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

                                  FORM 10-K

           |X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
                       SECURITIES EXCHANGE ACT OF 1934

                  FOR FISCAL YEAR ENDED: SEPTEMBER 30, 1997

                                      OR

         |_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
              SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)

                     For the transition period from _____ to _______.

Commission File Number:  0-12087

             PAINE WEBBER INCOME PROPERTIES FIVE LIMITED PARTNERSHIP
             -------------------------------------------------------
             (Exact name of registrant as specified in its charter)

       Delaware                                                  04-2780287
----------------------                                      ------------------
(State of organization)                                       (I.R.S.Employer
                                                            Identification No.)

265 Franklin Street, Boston, Massachusetts                        02110
--------------------------------------------------------------------------------
(Address of principal executive office)                         (Zip Code)

Registrant's telephone number, including area code:  (617) 439-8118
                                                     --------------

Securities registered pursuant to Section 12(b) of the Act:
                                                         Name of each exchange
Title of each class                                       on which registered
-------------------                                       -------------------
     None                                                        None 

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

                    UNITS OF LIMITED PARTNERSHIP INTEREST
                    -------------------------------------
                               (Title of class)

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|

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. Not applicable.
                     DOCUMENTS INCORPORATED BY REFERENCE
Documents                                                   Form 10-K Reference
---------                                                   -------------------
Prospectus of registrant dated                                 Part IV
May 26, 1983, as supplemented

<PAGE>


           PAINE WEBBER INCOME PROPERTIES FIVE LIMITED PARTNERSHIP
                                1997 FORM 10-K

                              TABLE OF CONTENTS

Part I                                                                   Page
------                                                                   ----

Item  1     Business                                                       I-1

Item  2     Properties                                                     I-3

Item  3     Legal Proceedings                                              I-3

Item  4     Submission of Matters to a Vote of Security Holders            I-4


Part  II
--------

Item  5     Market for the Partnership's Limited Partnership Interests
               and Related Security Holder Matters                        II-1

Item  6     Selected Financial Data                                       II-1

Item  7     Management's Discussion and Analysis of Financial Condition
               and Results of Operations                                  II-2

Item  8     Financial Statements and Supplementary Data                   II-7

Item  9     Changes in and Disagreements with Accountants on Accounting
               and Financial Disclosure                                   II-7


Part III
--------

Item  10    Directors and Executive Officers of the Partnership          III-1

Item  11    Executive Compensation                                       III-2

Item  12    Security Ownership of Certain Beneficial Owners 
               and Management                                            III-3

Item  13    Certain Relationships and Related Transactions               III-3


Part  IV
--------

Item  14    Exhibits, Financial Statement Schedules and Reports on 
               Form 8-K                                                   IV-1

Signatures                                                                IV-2

Index to Exhibits                                                         IV-3

Financial Statements and Supplementary Data                        F-1 to F-28


<PAGE>

                                    
    This Form 10-K  contains  forward-looking  statements  within the meaning of
Section 27A of the  Securities  Act of 1933 and  Section  21E of the  Securities
Exchange Act of 1934. The  Partnership's  actual results could differ materially
from those set forth in the  forward-looking  statements.  Certain  factors that
might cause such a difference  are  discussed in Item 7 in the section  entitled
"Certain Factors Affecting Future Operating  Results"  beginning on page II-5 of
this Form 10-K.

                                    PART I

Item 1.  Business

      Paine   Webber   Income   Properties   Five   Limited   Partnership   (the
"Partnership") is a limited partnership formed in January 1983 under the Uniform
Limited Partnership Act of the State of Delaware for the purpose of investing in
a diversified portfolio of existing  income-producing  operating properties such
as  apartments,   shopping  centers,   office   buildings,   and  other  similar
income-producing   properties.  The  Partnership  sold  $34,928,000  in  Limited
Partnership  Units (the "Units"),  representing  34,928 units at $1,000 per Unit
from May 26, 1983 to May 25, 1984 pursuant to a Registration  Statement filed on
Form S-11 under the Securities Act of 1933  (Registration No. 2-81537).  Limited
Partners will not be required to make any additional contributions.

      The  Partnership  originally  invested  the  net  proceeds  of the  public
offering,  through joint venture  partnerships,  in five  operating  properties,
which consisted of four multi-family apartment complexes and one retail shopping
center.  As  discussed  further  below,  through  September  30, 1997 one of the
Partnership's  original investments had been sold. As of September 30, 1997, the
Partnership  owned interests in operating  investment  properties  through joint
venture partnerships as set forth in the following table:
<TABLE>
<CAPTION>


Name of Joint Venture                                Date of
Name and Type of Property                            Acquisition      Type of
Location                                 Size        of Interest      Ownership (1)
-------------------------------------    ----        -------------    -------------------------
<S>                                      <C>         <C>              <C>   

Randallstown Carriage Hill              806          8/30/83          Fee ownership of land and
  Associates and                        units                         improvements (through
  Signature Partners, L.L.C.                                          joint venture)
Carriage Hill Village Apartments
Randallstown, Maryland

Amarillo Bell Associates                144,000      9/30/83          Fee ownership of land and
Bell Plaza Shopping Center              gross                         improvements (though
Amarillo, Texas                         leasable                      joint venture)
                                        sq. ft.

Greenbrier Associates                   324          6/29/84          Fee ownership of land and
Greenbrier Apartments                   units                         improvements (through
Indianapolis, Indiana                                                 joint venture)

Seven Trails West Associates            532         9/13/84           Fee ownership of land and
Seven Trails West Apartments            units                         improvements (through
Ballwin, Missouri                                                     joint venture)
</TABLE>

(1) See Notes to the  Financial  Statements  filed with this Annual Report for a
    description  of  the  long-term   mortgage   indebtedness   secured  by  the
    Partnership's  operating  property  investments and for a description of the
    agreements  through  which the  Partnership  has acquired  these real estate
    investments.

      The Partnership  previously owned an interest in Cambridge  Associates,  a
joint venture which owned the Cambridge Apartments, a 378-unit apartment complex
located in Omaha,  Nebraska.  On June 30, 1994,  Cambridge  Associates  sold its
operating  investment  property to an affiliate of the Partnership's  co-venture
partner for a gross  purchase  price of $9.7  million.  After  repayment  of the
outstanding mortgage debt and payment of transaction closing costs, net proceeds
of  approximately  $4.7 million were available for  distribution  to the venture
partners.  In accordance with the joint venture  agreement,  the Partnership was
entitled to and received  approximately $3.7 million of such proceeds. A portion
of the Cambridge sales proceeds was added to the Partnership's  cash reserves in
anticipation  of future capital  requirements  at certain of the remaining joint
ventures. The remainder of the proceeds,  totalling  approximately $2.2 million,
was distributed to the Limited Partners in September 1994.

      The Partnership's investment objectives are to:

   (i)   provide the Limited  Partners with cash  distributions  which,  to some
         extent, will not constitute taxable income;
   (ii)  preserve  and protect  the  Limited  Partners'  capital;  
   (iii) obtain long-term  appreciation in the value of its  properties;  and 
   (iv)  provide a  build-up of equity through the reduction of mortgage loans
         on its properties.

      Through  September 30, 1997, the Limited Partners had received  cumulative
cash distributions  totalling approximately  $18,047,000,  or approximately $542
per original $1,000  investment for the  Partnership's  earliest  investors,  of
which  approximately   $7,720,000,  or  $284  per  original  $1,000  investment,
represents  net proceeds from a refinancing  of the Carriage Hill  Apartments in
1987  and  approximately  $2,200,000,  or $63 per  original  $1,000  investment,
represents  the  distributed  portion of the net  proceeds  from the sale of the
Cambridge  Apartments in 1994. The remaining  distributions  have been made from
the net operating cash flow of the  Partnership.  A substantial  portion of such
distributions  has been sheltered from current taxable  income.  The Partnership
suspended the payment of regular quarterly distributions of excess net cash flow
in fiscal 1988. As of September 30, 1997, the Partnership  retains its ownership
interest in four of its five original investment  properties.  The Partnership's
success in meeting  its  capital  appreciation  objective  will  depend upon the
proceeds received from the final liquidation of the remaining  investments.  The
amount of such proceeds will ultimately  depend upon the value of the underlying
investment  properties  at the time of their  final  disposition,  which  cannot
presently be  determined.  At the present  time,  real estate  values for retail
shopping centers in certain markets are being adversely  impacted by the effects
of  overbuilding  and  consolidations  among retailers which have resulted in an
oversupply of space. It remains  unclear at this time what impact,  if any, this
general trend will have on the operations and market value of the  Partnership's
retail shopping center investment.

      All of the remaining  properties in which the  Partnership has an interest
are located in real estate  markets in which they face  significant  competition
for the revenues they generate.  The apartment  complexes  compete with numerous
projects  of  similar  type  generally  on the  basis  of  price,  location  and
amenities.  Apartment  properties  in all markets  also  compete  with the local
single family home market for prospective tenants. The continued availability of
low  interest  rates on home  mortgage  loans  has  increased  the level of this
competition  in most markets over the past several  years.  The shopping  center
competes for long-term commercial tenants with numerous projects of similar type
generally  on the  basis  of  location,  rental  rates,  tenant  mix and  tenant
improvement allowances.

      The Partnership has no operating property  investments located outside the
United States.  The Partnership is engaged solely in the business of real estate
investment,  therefore,  presentation of information  about industry segments is
not applicable.

      The  Partnership  has no  employees;  it  has,  however,  entered  into an
Advisory  Contract with  PaineWebber  Properties  Incorporated  (the "Adviser"),
which is  responsible  for the  day-to-day  operations of the  Partnership.  The
Adviser is a wholly-owned  subsidiary of  PaineWebber  Incorporated  ("PWI"),  a
wholly owned subsidiary of PaineWebber Group, Inc. ("PaineWebber").

      The general partners of the Partnership (the "General Partners") are Fifth
Income Properties Fund, Inc. and Properties Associates.  Fifth Income Properties
Fund,  Inc., a wholly-owned  subsidiary of PaineWebber,  is the Managing General
Partner of the Partnership.  The Associate General Partner of the Partnership is
Properties  Associates,  a Massachusetts  general  partnership,  certain general
partners of which are officers of the Adviser and the Managing  General Partner.
Subject  to  the  General  Partner's  overall  authority,  the  business  of the
Partnership  is managed by the Adviser.  The terms of  transactions  between the
Partnership  and affiliates of the Managing  General  Partner of the Partnership
are set forth in Items 11 and 13 below to which  reference  is hereby made for a
description of such terms and transactions.

Item 2. Properties

      As of  September  30,  1997,  the  Partnership  owned  interests  in  four
operating  properties  through  joint  venture  partnerships.  The joint venture
partnerships  and the related  properties  are referred to under Item 1 above to
which reference is made for the name, location and description of each property.

      Occupancy  figures  for each fiscal  quarter  during  1997,  along with an
average for the year, are presented below for each property:

                                         Percent Occupied At
                              --------------------------------------------------
                                                                       Fiscal
                                                                       1997
                              12/31/96   3/31/97    6/30/97   9/30/97  Average
                              --------   -------    -------   -------  -------

Carriage Hill Village 
  Apartments                   95%        93%        92%       95%       94%

Bell Plaza Shopping Center     99%        99%        99%       99%       99%

Greenbrier Apartments          94%        92%        88%       87%       90%

Seven Trails West Apartments   93%        94%        94%       92%       93%
<PAGE>

Item 3.  Legal Proceedings

     In  November  1994,  a series of  purported  class  actions  (the "New York
Limited Partnership Actions") were filed in the United States District Court for
the Southern District of New York concerning PaineWebber Incorporated's sale and
sponsorship of various limited partnership investments,  including those offered
by the Partnership.  The lawsuits were brought against PaineWebber  Incorporated
and Paine Webber Group Inc. (together "PaineWebber"), among others, by allegedly
dissatisfied  partnership  investors.  In March  1995,  after the  actions  were
consolidated under the title In re PaineWebber Limited  Partnership  Litigation,
the  plaintiffs  amended their  complaint to assert claims  against a variety of
other  defendants,  including Fifth Income  Properties Fund, Inc. and Properties
Associates,  which are the General Partners of the Partnership and affiliates of
PaineWebber.  On May 30, 1995, the court certified class action treatment of the
claims asserted in the litigation.

     The amended complaint in the New York Limited  Partnership  Actions alleged
that, in connection with the sale of interests in Paine Webber Income Properties
Five Limited  Partnership,  PaineWebber,  Fifth Income Properties Fund, Inc. and
Properties  Associates  (1) failed to provide  adequate  disclosure of the risks
involved; (2) made false and misleading  representations about the safety of the
investments and the Partnership's anticipated performance;  and (3) marketed the
Partnership  to  investors  for whom such  investments  were not  suitable.  The
plaintiffs,  who  purported to be suing on behalf of all persons who invested in
Paine  Webber  Income  Properties  Five Limited  Partnership,  also alleged that
following  the sale of the  partnership  interests,  PaineWebber,  Fifth  Income
Properties  Fund,  Inc.  and  Properties  Associates   misrepresented  financial
information about the Partnerships value and performance.  The amended complaint
alleged that  PaineWebber,  Fifth Income  Properties  Fund,  Inc. and Properties
Associates  violated the  Racketeer  Influenced  and Corrupt  Organizations  Act
("RICO") and the federal  securities  laws.  The plaintiffs  sought  unspecified
damages,   including  reimbursement  for  all  sums  invested  by  them  in  the
partnerships,  as well as  disgorgement  of all fees and other income derived by
PaineWebber  from the limited  partnerships.  In addition,  the plaintiffs  also
sought treble damages under RICO.

      In January 1996, PaineWebber signed a memorandum of understanding with the
plaintiffs in the New York Limited Partnership Actions outlining the terms under
which the  parties  agreed to settle the case.  Pursuant to that  memorandum  of
understanding,  PaineWebber  irrevocably  deposited  $125 million into an escrow
fund under the  supervision of the United States District Court for the Southern
District of New York to be used to resolve the  litigation in accordance  with a
definitive  settlement  agreement  and plan of  allocation.  On July  17,  1996,
PaineWebber and the class plaintiffs submitted a definitive settlement agreement
which  provides for the  complete  resolution  of the class  action  litigation,
including  releases in favor of the  Partnership and PWPI, and the allocation of
the $125 million settlement fund among investors in the various partnerships and
REITs at issue in the case. As part of the settlement,  PaineWebber  also agreed
to provide class members with certain financial  guarantees  relating to some of
the  partnerships  and REITs.  The details of the  settlement are described in a
notice mailed  directly to class members at the direction of the court.  A final
hearing on the fairness of the proposed  settlement  was held in December  1996,
and in March 1997 the court announced its final approval of the settlement.  The
release of the $125 million of settlement  proceeds had been delayed pending the
resolution  of an appeal of the  settlement  agreement  by two of the  plaintiff
class  members.  In July 1997, the United States Court of Appeals for the Second
Circuit upheld the settlement  over the objections of the two class members.  As
part of the settlement agreement, PaineWebber agreed not to seek indemnification
from the related  partnerships and real estate investment trusts at issue in the
litigation  (including the  Partnership)  for any amounts that it is required to
pay under the settlement.

      Based on the  settlement  agreement  discussed  above  covering all of the
outstanding unitholder litigation, the resolution of this matter will not have a
material impact on the Partnership's financial statements, taken as a whole.

      The  Partnership  is not  subject  to any  other  material  pending  legal
proceedings.

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

      None.


<PAGE>

                                   PART II

Item 5.  Market  for the  Partnership's  Limited  Partnership  Interests  and
Related Security Holder Matters

      At  September  30,  1997 there were 2,244  record  holders of Units in the
Partnership.  There is no public market for the Units, and it is not anticipated
that a public market for Units will develop.  Upon request, the Managing General
Partner will endeavor to assist a Unitholder  desiring to transfer his Units and
may utilize the  services  of PWI in this  regard.  The price to be paid for the
Units will be subject to negotiation  by the  Unitholder.  The Managing  General
Partner will not redeem or repurchase Units.

