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, 1995

                                      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: 0-17148

           PAINE WEBBER INCOME PROPERTIES EIGHT LIMITED  PARTNERSHI
             (Exact name of registrant as specified in its charter)

        Delaware                                                    04-2921780
(State of organization)                                       (I.R.S.Employer
                                                            Identification No.)

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

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

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

                                                   Name of each exchange 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

                     DOCUMENTS INCORPORATED BY REFERENCE
Documents                                                Form 10-K Reference
Prospectus of registrant dated                           Part IV
September 17, 1986, as supplemented




<PAGE>


           PAINE WEBBER INCOME PROPERTIES EIGHT LIMITED PARTNERSHIP
                                1995 FORM 10-K

                              TABLE OF CONTENTS

PART I                                                                  Page

Item  1       Business                                                  I-1

Item  2       Properties                                                I-3

Item  3       Legal Proceedings                                         I-4

Item  4       Submission of Matters to a Vote of Security Holders       I-5

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-3

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-21












<PAGE>

                                    PART I

Item 1.  Business

   Paine Webber Income Properties Eight Limited  Partnership (the "Partnership")
is a  limited  partnership  formed  in April  1986  under  the  Uniform  Limited
Partnership  Act of the State of  Delaware  for the  purpose of  investing  in a
diversified  portfolio  of existing  income-producing  real  properties  such as
apartments, shopping centers, office buildings, industrial buildings and hotels.
The Partnership sold $35,548,976 in Limited Partnership units (the "Units"),  at
$1 per Unit,  from  September  17, 1986 to  September  16,  1988  pursuant to an
Amended  Registration  Statement on Form S-11 filed under the  Securities Act of
1933  (Registration No. 33-5179).  Limited Partners will not be required to make
any additional capital contributions.

   As of September 30, 1995,  the  Partnership  owned  directly or through joint
venture  partnerships the properties or interests in the properties  referred to
below:


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

Marriott Suites - 
Newport Beach                    254        8/10/88       Fee ownership of land
  Hotel                          suites                   and improvements
Newport Beach, California

Daniel Meadows II 
 General Partnership             200        10/15/87      Fee ownership of land
The Meadows in the Park          units                    and improvements
  Apartments                                             (through jointventure)
Birmingham, Alabama

Maplewood Drive Associates       144        6/14/88      Fee ownership of land
Maplewood Park Apartments        units                   and improvements
Manassas, Virginia                                       (through joint venture)

Spinnaker Bay Associates:                                Fee ownership of land
 Bay Club Apartments             88 units     6/10/88    and improvements
 Spinnaker Landing Apartments    66 units     6/10/88    (through joint venture)
 Des Moines, Washington

Norman Crossing Associates       52,000       9/15/89    Fee ownership of land
Norman Crossing Shopping         square                  and improvements
 Center                          feet                    (through joint venture)
Charlotte, North Carolina

(1) See Notes to the  Financial  Statements  filed with this Annual Report for a
    description  of the  long-term  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.

   As discussed further in Note 4 to the accompanying financial statements,  the
Partnership  previously  owned a fee simple  interest in the  Marriott  Suites -
Perimeter Center, a 224-suite hotel located in Atlanta,  Georgia. On December 3,
1991,  the holder of the  mortgage  debt secured by the Atlanta  Marriott  hotel
foreclosed on the operating property due to the Partnership's  inability to meet
the required debt service payments.  As a result,  the Partnership no longer has
any ownership interest in this property.


<PAGE>



      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; 
(iv)  increase the Limited Partners' return on investment by using leverage;
      and
(v)   provide a build-up of equity  through the reduction of mortgage  loans on
      its properties.

   Through September 30, 1995, the Limited Partners had received cumulative cash
distributions from operations totalling  approximately  $5,719,000,  or $192 per
original  $1,000  investment  for  the  Partnership's   earliest  investors.   A
substantial  portion of the  distributions  paid to date has been sheltered from
current taxable income. Regular quarterly distributions of excess operating cash
flow were suspended  indefinitely  in fiscal 1991. The  Partnership  retains its
ownership interest in six of its seven original  investment  properties,  all of
which were acquired using leverage of between  approximately  60% and 75% of the
original  purchase  price.  As  stated  above,  the  Partnership  was  forced to
relinquish  its ownership of the Atlanta  Marriott  Suites hotel to the mortgage
lender in fiscal 1992 because the property could not generate  sufficient income
to cover its debt service  obligations.  The  inability of the hotel to meet the
debt  service  requirements  of the  mortgage  loan  resulted  mainly  from  the
significant  oversupply  of  competing  hotels  in the  Atlanta  market  and its
negative  impact on occupancy  and room rates.  The effects of the  overbuilding
were compounded by the impact of the sustained national recession on the lodging
industry as a whole.  Management  did not foresee any  improvement in the market
conditions for the next several years and believed that the use of cash reserves
to fund operating  deficits  would still not enable the  Partnership to sell its
investment  in the  hotel for an  amount  in  excess  of the  current  or future
obligation to the mortgage  lender.  Due to the foreclosure  loss of the Atlanta
Marriott,  which  represented  27%  of  the  Partnership's  original  investment
portfolio,  the  Partnership  will be unable to  return  the full  amount of the
original capital contributed by the Limited Partners.

   The amount of capital which will be returned will depend, in large part, upon
improvement of the operating  performance  of the Newport Beach Marriott  Suites
Hotel,  which represents 36% of the original  investment  portfolio,  and on the
proceeds received from the final liquidation of the remaining  investments.  The
amount of such proceeds will ultimately  depend upon the value of the underlying
investment  properties  at the time of their  final  disposition,  which  cannot
presently be  determined.  As discussed  further in Item 7, the  Partnership  is
presently in default of the modified terms of the first mortgage loan secured by
the  wholly-owned  Newport Beach  Marriott.  During fiscal 1995, the Partnership
reached  the  limit on the  debt  service  deferrals  imposed  by the 1993  loan
modification agreement, and the Hotel continues to generate sizable deficits. It
is  uncertain  at  this  time  whether  the  lender  will  agree  to  a  further
modification  of the loan terms and an  extension  of the August  1996  maturity
date.  In the event that an  agreement  with the lender  cannot be reached,  the
result could be a  foreclosure  on the  operating  investment  property.  At the
present  time,  the market value of the Newport Beach  Marriott  Suites Hotel is
estimated to be  significantly  less than the  outstanding  first  mortgage loan
obligation.  While increased demand from institutional  buyers and an absence of
any  significant  new  construction  activity have led to an  improvement in the
market for hotel properties in many areas of the country during 1995, it appears
unlikely that such  improvement will occur as rapidly or to the extent necessary
for the Partnership to recover any portion of its original net investment in the
Newport Beach Marriott.  The Managing General  Partner's  strategy has been, and
continues to be, to preserve the Partnership's equity interests, where possible,
while the  respective  local  economies and rental  markets  improve in order to
return as much of the invested capital as possible.

