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, 1998

                                       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 or other jurisdiction of                             (I.R.S. Employer
incorporation or organization)                              Identification No.)


265 Franklin Street, Boston, Massachusetts                         02110
------------------------------------------                         -----
(Address of principal executive offices)                           (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 on
Title of each class                                     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

Current Reports on Form 8-K of registrant                         Part IV
dated September 10, 1998 and September 21, 1998

<PAGE>
                   PAINE WEBBER INCOME PROPERTIES FIVE LIMITED PARTNERSHIP
                                       1998 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-3


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-30

<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-6 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, 1998 three of the
Partnership's original investments have been sold. As of September 30, 1998, the
Partnership  owned interests in operating  investment  properties  through joint
venture partnerships as set forth in the following table:

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

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.

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

(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.  On September 10,
1998,  Greenbrier  Associates,  a  joint  venture  which  owned  the  Greenbrier
Apartments, a 324-unit apartment complex located in Indianapolis,  Indiana, sold
its operating  investment property to an unrelated third party for a gross sales
price of $11.85 million.  The Partnership received net proceeds of approximately
$5,498,000  from  the  Greenbrier   sale  after   deducting   closing  costs  of
approximately $119,000,  closing proration adjustment of approximately $424,000,
the repayment of the existing  first  mortgage  loan of  $5,400,000  and related
accrued  interest  of  approximately  $26,000,  and a payment  of  approximately
$383,000  to the  Partnership's  co-venture  partner  for its share of the sales
proceeds in accordance with the joint venture agreement.  On September 21, 1998,
Randallstown Carriage Hill Associates,  and Signature Partners,  L.L.C., a joint
venture and limited  liability  company  which owned the  Carriage  Hill Village
Apartments and adjoining land, sold its operating  investment  property and land
to an unrelated third party for an aggregate sales price of $37.35 million.  The
Partnership received net proceeds of approximately  $8,481,000 after the receipt
of a credit of  $1,168,000  for  property  adjustments  and escrows  held by the
Department of Housing and Urban Development (HUD) for tenant security  deposits,
real estate  taxes,  property  insurance  and  replacement  reserves,  and after
deducting  closing  costs  of  approximately  $757,000,  the  assumption  of the
existing  first  mortgage  loan of  $27,298,000  and a payment of  approximately
$1,982,000 to the  Partnership's  co-venture  partner for its share of the sales
proceeds in accordance with the joint venture  agreement.  Of the total proceeds
received by the  Partnership of $8,481,000,  as discussed  further in Item 7, $4
million  represented a reimbursement of funds originally advanced to buy out the
selling co-venture partner's interest in the Carriage Hill joint venture on June
23, 1998. The Partnership  had borrowed the $4 million  required to complete the
buyout of the selling  partner's  interest  from an  affiliate  of the  Managing
General  Partner.  The $4 million related party loan was repaid on September 11,
1998  from  the  Partnership's  share of the net  proceeds  from the sale of the
Greenbrier Apartments.

      The Partnership's original investment objectives were 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, 1998, 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 made through September
30, 1998 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.  Subsequent  to  year-end on October 1, 1998,  the  Partnership
distributed  approximately  $3,493,000,  or $100 per original $1,000 investment,
from the net sale proceeds of the Greenbrier Apartments. The Partnership expects
to distribute approximately  $8,383,000, or $240 per original $1,000 investment,
from the net proceeds from the sale of the Carriage  Hill  property  sometime in
early  calendar  year 1999 after it  receives  final  approval  from HUD for the
assumption of the  HUD-insured  first mortgage loan by the buyer of the Carriage
Hill  property.  The  Partnership  suspended  the  payment of regular  quarterly
distributions  of excess net cash flow in fiscal 1988. As of September 30, 1998,
the  Partnership  retains its  ownership  interest  in two 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 be determined  with certainty at
the present time. The Partnership is currently focusing on potential disposition
strategies  for the two  remaining  investments  in its  portfolio.  Although no
assurances  can  be  given,  it is  currently  contemplated  that  sales  of the
Partnership's  Seven Trails and Bell Plaza investments could be completed by the
end of calendar year 1999.  The sales of the two remaining  properties  would be
followed by an orderly liquidation of the Partnership.

      Both 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  complex  competes 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.  However, the impact of
the competition from the single-family  home market has generally been offset by
the lack of significant new construction activity in the multi-family  apartment
market over most of this period. Over the past two years,  development  activity
for  multi-family  properties in many markets has escalated  significantly.  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, 1998, the Partnership owned interests in two 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  1998,  along with an
average for the year, are presented  below for each property owned during fiscal
1998:

                                            Percent Occupied At   
                              --------------------------------------------------
                                                                       Fiscal 
                                                                       1998
                              12/31/97   3/31/98    6/30/98   9/30/98  Average
                              --------   -------    -------   -------  -------

Seven Trails West Apartments     92%       94%        92%       91%       92%

Bell Plaza Shopping Center       98%       97%        97%       97%       97%

Greenbrier Apartments (1)        91%       91%        89%       N/A       N/A

Carriage Hill Village 
  Apartments (2)                 95%       95%        95%       N/A       N/A

(1)The Greenbrier Apartments property was sold on September 10, 1998 (see Item
   7).

(2)The Carriage Hill Village Apartments  property was sold on September 21, 1998
   (see Item 7).

Item 3.  Legal Proceedings

      The Partnership is not subject to any 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,  1998 there were 2,134  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 1998.

Item 6.  Selected Financial Data

             Paine Webber Income Properties Five Limited Partnership
       For the years ended September 30, 1998, 1997, 1996, 1995 and 1994
                       (In thousands except per Unit data
<TABLE>
<CAPTION>

                                             Years Ended September 30, 
                                 ----------------------------------------------------------
                                   1998        1997       1996        1995       1994
                                   ----        ----       ----        ----       ----
<S>                                <C>         <C>        <C>         <C>        <C> 

Revenues                           $   231     $   98     $    90      $   106    $    87

Operating loss                     $   (91)    $ (138)    $  (132)     $  (207)   $  (262)

Partnership's share of
  ventures' income (losses)        $   529     $  213     $  (691)     $(1,182)   $  (995)

Partnership's share of gains on
  sale of operating investment
  properties                       $15,518          -           -            -    $ 3,174

Net income (loss)                  $15,956    $    75     $  (823)     $(1,389)   $ 1,917

Net income (loss) per Limited
  Partnership Unit                 $452.25    $  2.13     $(23.33)     $(39.37)   $ 54.36

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

Total assets                       $15,719    $ 2,165     $ 1,739     $  1,658    $ 1,836
</TABLE>

      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.

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,  which consisted of four residential apartment
properties and one retail shopping center.  Through September 30, 1998, three of
the residential  apartment properties had been sold, including two during fiscal
1998, as discussed  further below. 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.