      No distributions were made to the Limited Partners during fiscal 1997.

Item 6.  Selected Financial Data

             Paine Webber Income Properties Five Limited Partnership
        For the years ended September 30, 1997, 1996, 1995, 1994 and 1993
                       (In thousands except per Unit data)

                                            Years  Ended September 30,
                             ---------------------------------------------------
                                1997       1996      1995      1994     1993
                                ----       ----      ----      ----     ----

Revenues                     $    98     $    90   $   106   $    87   $     21

Operating loss               $  (138)    $  (132)  $  (207)  $  (262)  $   (183)

Partnership's share of
  ventures' income (losses)  $   213     $  (691)  $(1,182)  $  (995)  $   (860)

Partnership's share of gain on
  sale of operating investment
  property                         -           -         -   $  3,174         -

Net income (loss)            $    75     $  (823)  $(1,389)  $  1,917  $ (1,043)

Net income (loss) per Limited
  Partnership Unit           $  2.13     $(23.33)  $(39.37)  $  54.36  $ (29.57)

Cash distributions from sale,
  refinancing or other
  disposition transactions 
  per Limited
  Partnership Unit                 -           -         -   $  63.00         -

Total assets                 $ 2,165     $ 1,739   $ 1,658   $  1,836  $  1,280

      The above selected  financial data should be read in conjunction  with the
financial  statements and the related notes  appearing  elsewhere in this Annual
Report.

      The above per  Limited  Partnership  Unit  information  is based  upon the
34,928 Limited Partnership Units outstanding during each year.


<PAGE>


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

Information Relating to Forward-Looking Statements
--------------------------------------------------

      The following  discussion of financial condition includes  forward-looking
statements  which  reflect  management's  current  views with  respect to future
events and  financial  performance  of the  Partnership.  These  forward-looking
statements  are  subject to certain  risks and  uncertainties,  including  those
identified below under the heading  "Certain Factors  Affecting Future Operating
Results",  which could cause actual results to differ materially from historical
results or those anticipated. The words "believe",  "expect",  "anticipate," and
similar expressions identify forward-looking  statements.  Readers are cautioned
not to place undue reliance on these forward-looking statements, which were made
based on facts and conditions as they existed as of the date of this report. The
Partnership   undertakes  no  obligation  to  publicly   update  or  revise  any
forward-looking  statements,  whether  as a result  of new  information,  future
events or otherwise.

Liquidity and Capital Resources
-------------------------------

      The Partnership offered limited  partnership  interests to the public from
May 1983 to May 1984  pursuant  to a  Registration  Statement  filed  under  the
Securities  Act of 1933.  Gross  proceeds of  $34,928,000  were  received by the
Partnership   and,  after  deducting   selling   expenses  and  offering  costs,
approximately  $30,920,000  was  invested  in joint  venture  interests  in five
operating  investment  properties.  The Partnership's  interest in the Cambridge
Apartments  property was sold in June 1994 in a  transaction  which  yielded net
proceeds of $3.7 million to the Partnership.  Of such proceeds, $2.2 million was
distributed  to the Limited  Partners  in  September  1994 and $1.5  million was
retained  by  the  Partnership  to  bolster  its  cash  reserve  balances.   The
Partnership does not have any commitments for additional capital expenditures or
investments but may be called upon to advance funds to its existing  investments
in accordance with the respective joint venture agreements.

      The Partnership's  four remaining  investment  properties consist of three
multi-family  apartment  complexes  and one retail  shopping  center.  While the
current estimated market values of certain of the remaining properties are below
the amounts paid for the  properties at the time of the  Partnership's  original
investment in 1983 and 1984, all of the properties  have estimated  values above
their respective  outstanding mortgage debt obligations.  Management's  strategy
over the past  several  years has been to  capitalize  on the  favorable  market
interest  rate  environment  by  refinancing  the mortgage  loans secured by the
operating investment properties to improve cash flow and permit the reinvestment
of funds for capital  improvement  work. Such capital  improvements are aimed at
preserving  and enhancing  the  properties'  market values while the  respective
local economies and market conditions improve until favorable  opportunities for
the sale of the  properties  can be  achieved.  With  the  last of the  required
financing  transactions  completed  during fiscal 1996,  the  Partnership is now
focusing  on  potential  disposition  strategies  for the  remaining  investment
properties.  Depending on the availability of favorable sales opportunities, the
Partnership  could be  positioned  for a  possible  liquidation  within the next
2-to-3 years. There are no assurances however, that the Partnership will be able
to achieve the sale of its remaining assets within this time frame.

      Bell  Plaza  Shopping  Center in  Amarillo,  Texas,  was 99%  leased as of
September  30,  1997,  unchanged  from the prior  quarter  and up from 98% as of
September  30, 1996.  However,  two tenants that closed their  operations in the
Center in January 1997,  with leases  totalling 3,237 square feet, are no longer
meeting  their  contractual  rental  obligations.  As a result,  the  property's
management team is actively pursuing the available legal remedies to collect the
unpaid rent.  During the first quarter of fiscal 1997,  the  property's  leasing
team signed a new  three-year  lease for 1,720 square feet with a cellular phone
retailer.  Also, two lease extensions were successfully negotiated with existing
tenants  during the third  quarter,  one with a  discount  golf  retailer  which
occupies  4,400  square  feet and the other  with a discount  shoe  store  which
occupies  3,200  square  feet.  In  addition,  during  the  fourth  quarter  the
property's  leasing team signed a lease for  approximately  1,500 square feet to
replace one of the stores that closed its operations in January. Only two leases
totalling  approximately  5,000 square feet, or approximately 4% of the Center's
total leasable area,  come up for renewal during fiscal year 1998. As previously
reported,  the  Partnership  had been  exploring the potential for a sale of the
Bell  Plaza  Shopping  Center.  However,  based on  discussions  with  local and
regional  brokers  specializing  in retail  properties,  the Partnership and its
co-venture  partner have decided not to pursue a near-term sale at this time. In
light of current market  conditions,  both the  Partnership  and the co-venturer
believe  that it  would  be in  their  best  interests  to  continue  to work on
improving  the tenant mix and cash flow of the  property  before  pursuing  sale
strategies for Bell Plaza.

      The occupancy level for the Seven Trails West  Apartments,  located in St.
Louis,  Missouri,  averaged 93% for fiscal  1997,  compared to 96% for the prior
year.  During the year,  the  property's  management  team  decided to match the
leasing  concessions given by other apartment  properties due to softness in the
local market by offering one-half month's free rent to new tenants.  In order to
improve Seven Trails'  competitive  position in the local market, the property's
cash flow,  after the payment of debt service,  was  reinvested in  improvements
throughout  most of fiscal 1997.  In addition to the  replacement  of carpeting,
vinyl flooring and appliances in units as needed,  exterior repairs were made to
several balconies and roofs. As a result of these ongoing  improvements,  higher
than expected  rental rate increases were  implemented at the property.  Further
rental rate  increases  are planned for early  fiscal year 1998.  As a result of
these rental rate increases, the Seven Trails joint venture has begun to produce
excess net cash flow.  In the fourth  quarter of fiscal  1997,  the  Partnership
received a  distribution  of $70,000 from the Seven Trails  joint  venture,  and
subsequent  to  year-end  the  Partnership   received  another  distribution  of
approximately $173,000.

      The occupancy level at the Carriage Hill  Apartments,  an 806-unit complex
in Randallstown,  Maryland,  averaged 94% for the year ended September 30, 1997,
compared  to 89% for the prior year.  The  increase  in the  property's  average
occupancy  level is  largely  attributable  to the  stabilization  of the tenant
move-outs  which resulted from the  implementation  of a program to transfer the
utility costs to the tenants  during fiscal 1996.  As previously  reported,  the
fiscal 1995  refinancing of the first mortgage loan secured by the Carriage Hill
Apartments reduced the venture's monthly debt service  requirements and provided
additional  funds  which have been used to make  improvements  to the  property.
These  improvements  included the  conversion of the gas utilities to individual
metering  for each  apartment  unit.  In the past,  operating  results have been
negatively  impacted by high utility costs incurred during the winter season. By
transferring  the  utility  payments to the  tenants,  the  property  management
company  sought  to reduce  and  stabilize  property  operating  expenses.  This
conversion was completed in fiscal year 1996 and 88% of the residents  currently
pay for their individual gas usage. Until recently residents have had the option
upon  renewal of their  leases to lower their  current  monthly  rental rate and
begin paying their own gas bill or to continue with landlord-paid gas and accept
a rental  rate  increase.  However,  in order to have all  residents  paying for
individual  gas  usage  by  the  end  of  fiscal  year  1998,  any  tenant  with
landlord-paid  gas who renews  their  lease  after  October 1, 1997 will now pay
their  own  utility  costs.  The  property's  leasing  team  continues  to offer
prospective  residents the option of renting an updated  apartment unit. So far,
26 units have been updated and leased at higher rental rates. These 26 apartment
units are priced at an additional monthly rent of $75 per apartment, which is an
average increase in excess of 10% over the original rent.

      Average occupancy at the Greenbrier Apartments, in Indianapolis,  Indiana,
was 90% for fiscal  1997,  compared  to 92% for the prior year.  The  property's
management  team has  been  forced  to  match  the  leasing  concessions  of its
competition  by offering one month's free rent to new  tenants.  The  property's
leasing and  management  team  attributes  the  current  softness in this market
primarily to tenants moving to purchase homes. Rental rate increases will not be
implemented  until  occupancy  levels  improve.  Because the first mortgage loan
secured by Greenbrier  Apartments  is scheduled to mature on June 29, 1998,  the
Partnership and its joint venture partner have begun to review both  refinancing
and sale  opportunities.  It is highly  likely the property will be marketed for
sale during fiscal 1998 and if satisfactory  offers to purchase the property are
received,  Greenbrier would be sold. Should the  Partnership's  joint venture be
unable to obtain a  satisfactory  sale price,  the current  first  mortgage loan
would be  refinanced.  While,  given current  market  conditions,  management is
optimistic  regarding the prospects for  refinancing  the venture's $5.4 million
first mortgage loan,  there are no assurances  that either a sale or refinancing
will be completed.

     At September 30, 1997,  the  Partnership  had cash and cash  equivalents of
$2,165,000.  Such cash and cash  equivalents  will be  utilized  for the working
capital requirements of the Partnership and for future capital contributions, if
necessary,  related to the  Partnership's  joint ventures.  The source of future
liquidity  and  distributions  to the  partners  is  expected  to be  from  cash
generated by the Partnership's income-producing properties and from the proceeds
received from the sale or refinancing of such properties or from the sale of the
Partnership's  interests in the joint  ventures.  These sources of liquidity are
expected to be sufficient to meet the  Partnership's  needs on both a short-term
and long-term basis.


<PAGE>


Results of Operations
1997 Compared to 1996
---------------------

      The  Partnership  reported  net  income  of  $75,000  for the  year  ended
September 30, 1997, as compared to a net loss of $823,000 for the same period in
the prior year.  This favorable  change of $898,000 in net operating  results is
primarily due to a favorable  change of $904,000 in the  Partnership's  share of
ventures' income (losses).  The favorable change in the  Partnership's  share of
ventures'  operations is mainly  attributable  to an increase in combined rental
revenues and expense  recoveries of $416,000 and  decreases in interest  expense
and property operating expenses of $452,000 and $547,000,  respectively.  Rental
revenues and expense recoveries increased mainly due to significant increases in
average  occupancy  levels at the Carriage Hill and Bell Plaza  properties  when
compared  to the same  period in the prior  year.  As noted  above,  the average
occupancy  level at the Carriage  Hill  Apartments  improved from 89% for fiscal
1996 to 94% for  fiscal  1997.  The  average  leasing  level at the  Bell  Plaza
Shopping  Center  increased  to 99% for fiscal  1997 from a level of 93% for the
prior fiscal year.  Increases in effective  rental rates at the Seven Trails and
Carriage Hill  properties also  contributed to the increase in rental  revenues.
The decrease in interest  expense is mainly due to the April 1996 refinancing of
the debt secured by the Seven Trails Apartments, which significantly lowered the
venture's debt service costs.  Property  operating expenses decreased partly due
to a reduction in  utilities  expense at the Carriage  Hill  property  which was
mainly  a  result  of the  utilities  conversion  discussed  further  above.  In
addition,  repairs and  maintenance  costs declined  significantly  at the Seven
Trails and Greenbrier properties in fiscal 1997.

     A slight increase in the  Partnership's  operating loss of $6,000 partially
offset the favorable change in the Partnership's  share of ventures'  operations
for fiscal 1997. The  Partnership's  operating loss increased due to an increase
in general and  administrative  expenses.  General and  administrative  expenses
increased  mainly due to an increase in certain required  professional  fees. An
$8,000 increase in interest income  partially offset the increase in general and
administrative  expenses.  Interest  income  increased due to an increase in the
Partnership's average outstanding cash balances during fiscal 1997.

1996 Compared to 1995
----------------------

      The  Partnership  reported  a net  loss of  $823,000  for  fiscal  1996 as
compared to a net loss of  $1,389,000  for fiscal 1995.  The primary  reason for
this favorable change in net operating  results was that the Carriage Hill joint
venture  recognized an extraordinary  loss on the early  extinguishment  of debt
during fiscal 1995 of  approximately  $1,177,000 as a result of the write-off of
unamortized  deferred  financing  costs related to the  venture's  prior debt in
conjunction with a June 1995 refinancing transaction. The Partnership's share of
this loss was approximately $471,000. Excluding this non-recurring charge during
fiscal 1995, the  Partnership's  share of ventures'  losses decreased by $20,000
when  compared to the prior year.  This  decrease was mainly  attributable  to a
$503,000  increase in combined  revenues from the four joint ventures.  Combined
revenues  increased  largely due to improved  occupancy  and rental rates at the
Seven Trails West and  Greenbrier  Apartments.  Revenues were also higher at the
Bell Plaza Shopping Center in fiscal 1996 due to certain  leasing  improvements.
In addition,  combined interest expense decreased by $261,000 as a result of the
lower  interest  rates on the debts secured by the Carriage Hill  Apartments and
the Bell Plaza Shopping Center, which were refinanced in fiscal 1995, and on the
debt  secured by the Seven Trails  Apartments,  which was  refinanced  in fiscal
1996.  The increase in rental  revenues  and  decrease in interest  expense were
partially  offset by  increases  in combined  property  operating  expenses  and
depreciation and amortization of $634,000 and $122,000,  respectively.  Property
operating  expenses  increased  primarily  due to  higher  utility  costs at the
Carriage Hill Apartments  resulting from more severe weather  conditions  during
fiscal  1996.  As noted  above,  during  fiscal 1996 the venture  completed  the
process of converting  the  utilities at Carriage Hill  Apartments to individual
metering. This conversion was undertaken in order to reduce the venture's future
exposure  to   fluctuations   in  utility  charges  caused  by  extreme  weather
conditions.  Depreciation and amortization expense increased at all of the joint
ventures,   except  for  Carriage  Hill,  during  fiscal  1996  due  to  capital
improvements,  tenant  improvements and leasing  commissions which were incurred
during the year.

      The  Partnership's  operating  loss  decreased by $75,000 for fiscal 1996,
when  compared to the prior year.  The  decrease  in  operating  loss was mainly
attributable  to a decrease  in general and  administrative  expense of $91,000.
General and administrative  expense decreased mainly due to certain  incremental
expenses incurred in the prior year relating to an independent  valuation of the
Partnership's operating properties.