   All of the  Partnership's  investments  are located in real estate markets in
which they face  significant  competition  for the revenues they  generate.  The
apartment  complexes compete with numerous projects of similar type generally on
the basis of price, location and amenities.  Apartment properties in all markets
also  compete  with the local  single  family  home  market  for  revenues.  The
continued  availability  of low  interest  rates  on  home  mortgage  loans  has
increased the level of this  competition over the past few years.  However,  the
impact of the competition from the single-family  home market has been offset by
the lack of significant new construction activity in the multi-family  apartment
market over this period.  The shopping center competes for long-term  commercial
tenants with numerous  projects of similar type generally on the basis of price,
location,  tenant mix and tenant  improvement  allowances.  At the present time,
real estate values for retail shopping  centers in certain markets have begun to
be affected by the effects of overbuilding  and  consolidations  among retailers
which have  resulted in an oversupply of space.  The remaining  hotel,  which is
located in a populated  market with a  substantial  hotel room supply,  competes
with other  "all-suites"  type hotels, as well as traditional  hotels,  based on
room rates, location,  amenities and dining and conference facilities. While the
occupancy levels of the Partnership's hotel have been maintained at or above the
national averages for hotel properties in recent years, due to the oversupply of
available hotel rooms in the Newport Beach market, along with Marriott's lack of
success in achieving separate name recognition for its suites hotel concept, the
Partnership's hotel has never been able to command its projected room rates.

   The Partnership has no real 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").

   In  connection  with the  ownership of the  Marriott  Suites Hotel in Newport
Beach,  California,  the Partnership has entered into an agreement with Marriott
Corporation  for the  management  of the Hotel's  operations.  The terms of this
agreement are set forth in the Notes to the Financial  Statements listed in Item
14(a)(1)  of this  Annual  Report  to  which  reference  is  hereby  made  for a
description of such terms.  All employees of the Hotel are employees of Marriott
Corporation or its affiliates, not of the Partnership.

   The general partners of the Partnership  (the "General  Partners") are Eighth
Income  Properties  Inc. and  Properties  Associates  1986,  L.P.  Eighth Income
Properties,  Inc. (the "Managing General Partner"), a wholly-owned subsidiary of
PaineWebber Group, Inc., is the managing general partner of the Partnership. The
associate general partner of the Partnership is Properties Associates 1986, L.P.
(the "Associate  General  Partner"),  a Virginia  limited  partnership,  certain
limited  partners of which are also  officers  of the  Adviser and the  Managing
General Partner.  Subject to the Managing 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, 1995,  the  Partnership  owned one  operating  investment
property directly and owned interests in five operating properties through joint
venture  partnerships.  Such  properties  are  referred to under Item 1 above to
which  reference is hereby made for the name,  location and  description of each
property.

   Leasing levels for each fiscal quarter during 1995, along with an average for
the year, are presented below for each property:
                                           Percent Leased At
                                                                    Fiscal 1995
                            12/31/94   3/31/95     6/30/95   9/30/95   Average

Marriott Suites - 
 Newport Beach Hotel           72%        73%         82%      86%       78%

The Meadows in the Park        96%        93%         83%      79%       88%
  Apartments

Maplewood Park Apartments      96%        93%         93%      99%       95%

Bay Club and                   95%        92%         95%      95%       94%
Spinnaker Landing Apartments

Norman Crossing 
 Shopping Center (1)           94%        97%        100%      100%      98%

   (1)In October 1993,  the sole anchor tenant of the Norman  Crossing  Shopping
      Center vacated the center to relocate its  operations.  This anchor tenant
      continues  to pay rent on its prior  space,  which  represents  48% of the
      property's net rentable  area,  under the terms of its lease which expires
      in the year 2007. As a result of this anchor tenant vacancy,  the physical
      occupancy of the property is  substantially  lower than the leasing  level
      shown above (see Item 7).

Item 3.  Legal Proceedings

      As  discussed   further  in  the  notes  to  the  accompanying   financial
statements,  construction-related  defects were  discovered  at the Bay Club and
Spinnaker Landing apartment  complexes during fiscal 1991. The complexes,  which
are located in a suburb of Seattle, Washington, were built by the same developer
in 1987. The  Partnership's  joint venture  investee,  Spinnaker Bay Associates,
which owns the two  properties,  brought suit  against the  developer to collect
damages  caused  by the  defects.  In  December  of 1991,  the  venture  and the
developer    executed   a    settlement    agreement    with   regard   to   the
construction-related  damage claim.  The venture  received  $900,000 in net cash
proceeds from the  settlement,  which has been used to partially fund the repair
costs at the  properties.  In addition  to the cash  received at the time of the
settlement,  the  venture  received  a note in the amount of  $161,500  from the
developer  which was due in 1994.  During  fiscal  1993,  the venture  agreed to
accept a  discounted  payment of  $113,050 in full  satisfaction  of the note if
payment  was made by December  31,  1993.  The  developer  made this  discounted
payment to the venture in the first quarter of fiscal 1994. In addition,  during
fiscal  1994 the  venture  received  additional  settlement  proceeds  totalling
approximately $351,000 from its pursuit of claims against certain subcontractors
of the development company and other responsible parties.  Additional settlement
proceeds totalling  approximately $402,000 were collected during fiscal 1995. No
significant further litigation proceeds are expected at the present time.