      On September 10, 1998, Greenbrier Associates, a joint venture in which the
Partnership  has an interest,  sold the property known as Greenbrier  Apartments
located in Indianapolis,  Indiana,  to an unrelated third party for $11,850,000.
The  Partnership  received  net  proceeds  of  approximately   $5,498,000  after
deducting closing costs of approximately $119,000, closing proration adjustments
of approximately  $424,000, the repayment of the existing first mortgage loan of
$5,400,000 and related accrued interest of  approximately  $26,000 and a payment
of approximately $383,000 to the Partnership's  co-venture partner for its share
of the sales proceeds in accordance  with the joint venture  agreement.  Because
the first  mortgage loan secured by the  Greenbrier  Apartments was scheduled to
mature on June 29, 1998, the Partnership and its joint venture partner had begun
to review  both  refinancing  and sale  opportunities  during the latter part of
fiscal 1997.  During the first quarter of fiscal 1998, the  Partnership  and the
co-venturer  agreed to initiate a marketing program for the possible sale of the
property. During the second quarter, the Partnership and the co-venturer engaged
a national real estate brokerage firm to market  Greenbrier for sale. As part of
the formal  marketing  campaign,  which began in early  March,  the property was
marketed extensively. Sales packages were distributed to national, regional, and
local prospective purchasers. As a result of these sales efforts, several offers
were received.  Management then asked the prospective  purchasers to submit best
and final offers.  Management  subsequently  received best and final offers from
five of the  prospective  buyers.  After  completing  an evaluation of the final
offers and the relative strength of the prospective purchasers,  the Partnership
and its co-venture  partner selected an offer and negotiated a purchase and sale
agreement.  As a result of the sale of Greenbrier  Apartments,  the  Partnership
made  a  special  distribution  of  $100  per  original  $1,000  investment,  or
approximately  $3,493,000, on October 1, 1998 to unitholders of record as of the
September  10,  1998 sale date.  The  remaining  net  proceeds  from the sale of
Greenbrier   of   approximately   $2,005,000,   along  with  an  amount  of  the
Partnership's cash reserves,  were used to help pay off a $4,000,000 demand loan
that the Partnership had obtained from PaineWebber  Capital,  Inc., an affiliate
of the Managing General Partner, as discussed below.

      On September 21, 1998, Randallstown Carriage Hill Associates and Signature
Partners  LLC,  a joint  venture  and a limited  liability  company in which the
Partnership  had  interests,  sold the property  known as Carriage  Hill Village
Apartments and adjoining land located in  Randallstown,  Maryland,  to unrelated
third  parties  for an  aggregate  sale price of  $37,350,000.  The  Partnership
received net proceeds of approximately  $8,481,000 after the receipt of a credit
of $1,168,000  for property  adjustments  and escrows held by the  Department of
Housing and Urban  Development (HUD) for tenant security  deposits,  real estate
taxes, property insurance and replacement reserves,  and after deducting closing
costs of approximately  $757,000,  the assumption of the existing first mortgage
loan  of  $27,298,000  and  a  payment  of   approximately   $1,982,000  to  the
Partnership's  co-venture  partner  for  its  share  of the  sales  proceeds  in
accordance with the joint venture  agreement.  Of the total proceeds received by
the  Partnership  of  $8,481,000,   as  discussed   further  below,  $4  million
represented a reimbursement of funds originally  advanced to buy out the selling
co-venture  partner's  interest in the Carriage  Hill joint  venture on June 23,
1998.  The  Partnership  had  borrowed  the $4 million  required to complete the
buyout of the selling  partner's  interest  from an  affiliate  of the  Managing
General  Partner.  The $4 million related party loan was repaid on September 11,
1998 from a combination of cash reserves and the Partnership's  share of the net
proceeds from the sale of the Greenbrier Apartments.

      On June 23, 1998, the  Partnership  and its original  co-venture  partner,
JBG/Carriage Hill Village Limited Partnership, purchased the 50% interest of its
other co-venture  partner,  Signature  Carriage Hill Village  Apartments Limited
Partnership,  in the Randallstown  Carriage Hill Associates  Joint Venture.  The
Partnership had held a 40% interest and the original co-venture partner had held
a 10% interest in the Joint Venture prior to this  transaction.  The Partnership
contributed  $4,048,000 and the original co-venturer  contributed  $1,012,000 to
complete the purchase of the other partner's interest.  After the purchase,  the
Partnership held an 80% interest and the original  co-venture partner held a 20%
interest.  On March 19, 1998, the  Partnership was notified by Signature that it
would be exercising  the  "buy/sell"  provision in the Joint Venture  agreement.
Under the terms of this provision,  this co-venturer,  which was admitted to the
Joint  Venture  as part of a 1988  restructuring  transaction,  had to propose a
price at which it would  either  purchase the other  partners'  interests in the
Venture  or  agree to the  sale of its  interest  in the  Venture  to the  other
partners.  The Partnership and its original  co-venture  partner in the Carriage
Hill Joint Venture had 45 days to decide whether to sell their  interests to the
exercising  partner or acquire  the  interest of the  exercising  partner at the
specified  gross  sale price for the  Venture's  assets of  approximately  $33.3
million. At an equivalent gross sale price of $33.3 million, the net proceeds to
the  Partnership  for the sale of its  interest  would  have been  approximately
$700,000  after the assumption of the  outstanding  first mortgage debt of $27.4
million,  the exercising  partner's preferred investment return of approximately
$5 million and the  original  co-venturer's  share of the  proceeds of $200,000.
After  a  thorough  review  and  analysis,  the  Partnership  and  the  original
co-venturer  notified the exercising partner on May 1, 1998 of their decision to
buy its interest for approximately $5 million in cash.

      Because  the  Partnership  believed  that  improvements  in the  apartment
segment of the real  estate  market  would  allow the  Partnership  to achieve a
higher net sale price now than may be possible in the  future,  the  Partnership
and its remaining  co-venture partner held discussions  concerning the near-term
sale of the Carriage Hill Village  Apartments  immediately  after completing the
purchase  of the selling  partner's  interest  in June 1998.  Subsequently,  the
Partnership and its co-venture partner selected a national real estate firm with
a strong background in selling apartments.  Preliminary sale materials were then
finalized  and  extensive  sale efforts  began in late June 1998. As a result of
those efforts,  ten offers were received.  After completing an evaluation of the
offers and the relative strength of the prospective purchasers,  the Partnership
and its co-venture  partner  selected an offer. On July 24, 1998, a purchase and
sale agreement was signed and a  non-refundable  deposit of $100,000 was made by
the  prospective  purchasers.  The Carriage Hill sale allowed the Partnership to
return  approximately  $3.7  million  more in net  sale  proceeds  and  property
escrows, after the repayment of the $4,000,000 buyout advance, than the $700,000
the Partnership  would have received had it not acquired the selling  co-venture
partner's   interest.   Because  the   Partnership   expects  to  receive  final
documentation  by  December  31,  1998  from  HUD  for  the  assumption  of  the
HUD-insured  first mortgage loan by the buyer of the Carriage Hill  property,  a
special capital distribution is expected to be sent by January 15, 1999 from the
sale of the Carriage  Hill  Village  Apartments  in the amount of  approximately
$8,383,000, or $240 per original $1,000 investment.

      As previously  reported,  the  Partnership  has been focusing on potential
disposition strategies for the remaining investments in its portfolio.  Although
no  assurances  can be given,  it is  currently  contemplated  that sales of the
Partnership's  Seven Trails and Bell Plaza investments could be completed by the
end of calendar  year 1999.  The sale of the two remaining  properties  would be
followed by an orderly liquidation of the Partnership.

      Bell  Plaza  Shopping  Center in  Amarillo,  Texas,  was 97%  leased as of
September 30, 1998,  compared to 99% as of September 30, 1997.  The  Partnership
and its co-venture  partner held discussions  during the third quarter of fiscal
1998 concerning potential sale opportunities for the Bell Plaza property.  After
extensive  discussions,  it was agreed that marketing efforts would begin by the
Partnership's  fiscal  year-end and would focus on regional  buyers of specialty
retail centers like Bell Plaza. These marketing efforts are currently  underway.
While Bell Plaza is 97% occupied, it was also agreed that the property's leasing
team would actively  pursue  prospective  retailers for the 5,000 square feet of
currently  vacant  space as well as for the  24,020  square  feet under the four
leases that expire over the next twelve months. The largest of the four, a local
theatre operator,  has a June 1999 lease expiration and represents 15,050 square
feet of this total. The property's  leasing team is also pursuing lease renewals
with these existing tenants.