<PAGE>

1995 Compared to 1994
---------------------

      The  Partnership  reported a net loss of  $1,389,000  for  fiscal  1995 as
compared to net income of $1,917,000  for the prior year. The primary reason for
this  unfavorable  change  in net  operating  results  was that the  Partnership
recognized  a $3.2  million  gain in  fiscal  1994 on the sale of the  Cambridge
Apartments,  which  occurred in June 1994. In addition,  the Carriage Hill joint
venture  recognized a loss of  $1,177,000  during fiscal 1995 as a result of the
write-off of unamortized deferred financing costs related to the venture's prior
debt in conjunction with a June 1995 refinancing transaction.  The Partnership's
share of this loss was $471,000,  which was included in the Partnership's  share
of  ventures'  losses for fiscal  1995.  The  Partnership's  share of  ventures'
losses,  prior to the effect of the Carriage Hill refinancing loss, decreased by
$284,000  in  fiscal  1995  mainly  due to  improved  operating  results  at the
Greenbrier,  Seven Trails and Carriage Hill joint ventures. Rental revenues were
higher at all three apartment  properties in fiscal 1995,  despite lower average
occupancy  levels,  due to  increases  in  rental  rates  made  possible  by the
generally  improving  market  conditions for multi-family  apartment  properties
across the country during fiscal 1995. At Greenbrier,  rental revenues  improved
by $58,000,  or 4%, in fiscal  1995,  when  compared  to the prior  year,  while
average occupancy declined from 94% to 91%. In addition, repairs and maintenance
expenses decreased by $96,000 at Greenbrier due to certain  non-recurring repair
work  performed  in  fiscal  1994 as a result  of winter  storm  damage.  Rental
revenues  increased by $194,000,  or 6%, at the Seven Trails property  despite a
slight  drop in average  occupancy  from 96% for  fiscal  1994 to 95% for fiscal
1995.  Such  increased  revenues at Seven  Trails were  partially  offset by the
increase in the venture's  interest  expense  which  resulted from a fiscal 1994
modification agreement. At Carriage Hill, revenues were up only slightly in what
have been  less  favorable  local  market  conditions.  The  improvement  in the
Carriage Hill joint venture's net operating  results were more attributable to a
decrease in expenses,  primarily  depreciation  and  utilities  expenses,  which
declined by $61,000 and $63,000, respectively. The improved operating results at
the three apartment properties were partially offset by a decline in revenues at
the Bell Plaza Shopping Center which resulted from an anchor tenant vacancy. The
resulting drop in average  occupancy at Bell Plaza,  from 87% for fiscal 1994 to
78% for fiscal 1995,  contributed  to the  decrease of $64,000 in the  venture's
rental revenues.

     The unfavorable changes in net operating results were also partially offset
by a decrease  in the  Partnership's  operating  loss of  approximately  $55,000
during  fiscal  1995 due to an  increase  in  interest  income and a decrease in
general and administrative expenses. Interest income increased by $19,000 due to
an increase in the interest rates earned on the Partnership's cash reserves,  as
well as the  significant  increase  in the average  outstanding  balance of such
reserves which resulted from the retention of $1.5 million of the Cambridge sale
proceeds  from  the June  1994  sale  transaction.  General  and  administrative
expenses decreased by $36,000 mainly due to higher professional fees incurred in
fiscal 1994.

Certain Factors Affecting Future Operating Results
--------------------------------------------------

    The following  factors could cause actual results to differ  materially from
historical results or those anticipated:

    Real Estate  Investment  Risks.  Real  property  investments  are subject to
varying degrees of risk.  Revenues and property values may be adversely affected
by the  general  economic  climate,  the local  economic  climate and local real
estate conditions,  including (i) the perceptions of prospective  tenants of the
attractiveness of the property; (ii) the ability to retain qualified individuals
to provide  adequate  management  and  maintenance  of the  property;  (iii) the
inability  to  collect  rent due to  bankruptcy  or  insolvency  of  tenants  or
otherwise;  and (iv) increased  operating costs.  Real estate values may also be
adversely  affected by such  factors as  applicable  laws,  including  tax laws,
interest rate levels and the availability of financing.

    Effect of Uninsured Loss. The Partnership carries  comprehensive  liability,
fire,  flood,  extended  coverage and rental loss  insurance with respect to its
properties  with  insured  limits  and  policy  specifications  that  management
believes are customary for similar properties. There are, however, certain types
of  losses  (generally  of  a  catastrophic  nature  such  as  wars,  floods  or
earthquakes) which may be either uninsurable,  or, in management's judgment, not
economically  insurable.  Should an uninsured loss occur, the Partnership  could
lose both its  invested  capital in and  anticipated  profits  from the affected
property.

    Possible Environmental  Liabilities.  Under various federal, state and local
environmental laws,  ordinances and regulations,  a current or previous owner or
operator of real property may become liable for the costs of the  investigation,
removal and  remediation  of  hazardous or toxic  substances  on,  under,  in or
migrating from such property. Such laws often impose liability without regard to
whether the owner or operator knew of, or was  responsible  for, the presence of
such hazardous or toxic substances.

    The  Partnership  is not aware of any  notification  by any private party or
governmental  authority  of any  non-compliance,  liability  or  other  claim in
connection  with  environmental  conditions  at any of its  properties  that  it
believes  will  involve  any   expenditure   which  would  be  material  to  the
Partnership,  nor is the Partnership aware of any  environmental  condition with
respect to any of its properties that it believes will involve any such material
expenditure.  However,  there  can  be no  assurance  that  any  non-compliance,
liability, claim or expenditure will not arise in the future.

    Competition.  The financial performance of the Partnership's  remaining real
estate  investments  will be  significantly  impacted  by the  competition  from
comparable  properties  in their local market areas.  The  occupancy  levels and
rental rates  achievable at the  properties are largely a function of supply and
demand in the markets.  In many markets  across the country,  development of new
multi-family  properties  has  increased  significantly  in the past 12  months.
Existing  apartment  properties  in such markets could be expected to experience
increased vacancy levels, declines in effective rental rates and, in some cases,
declines in estimated  market values as a result of the  increased  competition.
The retail  segment of the real estate  market is  currently  suffering  from an
oversupply of space in many markets  resulting from overbuilding in recent years
and the trend of consolidations and bankruptcies among retailers prompted by the
generally flat rate of growth in overall  retail sales.  There are no assurances
that these competitive pressures will not adversely affect the operations and/or
market values of the Partnership's investment properties in the future.

    Impact  of  Joint  Venture   Structure.   The  ownership  of  the  remaining
investments through joint venture partnerships could adversely impact the timing
of the Partnership's planned dispositions of its remaining assets and the amount
of  proceeds  received  from  such   dispositions.   It  is  possible  that  the
Partnership's  co-venture  partners  could have  economic or business  interests
which are  inconsistent  with those of the  Partnership.  Given the rights which
both parties have under the terms of the joint venture agreements,  any conflict
between the partners  could result in delays in completing a sale of the related
operating  property and could lead to an impairment in the  marketability of the
property to third  parties for purposes of achieving  the highest  possible sale
price.

    Availability of a Pool of Qualified  Buyers.  The  availability of a pool of
qualified  and  interested  buyers  for the  Partnership's  remaining  assets is
critical  to the  Partnership's  ability to realize  the  estimated  fair market
values of such  properties  at the time of their final  dispositions.  Demand by
buyers of  multi-family  apartment  and retail  properties  is  affected by many
factors, including the size, quality, age, condition and location of the subject
property,  the  quality and  stability  of the tenant  roster,  the terms of any
long-term leases,  potential environmental liability concerns, the existing debt
structure,  the liquidity in the debt and equity markets for asset acquisitions,
the general level of market  interest  rates and the general and local  economic
climates.

Inflation
---------

     The Partnership  completed its fourteenth full year of operations in fiscal
1997 and the effects of inflation and changes in prices on revenues and expenses
to date have not been significant.

      Inflation in future  periods may increase  revenues,  as well as operating
expenses,  at the Partnership's  operating  investment  properties.  Most of the
existing leases with tenants at the Partnership's retail shopping center contain
rental  escalation  and/or expense  reimbursement  clauses based on increases in
tenant  sales or  property  operating  expenses  which  would  tend to rise with
inflation.  Tenants at the  Partnership's  apartment  projects  have  short-term
leases,  generally  of  6-to-12  months  in  duration.  Rental  rates  at  these
properties  can be adjusted to keep pace with  inflation,  as market  conditions
allow, as the leases are renewed or turned over. Such increases in rental income
would be expected to at least partially  offset the  corresponding  increases in
Partnership and property operating expenses caused by future inflation.

Item 8.  Financial Statements and Supplementary Data

      The financial statements and supplementary data are included under Item 14
of this Annual Report.

Item 9.  Changes in and  Disagreements  with  Accountants  on Accounting and
Financial Disclosure

      None.


<PAGE>

                                   PART III

Item 10.  Directors and Executive Officers of the Partnership

      The Managing General Partner of the Partnership is Fifth Income Properties
Fund,  Inc.  a  Delaware  corporation,  which is a  wholly-owned  subsidiary  of
PaineWebber.  The Associate  General  Partner of the  Partnership  is Properties
Associates,  a Massachusetts  general  partnership,  certain general partners of
which are also  officers of the Adviser and the Managing  General  Partner.  The
Managing  General  Partner  has overall  authority  and  responsibility  for the
Partnership's operation,  however, the day-to-day business of the Partnership is
managed by the Adviser pursuant to an advisory contract.

      (a) and (b) The names and ages of the directors  and  principal  executive
officers of the Managing General Partner of the Partnership are as follows:

                                                                     Date
                                                                     elected
      Name                      Office                      Age      to Office
      ----                      ------                      ---      ---------

Bruce J. Rubin       President and Director                 38       8/22/96
Terrence E. Fancher  Director                               44       10/10/96
Walter V. Arnold     Senior Vice President and Chief
                       Financial Officer                    50       10/29/85
David F. Brooks      First Vice President and Assistant 
                       Treasurer                            55       11/19/82 *
Timothy J. Medlock   Vice President and Treasurer           36       6/1/88
Thomas W. Boland     Vice President and Controller          35       12/1/91

*  The date of incorporation of the Managing General Partner.

      (c) There are no other significant  employees in addition to the directors
and principal executive officers mentioned above.

      (d) There is no family  relationship among any of the foregoing  directors
and executive  officers of the Managing General Partner of the Partnership.  All
of the foregoing  directors  and  executive  officers have been elected to serve
until the annual meeting of the Managing General Partner.

      (e) All of the directors and officers of the Managing General Partner hold
similar  positions in affiliates of the Managing General Partner,  which are the
corporate general partners of other real estate limited  partnerships  sponsored
by PWI, and for which PaineWebber Properties Incorporated serves as the Adviser.
The  business  experience  of  each of the  directors  and  principal  executive
officers of the Managing General Partner is as follows:

     Bruce J. Rubin is President and Director of the Managing  General  Partner.
Mr.  Rubin was named  President  and Chief  Executive  Officer of PWPI in August
1996. Mr. Rubin joined  PaineWebber Real Estate  Investment  Banking in November
1995 as a Senior Vice  President.  Prior to joining  PaineWebber,  Mr. Rubin was
employed by Kidder, Peabody and served as President for KP Realty Advisers, Inc.
Prior to his association with Kidder,  Mr. Rubin was a Senior Vice President and
Director of Direct  Investments at Smith Barney  Shearson.  Prior  thereto,  Mr.
Rubin  was a First  Vice  President  and a real  estate  workout  specialist  at
Shearson Lehman Brothers. Prior to joining Shearson Lehman Brothers in 1989, Mr.
Rubin  practiced  law in the Real Estate Group at Willkie Farr & Gallagher.  Mr.
Rubin is a graduate of Stanford University and Stanford Law School.

     Terrence E.  Fancher  was  appointed  a Director  of the  Managing  General
Partner in October  1996.  Mr.  Fancher is the  Managing  Director  in charge of
PaineWebber's  Real Estate Investment  Banking Group. He joined PaineWebber as a
result of the firm's acquisition of Kidder,  Peabody. Mr. Fancher is responsible
for the origination  and execution of all of  PaineWebber's  REIT  transactions,
advisory  assignments  for real  estate  clients  and certain of the firm's real
estate debt and principal  activities.  He joined  Kidder,  Peabody in 1985 and,
beginning in 1989,  was one of the senior  executives  responsible  for building
Kidder,  Peabody's real estate  department.  Mr. Fancher previously worked for a
major law firm in New York City.  He has a J.D.  from  Harvard  Law  School,  an
M.B.A. from Harvard Graduate School of Business  Administration and an A.B. from
Harvard College.
<PAGE>

     Walter V. Arnold is a Senior Vice President and Chief Financial  Officer of
the Managing  General  Partner and a Senior Vice  President and Chief  Financial
Officer of the Adviser which he joined in October 1985. Mr. Arnold joined PWI in
1983 with the  acquisition  of Rotan  Mosle,  Inc.  where he had been First Vice
President and Controller  since 1978,  and where he continued  until joining the
Adviser.  Mr. Arnold is a Certified Public  Accountant  licensed in the state of
Texas.

     David F. Brooks is a First Vice  President and  Assistant  Treasurer of the
Managing  General Partner and a First Vice President and an Assistant  Treasurer
of the Adviser.  Mr. Brooks joined the Adviser in March 1980. From 1972 to 1980,
Mr. Brooks was an Assistant  Treasurer of Property  Capital  Advisors,  Inc. and
also,  from March 1974 to February 1980, the Assistant  Treasurer of Capital for
Real  Estate,  which  provided  real estate  investment,  asset  management  and
consulting services.

     Timothy J.  Medlock  is a Vice  President  and  Treasurer  of the  Managing
General  Partner and Vice President and Treasurer of the Adviser which he joined
in 1986.  From June 1988 to August 1989, Mr. Medlock served as the Controller of
the Managing General Partner and the Adviser. From 1983 to 1986, Mr. Medlock was
associated  with Deloitte  Haskins & Sells.  Mr. Medlock  graduated from Colgate
University  in 1983  and  received  his  Masters  in  Accounting  from  New York
University in 1985.

     Thomas W. Boland is a Vice President and Controller of the Managing General
Partner and a Vice  President  and  Controller of the Adviser which he joined in
1988.  From 1984 to 1987, Mr. Boland was associated with Arthur Young & Company.
Mr.  Boland  is  a  Certified  Public  Accountant   licensed  in  the  state  of
Massachusetts.  He holds a B.S.  in  Accounting  from  Merrimack  College and an
M.B.A. from Boston University.

      (f) None of the directors and officers were involved in legal  proceedings
which are  material to an  evaluation  of his or her ability or  integrity  as a
director or officer.

      (g)  Compliance  With  Exchange Act Filing  Requirements:  The  Securities
Exchange Act of 1934 requires the officers and directors of the Managing General
Partner, and persons who own more than ten percent of the Partnership's  limited
partnership units, to file certain reports of ownership and changes in ownership
with the Securities and Exchange Commission. Officers, directors and ten-percent
beneficial  holders are required by SEC  regulations to furnish the  Partnership
with copies of all Section 16(a) forms they file.

      Based solely on its review of the copies of such forms received by it, the
Partnership  believes that, during the year ended September 30, 1997, all filing
requirements  applicable to the officers and  directors of the Managing  General
Partner and ten-percent beneficial holders were complied with.

Item 11.  Executive Compensation

      The directors and officers of the  Partnership's  Managing General Partner
receive  no  current  or  proposed   remuneration  from  the  Partnership.   The
Partnership  is  required to pay certain  fees to the  Adviser,  and the General
Partners are entitled to receive a share of Partnership cash distributions and a
share of profits and losses. These items are described under Item 13.

    The Partnership has not paid regular cash  distributions  to the Unitholders
over the past five years.  Regular  quarterly  distributions of excess cash flow
were  suspended  in  1988.  Furthermore,  the  Partnership's  Units  of  Limited
Partnership  Interest are not actively traded on any organized exchange,  and no
efficient secondary market exists.  Accordingly no accurate price information is
available for these Units.  Therefore,  a presentation of historical  Unitholder
total returns would not be meaningful.