      Also as  discussed  further  in the  notes to the  accompanying  financial
statements, during fiscal 1991 the Partnership discovered that certain materials
used  to  construct  The  Meadows  in  the  Park  Apartments  were  manufactured
incorrectly  and would require  substantial  repairs.  Daniel Meadows II General
Partnership,  the joint  venture  which owns the  property,  engaged local legal
counsel during fiscal 1992 to seek recoveries from the joint venture's insurance
carrier, as well as various  contractors and suppliers,  for the venture's claim
of damages, which were estimated at between $1.6 and $2.1 million, not including
legal fees and other  incidental  expenses.  During  fiscal 1993,  the insurance
carrier deposited  approximately  $522,000 into an escrow account  controlled by
the venture's  mortgage  lender in settlement of the  undisputed  portion of the
venture's  claim.  Also during  fiscal  1993,  the  insurer  was denied  summary
judgment  for its  contention  that it was not liable  for  damages to the joint
venture.  Subsequently,  the insurer agreed to enter into non-binding  mediation
towards  settlement of the disputed claims out of court. On October 3, 1994, the
joint  venture  verbally  agreed to settle  its  claims  against  the  insurance
carrier,  architect,  general contractor and the surety/completion  bond insurer
for  $1,714,000,  which is in addition to the  $522,000  previously  paid by the
insurance  carrier.  Upon  execution  of the  release  document  required by the
defendant parties of the litigation,  the settlement proceeds were escrowed with
the mortgage  holder.  Under the terms of the new mortgage  loan which closed on
February 7, 1995, the settlement  proceeds will be used to complete the required
repairs.  The loan  will be  fully  recourse  to the  joint  venture  and to the
partners of the joint venture until the repairs are completed, at which time the
entire obligation will become non-recourse.  All repair work should be completed
during fiscal 1996.

     In  November  1994,  a series of  purported  class  actions  (the "New York
Limited Partnership Actions") were filed in the United States District Court for
the Southern District of New York concerning PaineWebber Incorporated's sale and
sponsorship of various limited partnership investments,  including those offered
by the Partnership.  The lawsuits were brought against PaineWebber  Incorporated
and Paine Webber Group Inc. (together "PaineWebber"), among others, by allegedly
dissatisfied  partnership  investors.  In March  1995,  after the  actions  were
consolidated under the title In re PaineWebber Limited  Partnership  Litigation,
the  plaintiffs  amended their  complaint to assert claims  against a variety of
other  defendants,  including  Eighth  Income  Properties,  Inc. and  Properties
Associates  1986,  L.P.  ("PA1986")  which  are  the  General  Partners  of  the
Partnership and affiliates of PaineWebber.  On May 30, 1995, the court certified
class action treatment of the claims asserted in the litigation.

     The amended complaint in the New York Limited  Partnership  Actions alleges
that, in connection with the sale of interests in PaineWebber  Income Properties
Eight  Limited  Partnership,  PaineWebber,  Eighth Income  Properties,  Inc. and
PA1986 (1) failed to provide adequate disclosure of the risks involved; (2) made
false and misleading representations about the safety of the investments and the
Partnership's  anticipated  performance;  and (3)  marketed the  Partnership  to
investors for whom such  investments  were not  suitable.  The  plaintiffs,  who
purport to be suing on behalf of all persons who invested in PaineWebber  Income
Properties Eight Limited Partnership, also allege that following the sale of the
partnership interests,  PaineWebber,  Eighth Income Properties,  Inc. and PA1986
misrepresented   financial   information   about  the  Partnerships   value  and
performance.  The amended  complaint  alleges that  PaineWebber,  Eighth  Income
Properties,  Inc.  and PA1986  violated  the  Racketeer  Influenced  and Corrupt
Organizations Act ("RICO") and the federal  securities laws. The plaintiffs seek
unspecified  damages,  including  reimbursement for all sums invested by them in
the  partnerships,  as well as disgorgement of all fees and other income derived
by PaineWebber from the limited partnerships.  In addition,  the plaintiffs also
seek treble damages under RICO. The  defendants'  time to move against or answer
the complaint has not yet expired.

      Pursuant to provisions of the Partnership  Agreement and other contractual
obligations,  under certain  circumstances  the  Partnership  may be required to
indemnify Eighth Income Properties,  Inc., PA1986 and their affiliates for costs
and liabilities in connection with this litigation.  The General Partners intend
to vigorously contest the allegations of the action, and believe that the action
will be resolved without material adverse effect on the Partnership's  financial
statements, taken as a whole.

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, 1995,  there were 1,733 record  holders of Units in the
Partnership.  There is no public  market for the resale of the Units,  and it is
not anticipated  that a public market for resale of the Units will develop.  The
Managing General Partner will not redeem or repurchase Units.

      There  were no cash  distributions  made to the  Limited  Partners  during
fiscal 1995.

Item 6.  Selected Financial Data

           PaineWebber Income Properties Eight Limited Partnership For the years
       ended September 30, 1995, 1994, 1993, 1992 and 1991
                     (In thousands, except per Unit data)

                           1995         1994       1993      1992 (2)   1991
                           ----         ----       ----      --------   ----

Revenues             $   8,649   $   8,195   $   8,050    $  8,717   $ 13,362

Operating loss       $  (8,957)  $  (2,940)  $  (2,978)   $ (5,325)  $ (7,958)

Partnership's share of
  ventures' losses   $    (577)  $  (1,036)  $  (1,356)   $ (1,246) $    (992)

Loss on transfer of
  assets at foreclosure      -           -           -    $ (5,653)         -

Loss before extraordinary
  gain               $  (9,534)  $  (3,976) $   (4,334)   $(12,224)  $ (8,950)

Extraordinary gain from
  settlement of debt
  obligation                 -           -           -    $ 11,360          -

Net loss             $  (9,534)   $ (3,976)$    (4,334) $     (864)  $ (8,950)

Total assets         $  23,623    $ 31,090  $   33,521    $ 36,660   $ 57,447

Mortgage debt payable$  36,060    $ 35,237  $   34,634 (1)$ 29,400   $ 29,400

Per 1,000 Limited
  Partnership Units:

  Loss before
   extraordinary gain$  (265.38)$ (110.68)  $ (120.64)   $ (340.23)  $(249.10)

  Extraordinary gain from
   settlement of debt
   obligation                 -         -           -     $  316.19         -

  Net loss          $  (265.38)  $ (110.68)  $ (120.64)   $  (24.04)  $(249.10)

  Cash distributions         -           -           -            -   $  25.00


<PAGE>


(1) The increase in long-term  debt as of September  30, 1993  resulted from the
    modification  of the  mortgage  note  payable  secured by the Newport  Beach
    Marriott operating investment property. As more fully explained in Note 6 to
    the accompanying financial statements, accrued interest payable as of August
    11, 1992 was added to the outstanding  principal  balance in accordance with
    the  modification  agreement  which also permitted the future  deferral of a
    portion of the debt service obligation (see Item 7).

