 92,650 2009 4-5 Yr.
- -
QuikTrip Norcross, Ga. 95,500 858,000 81,604 95,350 2009 4-5 Yr.
- -
QuikTrip Clive, Ia. 325,605 393,814 25,673 124,570 2015 4-5 Yr
- -
QuikTrip Alpharetta, Ga 148,585 1,324,000 49,654 149,472 2016 4-5 Yr
- -
QuikTrip Gainesville, Ga. 122,927 1,227,923 8,527 33,586 2012 4-5 Yr.
- -
7-Eleven Des Moines, Ia. 96,455 137,954 128,183 39,674 1999 1-5 Yr.
- -
7-Eleven Lincoln, NE. - - - 22,924 1999 1-5
Yr.Sold10/10/97
7-Eleven Omaha, NE. 44,110 128,574 122,682 30,838 1998 1-5 Yr.
- -
--------- ---------- ------------ ----------- ---
- -------
Total 2,281,741 13,483,233 3,155,578 1,831,057
- -
--------- ---------- ------------ ----------- ---
- -------
E. OFFICE BUILDINGS
Associates Financial
Serv. Des Moines, Ia. 61,692 55,812 41,161 14,850 1997 1-3 Yr.
- -
Corporate Headquarters b Des Moines, Ia. 25,000 418,222 336,428 39,520 1999 2-2 Yr.
- -
GTech Des Moines, Ia. 16,000 174,953 130,559 41,200 2001 1-2 Yr.
- -
--------- ---------- ------------ ----------- ---
- -------
Total 102,692 648,987 508,148 95,570
- -
--------- ---------- ------------ ----------- ---
- -------
F. GARDEN CENTERS
Wolfe Nursery a Dallas, TX. 125,000 586,825 537,923 94,791 1999 3-5 Yr.
- -
Tip-Top Nursery a Glendale, AZ. 66,144 433,057 148,374 158,484 2002 3-5 Yr.
- -
Wolfe Nursery a Arlington, TX. 200,000 1,700,000 254,133 218,500 2010 3-5 Yr.
- -
--------- ---------- ------------ ----------- ---
- -------
Total 391,144 2,719,882 940,430 471,775
- -
--------- ---------- ------------ ----------- ---
- -------
G. OTHER PROPERTIES 260,386 103,752 100,442 54,545
- -
--------- ---------- ------------ ----------- ---
- -------
Totals 4,380,815 23,045,530 8,935,995 3,491,764
246,194
========= ========== ============ ===========
==========

a Mortgaged to Lender - See Note 4 of Notes to Financial Statements.
b 50% Used by Registrant; 50% Leased

Other Properties

The following unencumbered properties are held for future
development by the Registrant.

(1) Real Estate, S. E. Delaware and Oralabor Road, Ankeny, Iowa.

This commercially zoned property is located in Ankeny, Iowa, at the Industrial
Exit of Interstate 35. It contains approximately 33 acres.

(2) Real Estate, Interstate 80 & Highway 14, Newton, Iowa.

This is a 4-acre undeveloped site adjoining the Perkins Restaurant and Days
Inn Motel.

(3) Real Estate, 4745 - 2nd Avenue, Des Moines, Iowa.

This site contains approximately 106,000 square feet of land and a 3,200
square foot concrete block building. The building is leased as a lounge for
$2,750 per month, and the lease expires December 31, 1998. Approximately
82,000 square feet of unused land is available for development.

(4) Real Estate, 845 Sixth Avenue, Des Moines, Iowa

This 6,000 square foot concrete block building situated on a lot of the same
size was purchased in 1974. This building is rented for $1,500 per month, and
the lease expires April 30, 1998.

Item 3. Legal Proceedings.

The Registrant is not engaged in any material legal proceedings.

Item 4. Submission of Matters to a Vote of Security Holders.

NOT APPLICABLE

PART II

Item 5. Market for the Registrant's Common Stock and Related
Security Holder Matters

The Common Stock of the Registrant (symbol NAPE) is traded on
the over-the-counter bulletin board; a product of the National
Association of Security Dealers, Inc., sponsored by market
makers. Quotations are inter-dealer prices, without retail
mark-up, or mark-down, or commission and may not necessarily
represent actual transactions. The prices shown below are by
calendar quarters for 1997 and 1996. N/A indicates prices were
not available.