Item 12.  Security Ownership of Certain Beneficial Owners and Management

      (a) The  Partnership  is a limited  partnership  issuing  Units of limited
partnership  interest,  not voting securities.  All the outstanding stock of the
Managing  General  Partner,  Fifth Income  Properties  Fund,  Inc.,  is owned by
PaineWebber.   Properties  Associates,  the  Associate  General  Partner,  is  a
Massachusetts  general  partnership,  the  general  partners  of which  are also
officers of the Adviser and the Managing General Partner.  No limited partner is
known by the  Partnership to own  beneficially  more than 5% of the  outstanding
interests of the Partnership.

      (b) The  directors  and  officers of the Managing  General  Partner do not
directly own any Units of limited  partnership  interest of the Partnership.  No
director or officer of the Managing General Partner,  nor any general partner of
the Associate General Partner, possesses a right to acquire beneficial ownership
of Units of limited partnership interest of the Partnership.

      (c) There exists no arrangement,  known to the Partnership,  the operation
of which  may,  at a  subsequent  date,  result  in a change in  control  of the
Partnership.
<PAGE>

Item 13.  Certain Relationships and Related Transactions

      The General Partners of the Partnership are Fifth Income  Properties Fund,
Inc. (the "Managing General Partner"), a wholly-owned  subsidiary of PaineWebber
Group, Inc.  ("PaineWebber")  and Properties  Associates (the "Associate General
Partner"),  a Massachusetts  general  partnership,  certain general  partners of
which  are  also  officers  of the  Managing  General  Partner  and  PaineWebber
Properties  Incorporated.  Subject to the  Managing  General  Partner's  overall
authority,  the business of the Partnership is managed by PaineWebber Properties
Incorporated (the "Adviser") pursuant to an advisory contract.  The Adviser is a
wholly-owned  subsidiary  of  PaineWebber   Incorporated  ("PWI").  The  General
Partners,  the Adviser and PWI receive fees and  compensation,  determined on an
agreed-upon  basis, in consideration of various services performed in connection
with  the  sale  of the  Units,  the  management  of  the  Partnership  and  the
acquisition, management, financing and disposition of Partnership investments.

      All  distributable  cash,  as  defined,  for  each  fiscal  year  shall be
distributed  quarterly in the ratio of 99% to the Limited Partners and 1% to the
General  Partners.  All  sale  or  refinancing  proceeds  shall  be  distributed
generally 85% to the Limited Partners and 15% to the General Partners, after the
prior receipt by the Limited  Partners of their adjusted  capital  contributions
and a  cumulative,  noncompounded  return  on  their  average  adjusted  capital
contributions  ranging from 10% to 6%  depending  on when a Limited  Partner was
admitted to the Partnership.  All sale and refinancing  proceeds received by the
Partnership to date have been  distributed to the Limited Partners in accordance
with the Partnership Agreement.

      Pursuant to the terms of the Partnership Agreement, taxable income and tax
loss of the Partnership  will be allocated 99% to the Limited Partners and 1% to
the  General  Partners.  Taxable  income  or tax  loss  arising  from a sale  or
refinancing of investment  properties will be allocated to the Limited  Partners
and to the General  Partners in proportion to the amounts of sale or refinancing
proceeds to which they are entitled; provided that the General Partners shall be
allocated at least 1% of taxable income arising from a sale or  refinancing.  If
there are no sale or refinancing proceeds,  taxable income and tax losses from a
sale or refinancing  will be allocated 99% to the Limited Partners and 1% to the
General Partners.  Notwithstanding this, the Partnership Agreement provides that
the  allocation  of taxable  income and tax  losses  arising  from the sale of a
property which leads to the dissolution of the Partnership  shall be adjusted to
the extent  feasible so that neither the General or Limited  Partners  recognize
any gain or loss as a result of having  either a positive  or  negative  balance
remaining in their capital accounts upon the dissolution of the Partnership.  If
the General Partner has a negative  capital  account  balance  subsequent to the
sale of a  property  which  leads to the  dissolution  of the  Partnership,  the
General  Partner may be obligated to restore a portion of such negative  capital
account  balance  as  determined  in  accordance  with  the  provisions  of  the
Partnership Agreement.  Allocations of the Partnership's  operations between the
General Partners and the Limited Partners for financial accounting purposes have
been made in conformity with the allocations of taxable income or tax loss.

      Under  the  advisory  contract,   the  Adviser  has  specific   management
responsibilities:  to administer day-to-day operations of the Partnership and to
report  periodically  the performance of the Partnership to the Managing General
Partner.  The Adviser is paid a basic  management fee (4% of adjusted cash flow)
and an incentive  management  fee (5% of adjusted  cash flow  subordinated  to a
noncumulative annual return to the Limited Partners equal to 6% based upon their
adjusted capital contribution) for services rendered.
No management fees were earned during fiscal 1997.

      An affiliate of the Managing General Partner performs certain  accounting,
tax  preparation,  securities  law compliance  and investor  communications  and
relations  services  for the  Partnership.  The  total  costs  incurred  by this
affiliate in providing  such  services are  allocated  among  several  entities,
including the Partnership.  Included in general and administrative  expenses for
the year ended  September 30, 1997 is $85,000,  representing  reimbursements  to
this affiliate for providing such services to the Partnership.

      The  Partnership  uses the  services  of Mitchell  Hutchins  Institutional
Investors,  Inc.  ("Mitchell  Hutchins"),  an affiliate of the Managing  General
Partner,  for the managing of cash assets.  Mitchell Hutchins is a subsidiary of
Mitchell Hutchins Asset Management,  Inc., an independently  operated subsidiary
of PaineWebber.  Mitchell  Hutchins earned $6,000 for managing the Partnership's
cash  assets  in  fiscal   1997,   which  amount  is  included  in  general  and
administrative  expenses  on the  accompanying  statement  of  operations.  Fees
charged by Mitchell Hutchins are based on a percentage of invested cash reserves
which varies based on the total amount of invested cash which Mitchell  Hutchins
manages on behalf of PWPI.



<PAGE>

                                   PART IV



Item 14.  Exhibits, Financial Statement Schedules and Reports on Form 8-K


      (a) The following documents are filed as part of this report:

            (1) and (2) Financial Statements and Schedule:

                 The  response  to this  portion  of Item 14 is  submitted  as a
                 separate  section  of  this  report.  See  Index  to  Financial
                 Statements and Financial Statement Schedule at page F-1.

            (3)   Exhibits:

                The  exhibits  listed on the  accompanying  index to exhibits at
                page IV-3 are filed as part of this Report.


      (b)   No Current Reports on Form 8-K were filed during the last quarter of
            fiscal 1997.

      (c)   Exhibits

                See (a)(3) above.

      (d)   Financial Statement Schedules

                The  response  to this  portion  of Item  14 is  submitted  as a
                separate  section  of  this  report.   See  Index  to  Financial
                Statements and Financial Statement Schedule at page F-1.


                                    


<PAGE>

                                  SIGNATURES


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


                                 PAINE WEBBER INCOME PROPERTIES FIVE
                                         LIMITED PARTNERSHIP


                                 By:  Fifth Income Properties Fund, Inc.
                                      Managing General Partner


                                  By: /s/ Bruce J. Rubin
                                      ------------------
                                      Bruce J. Rubin
                                      President and Chief Executive Officer


                                  By: /s/ Walter V. Arnold
                                      --------------------
                                      Walter V. Arnold
                                      Senior Vice President and
                                      Chief Financial Officer


                                  By: /s/ Thomas W. Boland
                                      ---------------------
                                      Thomas W. Boland
                                      Vice President and Controller

Dated:  January 13, 1998

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  Partnership in
the capacity and on the dates indicated.




By:/s/ Bruce J. Rubin                           Date:  January 13, 1998
   ------------------------                            ----------------
   Bruce J. Rubin
   Director





By:/s/ Terrence E. Fancher                      Date:  January 13, 1998
   ------------------------                            ----------------
   Terrence E. Fancher
   Director


<PAGE>


                          ANNUAL REPORT ON FORM 10-K
                                Item 14(a)(3)

           PAINE WEBBER INCOME PROPERTIES FIVE LIMITED PARTNERSHIP


                              INDEX TO EXHIBITS
<TABLE>
<CAPTION>

                                                        Page Number in the Report
Exhibit No.   Description of Document                   or Other Reference
-----------   -----------------------                   ------------------
<S>           <C>                                       <C>   

(3) and (4) Prospectus of the Registrant                Filed with  the Commission
            dated May 26, 1983, supplemented,           pursuant to Rule 424(c)
            with particular reference to the            and incorporated  herein by
            Restated Certificate and Agreement          reference.
            Limited Partnership.


(10)        Material contracts previously filed as      Filed  with  the Commission
            exhibits to registration statements and     pursuant  to Section 13 or 15(d)
            amendments thereto of the registrant        of  the Securities Exchange Act
            together with all such contracts filed      of 1934 and incorporated
            as exhibits of previously filed Forms       herein by reference.
            8-K and Forms 10-K are hereby
            incorporated herein by reference.


(13)        Annual Reports to Limited Partners        No  Annual Report for the year
                                                      ended   September  30, 1997 has
                                                      been sent to  the Limited Partners.
                                                      An  Annual  Report  will be sent
                                                      to the Limited Partners subsequent
                                                      to this filing.

(21)        List of Subsidiaries                      Included  in  Item 1 of Part I of this
                                                      Report  Page  I-1, to which reference
                                                      is hereby made.


(27)        Financial Data Schedule                   Filed  as  last  page of EDGAR
                                                      submission following the Financial
                                                      Statements and Financial
                                                      Statement Schedule  as required by
                                                      Item 14.


</TABLE>

               


<PAGE>


                          ANNUAL REPORT ON FORM 10-K
                       Item 14(a) (1) and (2) and 14(d)

           PAINE WEBBER INCOME PROPERTIES FIVE LIMITED PARTNERSHIP

        INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE


                                                                      Reference
                                                                      ---------

Paine Webber Income Properties Five Limited Partnership:

      Reports of independent auditors                                    F-2

      Balance sheets as of September 30, 1997 and 1996                   F-4

      Statements of operations  for the years ended  September 30, 
       1997,  1996 and 1995                                              F-5

      Statements  of  changes in  partners'  capital  (deficit)  
       for the years ended September 30, 1997, 1996 and 1995             F-6

      Statements of cash flows for the years ended  September  30,
       1997,  1996 and 1995                                              F-7

      Notes to financial statements                                      F-8

Combined  Joint  Ventures  of Paine  Webber  Income  Properties  Five  Limited
Partnership:

      Reports of independent auditors                                   F-17

      Combined balance sheets as of September 30, 1997 and 1996         F-19

      Combined  statements of operations and changes in venturers' 
        deficit for the  years ended September 30, 1997, 1996
        and 1995                                                        F-20

      Combined statements of cash flows for the years ended 
        September  30, 1997, 1996  and 1995                             F-21

      Notes to combined financial statements                            F-22

      Schedule III - Real estate and accumulated depreciation           F-28


   Other  schedules  have been  omitted  since the required  information  is not
present or not  present  in amounts  sufficient  to  require  submission  of the
schedule,  or because the  information  required  is  included in the  financial
statements, including the notes thereto.



<PAGE>


                        REPORT OF INDEPENDENT AUDITORS






The Partners of
Paine Webber Income Properties Five Limited Partnership:

      We have audited the  accompanying  balance  sheets of Paine Webber  Income
Properties  Five Limited  Partnership as of September 30, 1997 and 1996, and the
related statements of operations,  changes in partners' capital  (deficit),  and
cash flows for each of the three years in the period ended  September  30, 1997.
These  financial   statements  are  the   responsibility  of  the  Partnership's
management.  Our  responsibility  is to express  an  opinion on these  financial
statements  based on our audits.  We did not audit the  financial  statements of
Randallstown  Carriage  Hill  Associates  (an  unconsolidated   venture)  as  of
September  30,  1997 and for the  year  then  ended.  The  Partnership's  equity
investment in Randallstown  Carriage Hill Associates totalled $(6,207,000) as of
September 30, 1997, and the Partnership's  share of the net loss of Randallstown
Carriage Hill  Associates  totalled  $(123,000) for the year ended September 30,
1997.  Those  statements  were audited by other  auditors  whose report has been
furnished  to us, and our  opinion,  insofar as it relates to data  included for
Randallstown  Carriage  Hill  Associates,  is based  solely on the report of the
other auditors.

      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 and the report of other auditors provide a reasonable
basis for our opinion.

      In our opinion,  based on our audits and the report of other auditors, the
financial statements referred to above present fairly, in all material respects,
the  financial   position  of  Paine  Webber  Income   Properties  Five  Limited
Partnership  at September 30, 1997 and 1996,  and the results of its  operations
and its cash flows for each of the three years in the period ended September 30,
1997, in conformity with generally accepted accounting principles.






                                                /s/ ERNST & YOUNG LLP
                                                ---------------------
                                                ERNST & YOUNG LLP


Boston, Massachusetts
December 18, 1997


<PAGE>


                          Reznick Fedder & Silverman
                         Certified Public Accountants
                     217 East Redwood Street, Suite 1900
                             Baltimore, MD 21202



                         INDEPENDENT AUDITORS' REPORT



The Partners
Randallstown Carriage Hill Associates:

     We have audited the  accompanying  balance sheet  of Randallstown  Carriage
Hill  Associates  as of  September  30,  1997  and  the  related  statements  of
operations,  changes in partners' equity and cash flows for the year then ended.
These financial  statements are the responsibility of partnership's  management.
Our responsibility is to express an opinion on these financial  statements based
on our audits.

     We conducted  our audit 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 audit provides 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 Randallstown  Carriage Hill
Associates  as of  September  30,  1997 and the results of its  operations,  the
changes  in  partners'  equity and its cash  flows for the year then  ended,  in
conformity with generally accepted accounting principles.






                              /s/Reznick Fedder & Silverman
                              -----------------------------
                                 Reznick Fedder & Silverman


Baltimore, Maryland
November 5, 1997




<PAGE>


            PAINE WEBBER INCOME PROPERTIES FIVE LIMITED PARTNERSHIP

                                BALANCE SHEETS
                          September 30, 1997 and 1996
                    (In thousands, except per Unit amounts)

                                    ASSETS
                                                           1997        1996
                                                           ----        ----

Cash and cash equivalents                                $  2,165    $  1,739
                                                         ========    ========

                       LIABILITIES AND PARTNERS' DEFICIT

Losses in excess of investments and
  advances in joint ventures                             $  3,305    $  2,971
Accounts payable and accrued expenses                          47          30
                                                         --------    --------
      Total liabilities                                     3,352       3,001

Partners' deficit:
  General Partners:
   Capital contributions                                        1           1
   Cumulative net loss                                       (146)       (147)
   Cumulative cash distributions                              (60)        (60)

  Limited Partners ($1,000 per Unit; 34,928 Units issued):
   Capital contributions, net of offering costs            31,554      31,554
   Cumulative net loss                                    (14,489)    (14,563)
   Cumulative cash distributions                          (18,047)    (18,047)
                                                         --------    --------
      Total partners' deficit                              (1,187)     (1,262)
                                                         --------    --------
                                                         $  2,165    $  1,739
                                                         ========    ========

























                            See accompanying notes.


<PAGE>


            PAINE WEBBER INCOME PROPERTIES FIVE LIMITED PARTNERSHIP

                           STATEMENTS OF OPERATIONS
             For the years ended September 30, 1997, 1996 and 1995
                    (In thousands, except per Unit amounts)

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

Revenues:
   Interest income                           $     98       $   90    $   106

Expenses:
   General and administrative                     236          222        313
                                             --------       ------    -------

Operating loss                                   (138)        (132)      (207)

Partnership's share of ventures'
   income (losses)                                213         (691)    (1,182)
                                             --------       ------    -------
  

Net income (loss)                            $     75       $ (823)   $(1,389)
                                             ========       ======    =======

Net income (loss) per Limited
   Partnership Unit                          $   2.13      $(23.33)   $(39.37)
                                             ========      =======    =======




   The above net income  (loss) per Limited  Partnership  Unit is based upon the
34,928 Limited Partnership Units outstanding during each year.