(2) The loss on transfer of assets at foreclosure and the extraordinary  gain on
    settlement  of debt  obligation  recognized in fiscal 1992 resulted from the
    foreclosure,  on  December 3, 1991,  of the  wholly-owned  Atlanta  Marriott
    Suites Hotel. In anticipation of the  foreclosure,  the remaining assets and
    liabilities  of this  operating  investment  property  were  aggregated  and
    separately  classified  on the  Partnership's  balance  sheet as assets  and
    liabilities of investment  property  subject to foreclosure at September 30,
    1991.

      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 1,000 Limited Partnership Unit information is based upon the
35,548,976 Limited Partnership Units outstanding during each year.

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

Liquidity and Capital Resources

      The  Partnership  offered  Units of Limited  Partnership  interests to the
public from  September 17, 1986 to September 16, 1988 pursuant to a Registration
Statement filed under the Securities Act of 1933.  Gross proceeds of $35,548,976
were received by the Partnership  from the sale of Partnership  Units and, after
deducting  selling  expenses and offering costs,  approximately  $28,474,000 was
originally invested in two wholly-owned operating investment properties and four
joint venture  partnerships which own five operating investment  properties.  As
discussed in prior reports,  the Partnership was forced to relinquish  ownership
of one of its  wholly-owned  properties,  the Atlanta  Marriott Suites Hotel, on
December 3, 1991 as a result of uncured monetary defaults under the terms of the
property's first mortgage loan.

      As previously  reported,  on January 25, 1993 the Managing General Partner
and the lender on the Newport Beach Marriott Suites Hotel finalized an agreement
on a  modification  of the first  mortgage  loan  secured by the Hotel which was
retroactive to August 11, 1992. Per the terms of the modification,  the maturity
date of the loan was extended one year to August 11, 1996. The principal  amount
of the loan was adjusted to $32,060,518  (the original  principal of $29,400,000
plus  $2,660,518 of unpaid interest and fees).  The  outstanding  balance of the
loan bears interest at a rate of 9.59% through August 11, 1995 and at a variable
rate of the adjusted LIBOR index, as defined (5.91% at September 30, 1995), plus
2.5% from August 11, 1995 through the final maturity  date.  The  Partnership is
obligated  to pay the lender on a monthly  basis as debt service an amount equal
to Hotel Net Cash,  as defined in the Hotel  management  agreement.  In order to
increase Hotel Net Cash,  Marriott  agreed to reduce its Base  Management Fee by
one percent of total revenue through  January 3, 1997. In addition,  the reserve
for the  replacement  of equipment  and  improvements,  which is funded out of a
percentage of gross revenues  generated by the Hotel, was reduced to two percent
of gross  revenues  in 1992 and is equal  to  three  percent  of gross  revenues
thereafter through January 3, 1997. As part of the modification  agreement,  the
Partnership  agreed to make additional debt service  contributions to the lender
of $400,000,  of which $50,000 was paid at the closing of the  modification  and
the  balance  was to be payable  on a monthly  basis in  arrears  for  forty-two
months.

      As  part  of the  agreement  to  modify  the  Hotel's  mortgage  debt,  an
additional  loan  facility  of up to  $4,000,000  was  made  available  from the
existing lender to be used to pay debt service shortfalls.  This additional loan
facility bears interest at a variable rate of adjusted LIBOR,  as defined,  plus
one percent per annum. Interest on the new loan facility is payable currently to
the extent of available cash flow from Hotel  operations.  Interest deferred due
to the lack of available  cash flow could be added to the  principal  balance of
the new loan until the loan balance  reached the  $4,000,000  limitation.  As of
March 31, 1995,  the  Partnership  had exhausted  the entire  $4,000,000 of this
additional loan facility.  On April 11, 1995, the Partnership received a default
notice from the lender.  Under the terms of the loan agreement,  as of April 25,
1995 additional  default  interest accrues at a rate of 4% per annum on the loan
amount of $32,060,518 and the additional loan facility of $4,000,000. Subsequent
to the date of the default,  the  Partnership  suspended the monthly  additional
debt service  contributions  of $8,333 referred to above. At September 30, 1995,
approximately  $1,242,000 of accrued  interest on this  additional loan facility
remained  unpaid and default  interest of  approximately  $637,000  had accrued.
After preliminary discussions,  it is unclear whether the lender will be willing
to allow for further  modifications  to the loan and an  extension of the August
1996 maturity  date.  Despite an improvement  in the Hotel's  operating  results
during fiscal 1995, the estimated  value of the Hotel property is  substantially
less than the  obligation  to the  mortgage  lender at the present  time.  While
increased demand from institutional buyers and an absence of any significant new
construction  activity  have  led to an  improvement  in the  market  for  hotel
properties in many areas of the country  during 1995,  it appears  unlikely that
continued  improvement  will occur as rapidly or to the extent necessary for the
Partnership to recover any portion of its original net investment in the Newport
Beach  Marriott.  Management  will  continue  to make  every  prudent  effort to
preserve the Partnership's  ownership of the Hotel property, but if the mortgage
holder  were to choose  to  initiate  foreclosure  proceedings,  as a  practical
matter,  there  is  very  little  that  the  Partnership  could  do  to  prevent
foreclosure from occurring.