Bid Asked
1997 High Low High Low

1st Quarter 21-3/4 20-1/2 N/A N/A
2nd Quarter 24 22 N/A N/A
3rd Quarter 28 24 N/A N/A
4th Quarter 28-5/8 28 N/A N/A

Bid Asked
1996 High Low High Low

1st Quarter 23-3/4 17 N/A N/A
2nd Quarter 20 20 N/A N/A
3rd Quarter 20 20 N/A N/A
4th Quarter 20-1/2 20 N/A N/A

A cash dividend of 10 cents per share was paid in 1997. Future dividend
declarations will be dependent upon the earnings of the Registrant, its
financial condition, its capital requirements and general business conditions.

There were approximately 750 stockholders of record as of March 2, 1998.

Item 6. Selected Financial Data. (In thousands except for per
share amounts)

Year ended December 31,
1997 1996 1995 1994 1993

Year ended December 31,
Lease rental income 3,492 3,262 3,140 3,016 2,766
Interest income 1 - 3 8 2
Dividend income 72 80 89 107 114
Gain on sale of
securities 24 59 103 104 1
Net income 1,143 1,039 903 905 792

At December 31,
Total assets 20,778 20,115 19,118 19,600 17,412
Long-term debt 5,264 6,031 5,148 6,758 6,220
Book value-properties &
equipment 18,495 18,102 17,394 17,682 16,352
Net Unrealized Gain
Marketable Securities 917 569 605 462 -
Stockholders' equity 13,922 12,899 12,070 11,142 10,025

Per Common Share
Net income* 2.62 2.30 1.97 1.96 1.68
Cash dividends 0.10 0.10 0.00 0.18 0.17
Book value 32.27 28.71 26.49 24.15 21.38

*Based on weighted average shares outstanding

Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations.

Liquidity and Capital Resources

At December 31, 1997, the Registrant's primary source of
liquidity was $79,545 in cash; marketable securities with a
market value of approximately $2,148,000; and a $6,075,000
remaining loan balance available on three lines of credit with
two local banks. (See Note 4 of the Notes to Financial
Statements). In addition, the Registrant owns unencumbered real
estate having an aggregate depreciated cost of approximately $8,000,000.
Management
believes that its cash flow from operations and other potential
sources of cash, will be sufficient to finance current and
projected operations.

Each year for many years the Registrant has reacquired a limited
amount of its common stock. During the three years ended
December 31, 1997, 29,857 shares were repurchased in the open
market and negotiated transactions. The total cost of the
reacquired shares amounted to $671,433; an average per share
cost of $22.49.

Results of Operations 1997 Compared to 1996

As detailed on the Income Statement total income for the year 1997 was
approximately $185,000 more than in 1996. The increase in rental income of
approximately $230,000 was due to property acquisitions in 1996 and 1997 that
produced additional rental income of approximately $175,000. ($187,000 in
1997 versus $12,000 in 1996). In addition rent increases on nine properties
totaled approximately $46,000 in 1997, which was offset by a decrease of
approximately $6,700 in rental income due to a sale of one property in 1997.
Contingent rentals based on sales overages increased approximately $15,000 in
1997.

Total expenses increased approximately $36,000 in 1997 primarily due to
increases in professional fees, payroll costs and depreciation aggregating
$49,000 offset by a decrease in interest costs of $13,000.

The effective income tax rate was 36.1% in 1997 as compared to 36.6% in 1996.

Results of Operations 1996 Compared to 1995

As detailed on the Income Statement total income for the year 1996 was
approximately $69,000 more than in 1995. The increase in rental income of
approximately $122,000 was due to property acquisitions in 1996 and 1995 that
produced additional rental income of approximately $95,000. ($368,000 in 1996
versus $273,000 in 1995). In addition rent increases on seven properties
aggregated approximately $33,000 in 1996, which was offset by a decrease of
approximately $7,500 due to a sale of a rental property in 1995.

Total expenses decreased approximately $150,000 primarily due to decrease in
interest, professional fees, and payroll costs aggregating approximately
$171,000 offset by an increase in depreciation and maintenance costs
aggregating approximately $24,000.

The effective income tax rate was 36.6% in 1996 as compared to 36.4% in 1995.

Item 8. Financial Statements and Supplementary Data.