                            See accompanying notes.


<PAGE>


             PAINE WEBBER INCOME PROPERTIES FIVE LIMITED PARTNERSHIP

              STATEMENTS OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)
              For the years ended September 30, 1997, 1996 and 1995
                                 (In thousands)

                                          General       Limited
                                          Partners      Partners     Total
                                          -------       --------     --------

Balance at September 30, 1994              $(184)       $ 1,134      $    950

Net loss                                     (14)        (1,375)       (1,389)
                                           -----        -------      --------

Balance at September 30, 1995               (198)          (241)         (439)

Net loss                                      (8)          (815)         (823)
                                          ------        -------      --------

Balance at September 30, 1996               (206)        (1,056)       (1,262)

Net income                                     1             74            75
                                          ------        -------      --------

Balance at September 30, 1997             $ (205)       $  (982)     $ (1,187)
                                          ======        =======      ========

































                            See accompanying notes.


<PAGE>


             PAINE WEBBER INCOME PROPERTIES FIVE LIMITED PARTNERSHIP

                            STATEMENTS OF CASH FLOWS
              For the years ended September 30, 1997, 1996 and 1995
                Increase (Decrease) in Cash and Cash Equivalents
                                 (In thousands)

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

Cash flows from operating activities:
   Net income (loss)                            $    75    $  (823)  $ 1,389)
   Adjustments to reconcile net income (loss)
    to net cash used in operating activities:
     Partnership's share of ventures' income
      (losses)                                     (213)       691     1,182
     Changes in assets and liabilities:
       Accounts payable and accrued expenses         17         (8)       13
                                                -------    -------   -------
        Total adjustments                          (196)       683     1,195
                                                -------    -------   -------
        Net cash used in operating
          activities                               (121)      (140)     (194)
                                                -------    -------   -------

Cash flows from investing activities:
   Distributions from joint ventures                533        249       275
   Additional investments in and advances
     to joint ventures                              (14)      (628)     (259)
   Repayment of advances to joint ventures           28        600         -
                                                -------    -------   -------
        Net cash provided by
         investing activities                       547        221        16
                                                -------    -------   -------

Net increase (decrease) in cash 
  and cash equivalents                              426         81      (178)

Cash and cash equivalents, beginning of year      1,739      1,658     1,836
                                                -------    -------   -------

Cash and cash equivalents, end of year          $ 2,165    $ 1,739   $ 1,658
                                                =======    =======   =======



                            See accompanying notes.


<PAGE>
                     PAINE WEBBER INCOME PROPERTIES FIVE
                             LIMITED PARTNERSHIP
                        Notes to Financial Statements


1.  Organization and Nature of Operations
    -------------------------------------

      Paine   Webber   Income   Properties   Five   Limited   Partnership   (the
"Partnership") is a limited  partnership  organized  pursuant to the laws of the
State of Delaware in January 1983 for the purpose of investing in a  diversified
portfolio  of  income-producing   properties.  The  Partnership  authorized  the
issuance of units (the "Units") of limited  partnership  interest (at $1,000 per
Unit) of which 34,928 were  subscribed  and issued  between May 26, 1983 and May
25, 1984.

      The  Partnership  originally  invested  the  net  proceeds  of the  public
offering,  through  joint venture  partnerships,  in five  operating  investment
properties,  comprised of four multi-family  apartment  complexes and one retail
shopping center. To date, one of the Partnership's original investments has been
sold. See Note 4 for a further  discussion of the  Partnership's  remaining real
estate investments.

2.  Use of Estimates and Summary of Significant Accounting Policies
    ---------------------------------------------------------------

      The  accompanying  financial  statements have been prepared on the accrual
basis of accounting in accordance with generally accepted accounting  principles
which require  management  to make  estimates  and  assumptions  that affect the
reported amounts of assets and liabilities and disclosures of contingent  assets
and  liabilities as of September 30, 1997 and 1996 and revenues and expenses for
each of the three years in the period ended  September 30, 1997.  Actual results
could differ from the estimates and assumptions used.

      The   accompanying   financial   statements   include  the   Partnership's
investments   in  certain  joint  venture   partnerships   which  own  operating
properties.  The  Partnership  accounts  for its  investments  in joint  venture
partnerships  using the equity method  because the  Partnership  does not have a
voting  control  interest in the ventures.  Under the equity method the ventures
are  carried  at cost  adjusted  for the  Partnership's  share of the  ventures'
earnings and losses and distributions.  The Partnership's  policy is to identify
any permanent  impairment to the carrying value of its joint venture investments
on a specific identification basis. At September 30, 1997 and 1996, the carrying
value of one of the  Partnership's  joint  ventures is adjusted for an allowance
for possible  investment  loss.  See Note 4 for a discussion  of this  allowance
account and a description of the joint venture partnerships.

      For purposes of reporting cash flows,  cash and cash  equivalents  include
all highly liquid investments which have original maturities of 90 days or less.

      The cash and cash equivalents appearing on the accompanying balance sheets
represent   financial   instruments  for  purposes  of  Statement  of  Financial
Accounting  Standards  No.  107,  "Disclosures  about  Fair  Value of  Financial
Instruments."  The  carrying  amount of cash and cash  equivalents  approximates
their fair value as of September 30, 1997 and 1996 due to the short-term
maturities of these instruments.

      No  provision  for income  taxes has been made as the  liability  for such
taxes is that of the partners rather than the Partnership.

3.  The Partnership Agreement and Related Party Transactions
    --------------------------------------------------------

      The General Partners of the Partnership are Fifth Income  Properties Fund,
Inc. (the "Managing General Partner"), a wholly-owned  subsidiary of PaineWebber
Group, Inc.  ("PaineWebber")  and Properties  Associates (the "Associate General
Partner"),  a Massachusetts  general  partnership,  certain general  partners of
which  are  also  officers  of the  Managing  General  Partner  and  PaineWebber
Properties  Incorporated.  Subject to the  Managing  General  Partner's  overall
authority,  the business of the Partnership is managed by PaineWebber Properties
Incorporated (the "Adviser") pursuant to an advisory contract.  The Adviser is a
wholly-owned  subsidiary  of  PaineWebber   Incorporated  ("PWI").  The  General
Partners,  the Adviser and PWI receive fees and  compensation,  determined on an
agreed-upon  basis, in consideration of various services performed in connection
with  the  sale  of the  Units,  the  management  of  the  Partnership  and  the
acquisition, management, financing and disposition of Partnership investments.

      All  distributable  cash,  as  defined,  for  each  fiscal  year  shall be
distributed  quarterly in the ratio of 99% to the Limited Partners and 1% to the
General  Partners.  All  sale  or  refinancing  proceeds  shall  be  distributed
generally 85% to the Limited Partners and 15% to the General Partners, after the
prior receipt by the Limited  Partners of their adjusted  capital  contributions
and a  cumulative,  noncompounded  return  on  their  average  adjusted  capital
contributions  ranging from 10% to 6%  depending  on when a Limited  Partner was
admitted to the Partnership.  All sale and refinancing  proceeds received by the
Partnership to date have been  distributed to the Limited Partners in accordance
with the Partnership Agreement.

      Pursuant to the terms of the Partnership Agreement, taxable income and tax
loss of the Partnership  will be allocated 99% to the Limited Partners and 1% to
the  General  Partners.  Taxable  income  or tax  loss  arising  from a sale  or
refinancing of investment  properties will be allocated to the Limited  Partners
and to the General  Partners in proportion to the amounts of sale or refinancing
proceeds to which they are entitled; provided that the General Partners shall be
allocated at least 1% of taxable income arising from a sale or  refinancing.  If
there are no sale or refinancing proceeds,  taxable income and tax losses from a
sale or refinancing  will be allocated 99% to the Limited Partners and 1% to the
General Partners.  Notwithstanding this, the Partnership Agreement provides that
the  allocation  of taxable  income and tax  losses  arising  from the sale of a
property which leads to the dissolution of the Partnership  shall be adjusted to
the extent  feasible so that neither the General or Limited  Partners  recognize
any gain or loss as a result of having  either a positive  or  negative  balance
remaining in their capital accounts upon the dissolution of the Partnership.  If
the General Partner has a negative  capital  account  balance  subsequent to the
sale of a  property  which  leads to the  dissolution  of the  Partnership,  the
General  Partner may be obligated to restore a portion of such negative  capital
account  balance  as  determined  in  accordance  with  the  provisions  of  the
Partnership  Agreement.  The negative  capital  account  balances of the Limited
Partners as of September  30, 1997 are expected to be recovered  through  future
gain allocations resulting from disposition  transactions for the remaining real
estate  investments.  Allocations of the  Partnership's  operations  between the
General Partners and the Limited Partners for financial accounting purposes have
been made in conformity with the allocations of taxable income or tax loss.

      Under  the  advisory  contract,   the  Adviser  has  specific   management
responsibilities:  to administer day-to-day operations of the Partnership and to
report  periodically  the performance of the Partnership to the Managing General
Partner. The Adviser earns a basic management fee (4% of adjusted cash flow) and
an  incentive  management  fee  (5% of  adjusted  cash  flow  subordinated  to a
noncumulative annual return to the Limited Partners equal to 6% based upon their
adjusted capital  contribution) for services  rendered.  No management fees were
earned during the three-year period ended September 30, 1997.

      Included  in  general  and  administrative  expenses  for the years  ended
September 30, 1997, 1996 and 1995 is $85,000, $81,000 and $87,000, respectively,
representing  reimbursements to an affiliate of the Managing General Partner for
providing certain financial,  accounting and investor  communication services to
the Partnership.

      The  Partnership  uses the  services  of Mitchell  Hutchins  Institutional
Investors,  Inc.  ("Mitchell  Hutchins"),  an affiliate of the Managing  General
Partner,  for the managing of cash assets.  Mitchell Hutchins is a subsidiary of
Mitchell Hutchins Asset Management,  Inc., an independently  operated subsidiary
of PaineWebber.  Mitchell Hutchins earned $6,000, $4,000 and $5,000 for managing
the Partnership's cash assets in fiscal 1997, 1996 and 1995, respectively, which
amounts are included in general and administrative  expenses on the accompanying
statements of operations.


<PAGE>


4.  Investments in Joint Venture Partnerships
    -----------------------------------------

      As of September 30, 1997 and 1996, the Partnership had investments in four
joint ventures. The joint ventures are accounted for on the equity method in the
Partnership's  financial statements.  Condensed combined financial statements of
these joint ventures are as follows:

                       Condensed Combined Balance Sheet
                         September 30, 1997 and 1996
                                (in thousands)

                                    Assets
                                                            1997        1996
                                                            ----        ----

   Current assets                                        $  2,642    $  2,210
   Operating investment properties, net                    42,890      44,853
   Other assets, net                                        2,200       1,885
                                                         --------    --------
                                                         $ 47,732    $ 48,948
                                                         ========    ========

                      Liabilities and Venturers' Deficit

   Current liabilities                                   $  7,779    $  2,529
   Other liabilities                                          878         878
   Long-term mortgage debt,
     less current portion                                  46,893      52,791

   Partnership's share of combined deficit                 (3,798)     (3,583)
   Co-venturers' share of combined deficit                 (4,020)     (3,667)
                                                         --------    --------
                                                         $ 47,732    $ 48,948
                                                         ========    ========

                 Reconciliation of Partnership's Investments
                                (in thousands)
                                                            1997        1996
                                                            ----        ----

   Partnership's share of deficit, as shown above        $ (3,798)   $ (3,583)
   Partnership's share of current liabilities
     and long-term debt                                       793         912
   Less:  Allowance for possible investment loss (1)         (300)       (300)
                                                         --------    --------

   Investments in joint ventures, at equity, net         $ (3,305)   $ (2,971)
                                                         ========    ========

   (1)The carrying value of the  Partnership's  investments in joint ventures at
      September 30, 1997 and 1996 is net of an allowance for possible investment
      loss of $300,000,  which  relates to the Amarillo  Bell  Associates  joint
      venture. See discussion below for further details.


<PAGE>


                    Condensed Combined Summary of Operations
              For the years ended September 30, 1997, 1996 and 1995
                                 (in thousands)
                                                1997        1996        1995
                                                ----        ----        ----
   Revenues:
     Rental income and expense recoveries     $12,062     $11,646     $11,173
     Interest and other income                    443         473         443
                                              -------     -------     -------
                                               12,505      12,119      11,616

   Expenses:
     Property operating expenses                5,055       5,602       4,968
     Depreciation and amortization              2,805       2,647       2,525
     Interest expense                           4,503       4,955       5,216
     Loss on write-off of deferred
       financing costs                              -           -       1,177
                                              -------     -------     -------
                                               12,363      13,204      13,886
                                              -------     -------     -------

   Net income (loss)                          $   142     $(1,085)    $(2,270)
                                              =======     =======     =======

   Net income (loss):
     Partnership's share of 
       combined income (loss)                 $   213     $  (691)    $(1,182)
     Co-venturers' share of 
       combined income (loss)                     (71)       (394)     (1,088)
                                              -------     -------     -------
                                              $   142     $(1,085)    $(2,270)
                                              =======     =======     =======

      Investments  in  joint  ventures,  at  equity,  is the  Partnership's  net
investment in the joint venture  partnerships.  These joint ventures are subject
to partnership  agreements  which determine the distribution of available funds,
the  disposition  of the  venture's  assets  and  the  rights  of the  partners,
regardless of the Partnership's  percentage  ownership  interest in the venture.
Substantially all of the  Partnership's  investments in these joint ventures are
restricted as to distributions.

      Investments in joint  ventures,  at equity,  on the  accompanying  balance
sheets  at  September  30,  1997  and 1996 is  comprised  of the  following  (in
thousands):

                                                            1997        1996
                                                            ----        ----

   Randallstown Carriage Hill Associates                 $ (6,207)    $ (6,084)
   Signature Partners, L.L.C.                                 246          239
   Amarillo Bell Associates                                 1,578        1,623
   Greenbrier Associates                                      723          822
   Seven Trails West Associates                               355          429
                                                         --------     --------
                                                         $ (3,305)    $ (2,971)
                                                         ========     ========

      The Partnership received cash distributions from the ventures as set forth
      below (in thousands):

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

   Amarillo Bell Associates                   $   198      $    -      $   50
   Greenbrier Associates                          265         198         132
   Randallstown Carriage Hill Associates            -          51          93
   Seven Trails West Associates                    70           -           -
                                              -------      ------      ------
                                              $   533      $  249      $  275
                                              =======      ======      ======

      A  description  of the  ventures'  properties  and the  terms of the joint
venture agreements are summarized as follows:

    a)  Randallstown Carriage Hill Associates
        -------------------------------------

      On August 30, 1983, the  Partnership  acquired an interest in Randallstown
      Carriage Hill  Associates,  a Maryland  general  partnership  organized to
      purchase  and  operate  Carriage  Hill  Village  Apartments,  an  806-unit
      apartment complex in Randallstown,  Maryland. The Partnership ("PWIP5") is
      a general  partner in the joint venture.  JBG  Associates  ("JBG") was the
      original  co-venturer  of the joint  venture.  The joint venture  obtained
      necessary  new  capital by  admitting  Signature  Development  Corporation
      ("Signature")  as a new partner in fiscal  1988.  The amended  partnership
      agreement  provided for the admission of Signature as a 50% partner in the
      joint venture with JBG and PWIP5 (collectively  "JBG/PW"). JBG and PWIP5's
      ownership   percentages   were  adjusted,   pro  rata,  to  10%  and  40%,
      respectively.  In return  for its 50%  interest,  Signature  committed  to
      contribute  up to  $3,000,000  to the joint  venture  over the first three
      years,  primarily to fund capital improvements,  working capital needs and
      meet debt payments.