      The occupancy level for the Seven Trails West  Apartments,  located in St.
Louis,  Missouri,  averaged 92% for fiscal  1998,  compared to 93% for the prior
year. The Partnership and its Seven Trails  co-venture  partner held discussions
during the fourth quarter of fiscal 1998 concerning potential  opportunities for
a near-term sale of this 532-unit multi-family  apartment complex, and agreed to
market the property for sale. Subsequent to the fiscal year-end, the Partnership
and its joint  venture  partner  selected a local  brokerage  firm with a strong
background in selling  apartment  properties in the St. Louis area.  Preliminary
sales materials were prepared and extensive sale efforts began in mid-October.

     At September 30, 1998,  the  Partnership  had cash and cash  equivalents of
$13,867,000.  Such  cash  includes  the  net  proceeds  from  the  sales  of the
Greenbrier and Carriage Hill properties,  as discussed further above,  after the
repayment of the outstanding  related party loan.  Approximately $3.5 million of
this  cash  balance  was  distributed  to the  Limited  Partners  subsequent  to
year-end,  on October 1, 1998.  Another $8.4 million of this balance is expected
to  be  distributed  to  the  Limited  Partners  in  early  calendar  year  1999
immediately after the Partnership  receives the formal approval from HUD for the
assumption  of the  HUD-insured  mortgage  loan  secured  by the  Carriage  Hill
property.  The remainder of such cash and cash  equivalents will be utilized for
the  working  capital  requirements  of the  Partnership,  distributions  to the
Limited Partners and for future capital contributions,  if necessary, related to
the Partnership's  remaining 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.

      As noted above,  the  Partnership  expects to be  liquidated by the end of
calendar year 1999.  Notwithstanding  this, the Partnership believes that it has
made all necessary  modifications to its existing systems to make them year 2000
compliant and does not expect that  additional  costs  associated with year 2000
compliance,  if any, will be material to the Partnership's results of operations
or financial position.
<PAGE>

Results of Operations
1998 Compared to 1997
---------------------

     The  Partnership  reported  net  income of  $15,956,000  for the year ended
September  30,  1998,  as  compared to net income of $75,000 for the prior year.
This increase in net income was primarily due to the  $15,518,000  recognized as
the  Partnership's  share of the gains on the sales of the Carriage Hill Village
Apartments and the  Greenbrier  Apartments in September  1998. In addition,  the
Partnership's  share of ventures'  income  increased by $316,000 in fiscal 1998.
The increase in the Partnership's share of ventures' income was mainly due to an
increase in interest  and other  income and  decreases  in interest  expense and
management  fees.  Other income was higher at Seven Trails and Greenbrier due to
new management policies  implemented at both properties during fiscal 1998 which
resulted in additional service fee income. Interest expense decreased due to the
regular  principal  amortization of the mortgage loans  encumbering three of the
four joint venture  properties.  Management fees decreased at the Greenbrier and
Seven Trails joint  ventures due to a  restructuring  of the related  management
agreements  which resulted in a reduction in the percentage  rate of gross rents
used to calculate the monthly fees.

     A decrease of $47,000 in the Partnership's  operating loss also contributed
to the increase in net income for fiscal year 1998. The Partnership's  operating
loss  decreased  primarily  due to an increase in interest  and other  income of
$133,000.  Interest  income was higher due to an increase  in the  Partnership's
average  outstanding  cash  reserve  balances as a result of the sale of the two
properties in September 1998 and due to interest payments received during fiscal
1998 on a loan from the  Partnership  to the Seven  Trails  joint  venture.  The
increase in interest  income was partially  offset by an increase in general and
administrative expenses. The increase in general and administrative expenses was
primarily  due to an increase in legal  expenses  related to the  Carriage  Hill
restructuring  transaction  and  the  Partnership's  asset  disposition  efforts
discussed further above. In addition,  the Partnership incurred interest expense
of $63,000 in fiscal  1998 due to the  $4,000,000  demand  note  obtained by the
Partnership for the purchase of the co-venturer's  interest in the Carriage Hill
joint venture. 

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 was
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 was 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
the average occupancy levels at the Carriage Hill and Bell Plaza properties when
compared to fiscal 1996. The 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 was 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 a  utilities  conversion
project which  transferred  the  obligation  for the  utilities  payments to the
tenants.  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. 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  expenses of $91,000.
General and administrative  expenses decreased mainly due to certain incremental
expenses  incurred in fiscal 1995  relating to an  independent  valuation of the
Partnership's operating properties.

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  over the past two years.
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  continues  to suffer  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 fifteenth full year of operations in fiscal
1998 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  project  have  short-term
leases,  generally of 6-to-12 months in duration.  Rental rates at this property
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                 39       8/22/96
Terrence E. Fancher  Director                               45       10/10/96
Walter V. Arnold     Senior Vice President and Chief
                       Financial Officer                    51       10/29/85
David F. Brooks      First Vice President and Assistant
                       Treasurer                            56       11/19/82 *
Timothy J. Medlock   Vice President and Treasurer           37       6/1/88
Thomas W. Boland     Vice President and Controller          36       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.

     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, 1998, 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.  One limited partner
referred to below is known by the Partnership to own  beneficially  more than 5%
of the outstanding interests of the Partnership.

================================================================================
                                                        Amount
                        Name and Address                Beneficially   Percent
Title of Class          of Beneficial Owner             Owned          of Class
--------------          -------------------             -----          --------

Units of Limited        Kensington Investments, Inc.    2,730          7.81%
Partnership             4 Orinda Way, Suite 220-D       Units
                        Orinda, CA  94563

================================================================================

      (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.

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 1998.

      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, 1998 is $88,000,  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 $15,000 for managing the Partnership's
cash  assets  in  fiscal   1998,   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)   Current  Reports on Form 8-K were filed on  September  10,  1998 and
            September 21, 1998 reporting the sales of the Greenbrier  Apartments
            and Carriage Hill Village Apartments,  respectively,  and are hereby
            incorporated herein by reference.

      (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, 1999

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, 1999
   -----------------------                             ----------------
   Bruce J. Rubin
   Director





By:/s/ Terrence E. Fancher                      Date:  January 13, 1999
   -----------------------                             ----------------
   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, 1998 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, 1998 and 1997                   F-4

      Statements of operations for the years ended September 30,
        1998, 1997 and 1996                                              F-5

      Statements of changes in partners' capital (deficit) for the 
        years ended September 30, 1998, 1997 and 1996                    F-6

      Statements of cash flows for the years ended September 30, 
        1998, 1997 and 1996                                              F-7

      Notes to financial statements                                      F-8

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

      Reports of independent auditors                                   F-18

      Combined balance sheets as of September 30, 1998 and 1997         F-20

      Combined  statements  of  operations  and  changes in  
        venturers'  capital (deficit) for the years ended September 
        30, 1998, 1997 and 1996                                         F-21

      Combined statements of cash flows for the years ended
        September 30, 1998, 1997 and 1996                               F-22

      Notes to combined financial statements                            F-23

      Schedule III - Real estate and accumulated depreciation           F-30


   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, 1998 and 1997, 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, 1998.
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.  The  financial  statements  of  Randallstown
Carriage Hill  Associates (a joint venture in which the  Partnership  has an 80%
and 40%  interest  as of  September  30,  1998  and  1997,  respectively)  as of
September  30,  1998 and 1997 and for the years then ended have been  audited by
other  auditors whose report has been furnished to us; insofar as our opinion on
the financial statements relates to data included for Randallstown Carriage Hill
Associates as of September 30, 1998 and 1997 and for the years then ended, it is
based solely on their report.  In the financial  statements,  the  Partnership's
investment in Randallstown Carriage Hill Associates is stated at $(6,207,000) at
September  30,  1997,  the  Partnership's  share  of the net  income  (loss)  of
Randallstown  Carriage Hill  Associates is stated at $182,000 and $(123,000) for
the years ended September 30, 1998 and 1997, respectively, and the Partnership's
share of gain on sale of operating  investment  property is stated at $9,537,000
for the year ended September 30, 1998.