Financial statements filed herewith:

Balance Sheets as of December 31, 1997 and December 31, 1996.

Statements of Income and Stockholders' Equity for the years ended
December 31, 1997, December 31, 1996 and December 31, 1995.

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

Notes to Financial Statements.

Accountant's Report.

Item 9. Disagreements on Accounting and Financial Disclosures.

NONE

PART III

In answer to Items 10, 11, 12 and 13 of Part III, the Registrant
incorporates by reference the required information which is
contained in its definitive Proxy Statement. The Proxy
Statement is for the 1998 annual meeting of stockholders and
will be filed with the Commission not later than 120 days after
December 31, 1997.

PART IV

Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
(a) List the following documents filed as part of this report.
1. All financial statements.
See Item 8 of Part II.
2. Financial statement schedules.
Schedule III as of December 31, 1997.
Note to schedule III as of December 31, 1997, 1996 and
1995.
All other Schedules are omitted
because they are inapplicable or not required.
(b) No report on Form 8-K was filed during the last quarter of 1997.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused
this report to be signed on its behalf by the undersigned
thereunto duly authorized.

___NATIONAL PROPERTIES CORPORATION___ (Registrant)

Date __3/20/98__ By _____/S/__Raymond_Di_Paglia_________
Raymond Di Paglia, President and Chief
Executive Officer

Date __3/20/98__ By _____/S/__Kristine_M._Fasano__________
Kristine M. Fasano, Secretary

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.

DIRECTORS OF THE REGISTRANT

Date __3/20/98__ By _____/S/__William_D._Buzard________
William D. Buzard

Date __3/20/98__ By _____/S/__Raymond_Di_Paglia________
Raymond Di Paglia

Date __3/20/98__ By _____/S/__Kristine_M._Fasano_______
Kristine M. Fasano

Date __3/20/98__ By _____/S/__Robert_H._Jamerson_______
Robert H. Jamerson

NORTHUP, HAINES, KADUCE, SCHMID, MACKLIN, P.C.
Certified Public Accountants

Board of Directors and Stockholders
National Properties Corporation

INDEPENDENT AUDITOR'S REPORT

We have audited the accompanying balance sheets of National Properties
Corporation as of December 31, 1997 and 1996 and the related statements of
income, stockholders' equity and cash flows for each of the three years in the
period ended December 31, 1997. These financial statements and the schedules
referred to below are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
schedules 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 misstatements. 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 National Properties
Corporation as of December 31, 1997 and 1996, and the results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1997, in conformity with generally accepted accounting
principles.

Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedules listed in Item 14(a)(2)
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 our audits
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.

/S/ NORTHUP, HAINES, KADUCE, SCHMID, MACKLIN, P.C.
NORTHUP, HAINES, KADUCE, SCHMID, MACKLIN, P.C.

February 10, 1998
West Des Moines, Iowa

1025 Ashworth Road. Suite 500, West Des Moines, IA 50265-3500, Phone (515)
223-0221 Fax: (515) 223- 1030

NATIONAL PROPERTIES CORPORATION BALANCE SHEETS

December 31,
1997 1996

ASSETS

CURRENT ASSETS
Cash 79,545 120,784
Mortgage loans receivable - 718
Accounts receivable 12,451 15,576
Prepaid income taxes - 244,467
Other 6,711 6,724
---------- ----------
Total current assets 98,707 388,269
---------- ----------

PROPERTY AND EQUIPMENT, AT COST - Notes 1 and 5
Land 4,380,815 4,402,210
Buildings and improvements 23,045,530 21,896,495
Furniture and equipment 63,677 62,816
---------- ----------
27,490,022 26,361,521
Less-accumulated depreciation 8,995,091 8,259,087
---------- ----------
Property and equipment-net 18,494,931 18,102,434
---------- ----------

OTHER ASSETS
Marketable securities, at market value-Note 3 2,148,283 1,581,725
Deferred charges and other assets 35,596 42,723
---------- ----------
Total other assets 2,183,879 1,624,448
---------- ----------
20,777,517 20,115,151
========== ==========