      In light of the  circumstances  facing the Newport Beach  Marriott  Hotel,
management reviewed the carrying value of the Hotel for potential  impairment as
of September 30, 1995. In conjunction with such review, the Partnership  elected
early  application  of  Statement  of Financial  Accounting  Standards  No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of" (SFAS 121). In accordance with SFAS 121, an impairment loss with
respect to an operating  investment  property is recognized  when the sum of the
expected future net cash flows  (undiscounted  and without interest  charges) is
less than the carrying  amount of the asset.  An impairment  loss is measured as
the amount by which the  carrying  amount of the asset  exceeds  its fair value,
where fair value is defined as the amount at which the asset  could be bought or
sold in a current  transaction  between  willing  parties,  that is other than a
forced or liquidation sale. In conjunction with the application of SFAS 121, the
Partnership  recognized  an  impairment  loss of  $6,369,000  to write  down the
operating  investment  property to its estimated fair value of $20,000,000 as of
September 30, 1995. Fair value was estimated  using an independent  appraisal of
the operating  property.  The impairment loss resulted because,  in management's
judgment,  the  current  default  status of the  mortgage  loan  secured  by the
property  discussed  above,  combined  with the lack of near-term  prospects for
sufficient  future  improvement in market conditions in the Orange County market
in which the property is located,  are not expected to enable the Partnership to
recover the adjusted cost basis of the property.  Because the net carrying value
of the Hotel is below the balance of the nonrecourse debt obligation  secured by
the property as of September 30, 1995, the Partnership would recognize a sizable
net gain for financial  reporting  purposes upon a foreclosure  of the operating
property and settlement of the debt obligation.

      The loss of the Atlanta  Marriott Suites to foreclosure in fiscal 1992 and
the unlikely  prospects  for  recovery of the  Partnership's  investment  in the
Newport Beach Marriott,  as discussed  further above,  mean that the Partnership
will be unable to return the full amount of the original invested capital to the
Limited Partners. The two hotel investments represented 63% of the Partnership's
original investment portfolio. The amount of capital which will be returned will
depend upon the proceeds  received  from the  disposition  of the  Partnership's
other investments, which cannot presently be determined. The Partnership's other
investments  consist of four  multi-family  apartment  complexes  and one retail
shopping  center.  Based  on  the  current  estimated  market  values  of  these
investments,  only  the  Partnership's  interest  in the  Meadows  in  the  Park
Apartments has any significant value above the outstanding mortgage indebtedness
secured by the properties. In October 1993, the sole anchor tenant of the Norman
Crossing  Shopping  Center vacated the center to relocate its  operations.  This
anchor tenant,  which occupied  25,000 square feet of the property's  52,000 net
leasable square feet, is still obligated under the terms of its lease which runs
through  the year  2007.  To date,  all  rents due from  this  tenant  have been
collected. Nonetheless the anchor tenant vacancy has resulted in several tenants
receiving rental  abatements during fiscal 1995 and has had an adverse effect on
the ability to lease other vacant shop space at the center,  which had been 100%
occupied prior to the anchor tenant's departure.  During fiscal 1995, two vacant
shops were leased,  both at below market rent levels  necessitated by the anchor
tenant vacancy. The center was 49% occupied as of September 30, 1995. During the
last quarter of fiscal 1995,  the former anchor  tenant  reached an agreement to
sub-lease  its space to a new tenant.  This new sublease  tenant is scheduled to
take occupancy in January 1996. At such time, the rental  abatements  granted to
the other tenants will be  terminated.  However,  the  long-term  impact of this
subleasing  arrangement on the operations of the property  remains  uncertain at
the present  time.  The joint  venture may have to continue to make  significant
tenant  improvements and grant further rental concessions in order to maintain a
high occupancy level.  Funding for such  improvements,  along with any operating
cash flow  deficits  incurred  during  this period of  re-stabilization  for the
shopping center, would be provided primarily by the Partnership. The Partnership
funded cash flow deficits of approximately $56,000 for the Norman Crossing joint
venture  during  fiscal  1995.  The  Partnership  also  funded  its share of the
deficits at the Maplewood  joint venture  during  fiscal 1995.  While  occupancy
levels have been  maintained  in the mid-90%  range at the  Maplewood  property,
gross  collections  have  declined  over the past twelve  months due to slightly
deteriorating  local  market  conditions.  In  December  1994,  the  Partnership
contributed  $35,000 to the  Maplewood  joint  venture to cover its share of the
venture's  cash flow  deficits.  Subsequent  to year-end,  in December  1995 the
Partnership  funded  an  additional  $63,000  to the  Maplewood  joint  venture.
Management is prepared to fund the Partnership's share of any additional amounts
required to support these two operating investment properties in the near-term.

      Significant progress was made over the past two years toward resolving the
remedial  repair work and  associated  litigation  affecting  the  Partnership's
investments  in  the  Meadows,   Spinnaker  Landing  and  Bay  Club  Apartments.
Management  renewed  marketing and leasing efforts at the Spinnaker  Landing and
Bay Club Apartments during the latter part of fiscal 1993 upon the completion of
the repair  work to correct  the  construction  defects,  and  occupancy  levels
stabilized  in the mid-90% range during  fiscal 1995.  However,  the venture had
negative operating cash flow during fiscal 1995, which was funded from available
recoveries on certain legal claims,  as discussed  further below.  Management is
hopeful that further  improvement  in market  conditions,  combined with further
local market acceptance of the improved physical condition and appearance of the
renovated  apartment  properties,  will  enable the  venture  to  achieve  above
breakeven  cash flow levels in the near future.  As of September  30, 1995,  the
venture has settled  substantially all of the outstanding  litigation related to
the construction  defects.  During fiscal 1995 the venture  received  additional
settlement proceeds totalling  approximately $402,000 from its pursuit of claims
against certain  subcontractors of the development company and other responsible
parties. The Partnership  received  distributions of $160,000 from the Spinnaker
Bay joint venture in fiscal 1995 as a result of these additional recoveries.  No
significant further litigation proceeds are expected at the present time.