     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, 1998 and 1997,  and the results of its  operations
and its cash flows for each of the three years in the period ended September 30,
1998, in conformity with generally accepted accounting principles.






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


Boston, Massachusetts
December 18, 1998


<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 sheets of Randallstown  Carriage
Hill Associates as of September 30, 1998 and 1997 and the related  statements of
operations, changes in partners' equity and cash flows for the years 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 audits in accordance  with  generally  accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

     In our opinion,  the financial statements referred to above present fairly,
in all material respects,  the financial position of Randallstown  Carriage Hill
Associates  as of  September  30,  1998 and the results of its  operations,  the
changes in  partners'  equity and its cash  flows for the years then  ended,  in
conformity with generally accepted accounting principles.






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


Baltimore, Maryland
November 10, 1998



<PAGE>


             PAINE WEBBER INCOME PROPERTIES FIVE LIMITED PARTNERSHIP

                                 BALANCE SHEETS
                           September 30, 1998 and 1997
                     (In thousands, except per Unit amounts)

                                     ASSETS
                                                            1998        1997
                                                            ----        ----

Investments in joint venture, at equity                 $   1,507    $      -
Cash and cash equivalents                                  13,867       2,165
Accounts receivable - affiliates                              345           -
                                                        ---------    --------
                                                        $  15,719    $  2,165
                                                        =========    ========

                   LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)

Losses in excess of investments and
  advances in joint ventures                            $       -    $  3,305
Accounts payable - affiliates                                 878           -
Accounts payable and accrued expenses                          72          47
                                                        ---------    --------
      Total liabilities                                       950       3,352

Partners' capital (deficit):
  General Partners:
   Capital contributions                                        1           1
   Cumulative net income (loss)                                14        (146)
   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 income (loss)                             1,307     (14,489)
   Cumulative cash distributions                          (18,047)    (18,047)
                                                        ---------    --------
      Total partners' capital (deficit)                    14,769      (1,187)
                                                        ---------    --------
                                                        $  15,719    $  2,165
                                                        =========    ========





















                             See accompanying notes.


<PAGE>


             PAINE WEBBER INCOME PROPERTIES FIVE LIMITED PARTNERSHIP

                            STATEMENTS OF OPERATIONS
              For the years ended September 30, 1998, 1997 and 1996
                     (In thousands, except per Unit amounts)

                                                 1998        1997       1996
                                                 ----        ----       ----


Revenues:
   Interest and other income                  $   231       $   98    $    90

Expenses:
   Interest expense                                63           -           -
   General and administrative                     259         236         222
                                              -------       -----     -------
                                                  322         236         222
                                              -------       -----     -------
Operating loss                                    (91)       (138)       (132)

Partnership's share of ventures'
  income (losses)                                 529         213        (691)

Partnership's share of gains on sale of
    operating investment properties            15,518           -           -
                                              -------       -----     -------


Net income (loss)                             $15,956       $  75     $  (823)
                                              =======       =====     =======

Net income (loss) per Limited
 Partnership Unit                             $452.25       $2.13     $(23.33)
                                              =======       =====     =======




   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, 1998, 1997 and 1996
                                 (In thousands)

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

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)

Net income                                   160         15,796        15,956
                                        --------       --------     ---------

Balance at September 30, 1998           $    (45)      $ 14,814     $  14,769
                                        ========       ========     =========

































                             See accompanying notes.


<PAGE>


             PAINE WEBBER INCOME PROPERTIES FIVE LIMITED PARTNERSHIP

                            STATEMENTS OF CASH FLOWS
             For the years ended September 30, 1998, 1997 and 1996
                Increase (Decrease) in Cash and Cash Equivalents
                                 (In thousands)
<TABLE>
<CAPTION>

                                                            1998        1997       1996
                                                            ----        ----       ----
<S>                                                         <C>         <C>        <C>

Cash flows from operating activities:
   Net income (loss)                                        $  15,956   $    75    $   (823)
   Adjustments to reconcile net income (loss)
    to net cash provided by (used in) operating activities:
     Partnership's share of ventures' income (losses)            (529)     (213)        691
     Partnership's share of gain on sales of operating
          investment properties                               (15,518)        -           -
     Changes in assets and liabilities:
      Accounts payable - affiliates                               878         -           -
      Accounts payable and accrued expenses                        25        17          (8)
                                                            ---------   -------     -------
         Total adjustments                                    (15,144)     (196)        683
                                                            ---------   -------     -------
         Net cash provided by (used in)
            operating  activities                                 812      (121)       (140)
                                                            ---------   -------     -------

Cash flows from investing activities:
   Distributions from joint ventures                           15,080       533         249
   Additional investments in and advances to 
     joint ventures                                            (4,190)      (14)       (628)
   Repayment of advances to joint ventures                          -        28         600
                                                            ---------   -------     -------
         Net cash provided by investing activities             10,890       547         221
                                                            ---------   -------     -------

Net increase in cash and cash equivalents                      11,702       426          81

Cash and cash equivalents, beginning of year                    2,165     1,739       1,658
                                                            ---------   -------     -------

Cash and cash equivalents, end of year                      $  13,867   $ 2,165     $ 1,739
                                                            =========   =======     =======

Cash paid for interest                                      $      63   $     -     $     -
                                                            =========   =======     =======

</TABLE>





                                   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, three of the  Partnership's  original  investments in
multi-family  apartment  complexes  have been sold,  including two during fiscal
1998. See Note 4 for a further  discussion of the  Partnership's  remaining real
estate  investments.   The  Partnership  is  currently  focusing  on  potential
disposition  strategies  for the two  remaining  investments  in its  portfolio.
Although no assurances can be given, it is currently  contemplated that sales of
the Partnership's  Seven Trails and Bell Plaza investments could be completed by
the end of calendar year 1999. The sales of the two remaining  properties  would
be followed by an orderly liquidation of the Partnership.

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, 1998 and 1997 and revenues and expenses for
each of the three years in the period ended  September 30, 1998.  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, 1998 and 1997, 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,  1998  and  1997 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.  The  principal
difference  between the  Partnership's  accounting on a federal income tax basis
and the accompanying  financial statements prepared in accordance with generally
accepted  accounting  principals (GAAP) relates to the methods used to determine
the depreciation expense on the unconsolidated  operating investment properties.
As a result of the difference in  depreciation,  the gains  calculated  upon the
sale of the operating investment  properties for GAAP purposes differ from those
calculated for federal income tax purposes.

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.  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, 1998.

      Included  in  general  and  administrative  expenses  for the years  ended
September 30, 1998, 1997 and 1996 is $88,000, $85,000 and $81,000, 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 $15,000, $6,000 and $4,000 for managing
the Partnership's cash assets in fiscal 1998, 1997 and 1996, respectively, which
amounts are included in general and administrative  expenses on the accompanying
statements of operations.