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
Accounts payable 3,830 5,699
Notes payable - Note 4 - 225,000
Accrued liabilities 287,266 264,653
Current maturities of long-term debt 407,062 96,929
Federal and state income taxes 27,298 -
---------- ----------
Total current liabilities 725,456 592,281
---------- ----------
LONG-TERM DEBT - Notes 4 & 5 5,264,132 6,030,779
---------- ----------
DEFERRED INCOME TAXES 865,733 592,638
---------- ----------
STOCKHOLDERS' EQUITY
Common stock - $1 par value
Authorized - 5,000,000 shares
Issued - (1997-431,456 shares; 1996-449,245 shares) 431,456 449,245
Retained earnings 12,573,294 11,881,556
Net unrealized gain on marketable securities 917,446 568,652
---------- ----------
Total stockholders' equity 13,922,196 12,899,453
---------- ----------
20,777,517 20,115,151
========== ==========

NATIONAL PROPERTIES CORPORATION
STATEMENTS OF INCOME AND STOCKHOLDERS' EQUITY
For the years ended December 31, 1997, 1996 and 1995

STATEMENTS OF INCOME 1997 1996 1995

REVENUES
Lease rental income 3,491,764 3,262,200 3,139,978
Interest income 703 235 2,975
Dividend income 71,985 79,870 89,168
Gain on sale of assets 24,336 61,819 102,823
---------- ---------- ----------
Total revenues 3,588,788 3,404,124 3,334,944
---------- ---------- ----------

EXPENSES
Salaries and wages 251,440 245,874 269,964
Depreciation 807,989 776,699 767,455
Property, payroll and misc. taxes 60,958 56,776 57,586
Interest 484,119 497,161 638,821
Other 196,605 188,560 181,603
---------- ---------- ----------
Total expenses 1,801,111 1,765,070 1,915,429
---------- ---------- ----------
Income before income taxes 1,787,677 1,639,054 1,419,515

INCOME TAXES-Note 2 644,595 599,951 516,822
---------- ---------- ----------
Net income 1,143,082 1,039,103 902,693
========== ========== ==========

Net income per share 2.62 2.30 1.97
Weighted average common shares outstanding 435,761 451,876 457,720

STATEMENTS OF STOCKHOLDERS' EQUITY
Net

Unrealized
gain on
Common Retained
marketable
Stock Earnings
securities
---------- ---------- ----------

Balances December 31, 1994 461,313 10,219,318 461,579
Net income - 1995 - 902,693 -
Purchase and retirement of common stock (5,658) (112,229) -
Change in unrealized gains, net of tax - - 143,427
---------- ---------- ----------
Balances December 31, 1995 455,655 11,009,782 605,006
Net income - 1996 - 1,039,103 -
Purchase and retirement of common stock (6,410) (121,950) -
Cash dividend - 10 cents per share - (45,379) -
Change in unrealized gains, net of tax - -
(36,354)
---------- ---------- ----------
Balances December 31, 1996 449,245 11,881,556 568,652
Net income - 1997 - 1,143,082 -
Purchase and retirement of common stock (17,789) (407,397) -
Cash dividend - 10 cents per share - (43,947) -
Change in unrealized gains, net of tax - - 348,794
---------- ---------- ----------
Balances December 31, 1997 431,456 12,573,294 917,446
========== ========== ==========

NATIONAL PROPERTIES CORPORATION
STATEMENTS OF CASH FLOWS
For the years ended December 31, 1997, 1996 and 1995

Increase(Decrease) in Cash
1997 1996 1995
---------- ---------- ----------

CASH FLOW FROM OPERATING ACTIVITIES
Net income 1,143,082 1,039,103 902,693
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation and amortization 815,116 782,712 774,075
Deferred income taxes 73,471 267,183 -
Gain on sale of assets (24,336) (61,819)
(102,823)
Changes in assets and liabilities:
Accounts receivable 3,125 2,158 161
Prepaid expenses and deferred charges 13 (14,532)
(20)
Accounts payable and accrued expenses 20,745 75,266
(141,275)
Federal and state income taxes 271,765 (247,800)
(65,729)
---------- ---------- ----------
Net cash provided by operations 2,302,981 1,842,271 1,367,082
---------- ---------- ----------

CASH FLOW FROM INVESTING ACTIVITIES
Additions to property and equipment (1,200,486) (1,484,811)
(479,928)
Payments received on mortgage notes 718 2,586 8,713
Purchase of securities (37,368) (148,736)
(128,962)
Proceeds - sale of assets 43,563 119,501 518,793
---------- ---------- ----------
Net cash used in
investing activities (1,193,573) (1,511,460)
(81,384)
---------- ---------- ---------
- -