      As part of the initial  settlement  with the  developer  of the  Spinnaker
Landing and Bay Club Apartments, the venture also negotiated a loan modification
agreement which provided the majority of the additional funds needed to complete
the repairs to the  operating  properties  and extended  the  maturity  date for
repayment  of the  obligation  to  December  1996.  Under  the terms of the loan
modification,  which was executed in December 1991, the lender agreed to loan to
the joint venture 80% of the additional amounts necessary to complete the repair
of the properties up to a maximum of $760,000.  Advances  through the completion
of the  repair  work  totalled  approximately  $617,000.  The loan  modification
agreement also required the lender to defer all past due interest and all of the
interest  due in  calendar  1992.  During  1993,  the joint  venture  was not in
compliance  with the loan  modification  agreement  with  respect  to  scheduled
payments of principal  and interest due to negative  cash flow from  operations.
However, on November 1, 1993 a second loan modification was reached in which the
lender agreed to an additional  deferral of debt service payments,  through July
1, 1993,  which was added to the loan  principal.  The  execution of this second
modification  agreement  cured any  defaults  on the part of the joint  venture.
Additional  amounts  owed to the  lender as a result of the  deferred  payments,
after the effect of the second  modification  agreement  and  including  accrued
interest,  total in excess of $1 million.  These additional  amounts owed to the
lender,   while  critical  and  necessary  to  the  process  of  correcting  the
construction  defects,  have  further  subordinated  the equity  position of the
Partnership in these investment properties.  The current estimated market values
of the two  apartment  complexes  are below the amount of the  outstanding  debt
obligations.  Furthermore, under the terms of the second modification agreement,
100% of any net cash flow  available  after the payment of current  debt service
requirements  will be payable to the lender until all deferred interest has been
paid;  thereafter  50% of any net cash flow will be  payable to the lender to be
applied against  outstanding  principal.  As a result,  no additional  funds are
expected to be received  from this venture for the  foreseeable  future.  During
fiscal 1995,  management  evaluated a proposal from the existing mortgage lender
to repay the  outstanding  debt at a  significant  discount.  Such a plan  would
require  a  sizable  equity  contribution  by the  Partnership.  Management  has
evaluated  whether an  additional  investment  of funds in the venture  would be
economically  prudent  in  light of the  future  appreciation  potential  of the
properties.  At the present time, it does not appear likely that the Partnership
will choose to commit the additional  equity  investment  required to effect the
proposed debt restructuring.  Management  continues to examine alternative value
creation scenarios,  however,  there are no assurances that the Partnership will
realize any future  proceeds from the ultimate  disposition  of its interests in
these two properties.

      During fiscal 1991, the Partnership discovered that certain materials used
to construct The Meadows in the Park Apartments,  in Birmingham,  Alabama,  were
manufactured  incorrectly and would require substantial  repairs.  During fiscal
1992, the Meadows joint venture  engaged local legal counsel to seek  recoveries
from  the  venture's  insurance  carrier,  as well as  various  contractors  and
suppliers,  for the venture's claim of damages,  which were estimated at between
$1.6 and $2.1 million,  not  including  legal fees and other  incidental  costs.
During fiscal 1993, the insurance carrier deposited  approximately $522,000 into
an escrow account  controlled by the venture's  mortgage lender in settlement of
the undisputed  portion of the venture's claim.  During fiscal 1994, the insurer
agreed to enter into non-binding  mediation  towards  settlement of the disputed
claims out of court.  On October 3, 1994, the joint venture  verbally  agreed to
settle its claims against the insurance carrier,  architect,  general contractor
and the surety/completion  bond insurer for $1,714,000,  which is in addition to
the $522,000 previously paid by the insurance carrier. These settlement proceeds
were escrowed with the mortgage holder. The nonrecourse mortgage payable secured
by the Meadows'  operating property was scheduled to mature on November 1, 1994.
During the first  quarter of fiscal 1995,  the venture  obtained an extension of
the  maturity  date from the lender to January  1, 1995.  Delays in the  closing
process for a new loan resulted in the inability to repay the mortgage loan upon
the  expiration  of the  forbearance  period.  On January 3, 1995,  the mortgage
lender  sent a formal  default  notice  to the  venture  stating  that a default
interest rate of 15.5% per annum would be applied to the loan effective  January
1, 1995. On February 7, 1995,  the venture closed on a new loan and fully repaid
the prior  mortgage  debt  obligation.  The new debt,  in the initial  principal
amount of  $5,500,000,  bears  interest  at a variable  rate equal to the 30-day
LIBOR rate plus 2.25% (equivalent to a rate of approximately 8.125% per annum as
of September 30, 1995). The loan has a 5-year term and requires monthly interest
and principal payments based on a 25-year amortization schedule. Under the terms
of the new loan, the  settlement  proceeds will be used to complete the required
repairs.  The loan  will be  fully  recourse  to the  joint  venture  and to the
partners of the joint venture until the repairs are completed, at which time the
entire obligation will become  non-recourse.  As of September 30, 1995, $996,000
had been disbursed for the renovations,  which were  approximately 67% complete,
leaving  $718,000  in escrow  for  future  repairs.  All of the  repair  work is
expected to be  completed  by the end of fiscal  1996.  The  occupancy  level at
Meadows  dropped  significantly  to 79% at September 30, 1995,  down from 98% at
September  30,  1994.  This  decline is due to ongoing  construction  activities
related to the repair work which have  resulted in  apartment  units being taken
out of service  while the repair  work is  performed.  The  overall  Birmingham,
Alabama market  remains  strong and the occupancy  level is expected to increase
back to stabilized levels as repairs to the property are completed.

      As stated above, the Meadows in the Park Apartments is the only one of the
Partnership's investments which would appear to have any significant value above
the related mortgage loan obligations  based on current estimated market values.
Assuming that the overall market for multi-family  apartment  properties remains
strong  in the  near-term,  the  Meadows  joint  venture  may  have a  favorable
opportunity  to  sell  the  operating  investment  property  subsequent  to  the
completion  of the repair work  discussed  above.  While there are no assurances
that a sale transaction  will be completed,  if the Partnership were to sell its
investment in the Meadows  property,  management would have to determine whether
to distribute  all of the net proceeds  from such a  transaction  to the Limited
Partners  or to  withhold  all or a  portion  of  such  proceeds  for  potential
reinvestment in the remaining investment  properties as part of a plan to create
value  for  the  Partnership's   remaining  investment  positions.   Under  such
circumstances,  management  would base its  decisions  on an  assessment  of the
expected overall returns to the Limited Partners. Management is currently in the
process  of  identifying  and  evaluating  alternative  operating  plans for the
Partnership  in light of the pending  resolution of the Newport  Beach  Marriott
default  situation,  the potential  future sale of the Meadows  property and the
status of the Partnership's existing cash reserves.