      Accounts  receivable - affiliates  at September  30, 1998  represents  the
Partnership's  remaining  share of the net sale proceeds and operating cash flow
to be  received  from  Greenbrier  Associates  subsequent  to  the  sale  of the
Greenbrier  Apartments  (see Note 4). Such  amount was  received  subsequent  to
year-end.  Accounts  payable - affiliates at September 30, 1998  represents  the
co-venturer's  remaining share of the net sales proceeds to be distributed  from
the sale of the Carriage Hill Village Apartments and adjoining land.

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

      As of September 30, 1998,  the  Partnership  had  investments in two joint
ventures  (four at September 30, 1997).  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:
<PAGE>

                        Condensed Combined Balance Sheet
                           September 30, 1998 and 1997
                                 (in thousands)

                                     Assets
                                                            1998        1997
                                                            ----        ----

   Current assets                                       $   2,014    $  2,642
   Operating investment properties, net                    21,039      42,890
   Other assets, net                                          413       2,200
                                                        ---------    --------
                                                        $  23,466    $ 47,732
                                                        =========    ========

                             Liabilities and Venturers' Deficit

   Current liabilities                                  $   1,877    $  7,779
   Other liabilities                                          878         878
   Long-term mortgage debt,
     less current portion                                  19,266      46,893

   Partnership's share of combined capital (deficit)          937      (3,798)
   Co-venturers' share of combined capital (deficit)          508     (4,020)
                                                        ---------    --------
                                                        $  23,466    $ 47,732
                                                        =========    ========

                   Reconciliation of Partnership's Investments
                                 (in thousands)
                                                            1998        1997
                                                            ----        ----

   Partnership's share of capital (deficit),
     as shown above                                     $     937    $ (3,798)
   Partnership's share of distributions and
     notes payable to venturers                               870         793
   Less:  Allowance for possible investment loss (1)         (300)       (300)
                                                        ---------    --------

   Investments in joint ventures, at equity, net        $   1,507    $ (3,305)
                                                        =========    ========

   (1)The carrying value of the  Partnership's  investments in joint ventures at
      both  September  30,  1998 and 1997 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.

                    Condensed Combined Summary of Operations
             For the years ended September 30, 1998, 1997 and 1996
                                 (in thousands)

                                                1998        1997        1996
                                                ----        ----        ----
   Revenues:
     Rental income and expense recoveries    $ 12,057     $12,062     $11,646
     Interest and other income                    537         443         473
                                             --------     -------     -------
                                               12,594      12,505      12,119

   Expenses:
     Property operating expenses                5,371       5,055       5,602
     Depreciation and amortization              2,616       2,805       2,647
     Interest expense                           4,434       4,503       4,955
                                             --------     -------     -------
                                               12,421      12,363      13,204
                                             --------     -------     -------

   Operating income (loss)                        173         142      (1,085)
   Gains on sale of operating 
     investment properties                     26,917           -           -
                                             --------     -------     -------
   Net income (loss)                         $ 27,090     $   142     $(1,085)
                                             ========     =======     =======

   Net income (loss):
     Partnership's share of combined
       income (loss)                         $ 23,068     $  213      $  (691)
     Co-venturers' share of combined 
       income (loss)                            4,022        (71)        (394)
                                             --------     -------     --------
                                             $ 27,090     $   142     $(1,085)
                                             ========     =======     =======
<PAGE>

             Reconciliation of Partnership's Share of Income (Loss)

                                                1998        1997        1996
                                                ----        ----        ----

Partnership's share of income (loss), 
  as shown above                             $ 23,068       $  213     $  (691)
Transfer of ownership (1)                      (2,973)           -           -
Additional contribution (1)                    (4,048)           -           -
                                             --------       ------     -------
Partnership's share of ventures' net
  income (loss)                              $ 16,047       $  213     $  (691)
                                             ========       ======     =======

(1)  As discussed  further below, in June 1998, the Partnership  received 80% of
     the partnership  interest and 80% of the membership  interest of one of its
     co-venture  partners in the  Randallstown  Carriage Hill Associates and the
     Signature Partners,  L.L.C. joint ventures,  respectively,  in exchange for
     cash  in the  amount  of  $4,048.  At the  time  of  the  transaction,  the
     co-venturer's  partnership  interest  in  the  Randallstown  Carriage  Hill
     Associates  joint venture had a historical  cost basis of $(4,032) and its
     membership interest in the Signature Partners L.L.C.  joint  venture  had a
     historical cost basis of $316.

      The  Partnership's  share of ventures'  net income  (loss) is presented as
follows in the statements of operations (in thousands):

                                                1998        1997        1996
                                                ----        ----        ----

Partnership's share of ventures'
  income (loss)                              $    529      $  213     $  (691)
Partnership's share of gains on sale of
     operating investment properties           15,518           -           -
                                             --------      ------     -------
                                             $ 16,047      $  213     $  (691)
                                             ========      ======     =======

      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,  1998  and 1997 is  comprised  of the  following  (in
thousands):

                                                            1998        1997
                                                            ----        ----

   Randallstown Carriage Hill Associates                 $      -    $ (6,207)
   Signature Partners, L.L.C.                                   -         246
   Amarillo Bell Associates                                 1,518       1,578
   Greenbrier Associates                                        -         723
   Seven Trails West Associates                               (11)        355
                                                         --------    ---------
                                                         $  1,507    $ (3,305)
                                                         ========    ========

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

                                                1998        1997        1996
                                                ----        ----        ----

   Amarillo Bell Associates                   $   152    $    198     $     -
   Greenbrier Associates                        5,958         265         198
   Randallstown Carriage Hill Associates        7,585           -          51
   Signature Partners, L.L.C.                     900           -           -
   Seven Trails West Associates                   485          70           -
                                              -------    --------     -------
                                              $15,080    $    533     $   249
                                              =======    =========    =======

      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") was
      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 initial
      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, had a fixed interest rate
      of 7.65%  and a term of 35  years.  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. was owned by Signature,  JBG and
      the  Partnership  with the same ownership  interest  percentages as in the
      Carriage Hill joint venture agreement.

      On June 23, 1998,  the  Partnership  and its original  co-venture  partner
      purchased the 50% interest of its other co-venture partner,  Signature, in
      the  Joint  Venture.  The  Partnership  had  held a 40%  interest  and the
      original  co-venture  partner had held a 10% interest in the Joint Venture
      prior to this transaction. After the purchase, the Partnership held an 80%
      interest and the original co-venture partner held a 20% interest. On March
      19, 1998,  the  Partnership  was  notified by  Signature  that it would be
      exercising the "buy/sell" provision in the Joint Venture agreement.  Under
      the terms of this provision,  this co-venturer,  which was admitted to the
      Joint Venture as part of a 1988 restructuring transaction,  had to propose
      a price at which it would either purchase the other partners' interests in
      the  Venture or agree to the sale of its  interest  in the  Venture to the
      other partners. The Partnership and its original co-venture partner in the
      Carriage  Hill Joint  Venture had 45 days to decide  whether to sell their
      interests  to the  exercising  partner  or  acquire  the  interest  of the
      exercising  partner at the  specified  gross sale price for the  Venture's
      assets of approximately  $33.3 million.  At an equivalent gross sale price
      of $33.3 million,  the net proceeds to the Partnership for the sale of its
      interest would have been  approximately  $700,000  after  repayment of the
      outstanding first mortgage debt of $27.4 million, the exercising partner's
      preferred  investment  return of approximately $5 million and the original
      co-venturer's  share of the proceeds of $200,000.  After a thorough review
      and analysis,  the Partnership and the original  co-venturer  notified the
      exercising  partner on May 1, 1998 of their  decision to buy its  interest
      for  approximately  $5 million  in cash and put up a  $300,000  deposit in
      connection  with the pending  transaction in accordance  with the terms of
      the Joint Venture agreement. The Partnership obtained its 80% share of the
      needed $5 million by  executing a $4 million  demand  note to  PaineWebber
      Capital,  Inc.,  an  affiliate  of the  Managing  General  Partner  of the
      Partnership. The note bore interest at a rate of 6.56% per annum. The loan
      proceeds  were repaid on  September  11, 1998 from a  combination  of cash
      reserves and the net proceeds from the sale of the  Greenbrier  Apartments
      on September 10, 1998. The  Partnership  contributed a total of $4,048,000
      and JBG  contributed  $1,012,000  to complete the purchase of  Signature's
      interest.