CASH FLOW FROM FINANCING ACTIVITIES
Borrowings on credit lines 3,000,000 2,679,664 1,297,303
Repayments of credit line borrowings (3,584,585) (2,275,079)
(2,317,302)
Principal payments on mortgage Notes (96,929) (564,704)
(262,640)
Dividends paid (43,947) (45,379) -
Purchase of treasury stock (425,186) (128,360)
(117,887)
---------- ---------- ----------
Net cash provided by (used) in
financing activities (1,150,647) (333,858)
(1,400,527)
---------- ---------- ----------
Net increase (decrease) in cash (41,239) (3,047)
(114,829)
Cash at beginning of year 120,784 123,831 238,660
---------- ---------- ----------
Cash at the end of year 79,545 120,784 123,831
========== ========== ==========

SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid during the year for:
Interest expense 523,320 503,527 657,366
Income tax payments 372,830 580,568 582,551

NON-CASH INVESTING TRANSACTIONS
Exchange of like kind real restate:
Basis of property received 1,350,850 - 535,247
Less cash paid 1,238,957 - 335,247
---------- ---------- ---------
Basis of property given up 111,893 - 200,000
========== ========== =========

NOTES TO FINANCIAL STATEMENTS
SUMMARY OF ACCOUNTING POLICIES

Marketable Securities: Marketable securities are classified as available-for
- -sale and reported at fair market value in accordance with the Statement of
Financial Accounting Standards (SFAS) No. 115. The Registrant's investments
are held for an indefinite period.

Property and Equipment: Property and equipment are recorded at
cost and depreciated on a straight-line basis over the estimated
useful lives of 15 to 39 years for buildings and 5 to 7 years
for equipment.

Long-Lived Assets: On January 1, 1996, the Registrant adopted SFAS 121 (SFAS
121), "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed of". SFAS 121 requires that long-lived assets and
certain indentifiable intangible assets to be held and used, or disposed of,
be reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable. During
1997 and 1996, the Company determined that none of its long-lived assets had
been impaired, and therefore the Company did not adjust the carrying amounts
of such assets.

Net Earnings Per Common Share: Net earnings per share are based
on the weighted average number of shares outstanding 435,761 in
1997; 451,876 in 1996 and 457,720 in 1995.

Profit-Sharing Plan: The Registrant has a profit sharing plan adopted in
1965, for eligible employees, under which it contributes a portion of its
annual earnings. The plan and all of its amendments have been approved by the
Internal Revenue Service. The Registrant's contribution to the plan was
$35,662 in 1997; $36,166 in 1996 and $39,142 in 1995.

Lease Rentals - Commercial Real Estate: Lease rentals received on commercial
real estate are accounted for under the operating method; rentals are included
in income as earned over the term of the lease.

Estimates: The preparation of the financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could vary from the estimates that were
used.

Fair Value of Financial Instruments: The Registrant's financial instruments
are valued at their carrying amounts which are reasonable estimates of fair
value.

Recent Accounting Pronouncement: In June 1997, the FASB issued a Statement of
Financial Accounting Standard No. 130, "Reporting Comprehensive Income." This
statement is effective for fiscal years commencing after December 15, 1997.
The Company will be required to comply with the provisions of this statement
in 1998. The Company has not assessed the effect that this new standard will
have on its financial statements and/or disclosures.

NOTE 1 - PROPERTIES UNDER LEASE

The Registrant is the lessor of commercial real estate under noncancelable
operating leases requiring fixed and contingent rentals through the year 2017.
Contingent rentals based on sales overages amounted to $71,663 in 1997;
$56,294 in 1996 and $54,701 in 1995. The following is a schedule of future
minimum rentals at December 31, 1997, not including renewal options and
contingent rentals.