      At  September  30,  1995,  the  Partnership  had  available  cash and cash
equivalents  of $1,362,000.  Approximately  $575,000 of such cash is held at the
wholly-owned  Newport Beach  Marriott  Suites Hotel and is designated for use to
pay hotel operating expenses and required debt service. The balance of such cash
and cash  equivalents  will be utilized as needed for  Partnership  requirements
such as the  payment of  operating  expenses  and the  funding of joint  venture
capital  improvements,  operating deficits or refinancing expenses. In addition,
the Partnership had a cash reserve of approximately $618,000 as of September 30,
1995, which is held by Marriott  Corporation and is available  exclusively to be
used for repairs and  replacements  related to the Newport Beach Marriott Suites
Hotel.  The source of future  liquidity  and  distributions  to the  partners is
expected to be through  cash  generated  from  operations  of the  Partnership's
income-producing  investment  properties and proceeds  received from the sale or
refinancing  of such  properties.  Such sources of liquidity  are expected to be
sufficient to meet the  Partnership's  needs on a short-term basis. As discussed
further  above,   management  is  currently  evaluating   alternative  operating
strategies to address the Partnership's long-term liquidity needs.

Results of Operations
1995 Compared to 1994

      The  Partnership had a net loss of $9,534,000 for fiscal 1995, as compared
to a net loss of $3,976,000 in the prior year. This significant  increase in net
loss is primarily due to the $6,369,000 impairment  write-down recorded on the
Newport Beach Marriott Suites Hotel in fiscal 1995, as discussed  further above.
In addition,  an increase in interest expense on the Marriott loan  arrangements
of $1,421,000 also contributed to the increase in net loss for the current year.
The increase in interest expense is the result of default interest being accrued
on the  outstanding  mortgage loan and additional  loan facility  secured by the
Newport  Beach  Marriott  Suites Hotel  beginning in April 1995,  along with the
increase in the outstanding amount of the additional loan facility over the past
two years.  The increase in net loss was partially offset by a decrease in Hotel
operating  expenses of $716,000,  an increase in Hotel  revenues of $390,000,  a
decrease in depreciation and  amortization  expense of $567,000 and a decline in
the  Partnership's  share of  ventures'  losses of  $459,000.  The  decrease  in
expenses at the wholly-owned  Marriott Hotel is mainly due to a substantial real
estate tax refund received in fiscal 1995 as a result of a successful  appeal of
prior year assessments.  The refund, which totalled $731,000,  was received late
in fiscal 1995 and, subsequent to year-end,  was remitted to the mortgage lender
as additional  debt service owed under the terms of the modified loan agreement.
Room revenues at the Newport Beach Hotal were up by $344,000,  or 6%, for fiscal
1995 as a result of an  increase  in average  occupancy.  The  increase  in room
revenues  resulted from an improvement in the Hotel's  average  occupancy  level
from 75% for  fiscal  1994 to 78% for  fiscal  1995.  Amortization  expense  was
significantly  lower in fiscal 1995 as a result of certain fees  becoming  fully
amortized in the prior year. In addition, an increase of $64,000 in interest and
other income and a decrease of $36,000 in Partnership general and administrative
expenses also offset the increase in net loss for fiscal 1995.  Interest  income
in fiscal 1995  reflects  interest  received  on certain  advances to one of the
Partnership's joint ventures.

      The decrease in the Partnership's  share of ventures' losses is mainly the
result of increases in revenues at the Meadows,  Spinnaker Landing, and Bay Club
Apartments,  a decrease in depreciation expense at the Meadows joint venture and
a decrease in combined property  operating  expenses.  Rental income at Bay Club
and  Spinnaker  Landing  increased as a result of the  lease-up  achieved at the
renovated  apartments  over the past two  years,  as  discussed  further  above.
Revenues  were  higher at the Meadows  joint  venture  despite  the  decrease in
occupancy  discussed  above as a result of the  designation of the excess of the
settlement   proceeds  received  over  the  estimated  repair  costs  as  rental
interruption  compensation,  which  was  recorded  as  income  in  fiscal  1995.
Depreciation  expense at the Meadows  joint  venture  decreased by $100,000 as a
result of certain assets being fully  depreciated  during the prior fiscal year.
The decline in combined property operating expenses can be primarily  attributed
to a decrease in repairs and maintenance expenses at the Meadows joint venture.

1994 Compared to 1993

     The  Partnership  had a net loss of $3,976,000 for fiscal 1994, as compared
to a net loss of  $4,334,000  in the prior  year.  The  primary  reason for this
decrease in net loss of $358,000  was a decrease in the  Partnership's  share of
ventures'  losses in fiscal 1994. The  Partnership's  share of ventures'  losses
decreased by $320,000 mainly due to an increase in rental income  resulting from
a  significant  increase  in  occupancy  at the  Spinnaker  Landing and Bay Club
Apartments as a result of the renewal of leasing efforts,  as discussed  further
above.  The  increase in rental  income was  partially  offset by an increase in
interest  expense on the  Spinnaker  Landing  and Bay Club  mortgage  loans as a
result of the  accrual of  interest  on debt  service  payments  deferred by the
lender during fiscal 1993. The Partnership's operating loss decreased by $38,000
in fiscal 1994 primarily as a result of an increase in net operating income from
the Newport Beach  Marriott  Suites Hotel,  due to the higher  occupancy  levels
achieved  at the  Hotel in fiscal  1994,  and a  decrease  in  depreciation  and
amortization  expense, due to certain deferred fees being fully amortized in the
prior year.  The  increase  in hotel net  operating  income and the  decrease in
depreciation  and  amortization  expense were  partially  offset by increases in
interest  expense  and  general and  administrative  expenses in 1994.  Interest
expense  increased due to the advances under the  additional  loan facility from
the Hotel's  mortgage  lender to pay debt service  shortfalls and an increase in
the variable  interest rate on this loan  facility.  The increase in Partnership
general  and  administrative   expenses  reflected  certain  costs  incurred  in
connection  with  an  independent  valuation  of  the  Partnership's   operating
properties  which  was  commissioned  during  fiscal  1994 in  conjunction  with
management's    ongoing   refinancing    efforts   and   portfolio    management
responsibilities.