      On September 21, 1998,  the joint venture and Signature  Partners LLC sold
      the Carriage Hill Village Apartments and adjoining land to unrelated third
      parties  for an  aggregate  sale  price of  $37,350,000.  The  Partnership
      received net proceeds of  approximately  $8,481,000 after the receipt of a
      credit of  $1,168,000  for  property  adjustments  and escrows held by the
      Department  of Housing  and Urban  Development  (HUD) for tenant  security
      deposits,  real estate taxes, property insurance and replacement reserves,
      and  after  deducting  closing  costs  of  approximately   $757,000,   the
      assumption  of the  existing  first  mortgage  loan of  $27,298,000  and a
      payment  of  approximately  $1,982,000  to  the  Partnership's  co-venture
      partner for its share of the sales  proceeds in accordance  with the joint
      venture  agreement.  Of the total proceeds  received by the Partnership of
      $8,481,000,   as  discussed  further  above,  $4  million   represented  a
      reimbursement  of  funds  originally  advanced  to  buy  out  the  selling
      co-venture  partner's  interest in the Carriage Hill joint venture on June
      23, 1998.
<PAGE>

      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, 1998,  the balance of the mortgage
      loan, which matures on July 1, 2002, was approximately $3,153,000.

      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,  1998  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  owned  and  operated
      Greenbrier   Apartments,   a  324-unit   apartment   complex   located  in
      Indianapolis,  Indiana. The Partnership was a general partner in the joint
      venture.  The  Partnership's  co-venturer  was 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 was  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 were due.

      On September 10, 1998, the joint venture sold the Greenbrier Apartments to
      an unrelated third party for  $11,850,000.  The  Partnership  received net
      proceeds of  approximately  $5,498,000  after  deducting  closing costs of
      approximately  $119,000,  closing  proration  adjustments of approximately
      $424,000,  the repayment of the existing first mortgage loan of $5,400,000
      and related accrued  interest of approximately  $26,000,  and a payment of
      approximately  $383,000 to the  Partnership's  co-venture  partner for its
      share  of  the  sales  proceeds  in  accordance  with  the  joint  venture
      agreement.  Because  the first  mortgage  loan  secured by the  Greenbrier
      Apartments was scheduled to mature on June 29, 1998, the  Partnership  and
      its joint venture  partner had begun to review both  refinancing  and sale
      opportunities  during the  latter  part of fiscal  1997.  During the first
      quarter of fiscal 1998,  the  Partnership  and the  co-venturer  agreed to
      initiate a marketing program for the possible sale of the property. During
      the second quarter, the Partnership and the co-venturer engaged a national
      real estate  brokerage firm to market  Greenbrier for sale. As part of the
      formal  marketing  campaign,  which began in early March, the property was
      marketed  extensively.   Sales  packages  were  distributed  to  national,
      regional,  and local  prospective  purchasers.  As a result of these sales
      efforts,   several  offers  were  received.   Management  then  asked  the
      prospective  purchasers  to  submit  best  and  final  offers.  Management
      subsequently  received best and final offers from five of the  prospective
      buyers.  After  completing  an  evaluation  of the  final  offers  and the
      relative strength of the prospective  purchasers,  the Partnership and its
      co-venture  partner  selected an offer and  negotiated a purchase and sale
      agreement.  As  a  result  of  the  sale  of  Greenbrier  Apartments,  the
      Partnership  made a  special  distribution  of $100  per  original  $1,000
      investment, or approximately $3,493,000, on October 1, 1998 to unitholders
      of record as of the  September  10,  1998 sale  date.  The  remaining  net
      proceeds from the sale of Greenbrier of  approximately  $2,005,000,  along
      with an amount of the Partnership's  cash reserves,  were used to help pay
      off a  $4,000,000  demand  loan that the  Partnership  had  obtained  from
      PaineWebber  Capital,  Inc., an affiliate of the Managing General Partner,
      during fiscal 1998 to finance the restructuring of the Carriage Hill joint
      venture discussed further above.

      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.

      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,  1998 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, 1998,  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 originally 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.  On April 1, 1997,
      management of the operating property was transferred to an unrelated third
      party. The management fee to the prior affiliated  manager was equal to 5%
      of the gross receipts collected from the property.

5. Subsequent event
   ----------------

      On  October  1,  1998,  the  Partnership  made a special  distribution  of
      approximately  $3,493,000 to the Limited Partners of the net proceeds from
      the sale of the Greenbrier Apartments.



<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, 1998 and 1997, and the related  combined  statements of operations
and  changes in  venturers'  capital  (deficit),  and cash flows for each of the
three years in the period ended September 30, 1998. 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 (a joint venture in which the Partnership
has an 80% and 40% interest as of September 30, 1998 and 1997, respectively)  as
of September  30, 1998 and 1997 and for the years then ended.  Those  statements
reflect total assets of $16,861,000 as of September 30, 1997,  total revenues of
$5,621,000  and  $5,529,000  for the years  ended  September  30, 1998 and 1997,
respectively,  and a gain  on the  sale  of  operating  investment  property  of
$20,644,000 for the year ended September 30, 1998. 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, 1998 and 1997 and for the years 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, 1998
and 1997, and the combined  results of their operations and their cash flows for
each of the three years in the period ended  September  30, 1998,  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 23, 1998


<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 sheets of Randallstown  Carriage
Hill Associates as of September 30, 1998 and 1997 and the related  statements of
operations, changes in partners' equity and cash flows for the years 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 audits in accordance  with  generally  accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

     In our opinion,  the financial statements referred to above present fairly,
in all material respects,  the financial position of Randallstown  Carriage Hill
Associates as of September 30, 1998 and 1997 and the results of its  operations,
the changes in partners'  equity and its cash flows for the years then ended, in
conformity with generally accepted accounting principles.