Year ended December 31, Amount

1998 3,525,911
1999 3,405,554
2000 2,967,760
2001 2,857,889
2002 2,552,564
Subsequent years 20,355,564
----------
Aggregate future minimum rentals 35,665,242
==========

NOTE 2 - INCOME TAXES

Income tax expense for the years ended December 31, 1997, 1996 and 1995 is
comprised of the following:

1997 1996 1995
---------- ---------- ----------
Current
Federal 498,071 273,807 433,406
State 73,053 58,961 83,416
---------- ---------- ----------
Total current 571,124 332,768 516,822
Deferred 73,471 267,183 -
---------- ---------- ----------
644,595 599,951 516,822
========== ========== ==========

A reconciliation of the statutory federal income tax rate of 34 percent in
1997, 1996 and 1995 to the effective tax rate is as follows:

1997 1996 1995
---------- ---------- ----------

Statutory federal income tax rate 34.0% 34.0% 34.0%
State taxes, net of federal tax benefit 3.1 3.8 3.5
Tax savings on dividends (1.0) (1.2) (1.1)
---------- ---------- ----------
Total tax provision 36.1 36.6 36.4
========== ========== ==========

Temporary differences which give rise to deferred tax liabilities in 1997 and
1996 are as follows:

1997 1996
---------- ---------
Excess of tax over book depreciation 340,654 267,183
Unrealized gain on marketable securities 525,079 325,455
---------- ---------
Total tax provision 865,733 592,638
========== =========

Deferred income taxes result from the temporary differences in the recognition
of income and expenses for tax and financial statement purposes. The source
of the temporary difference was due to a change in depreciation for income tax
reporting in 1996. The Small Business Job Protection Act of 1996 (The Act)
amended the Internal Revenue Code regarding depreciation of motor fuel retail
outlets permitting the Registrant to depreciate its qualifying convenience
stores over a life of 20 years. The Act further provided that this change
could be applied retroactively to all such properties placed in service after
1986. The retroactive change decreased the Registrant's federal and state
income taxes for 1996 by $267,183. This amount was recorded as a deferred tax
liability as of December 31, 1996. For financial statement purposes the
Registrant depreciates its convenience stores over an average useful life of
30 years.

NOTE 3 - MARKETABLE SECURITIES

The Company's marketable securities consist of equity securities and were
carried at fair market value. At December 31, 1997, marketable Securities
available-for-sale had an aggregate market value of $2,148,283 and a cost of
$705,758 resulting in a gross unrealized gain of $1,442,525. At December 31,
1996, marketable securities had an aggregate market value of $1,581,725 and a
cost of $687,617 for a gross unrealized gain of $894,108. The difference
between the cost and fair market value of the securities, net of the tax
effect, is shown as a separate component of shareholder's equity.

The Company had gross realized gains of $24,336 and $59,144 on the sale of
marketable securities during 1997 and 1996 and no realized losses. During
1995 the Company had gross realized gains of $124,730 and gross realized
losses of $21,907. Gain or loss on sales was based on the cost of the
securities using the specific indentification method.

NOTE 4 - NOTES PAYABLE - BANKS

As of December 31, 1997, the registrant had a $4,000,000 unsecured working
capital line of credit with Norwest Bank Iowa, N.A. The credit line which has
been in effect for the past several years was created to facilitate the
Registrant's real estate acquisitions. Borrowings will bear interest at the
bank's base (Prime) rate floating. No compensating balance is required but a
non-usage fee of 1/8 of 1% is payable quarterly to the bank on the unused
portion of the line. As of December 31, 1997, there was no outstanding
balance on this loan as compared to $225,000 as of December 31, 1996.

As of December 31, 1997, the Registrant had a $6,000,000 10-year, revolving
credit line with Norwest Bank Iowa, N.A. The $6,000,000 loan commitment
reduces $600,000 beginning December 31, 1997, and each year thereafter until
final maturity on December 31, 2006. Borrowings secured by first mortgages on
various properties, bear interest at the bank's base (Prime) rate floating,
and no compensating balance is required. As of December 31, 1997, the
outstanding balance on this loan was $3,325,000 as compared to $4,322,585 as
of December 31, 1996.

In November, 1994, the Registrant established a $3,000,000 10-year revolving
loan with Brenton Bank, N.A., Des Moines, Iowa. The credit line reduces
$300,000 beginning December 31, 1995, and each year thereafter until final
maturity on December 31, 2004. Borrowings secured by first mortgages on
properties, bear interest at the bank's base (Prime) rate floating. At
December 31, 1997, the outstanding balance on this loan was $2,100,000
compared to $1,462,000 as of December 31, 1996.