      The aggregate cash investment made by the Partnership for its interest was
      approximately $11,524,000 (including an acquisition fee of $1,150,000 paid
      to the  Adviser).  The  apartment  complex  was  acquired  subject to four
      mortgages;  two  institutional  nonrecourse  first mortgages with balances
      totalling approximately  $6,136,000 at the time of closing, and two second
      mortgage  notes from the seller of the property  with  balances  totalling
      $6,000,000 at the time of closing.  On December 30, 1986, the  Partnership
      refinanced the aforementioned debt by obtaining a $28,000,000 non-recourse
      mortgage loan. The Partnership  received a distribution  of  approximately
      $9,926,000 in fiscal 1987,  reflecting its share of the excess refinancing
      proceeds.  In fiscal 1995,  the  venture's  mortgage  debt was  refinanced
      again.  The  new  mortgage  loan,  in  the  initial  principal  amount  of
      approximately $27.9 million, has a fixed interest rate of 7.65% and a term
      of 35 years. The venture recognized a loss of $1,177,000 in fiscal 1995 in
      connection with the  refinancing  transaction to write off the unamortized
      balance of the  deferred  financing  costs  related to the prior  mortgage
      loan.  The new loan also released from the  collateral a 23-acre parcel of
      excess  land.  The  venture  distributed  this  land  parcel,  which had a
      carrying value of $563,000, to a new entity,  Signature Partners,  L.L.C.,
      in  conjunction  with the  refinancing  transaction.  Signature  Partners,
      L.L.C.  is  owned  by  Signature,  JBG and the  Partnership  with the same
      ownership  interest  percentages  as in the  Carriage  Hill joint  venture
      agreement.  The land owned by Signature Partners,  L.L.C. could eventually
      be marketed to local developers once market conditions  improve.  Proceeds
      of any such sale,  if  completed,  would be  distributed  to the owners in
      accordance  with the same  priorities  called  for  under the terms of the
      Carriage Hill joint venture agreement described below.

      The amended joint venture agreement provides that available net cash flow,
      as defined, is to be distributed in the following order of priority: 1) To
      the partners for any deficiency  loans, as defined,  simple but cumulative
      interest at 15% per annum;  2) To  Signature  and JBG/PW,  until both have
      received an amount of $151,324 plus simple but cumulative  interest at 10%
      thereon  from  January 15, 1995  through the date of  distribution;  3) To
      Signature,  simple  but  cumulative  interest  at  10%  per  annum  on the
      aggregate   unreturned  balance  of  the  Initial  Capital  Commitment  of
      $2,549,120 and any Additional Capital,  as defined;  4) To JBG/PW,  simple
      but  cumulative  interest  at 10% per annum on the  unreturned  balance of
      JBG/PW's deemed capital  contribution of $1,500,000;  and (5) any net cash
      flow remaining, to the partners pro rata in proportion to their respective
      partnership  interests.  Any cash flow distributed by the joint venture to
      JBG/PW  is to be  distributed  between  them  in the  following  order  of
      priority:  1) To the holders of operating notes, interest on all operating
      notes other than the Initial  Operating Loan, as defined;  2) To PWIP5 and
      JBG,  $300,000  distributed  90%  to  PWIP5  and  10% to  JBG;  and 3) any
      remainder, 80% to PWIP5 and 20% to JBG.

      Per the terms of the amended  joint  venture  agreement,  any net proceeds
      arising from the refinancing,  sale,  exchange or other disposition of the
      Property or any part thereof,  will be distributed in the following  order
      of priority:  1) To the lenders of deficiency loans, simple but cumulative
      interest at 15% per annum on, and then to the payment of the principal of,
      any deficiency loans; 2) To Signature and JBG/PW, until both have received
      an amount of $151,324 plus simple but  cumulative  interest at 10% thereon
      from  January 15, 1995 through the date of  distribution;  3) to Signature
      and  JBG/PW,  an  amount  equal to  their  respective  Closing  Adjustment
      Accounts,  as defined,  plus the Deferred Distribution of $137,500 owed to
      JBG/PW,  together  with  simple but  cumulative  interest at 10% per annum
      thereon; 4) to Signature,  simple but cumulative interest at 10% per annum
      on, and then to the  payment of  principal  of, the  aggregate  unreturned
      balance of the Initial Capital Commitment of $2,549,120 and any Additional
      Capital, as defined;  5) to JBG/PW,  simple but cumulative interest at 10%
      per annum on, and then to the  payment  of  principal  of, the  unreturned
      aggregate  balance of JBG/PW's deemed capital  contribution of $1,500,000,
      plus  $351,000;  and 6) the balance pro rata to the partners in proportion
      to their  respective  percentages  of partnership  interests.  Any capital
      proceeds  distributed by the joint venture to JBG/PW are to be distributed
      between  them in the  following  order of  priority:  1) To the holders of
      operating  notes,  all unpaid accrued interest on, and then to the payment
      of principal of, all  outstanding  operating  notes other than the Initial
      Operating Loan; 2) To JBG, any subordinated management fees and management
      fees then unpaid and accrued from prior fiscal years, 3) To PWIP5, payment
      of the Initial Operating Note together with accrued interest  thereon;  4)
      To JBG,  $200,000 for services rendered in connection with the refinancing
      of the  original  mortgage;  5) To  PWIP5  and JBG,  the  next  $5,000,000
      distributed  90% to PWIP5  and 10% to JBG;  and 6) To PWIP5  and JBG,  any
      remaining balance distributed 80% to PWIP5 and 20% to JBG.

      All tax losses shall be allocated to the partners in  proportion  to their
      percentages of partnership  interest;  provided,  however, that no partner
      shall be allocated  any loss which would reduce its capital  account below
      zero unless all Partners have negative  capital  accounts.  Taxable income
      shall be  allocated in  accordance  with the cash flow  distributions  set
      forth above.  Any income allocated by the joint venture to JBG/PW is to be
      allocated  between them to the extent of cash flow distributed to them for
      such taxable year,  with the  remainder  allocated 80% to PWIP5 and 20% to
      JBG.  Tax  losses  allocated  by the  joint  venture  to  JBG/PW  shall be
      allocated  between  them in the ratio of their  positive  capital  account
      balances,  subsequent  to any  distributions,  with any  remaining  losses
      allocated 80% to PWIP5 and 20% to JBG.  Allocations of the joint venture's
      net losses for financial  accounting purposes have been made in accordance
      with the allocations of tax losses.

      A management agreement ("Management Agreement"), dated as of July 8, 1988,
      between the joint  venture and  Signature  Management  Services,  Inc., an
      affiliate of Signature,  sets forth conditions of the property  management
      for the Carriage Hill Apartments.  The Management Agreement provides for a
      monthly  management  fee of 5% of the prior  month's  gross  revenues,  as
      defined.

      b)  Amarillo Bell Associates
          ------------------------

      On September 30, 1983, the Partnership acquired a 50% interest in Amarillo
      Bell  Associates,  an  existing  Texas  general  partnership  which owns a
      144,000 square foot shopping center in Amarillo, Texas. The Partnership is
      a general partner in the joint venture.  The Partnership's  co-venturer is
      an  affiliate  of The  Boyer  Company.  The  aggregate  investment  by the
      Partnership for its interest was  approximately  $2,222,000  (including an
      acquisition fee of $230,000 paid to the Adviser).

      On June  19,  1995,  the  Partnership  completed  the  refinancing  of the
      existing first mortgage loan secured by Bell Plaza,  reducing the interest
      rate from 9.4% to 8.125%. The new loan, in the initial principal amount of
      $3,300,000,  has a seven-year  term and  requires  monthly  principal  and
      interest payments based upon a twenty-five year amortization schedule. The
      terms of the loan allow for a prepayment  of the  principal  balance after
      the end of one year.  At September  30, 1997,  the balance of the mortgage
      loan, which matures on July 1, 2002, was approximately $3,204,000.

      Subsequent  to the end of fiscal 1990,  the  Partnership  had entered into
      negotiations  with its  co-venture  partner to execute a purchase and sale
      agreement for the sale of the Partnership's interest in the joint venture.
      The  proposed  agreement  would  have given the  co-venturer  an option to
      purchase the  Partnership's  interest for  $1,500,000.  Because the option
      price was below the  equity  method  carrying  value of the  Partnership's
      investment  in  Amarillo  Bell  Associates  at  September  30,  1990,  the
      Partnership  recognized  a  provision  for  possible  investment  loss  of
      $300,000 in fiscal 1990 which reflected an estimate of the loss that would
      have been  incurred if the option had been  executed  and  exercised.  The
      co-venturer  was unable to obtain  financing to complete this  transaction
      and the option was never  executed.  The $300,000  allowance  for possible
      investment  loss remains on the  Partnership's  balance sheet at September
      30,  1997  due to  management's  belief  that it  represents  a  permanent
      impairment to the carrying value of the investment in the Bell Plaza joint
      venture.

      The joint venture  agreement  provides that the  Partnership  will receive
      from cash flow an annual non-cumulative preferred return, payable monthly,
      of 50% of the  distributable  cash flow with a minimum  of  $164,000  from
      October 1, 1988 annually through  September 30, 1990. For the period after
      September 30, 1990, the  Partnership  will receive an annual  distribution
      paid on a monthly  basis  equal to 50% of  distributable  cash  flow.  The
      co-venturer  will  receive an annual  non-cumulative  base return  payable
      quarterly equal to the available cash flow after the Partnership's  return
      as set forth above.

      Taxable income before  depreciation  will be allocated to the  Partnership
      and the co-venturer  first in the same amount as cash is distributed,  and
      any  balance  will  be  allocated  50% to the  Partnership  and 50% to the
      co-venturer. If no cash flow is available, then 100% is to be allocated to
      the Partnership.  Depreciation  will be allocated to the partners as it is
      attributable  to  their  respective  basis  in  the  depreciable   assets.
      Allocations of income and loss for financial accounting purposes have been
      made in accordance with the allocations of taxable income or tax loss.

      If additional cash is required for any reason in connection with the joint
      venture,  it is to be provided in equal proportions by the Partnership and
      the co-venturer.

      Per the terms of the joint venture agreement, distributions from a sale of
      the operating  investment property and/or refinancing  proceeds will be as
      follows,  after  the  payment  of  mortgage  debts and to the  extent  not
      previously  returned to each  partner:  1) to the  Partnership,  an amount
      equal  to the  Partnership's  gross  investment,  2) to  the  co-venturer,
      $2,140,000,  3) payment of all unpaid accrued  interest on all outstanding
      operating  notes  and  then  to  the  repayment  of the  principal  of all
      outstanding  operating  notes,  4)  payment  of any  accrued  subordinated
      management fees, 5) any remaining balance thereof shall be distributed 50%
      to the Partnership and 50% to the co-venturer.

      The joint venture has entered into a property  management contract with an
      affiliate of the co-venturer  cancellable at the option of the Partnership
      upon the occurrence of certain  events.  The management fee is equal to 4%
      of gross rents.

      c)  Greenbrier Associates
          ---------------------

      On June 29,  1984,  the  Partnership  acquired an  interest in  Greenbrier
      Associates,   an  Indiana  general  partnership  that  owns  and  operates
      Greenbrier   Apartments,   a  324-unit   apartment   complex   located  in
      Indianapolis,  Indiana.  The Partnership is a general partner in the joint
      venture.  The  Partnership's  co-venturer  is an  affiliate of the Paragon
      Group.

      The aggregate cash investment made by the Partnership for its interest was
      approximately $4,109,000 (including an acquisition fee of $432,000 paid to
      the Adviser). The apartment complex is encumbered by a first mortgage loan
      with a balance of $5,400,000  at September  30, 1997.  In 1993,  the joint
      venture  exercised  an option to extend the  maturity  date of the loan to
      June 29, 1998, at which time the entire  principal and any unpaid  accrued
      interest  are due.  Management  may  attempt  to  refinance  the debt with
      similar terms,  or the venture may elect to sell the property prior to the
      June  1998  maturity  date.  There  are  no  assurances,  however,  that a
      refinancing  or sale will be  completed.  Management  cannot  predict  the
      outcome of these  uncertainties.  The financial  statements do not include
      any adjustments that might result from the outcome of these uncertainties.

      The joint venture  agreement  provides that the  Partnership  will receive
      from  available  cash flow an annual  cumulative  preferred  base  return,
      payable  monthly,  of $378,000.  The  Partnership's  preference  return is
      noncumulative  on  a  year-to-year  basis  beginning  July  1,  1987.  The
      cumulative  preference  return of the  Partnership in arrears at September
      30, 1997 and 1996 for unpaid  preference  returns through June 30, 1987 is
      approximately  $312,000.  Since such amount is payable only from available
      future sale or refinancing proceeds, as set forth below, it is not accrued
      in the joint  venture's  financial  statements.  After the Partnership has
      received its preferred return, the co-venturer is then entitled to receive
      an annual noncumulative,  subordinated base return, payable quarterly,  of
      $21,000. Any remaining cash flow not previously  distributed at the end of
      each  year will be used to pay any  accrued  interest  on all  outstanding
      operating  notes.  The next  $100,000  of cash  flow in any  year  will be
      distributed 90% to the Partnership and 10% to the co-venturer. Thereafter,
      any excess cash flow will be distributed 80% to the Partnership and 20% to
      the co-venturer.

      Taxable income or tax loss from  operations  will be allocated in the same
      proportions  as cash  distributions,  but in no event  less than 5% to the
      co-venturer.  Additionally,  the  co-venturer  shall not be allocated  net
      profits  in excess of net cash flow  distributed  to it during  the fiscal
      year.  Allocations of the venture's operations between the Partnership and
      the  co-venturer  for  financial  accounting  purposes  have  been made in
      conformity with the actual allocations of taxable income or tax loss.

      If additional cash is required for any reason in connection with the joint
      venture,  it will be provided by the  Partnership  and the  co-venturer as
      loans to the  joint  venture.  Such  loans  would be  provided  85% by the
      Partnership and 15% by the co-venturer.

      Any  proceeds  arising  from  a  refinancing,   sale,  exchange  or  other
      distribution  of property will be  distributed  in the following  order of
      priority:  (1) to the payment of unpaid  principal and accrued interest on
      all outstanding operating notes, then to the repayment of unpaid operating
      loans and accrued interest to the Partnership and the co-venturer,  (2) to
      the  Partnership,  the aggregate  amount of the  Partnership's  cumulative
      preference return not previously  distributed,  (3) the next $4,044,000 to
      the  Partnership,  (4) the next  $200,000 to the  co-venturer,  (5) to the
      property  manager,  an amount equal to the sum of any unpaid  subordinated
      management  fees,  (6) the  next  $3,500,000  to the  Partnership  and the
      co-venturer allocated 90% and 10%,  respectively,  (7) the next $3,000,000
      to  the   Partnership   and  the   co-venturer   allocated  80%  and  20%,
      respectively,  and (8) any remaining  balance to the  Partnership  and the
      co-venturer in the proportions of 70% and 30%, respectively.

      The joint  venture  entered into a property  management  contract  with an
      affiliate of the co-venturer, cancellable at the option of the Partnership
      upon the  occurrence of certain  events.  The  management fee is 5% of the
      gross receipts collected from the property.

    d)  Seven Trails West Associates
        ----------------------------

      On  September  13,  1984,  the  Partnership  acquired an interest in Seven
      Trails  West  Associates,  a Missouri  general  partnership  that owns and
      operates Seven Trails West  Apartments,  a 532-unit  apartment  complex in
      Ballwin,  Missouri.  The  Partnership  is a general  partner  in the joint
      venture.
<PAGE>

      The  aggregate  cash  investment by the  Partnership  for its interest was
      approximately $10,011,000 (including an acquisition fee of $1,050,000 paid
      to the Adviser). On April 17, 1996, the Partnership successfully completed
      the  refinancing  of the existing first mortgage loan secured by the Seven
      Trails West  Apartments,  reducing  the annual  interest  rate from 12% to
      7.87%. The new loan, in the initial  principal  amount of $17,000,000,  is
      for a term of ten years with monthly  payments of  principal  and interest
      totalling  $130,000.  The  proceeds  of  the  new  loan,  together  with a
      contribution of $159,000 from the joint venture,  were used to pay off all
      obligations  of the  prior  first  mortgage  loan as  well as to fund  all
      reserves  and  escrows  required  by the new  lender.  Because  the  prior
      mortgage  loan was not  repaid by  February  1,  1996,  the joint  venture
      forfeited  a  $147,000  fee which  had been  paid to the  prior  lender in
      connection with a fiscal 1994 extension agreement and was to be refundable
      under certain conditions.