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


Baltimore, Maryland
November 10, 1998



<PAGE>


                           COMBINED JOINT VENTURES OF
             PAINE WEBBER INCOME PROPERTIES FIVE LIMITED PARTNERSHIP

                             COMBINED BALANCE SHEETS
                           September 30, 1998 and 1997
                                 (In thousands)

                                     Assets

                                                            1998        1997
                                                            ----        ----
Current assets:
   Cash and cash equivalents                           $    1,020    $    833
   Escrow deposits                                            823       1,103
   Accounts receivable                                         93         129
   Prepaid expenses                                            78         577
                                                       ----------    --------
      Total current assets                                  2,014       2,642

Operating investment properties:
   Land                                                     3,229       5,250
   Buildings, improvements and equipment                   33,181      70,929
                                                       ----------    --------
                                                           36,410      76,179
   Less accumulated depreciation                          (15,371)    (33,289)
                                                       ----------    --------
      Net operating investment properties                  21,039      42,890

Reserve for capital expenditures                                -         764

Deferred expenses, net of accumulated amortization
   of $338 ($334 in 1997)                                     413       1,295
Other assets, net                                               -         141
                                                       ----------    --------
                                                       $   23,466    $ 47,732
                                                       ==========    ========

                  Liabilities and Venturers' Capital (Deficit)

Current liabilities:
   Current portion of long-term debt                   $      328    $  5,898
   Accounts payable                                            45         104
   Accounts payable - affiliates                                -          51
   Accrued real estate taxes                                  303         526
   Accrued interest                                           489         643
   Tenant security deposits                                   122         395
   Distributions payable to venturers                         538          61
   Other current liabilities                                   52         101
                                                       ----------    --------
      Total current liabilities                             1,877       7,779

Notes payable to venturers                                    847         847

Other liabilities                                              31          31

Long-term debt                                             19,266      46,893

Venturers' capital (deficit)                                1,445      (7,818)
                                                       ----------    --------
                                                       $   23,466    $ 47,732
                                                       ==========    ========


                             See accompanying notes.


<PAGE>


                           COMBINED JOINT VENTURES OF
             PAINE WEBBER INCOME PROPERTIES FIVE LIMITED PARTNERSHIP

  COMBINED STATEMENTS OF OPERATIONS AND CHANGES IN VENTURERS' CAPITAL (DEFICIT)
             For the years ended September 30, 1998, 1997 and 1996
                                 (In thousands)

                                                1998        1997        1996
                                                ----        ----        ----

Revenues:
  Rental income and expense recoveries        $12,057     $12,062     $11,646
  Interest and other income                       537         443         473
                                              -------     -------     -------
                                               12,594      12,505      12,119

Expenses:
  Interest expense                              4,434       4,503       4,955
  Depreciation expense                          2,556       2,745       2,616
  Real estate taxes                             1,005       1,025         958
  Repairs and maintenance                         880         816         920
  Salaries and related expenses                 1,456       1,333       1,454
  Utilities                                       690         710         958
  General and administrative                      545         449         577
  Management fees                                 491         591         573
  Insurance                                       140         131         137
  Bad debt expense                                164           -          25
  Amortization expense                             60          60          31
                                              -------     -------     -------
                                               12,421      12,363      13,204
                                              -------     -------     -------

Operating income (loss)                           173         142      (1,085)

Gains on sale of operating 
  investment properties                        26,917           -           -
                                              -------     -------     -------

Net income (loss)                              27,090         142      (1,085)

Contributions from venturers                      237           -           -

Distributions to venturers                    (18,064)       (710)       (444)

Venturers' deficit, beginning of year          (7,818)     (7,250)     (5,721)
                                              -------     -------     -------

Venturers' capital (deficit), end of year     $ 1,445     $(7,818)    $(7,250)
                                              =======     =======     =======












                                  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, 1998, 1997 and 1996
                Increase (Decrease) in Cash and Cash Equivalents
                                 (In thousands)
<TABLE>
<CAPTION>

                                                                 1998        1997        1996
                                                                 ----        ----        ----
<S>                                                              <C>         <C>         <C> 
Cash flows from operating activities:
   Net income (loss)                                             $ 27,090    $     142   $  (1,085)
   Adjustments to reconcile net income (loss) to
     net cash provided by operating activities:
      Gain on sales of operating investment properties            (26,917)           -           -
      Depreciation and amortization                                 2,616        2,805       2,647
      Amortization of deferred financing costs                         47           47          70
      Changes in assets and liabilities:
         Escrow deposits                                              280          (18)        (55)
         Accounts receivable                                           36          (46)         47
         Prepaid expenses                                             499           (4)         91
         Deferred expenses                                              -          (22)        (86)
         Other assets                                                 141            -           -
         Accounts payable                                             (59)        (101)         88
         Accounts payable - affiliates                                  -          (69)         90
         Accrued real estate taxes                                   (223)          15         (37)
         Accrued interest                                            (154)          (5)         63
         Tenant security deposits                                    (273)          45         (14)
         Other current liabilities                                    (49)          (1)        (19)
         Deferred interest                                              -            -      (1,657)
         Other liabilities                                              -            -          17
                                                                  -------   ----------   ---------
            Total adjustments                                     (24,056)       2,646       1,245
                                                                  -------   ----------   ---------
            Net cash provided by operating activities               3,034        2,788         160
                                                                  -------   ----------   ---------

Cash flows from investment activities:
   Proceeds from sales of operating investment properties          48,079            -           -
   Additions to operating investment properties                    (1,092)        (782)     (1,903)
   Decrease (increase) in reserve for capital expenditures            764         (400)        325
                                                                  -------   ----------   ---------
            Net cash provided by (used in)
             investing activities                                  47,751       (1,182)     (1,578)
                                                                  -------   ----------   ---------

Cash flows from financing activities:
   Proceeds from long-term debt                                         -            -      17,000
   Payment of deferred financing costs                                  -            -        (243)
   Contributions by venturers                                         186            -           -
   Distributions to venturers                                     (17,587)        (781)       (312)
   Repayment of long-term debt                                     33,197)        (461)    (14,984)
   Repayment of notes to partners                                       -            -        (119)
                                                                  -------   ----------   ---------
            Net cash (used in) provided by
             financing activities                                 (50,598)      (1,242)      1,342
                                                                  -------   ----------   ---------
Net increase (decrease) in cash and cash equivalents                  187          364         (76)
Cash and cash equivalents, beginning of year                          833          469         545
                                                                  -------   ----------   ---------

Cash and cash equivalents, end of year                            $ 1,020   $      833   $      469
                                                                  =======   ==========  ===========

Cash paid during the year for interest                            $ 4,541   $    4,461   $    6,479
                                                                  =======   ==========   ==========
</TABLE>


                             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

      During fiscal 1998 Randallstown Carriage Hill Associates sold the Carriage
Hill Village  Apartments to an unrelated third party.  Signature Partners L.L.C.
sold its land to the same unrelated third party. In addition, during fiscal 1998
Greenbrier  Associates  sold the  Greenbrier  Apartments  to an unrelated  third
party. See Note 3 for a further discussion of these transactions.

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, 1998 and 1997 and revenues and expenses for
each of the three years in the period ended  September 30, 1998.  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 Combined Joint Ventures  generally  assess  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 over the terms of the related  leases and loans,  respectively.
Amortization  of deferred  loan fees,  which is  calculated  using the effective
interest method, 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,  1998 and 1997 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, 1998 and 1997 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  owned and  operated  the  Carriage  Hill Village
      Apartments,   an  806-unit  apartment  complex  located  in  Randallstown,
      Maryland.

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

            This  limited  liability  company  owned a  23-acre  parcel  of land
      located in Randallstown, Maryland.

            On  June  23,  1998,  PWIP 5 and  its  original  co-venture  partner
      purchased  the 50%  interest of its other  co-venture  partner,  Signature
      Carriage Hill Village Apartments Limited Partnership ("Signature"), in the
      Randallstown Carriage Hill Associates Joint Venture. PWIP 5 had held a 40%
      interest  and the original  co-venture  partner had held a 10% interest in
      the Joint Venture prior to this  transaction.  After the purchase,  PWIP 5
      held  an 80%  interest  and the  original  co-venture  partner  held a 20%
      interest.