NOTE 5 - LONG-TERM DEBT

Long-term debt consists of the following:

December 31,
Rate 1997 1996
---------- ---------- ----------

Real estate mortgage notes
Due 1997-2000 10% 246,194 343,123

Norwest Bank Iowa, N.A.
Due 2006 - See Note 4 8.5% 3,325,000 4,322,585

Brenton Bank, N.A.
Due 2004 - See Note 4 8.5% 2,100,000 1,462,000
---------- ----------
5,671,194 6,127,708

Less-Current principal maturities 407,062 96,929
---------- ----------
5,264,132 6,030,779
========== ==========

Annual principal maturities over the next five years are as follows:

1998 1999 2000 2001 2002
------- ------- ------- ------- -------

Mortgage Note 107,062 118,254 20,878 - -
Norwest Bank - - - 325,000 600,000
Brenton Bank 300,000 300,000 300,000 300,000 300,000

NOTE 6 - REVENUE FROM MAJOR TENANTS

Lease rental income from three major tenants were $2,612,833, $2,426,281 and
$2,327,594 for the years ended December 31, 1997, 1996 and 1995 respectively,
representing 74% of total rental income for these years. Rents from these
major tenants were as follows:

1997 1996 1995
---- ---- ----

Industry Revenue % Revenue % Revenue %

Convenience stores 1,737,621 49.8 1,560,986 47.9 1,455,467 46.3
Garden centers 471,775 13.5 469,260 14.4 473,815 15.1
Restaurants 403,437 11.5 396,035 12.1 398,312 12.7
--------- ---- --------- ---- --------- ----
2,612,833 74.8 2,426,281 74.4 2,327,594 74.1
========= ==== ========= ==== ========= ====

NOTE 7 - QUARTERLY OPERATING DATA (UNAUDITED)

The following is a summary of unaudited quarterly results of operations:

Quarter
First Second Third Fourth
---------- ---------- ---------- ----------

1997
Revenues 928,414 894,570 864,620 901,184
Net Income 293,631 280,895 276,107 292,449
Per share 66 cents 63 cents 63 cents 67 cents

1996
Revenues 855,170 846,519 849,167 853,268
Net Income 259,543 236,485 271,173 271,902
Per share 57 cents 52 cents 60 cents 60 cents

NATIONAL PROPERTIES CORPORATION

SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION

Description Encum- Initial costs Cost capi- Gross
Accumulated Date ac- Life on
brances to company talized amount at
depreciation quired which de-
subsequent which car-
preciation
to acquis- ried at
in latest in-
tion close of pe-
come state-
iod
ments is

computed

<>c>
QuikTrip Stores
Tulsa, OK $ -0- $ 1,340,000 $ -0- $ 1,340,000
$ 313,761 08/22/90 31 1/2
St. Louis, MO 1,381,946 1,454,000 121,433 1,575,433
271,215 1992/1995 31 1/2
Alpharetta, GA -0- 1,324,000 -0- 1,324,000
49,654 12/03/96 30
Gainesville, GA -0- 1,227,923 -0- 1,227,923
8,527 10/15/97 30

Garden Center
Wolfe Nursery
Arlington, TX 1,520,000 1,700,000 -0- 1,700,000
254,133 04/01/93 31 1/2
Miscellaneous
investments 2,769,248 15,006,539 871,636 15,878,175
8,038,705 1976/1995 15/39
---------- ----------- ---------- ----------
- ----------
Totals $5,671,194 $22,052,426 $ 993,069 $23,045,531
$8,935,995
========== =========== ========== ===========
==========

NOTE TO SCHEDULE III
Real Estate
1997 1996 1995

Balance, Beginning of period $21,896,495 $20,572,495 $20,105,570
additions 1,227,923 1,324,000 515,247
----------- ----------- -----------
23,124,418 21,896,495 20,620,817
Reductions 78,887 -0- 48,322
----------- ----------- -----------
Balance, End of period $23,045,531 $21,896,495 $20,572,495
=========== =========== ===========

Accumulated Depreciation
Real Estate
1997 1996 1995

Balance, Beginning of period $ 8,202,683 $ 7,432,040 $ 6,713,694
additions 805,296 770,643 763,668
----------- ----------- -----------
9,007,979 8,202,683 7,477,362
Reductions 71,984 -0- 45,322
----------- ----------- -----------
Balance, End of period $ 8,935,995 $ 8,202,683 $ 7,432,040
=========== =========== ===========