      The joint venture  agreement  provides that the  Partnership  will receive
      from  available  cash flow an annual  cumulative  preferred  base  return,
      payable monthly,  of $875,000.  The  Partnership's  preference  return was
      cumulative  on a year to year  basis  through  September  30,  1987 and is
      cumulative monthly but not annually thereafter.  The cumulative preference
      return of the  Partnership  in arrears at  September  30,  1996 for unpaid
      preference returns through September 30, 1987 is approximately $1,691,000.
      As such amount is payable only from future  available  sale or refinancing
      proceeds,  as set forth  below,  it is not accrued in the joint  venture's
      financial statements.

      After the Partnership has received its preferred  return,  the co-venturer
      is then  entitled to receive an annual  noncumulative,  subordinated  base
      return,  payable  quarterly,  of  $50,000.  Any cash  flow not  previously
      distributed at the end of each fiscal year will be applied as follows:  to
      the payment of all unpaid accrued  interest on all  outstanding  operating
      notes;  $250,000 of cash flow in any year will be  distributed  90% to the
      Partnership and 10% to the  co-venturer;  the next $300,000 of annual cash
      flow  will  be  distributed   80%  to  the  Partnership  and  20%  to  the
      co-venturer;  thereafter,  any excess cash flow will be distributed 70% to
      the Partnership and 30% to the co-venturer.

      Taxable income or tax loss from  operations  will be allocated in the same
      proportions  as cash  distributions,  but in no event less than 10% to the
      co-venturer.  Additionally,  the  co-venturer  shall not be allocated  net
      profits  in excess of net cash flow  distributed  to it during  the fiscal
      year.  Allocations of the venture's operations between the Partnership and
      the  co-venturer  for  financial  accounting  purposes  have  been made in
      conformity with the allocations of taxable income or tax loss.

      If additional cash is required for any reason in connection with the joint
      venture,  the joint venture  agreement calls for such funds to be provided
      by the Partnership and the co-venturer as loans to the joint venture. Such
      loans would be provided 90% by the Partnership and 10% by the co-venturer.
      Through  September  30, 1997,  operating  notes have been  provided by the
      Partnership  and  co-venturer  in the  amounts of  $836,000  and  $11,000,
      respectively.  The notes bear  interest  at the prime  interest  rate of a
      local bank. The Partnership advanced 100% of the funds required to close a
      loan  modification and extension  agreement in fiscal 1994. The portion of
      such operating notes  representing  the co-venture  partner's 10% share of
      the  required  funds  bears  interest  at twice  the  rate of the  regular
      operating  notes and the accrued  interest on such notes is payable as the
      first priority from net cash flow, as defined.

      Any  proceeds  arising  from a  refinancing,  sale or  exchange  or  other
      disposition of property will be distributed first to the payment of unpaid
      principal and accrued  interest on any  outstanding  notes.  Any remaining
      proceeds will be distributed in the following  order:  repayment of unpaid
      principal and accrued  interest on all outstanding  operating notes to the
      Partnership and the co-venturer; and any remaining balance distributed 90%
      to the Partnership and 10% to the co-venturer.

      The joint venture has entered into a property  management contract with an
      affiliate of the co-venturer, cancellable at the option of the Partnership
      upon the occurrence of certain  events.  The management fee is equal to 5%
      of the gross receipts collected from the property.



<PAGE>

                                    
                        REPORT OF INDEPENDENT AUDITORS





The Partners of
Paine Webber Income Properties Five Limited Partnership:

     We have audited the  accompanying  combined  balance sheets of the Combined
Joint Ventures of Paine Webber Income Properties Five Limited  Partnership as of
September 30, 1997 and 1996, and the related  combined  statements of operations
and changes in venturers' deficit, and cash flows for each of the three years in
the period ended  September  30, 1997.  Our audits also  included the  financial
statement schedule listed in the Index at Item 14(a). These financial statements
and  schedule  are  the  responsibility  of the  Partnership's  management.  Our
responsibility  is to  express  an opinion  on these  financial  statements  and
schedule  based on our  audits.  We did not audit the  financial  statements  of
Randallstown  Carriage Hill Associates as of September 30, 1997 and for the year
then ended, which statements reflect 35% of the combined total assets and 44% of
the  combined  revenues of the Combined  Joint  Ventures of  PaineWebber  Income
Properties  Five Limited  Partnership  as of September 30, 1997 and for the year
then ended.  Those  statements  were audited by other  auditors whose report has
been  furnished to us, and our opinion,  insofar as it relates to data  included
for  Randallstown  Carriage Hill Associates as of September 30, 1997 and for the
year then ended, is based solely on the report of the other auditors.

      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 and the report of other auditors provide a reasonable
basis for our opinion.

      In our opinion,  based on our audits and the report of other auditors, the
combined financial  statements referred to above present fairly, in all material
respects,  the combined  financial  position of the Combined  Joint  Ventures of
Paine Webber Income  Properties  Five Limited  Partnership at September 30, 1997
and 1996, and the combined  results of their operations and their cash flows for
each of the three years in the period ended  September  30, 1997,  in conformity
with generally accepted accounting  principles.  Also, in our opinion,  based on
our audits and the report of other  auditors,  the related  financial  statement
schedule, when considered in relation to the basic financial statements taken as
a whole,  presents  fairly in all material  respects the  information  set forth
therein.






                                                /s/ Ernst & Young LLP
                                                ---------------------
                                                ERNST & YOUNG LLP



Boston, Massachusetts
November 20, 1997


<PAGE>


                          Reznick Fedder & Silverman
                         Certified Public Accountants
                     217 East Redwood Street, Suite 1900
                             Baltimore, MD 21202



                         INDEPENDENT AUDITORS' REPORT



The Partners
Randallstown Carriage Hill Associates:

     We have audited the  accompanying  balance sheet  of Randallstown  Carriage
Hill  Associates  as of  September  30,  1997  and  the  related  statements  of
operations,  changes in partners' equity and cash flows for the year then ended.
These financial  statements are the responsibility of partnership's  management.
Our responsibility is to express an opinion on these financial  statements based
on our audits.

     We conducted  our audit 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 audit provides 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 Randallstown  Carriage Hill
Associates  as of  September  30,  1997 and the results of its  operations,  the
changes  in  partners'  equity and its cash  flows for the year then  ended,  in
conformity with generally accepted accounting principles.






                              /s/Reznick Fedder & Silverman
                              -----------------------------
                              Reznick Fedder & Silverman
 

Baltimore, Maryland
November 5, 1997




<PAGE>


                          COMBINED JOINT VENTURES OF
           PAINE WEBBER INCOME PROPERTIES FIVE LIMITED PARTNERSHIP

                           COMBINED BALANCE SHEETS
                         September 30, 1997 and 1996
                                (In thousands)

                                    Assets

                                                            1997        1996
                                                            ----        ----
Current assets:
   Cash and cash equivalents                             $    833    $    469
   Escrow deposits                                          1,103       1,085
   Accounts receivable                                        129          83
   Prepaid expenses                                           577         573
                                                         --------    --------
      Total current assets                                  2,642       2,210

Operating investment properties:
   Land                                                     5,250       5,250
   Buildings, improvements and equipment                   70,929      70,147
                                                         --------    --------
                                                           76,179      75,397
   Less accumulated depreciation                          (33,289)    (30,544)
                                                         --------    --------
      Net operating investment properties                  42,890      44,853

Reserve for capital expenditures                              764         364

Deferred expenses, net of accumulated amortization
   of $334 ($234 in 1996)                                   1,295       1,373
Other assets, net                                             141         148
                                                         --------    --------
                                                         $ 47,732    $ 48,948
                                                         ========    ========

                      Liabilities and Venturers' Deficit
Current liabilities:
   Current portion of long-term debt                     $  5,898    $    461
   Accounts payable                                           104         205
   Accounts payable - affiliates                               51         120
   Accrued real estate taxes                                  526         511
   Accrued interest                                           643         648
   Tenant security deposits                                   395         350
   Distributions payable to venturers                          61         132
   Other current liabilities                                  101         102
                                                         --------    --------
      Total current liabilities                             7,779       2,529

Notes payable to venturers                                    847         847

Other liabilities                                              31          31

Long-term debt                                             46,893      52,791

Venturers' deficit                                         (7,818)     (7,250)
                                                         --------    --------
                                                         $ 47,732    $ 48,948
                                                         ========    ========


                           See accompanying notes.


<PAGE>


                           COMBINED JOINT VENTURES OF
             PAINE WEBBER INCOME PROPERTIES FIVE LIMITED PARTNERSHIP

       COMBINED STATEMENTS OF OPERATIONS AND CHANGES IN VENTURERS' DEFICIT
              For the years ended September 30, 1997, 1996 and 1995
                                 (In thousands)

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

Revenues:
  Rental income and expense recoveries        $12,062     $11,646     $11,173
  Interest and other income                       443         473         443
                                              -------     -------     -------
                                               12,505      12,119      11,616

Expenses:
  Interest expense                              4,503       4,955       5,216
  Depreciation expense                          2,745       2,616       2,501
  Real estate taxes                             1,025         958         994
  Repairs and maintenance                         816         920         839
  Salaries and related expenses                 1,333       1,454       1,376
  Utilities                                       770         958         725
  General and administrative                      449         577         320
  Management fees                                 591         573         532
  Insurance                                       131         137         155
  Bad debt expense                                  -          25          27
  Amortization expense                             60          31          24
  Loss on write-off of deferred 
    financing costs                                 -           -       1,177
                                              -------     -------     -------
                                               12,363      13,204      13,886
                                              -------     -------     -------

Net income (loss)                                 142      (1,085)     (2,270)

Contributions from venturers                        -           -         916

Distributions to venturers                       (710)       (444)       (695)

Venturers' deficit, beginning of year          (7,250)     (5,721)     (3,672)
                                              -------     -------     -------

Venturers' deficit, end of year               $(7,818)    $(7,250)    $(5,721)
                                              =======     =======     =======
















                           See accompanying notes.


<PAGE>


                           COMBINED JOINT VENTURES OF
             PAINE WEBBER INCOME PROPERTIES FIVE LIMITED PARTNERSHIP
                        COMBINED STATEMENTS OF CASH FLOWS
             For the years ended September 30, 1997, 1996 and 1995
                Increase (Decrease) in Cash and Cash Equivalents
                                 (In thousands)
                                                1997        1996        1995
                                                ----        ----        ----
Cash flows from operating activities:
   Net income (loss)                          $   142    $ (1,085)   $ (2,270)
   Adjustments to reconcile net income 
     (loss) to  net cash provided by 
     operating activities:
      Depreciation and amortization             2,805       2,647       2,525
      Amortization of deferred financing costs     47          70          99
      Loss on write-off of deferred financing 
        costs                                       -           -       1,177
      Changes in assets and liabilities:
         Escrow deposits                          (18)        (55)        183
         Accounts receivable                      (46)         47         (63)
         Prepaid expenses                          (4)         91         (83)
         Deferred expenses                        (22)        (86)       (126)
         Accounts payable                        (101)         88        (134)
         Accounts payable - affiliates            (69)         90         (14)
         Accrued real estate taxes                 15         (37)         (1)
         Accrued interest                          (5)         63          60
         Tenant security deposits                  45         (14)        (34)
         Other current liabilities                 (1)        (19)         (4)
         Deferred interest                          -      (1,657)         11
         Other liabilities                          -          17           1
                                              -------    --------     -------
            Total adjustments                   2,646       1,245       3,597
                                              -------    --------     -------
            Net cash provided by operating
              activities                        2,788         160       1,327
                                              -------    --------     -------

Cash flows from investment activities:
   Additions to operating investment 
     properties                                  (782)     (1,903)     (1,323)
   Decrease (increase) in reserve for capital
     expenditures                                (400)        325        (467)
                                              -------    --------     -------
            Net cash used in investing
              activities                       (1,182)     (1,578)     (1,790)
                                              -------    --------     -------

Cash flows from financing activities:
   Proceeds from long-term debt                     -      17,000      31,184
   Payment of deferred financing costs              -        (243)       (945)
   Contributions by venturers                       -           -         916
   Distributions to venturers                    (781)       (312)       (930)
   Repayment of long-term debt                   (461)    (14,984)    (30,002)
   Proceeds from loans from venturers               -           -         119
   Repayment of notes to partners                   -        (119)          -
                                              -------    --------     -------
            Net cash (used in) provided by
             financing activities              (1,242)      1,342         342
                                              -------    --------     -------

Net increase (decrease) in cash and
  cash equivalents                                364         (76)       (121)
Cash and cash equivalents, beginning of year      469          545        666
                                               -------    --------    -------

Cash and cash equivalents, end of year        $   833    $     469    $    545
                                              =======    =========    ========

Cash paid during the year for interest        $ 4,461    $   6,479    $  4,909
                                              =======    =========    ========

                           See accompanying notes.


<PAGE>

                          COMBINED JOINT VENTURES of
                     PAINE WEBBER INCOME PROPERTIES FIVE
                             LIMITED PARTNERSHIP
                    Notes to Combined Financial Statements


1.  Organization and Nature of Operations
    -------------------------------------

      The  accompanying  financial  statements of the Combined Joint Ventures of
Paine  Webber  Income  Properties  Five  Limited  Partnership   (Combined  Joint
Ventures)  include the accounts of  Randallstown  Carriage  Hill  Associates,  a
Maryland general  partnership;  Signature  Partners,  L.L.C., a Maryland limited
liability  company;  Amarillo  Bell  Associates,  a Texas  general  partnership;
Greenbrier  Associates,  an Indiana general  partnership;  and Seven Trails West
Associates a Missouri  general  partnership.  The  financial  statements  of the
Combined  Joint Ventures are presented in combined form due to the nature of the
relationship  between the co-venturers  and Paine Webber Income  Properties Five
Limited Partnership  (PWIP5),  which owns a majority financial interest but does
not have voting control in each joint venture.

      The dates of PWIP5's acquisition of interests in the joint ventures are as
follows:

                                                    Date of Acquisition
                      Joint Venture                     of Interest
                      -------------                     -----------

         Randallstown Carriage Hill Associates          8/30/83
         Signature Partners L.L.C.                      6/1/95
         Amarillo Bell Associates                       9/30/83
         Greenbrier Associates                          6/29/84
         Seven Trails West Associates                   9/13/84


2.  Use of Estimates and Summary of Significant Accounting Policies
    ---------------------------------------------------------------

      The  accompanying  financial  statements have been prepared on the accrual
basis of accounting in accordance with generally accepted accounting  principles
which require  management  to make  estimates  and  assumptions  that affect the
reported amounts of assets and liabilities and disclosures of contingent  assets
and  liabilities as of September 30, 1997 and 1996 and revenues and expenses for
each of the three years in the period ended  September 30, 1997.  Actual results
could differ from the estimates and assumptions used.

      Basis of presentation
      ---------------------

      Generally,  the records of the combined  joint  ventures are maintained on
the income tax basis of accounting and adjusted to generally accepted accounting
principles for financial reporting purposes, principally for depreciation.

      Reclassifications
      -----------------

      Certain  prior  year  amounts  have been  reclassified  to  conform to the
current year presentation.

      Operating investment properties
      -------------------------------

      The  operating  investment  properties  are  carried  at cost,  reduced by
accumulated  depreciation,  or  an  amount  less  than  cost  if  indicators  of
impairment  are present in  accordance  with  Statement of Financial  Accounting
Standards (SFAS) No. 121 "Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to Be Disposed Of," which was adopted in fiscal 1997. SFAS
No. 121 requires  impairment  losses to be recorded on long-lived assets used in
operations when indicators of impairment are present and the  undiscounted  cash
flows  estimated  to be  generated  by those  assets  are less than the  assets'
carrying amount. The Partnership  generally assesses indicators of impairment by
a review of independent appraisal reports on each operating investment property.
Such  appraisals  make  use  of a  combination  of  certain  generally  accepted
valuation techniques, including direct capitalization, discounted cash flows and
comparable sales analysis.