            On March 19, 1998, PWIP 5 was notified by Signature that it would be
      exercising the "buy/sell" provision in the Joint Venture agreement.  Under
      the terms of this provision,  this co-venturer,  which was admitted to the
      Joint Venture as part of a 1988 restructuring transaction,  had to propose
      a price at which it would either purchase the other partners' interests in
      the  Venture or agree to the sale of its  interest  in the  Venture to the
      other partners. PWIP 5 and its original co-venture partner in the Carriage
      Hill Joint Venture had 45 days to decide  whether to sell their  interests
      to the  exercising  partner  or acquire  the  interest  of the  exercising
      partner at the  specified  gross sale  price for the  Venture's  assets of
      approximately  $33.3 million.  At an equivalent  gross sale price of $33.3
      million,  the net  proceeds to PWIP 5 for the sale of its  interest  would
      have been approximately  $700,000 after repayment of the outstanding first
      mortgage  debt  of  $27.4  million,  the  exercising  partner's  preferred
      investment   return  of   approximately   $5  million  and  the   original
      co-venturer's  share of the proceeds of $200,000.  After a thorough review
      and analysis,  PWIP 5 and the original co-venturer notified the exercising
      partner  on May  1,  1998  of  their  decision  to buy  its  interest  for
      approximately  $5  million  in  cash  and  put up a  $300,000  deposit  in
      connection  with the pending  transaction in accordance  with the terms of
      the Joint Venture agreement.

            On September 21, 1998,  Randallstown  Carriage Hill  Associates  and
      Signature  Partners  LLC sold  Carriage  Hill Village  Apartments  and the
      adjoining  land to unrelated  third parties for an aggregate sale price of
      $37,350,000.  PWIP 5 received  net  proceeds of  approximately  $8,481,000
      after the receipt of a credit of $1,168,000 for property  adjustments  and
      escrows held by the Department of Housing and Urban  Development (HUD) for
      tenant  security  deposits,  real estate  taxes,  property  insurance  and
      replacement  reserves,  and after deducting closing costs of approximately
      $757,000,   the   assumption  of  the  existing  first  mortgage  loan  of
      $27,298,000  and  a  payment  of  approximately  $1,982,000  to  PWIP  5's
      co-venture  partner for its share of the sales proceeds in accordance with
      the joint venture agreement.

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

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

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

            The joint venture owned and operated the  Greenbrier  Apartments,  a
      324-unit apartment complex located in Indianapolis, Indiana.

            On September 10, 1998,  Greenbrier  Associates,  sold the Greenbrier
      Apartments to an unrelated  third party for  $11,850,000.  PWIP 5 received
      net proceeds of approximately  $5,498,000 after deducting closing costs of
      approximately  $119,000,  closing  proration  adjustments of approximately
      $424,000,  the repayment of the existing first mortgage loan of $5,400,000
      and related accrued  interest of approximately  $26,000,  and a payment of
      approximately $383,000 to the PWIP 5's co-venture partner for its share of
      the sales proceeds in accordance with the joint venture agreement.

            Because the first mortgage loan secured by the Greenbrier Apartments
      was  scheduled  to mature on June 29, 1998,  PWIP 5 and its joint  venture
      partner had begun to review both refinancing and sale opportunities during
      the latter part of fiscal 1997.  During the first  quarter of fiscal 1998,
      PWIP 5 and the co-venturer  agreed to initiate a marketing program for the
      possible sale of the property.  During the second quarter,  PWIP 5 and the
      co-venturer  engaged  a  national  real  estate  brokerage  firm to market
      Greenbrier for sale. As part of the formal marketing campaign, which began
      in early March, the property was marketed extensively. Sales packages were
      distributed to national,  regional, and local prospective purchasers. As a
      result of these sales efforts,  several  offers were received.  Management
      then asked the  prospective  purchasers  to submit best and final  offers.
      Management  subsequently  received  best and final offers from five of the
      prospective buyers. After completing an evaluation of the final offers and
      the  relative  strength  of the  prospective  purchasers,  PWIP 5 and  its
      co-venture  partner  selected an offer and  negotiated a purchase and sale
      agreement.

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

            The  joint   venture   owns  and  operates  the  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.

      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  originally  entered into property  management
agreements  with  affiliates  of  the  co-venturers,  cancelable  at  the  joint
ventures'  option  upon  the  occurrence  of  certain  events.   These  original
management fees were equal to between 4% and 5% of gross receipts, as defined in
the  agreements.  As of April 1, 1997,  management of the  Greenbrier  and Seven
Trails properties was transferred to unrelated third parties.

      Accounts  payable  -  affiliates  at  September  30,  1998  and  1997  are
principally  management fees and  reimbursements  payable to property  managers.
Notes  payable to venturers at September 30, 1998 and 1997  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, 1998 and 1997 consists of the following (in
thousands):

                                                           1998        1997
                                                           ----        ----

     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.                            $       -    $  27,494

     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,  1998 and  1997.                   3,153        3,204
<PAGE>

     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 was due
     June 29,  1998.  The fair  value of
     this note payable  approximated its
     carrying  value as of September 30,
     1997.                                                     -        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,
     1998  and   1997.                                    16,441       16,693
                                                       ---------    ---------

                                                          19,594       52,791

      Less current portion                                  (328)      (5,898)
                                                       ---------    ---------
                                                       $  19,266    $  46,893
                                                       =========    =========

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

            1999                   $   328
            2000                       354
            2001                       383
            2002                     3,320
            2003                       373
            Thereafter              14,836
                                   -------
                                   $19,594
                                   =======

      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, 1998 are as follows (in thousands):

            1999                   $   676
            2000                       489
            2001                       437
            2002                       428
            2003                       428
            Thereafter               3,090
                                   -------
                                   $ 5,548
                                   =======

      Revenues  from  three  major  tenants of the Bell  Plaza  Shopping  Center
comprised  approximately  33%,  15%  and 11% of the  total  rental  revenues  of
Amarillo Bell  Associates for the year ended September 30, 1998. 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, 1998
                                       (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:

Shopping 
 Center     $ 3,153      $1,519   $ 6,310    $ 1,167      $1,519   $ 7,477   $ 8,996  $ 3,314      1979-82     9/30/83     5-40 yrs.
Amarillo,
 TX

Apartment 
 Complex
Ballwin,
 MO          16,441       1,710     22,131     3,573       1,710    25,704    27,414   12,057      1968-74     9/13/84     5-30 yrs.
            -------      ------    -------   -------      ------   -------   -------  -------
Total       $19,594      $3,229    $28,441   $ 4,740      $3,229   $33,181   $36,410  $15,371
            =======      ======    =======   =======      ======   =======   =======  =======

Notes
(A) The  aggregate  cost of real estate owned at September  30, 1998 for Federal income  tax  purposes  is  approximately  $34,410.
(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:

                                               1998             1997               1996
                                               ----             ----               ----

      Balance at beginning of period         $ 76,179        $ 75,397            $ 73,494
      Acquisitions and improvements             1,092             782               1,903
      Dispositions                            (40,861)              -                   -
                                             --------        --------            --------
      Balance at end of period               $ 36,410        $ 76,179            $ 75,397
                                             ========        ========            ========

(D) Reconciliation of accumulated depreciation:

      Balance at beginning of period         $ 33,289        $ 30,544            $ 27,928
      Depreciation expense                      2,556           2,745               2,616
      Dispositions                            (20,474)              -                   -
                                             --------        --------            --------
      Balance at end of period               $ 15,371        $ 33,289            $ 30,544
                                             ========        ========            =========
</TABLE>