      Depreciation  expense  is  computed  on a  straight-line  basis  over  the
estimated useful lives of the buildings,  improvements and equipment, generally,
five to forty years.  Professional  fees and other costs  incurred in connection
with the acquisition of the properties have been capitalized and are included in
the cost of the land and buildings.

      Deferred expenses
      -----------------

      Deferred  expenses consist of leasing  commissions and loan fees which are
being amortized,  using the straight-line  method, over the terms of the related
leases and loans,  respectively.  Amortization of deferred loan fees is included
in interest expense on the accompanying statements of operations.

      Revenue Recognition
      -------------------

      The  Combined  Joint  Ventures  lease  space at the  operating  investment
properties under short-term and long-term operating leases.  Rental revenues are
recognized  on a  straight-line  basis as  earned  pursuant  to the terms of the
leases.

      Income tax matters
      ------------------

      The  Combined  Joint  Ventures  are  comprised  of entities  which are not
taxable and accordingly, the results of their operations are included on the tax
returns  of the  various  partners.  Accordingly  no  income  tax  provision  is
reflected in the accompanying combined financial statements.

      Cash and cash equivalents
      -------------------------

      For purposes of the statement of cash flows, the Partnerships consider all
short-term  investments  with original  maturity  dates of 90 days or less to be
cash equivalents.

      Fair Value of Financial Instruments
      -----------------------------------

       The carrying  amounts of cash and cash  equivalents  and escrow  deposits
approximate  their  fair  values as of  September  30,  1997 and 1996 due to the
short-term maturities of these instruments. It is not practicable for management
to  estimate  the fair  value of the notes  payable  to  venturers  because  the
obligations  were provided in non-arm's  length  transactions  without regard to
fixed  maturities,   collateral  issues  or  other  traditional  conditions  and
covenants. Information regarding the fair value of long-term debt is provided in
Note 5. The fair value of long-term debt is estimated using discounted cash flow
analyses,  based on the  current  market  rates for similar  types of  borrowing
arrangements.

      Escrow deposits
      ---------------

      Escrow  deposits at September 30, 1997 and 1996 consist of tenant security
deposits,  amounts escrowed for the payment of insurance  premiums,  real estate
taxes and repair and replacement funds.

      Reserve for Capital Expenditures
      --------------------------------

      In connection  with the mortgage loan of the Carriage Hill joint  venture,
an escrow reserve account was established for  replacements  stipulating  that a
portion of each month's  mortgage  payment is to be deposited in the reserve for
replacement  account.  When repairs are made,  the joint venture pays the vendor
and then the lender  reimburses the joint venture and reduces the escrow account
by the  amount  of the  expenditure.  These  funds  can only be used for  making
necessary repairs as stipulated in the mortgage agreement.

3.  Joint Ventures
    --------------

      See Note 4 to the financial  statements of PWIP5 in this Annual Report for
a more detailed description of the joint venture  partnerships.  Descriptions of
the ventures' properties are summarized below:

      a.  Randallstown Carriage Hill Associates
          -------------------------------------

            The  joint   venture  owns  and  operates   Carriage   Hill  Village
      Apartments,   an  806-unit  apartment  complex  located  in  Randallstown,
      Maryland.

      b.  Signature Partners, L.L.C.
          --------------------------

            This  limited  liability  company  owns a  23-acre  parcel of land
      located in Randallstown, Maryland.  See Note 5.

      c.  Amarillo Bell Associates
          ------------------------

            The joint venture owns and operates Bell Plaza  Shopping  Center,  a
      144,000 gross  leasable  square foot shopping  center located in Amarillo,
      Texas.
<PAGE>

      d.  Greenbrier Associates
          ---------------------

            The  joint  venture  owns  and  operates  Greenbrier  Apartments,  a
      324-unit  apartment  complex located in  Indianapolis,  Indiana.  The debt
      secured by the Greenbrier Apartments is scheduled to mature in fiscal 1998
      (see Note 5).

      e.  Seven Trails West Associates
          ----------------------------

            The joint venture owns and operates Seven Trails West Apartments,  a
      532-unit apartment complex located in Ballwin, Missouri.

      The following description of the joint venture agreements provides certain
general information.

      Allocations of net income and loss
      ----------------------------------

      The  agreements  generally  provide that taxable  income and losses (other
than those  resulting from sales or other  dispositions of the projects) will be
allocated  between PWIP5 and the  co-venturers  in the same  proportions as cash
flow  distributed   from   operations,   except  for  certain  items  which  are
specifically  allocated  to the  partners,  as set  forth in the  joint  venture
agreements.  Gains or losses  resulting from sales or other  dispositions of the
projects  shall be  allocated  as  specified  in the joint  venture  agreements.
Allocations of income and loss for financial  accounting purposes have been made
in accordance with the actual joint venture agreement.

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

      The joint venture agreements  generally provide that distributions will be
paid on an annual  basis  first to PWIP5,  in  specified  amounts  ranging  from
$283,500 to $875,000 as a preferred return.  After payment of PWIP5's preference
return, the agreements  generally provide for certain preferred payments,  up to
specified amounts, to be paid to the co-venturers.  Any remaining  distributable
cash will be paid in proportions ranging from 90% to 50% to PWIP5 and 10% to 50%
to the co-venturers,  as set forth in the joint venture agreements.  Allocations
of  the   distributable   cash  of  the  Carriage  Hill  joint  venture   differ
significantly  from these general terms. See Note 4 to the financial  statements
of PWIP5 included in this Annual Report for a further discussion.

      Distributions of net proceeds upon the sale or refinancing of the projects
shall  be made  in  accordance  with  formulas  provided  in the  joint  venture
agreements.

4.  Related Party Transactions
    --------------------------

      The Combined Joint Ventures  entered into property  management  agreements
with affiliates of the  co-venturers,  cancelable at the joint ventures'  option
upon the occurrence of certain events.  The management fees are equal to between
4% and 5% of gross  receipts,  as defined  in the  agreements.  Management  fees
totalling  $591,000,  $573,000 and  $532,000  were earned by  affiliates  of the
co-venturers for fiscal 1997, 1996 and 1995, respectively.

      Accounts  payable  -  affiliates  at  September  30,  1997  and  1996  are
principally  management fees and  reimbursements  payable to property  managers.
Notes  payable to venturers at September 30, 1997 and 1996  represent  operating
notes provided by PWIP5 and its  co-venturer to Seven Trails West  Associates in
the amount of $847,000. Such loans generally bear interest at the prime rate and
are payable only out of the respective venture's available net cash flow or sale
or refinancing proceeds.

5.  Long-term Debt
    --------------

      Long-term  debt at September 30, 1997 and 1996 consists of the following
(in thousands):

                                                           1997        1996
                                                           ----        ----

     7.65%  mortgage note to a financial
     institution,  due in 2030. Payments
     are made in monthly installments of
     $191,   including   principal   and
     interest.   The  mortgage  note  is
     secured  by the  property  owned by
     Randallstown      Carriage     Hill
     Associates   and  is   subject   to
     certain        escrow       deposit
     requirements.  The mortgage note is
     co-insured   by  the  Secretary  of
     Housing and Urban Development (HUD)
     in accordance  with the  provisions
     of the National Housing Act and the
     laws of the State of Maryland.  The
     fair  value  of this  note  payable
     approximated  its carrying value as
     of  September  30, 1997 and 1996.                 $  27,494    $  27,675
<PAGE>

     8.125%  nonrecourse  mortgage  note
     secured by land and building  owned
     by   Amarillo   Bell    Associates,
     guaranteed   by  the   co-venturer.
     Payable in monthly  installments of
     $26,  including  interest,  with  a
     final   payment  of   approximately
     $2,943 due July 1,  2002.  The fair
     value   of   this   note    payable
     approximated  its carrying value as
     of  September  30,  1997 and  1996.                   3,204        3,250

     Wrap-around mortgage note of $5,400
     secured    by    the     Greenbrier
     Associates   property  which  bears
     interest  at 10%  payable  monthly.
     The entire  principal of $5,400 and
     any unpaid accrued  interest is due
     June  29,   1998  (see   discussion
     below). The fair value of this note
     payable  approximated  its carrying
     value as of September  30, 1997 and
     1996.                                                 5,400        5,400

     7.87%  nonrecourse   mortgage  note
     secured  by the Seven  Trails  West
     Associates   operating   investment
     property  bearing interest at 7.87%
     per annum.  The mortgage is payable
     in monthly installments,  including
     principal  and  interest,  of  $130
     through May 1, 2006,  at which time
     the final principal  installment of
     $13,724  plus  any  unpaid  accrued
     interest is due.  The fair value of
     this note payable  approximated its
     carrying  value as of September 30,
     1997  and   1996.                                    16,693       16,927
                                                        --------     --------
                                                          52,791       53,252

      Less current portion                                (5,898)        (461)
                                                        --------     --------
                                                        $ 46,893     $ 52,791
                                                        ========     ========

    Maturities  of  long-term  debt,  which  is all  non-recourse  to the  joint
    ventures and PWIP5,  for each of the next five years and  thereafter  are as
    follows (in thousands):

            1998                   $ 5,898
            1999                       539
            2000                       582
            2001                       629
            2002                     3,584
            Thereafter              41,559
                                   -------
                                   $52,791
                                   =======

      In 1993,  the Greenbrier  joint venture  exercised an option to extend the
maturity  date of its first  mortgage  loan to June 29, 1998,  at which time the
entire principal and any unpaid accrued interest are due. Management may attempt
to refinance the debt with similar  terms,  or the venture may elect to sell the
property prior to the June 1998 maturity date. There are no assurances, however,
that a refinancing  or sale will be  completed.  Management  cannot  predict the
outcome of these  uncertainties.  The  financial  statements  do not include any
adjustments that might result from the outcome of these uncertainties.

      During  fiscal 1995, an existing  first  mortgage loan secured by Carriage
Hill, with an outstanding  principal balance of approximately $26.5 million, was
refinanced. The new loan, in the initial principal amount of approximately $27.9
million,  has a fixed interest rate of 7.65% and a term of 35 years. The venture
recognized  a  loss  of  $1,177,000  in  fiscal  1995  in  connection  with  the
refinancing  transaction  to write off the  unamortized  balance of the deferred
financing costs related to the prior mortgage loan. As part of this  refinancing
transaction, the Carriage Hill joint venture was able to secure the release from
collateral of a 23-acre parcel of excess land.  Title to this land,  which had a
carrying value of $563,000,  was  transferred  from the joint venture to a newly
formed  limited  liability  company,   Signature  Partners,  L.L.C.  ("Signature
Partners").  Signature  Partners is owned by the venture  partners with the same
ownership interest  percentages as in the Carriage Hill joint venture agreement.
This  land  could  eventually  be  marketed  to  local  developers  once  market
conditions  improve.  Proceeds  of  any  such  sale,  if  completed,   would  be
distributed  to the owners in  accordance  with the same  priorities  called for
under the terms of the Carriage Hill joint venture agreement.

      On April 17, 1996, the Seven Trails joint venture  successfully  completed
the  refinancing of the existing first mortgage loan secured by the Seven Trails
West  Apartments,  reducing the annual interest rate from 12% to 7.87%.  The new
loan,  in the  initial  principal  amount of  $17,000,000,  is for a term of ten
years.  The proceeds of the new loan,  together with a contribution  of $159,000
from the joint venture,  were used to pay off all obligations of the prior first
mortgage  loan as well as to fund all reserves  and escrows  required by the new
lender.  Because the prior mortgage loan was not repaid by February 1, 1996, the
joint  venture  forfeited a $147,000 fee which had been paid to the prior lender
in connection  with a fiscal 1994  extension  agreement and was to be refundable
under certain conditions. As part of the new loan agreement, reserves for agreed
upon repairs and future  replacements  aggregating  approximately  $209,000 were
established in escrow accounts with the mortgage lender.

6.  Leases
    ------

      Minimum annual future lease revenues under noncancellable operating leases
at the Bell Plaza  Shopping  Center  (owned by Amarillo Bell  Associates)  as of
September 30, 1997 are as follows (in thousands):

            1998                  $    798
            1999                       676
            2000                       489
            2001                       437
            2002                       555
            Thereafter               3,394
                                  --------
                                  $  6,349
                                  ========

      Revenues  from  three  major  tenants of the Bell  Plaza  Shopping  Center
comprised  approximately  31%,  12%  and 10% of the  total  rental  revenues  of
Amarillo Bell  Associates for the year ended September 30, 1997. The duration of
these leases extend  between the years 1999 and 2014 and the tenants are subject
to a base rent and a percentage rent which fluctuates with sales volume.

<PAGE>

<TABLE>


Schedule III - Real Estate and Accumulated Depreciation
 COMBINED JOINT VENTURES OF PAINE WEBBER INCOME PROPERTIES FIVE LIMITED PARTNERSHIP
              SCHEDULE OF REAL ESTATE AND ACCUMULATED DEPRECIATION

                               September 30, 1997
                                 (In thousands)
<CAPTION>
                                                                                                                       Life on Which
                           Initial Cost of     Costs           Gross Amount at Which Carried at                        Depreciation
                           Partnership       Capitalized                Close of period                                in Latest 
                               Buildings    (Removed)          Buildings                                               Income 
                               and          Subsequent to       and                Accumulated  Date of      Date      Statement
 Description Encumbrances Land Improvements Acquisition(1) Land Improvements Total Depreciation Construction Acquired  is Computed
 ----------- ------------ ---- ------------ -------------- --- ------------- ----- ------------ ------------ -------- -------------
<S>            <C>        <C>      <C>         <C>         <C>       <C>      <C>       <C>         <C>       <C>       <C>

COMBINED JOINT VENTURES:

Apartment
 Complex      $27,494     $1,000   $23,633     $4,875      $1,000    $28,508  $29,508   $ 14,982    1970-73   8/30/83   5-30 yrs.
Randallstown,
 MD

Land                -        563         -         38         601          -      601          -          -   6/1/95       -
Randallstown, 
 MD

Shopping 
 Center         3,204      1,519     6,310      1,143       1,519      7,453    8,972      3,053    1979-82  9/30/83    5-40 yrs.
Amarillo,
 TX

Apartment 
 Complex        5,400        420     8,990        761         420      9,751   10,171      4,246    1964-68  6/29/84    5-30 yrs.
Indianapolis,
 IN

Apartment
 Complex
Ballwin, MO    16,693      1,710    22,131      3,086       1,710     25,217   26,927     11,008    1968-74  9/13/84    5-30 yrs.
              -------    -------   -------     ------      ------    -------  -------    -------
Total         $52,791    $ 5,212   $61,064     $9,903      $5,250    $70,929  $76,179    $33,289
              =======    =======   =======     ======      ======    =======  =======    =======

Notes

(A) The aggregate cost of real estate owned at September 30, 1997 for Federal income tax purposes is approximately $73,793,000.

(B) See Note 5 to Combined Financial  Statements for a description of the terms of the debt encumbering the properties.

(C) Reconciliation of real estate owned:

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

      Balance at beginning of period          $ 75,397            $ 73,494          $ 72,171
      Acquisitions and improvements                782               1,903             1,323
                                              --------            --------          --------
      Balance at end of period                $ 76,179            $ 75,397          $ 73,494
                                              ========            ========          ========

(D) Reconciliation of accumulated depreciation:

      Balance at beginning of period          $ 30,544            $ 27,928          $ 25,427
      Depreciation expense                       2,745               2,616             2,501
                                              --------            --------          --------
      Balance at end of period                $ 33,289            $ 30,544          $ 27,928
                                              ========            ========          ========
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