1993 Compared to 1992

     The Partnership's net loss increased by $3,471,000 during fiscal 1993, when
compared to fiscal 1992.  The increase in net loss  primarily  resulted from the
foreclosure  of the Atlanta  Marriott  Suites  Hotel in fiscal  1992  which,  as
explained  below,  resulted in an  extraordinary  gain from  settlement  of debt
obligation of $11,360,000. The extraordinary gain was partially offset by a loss
on transfer of assets at foreclosure of $5,653,000.  The transfer of the Atlanta
Hotel's title to the lender through foreclosure proceedings was accounted for as
a  troubled  debt  restructuring  in  accordance  with  Statement  of  Financial
Accounting  Standards No. 15,  "Accounting by Debtors and Creditors for Troubled
Debt Restructurings" (SFAS No. 15). The extraordinary gain arose due to the fact
that the balance of the mortgage loan and related accrued interest  exceeded the
estimated  fair  value  of  the  Hotel   investment  and  certain  other  assets
transferred to the lender at the time of the  foreclosure.  The loss on transfer
of  assets  resulted  from the fact  that the net  carrying  value of the  Hotel
exceeded the Hotel's estimated fair value at the time of foreclosure.

     Net  loss  also  included  operating  loss and the  Partnership's  share of
ventures'  losses.  Operating loss decreased by approximately  44% during fiscal
1993  primarily  due to the  foreclosure  of the Atlanta  Hotel,  which had been
generating  significant  losses from operations  prior to the  foreclosure.  The
operating  results for fiscal 1992 included the  operations of the Atlanta Hotel
through December 3, 1991, the date of foreclosure. In addition, interest expense
on the  mortgage  loan  secured  by the  Newport  Beach  Marriott  Suites  Hotel
decreased in fiscal 1993 as a result of the  amortization  of the deferred  gain
which resulted from the modification described above. This modification was also
accounted for in accordance  with SFAS No. 15.  Accordingly,  the forgiveness of
accrued  interest  and fees  through  August 11,  1992 of  $1,767,000  was being
deferred and amortized as a reduction of interest expense  prospectively,  using
the  effective   interest   method  over  the  remaining  term  of  the  Hotel's
indebtedness.  The  reduction  in  interest  expense  which  resulted  from this
accounting  treatment of the debt  modification was partially offset by interest
incurred  on the  additional  advances  from the  Marriott  lender  to cover the
deferred portion of the Partnership's debt service payments.

     The  Partnership's  share of ventures' losses increased by approximately 9%
in fiscal 1993 mainly due to a decline in operating  revenues at  Spinnaker  Bay
Associates.  Due  to the  construction-related  defects  found  at  both  of the
apartment  complexes  owned by the joint  venture,  management  had  temporarily
suspended  leasing  efforts  while the repair work at the  properties  was being
performed,  which  resulted in a decline in average  occupancy and revenues.  In
addition,  interest expense on the venture's mortgage loan increased as a result
of the  accrual of  interest  on debt  service  payments  deferred by the lender
during fiscal 1993.

Inflation

      The  Partnership  completed  its eighth full year of  operations in fiscal
1995.  The  effects of  inflation  and  changes  in prices on the  Partnership's
operating results 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.  Some of the
existing leases with tenants at the Partnership's commercial investment property
contain  rental  escalation  and/or  expense   reimbursement  clauses  based  on
increases  in  tenant  sales or  property  operating  expenses.  Tenants  at the
Partnership's   apartment  properties  have  short-term  leases,   generally  of
six-to-twelve  months  in  duration.  Rental  rates at these  properties  can be
adjusted to keep pace with  inflation,  to the extent market  conditions  allow,
when the leases are renewed or turned  over.  In  addition,  rental rates at the
Partnership's  remaining  hotel  property  can be set  daily to keep  pace  with
inflationary  pressures,  as market  conditions  will allow.  Such  increases in
rental income would be expected to at least partially  offset the  corresponding
increases in Partnership and property operating expenses.

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  Eighth  Income
Properties, Inc., a Delaware corporation,  which is a wholly-owned subsidiary of
PaineWebber.  The Associate  General  Partner of the  Partnership  is Properties
Associates 1986, L.P., a Virginia limited partnership,  certain limited 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

Lawrence A. Cohen    President and Chief Executive Officer  42       5/1/91
Albert Pratt         Director                               84
8/27/85 *
J. Richard Sipes     Director                               48       6/9/94
Walter V. Arnold     Senior Vice President and Chief
                       Financial  Officer                   48       10/29/85
James A. Snyder      Senior Vice President                  50       7/6/92
John B. Watts III    Senior Vice President                  42       6/6/88
David F. Brooks      First Vice President and 
                       Assistant Treasurer                  53       8/27/85 *
Timothy J. Medlock   Vice President and Treasurer           34       6/1/88
Thomas W. Boland     Vice President                         33       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  principal  executive  officers  of  the  Managing  General  Partner  of the
Partnership.  All of the foregoing  directors and principal  executive  officers
have been  elected to serve  until the annual  meeting of the  Managing  General
Partner.

      (e) All of the directors and  executive  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  Paine  Webber   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:

      Lawrence A. Cohen is President and Chief Executive Officer of the Managing
General Partner and President and Chief  Executive  Officer of the Adviser which
he joined in January 1989. He is also a member of the Board of Directors and the
Investment Committee of the Adviser. From 1984 to 1988, Mr. Cohen was First Vice
President of VMS Realty  Partners where he was  responsible  for origination and
structuring  of  real  estate  investment  programs  and for  managing  national
broker-dealer  relationships.  He is a  member  of the  New  York  Bar  and is a
Certified Public Accountant.

      Albert Pratt is a Director of the Managing General  Partner,  a Consultant
of PWI and a General Partner of the Associate General Partner.  Mr. Pratt joined
PWI as  Counsel  in 1946 and  since  that  time has held a number  of  positions
including Director of both the Investment Banking Division and the International
Division,  Senior  Vice  President  and Vice  Chairman  of PWI and  Chairman  of
PaineWebber International, Inc.


<PAGE>


    J.  Richard  Sipes is a Director  of the  Managing  General  Partner  and a
Director  of  the  Adviser.  Mr.  Sipes  is  an  Executive  Vice  President  at
PaineWebber.  He joined the firm in 1978 and has  served in various  capacities
within the Retail Sales and  Marketing  Division.  Before  assuming his current
position  as  Director of Retail  Underwriting  and  Trading in 1990,  he was a
Branch Manager,  Regional  Manager,  Branch System and Marketing  Manager for a
PaineWebber  subsidiary,  Manager  of Branch  Administration  and  Director  of
Retail  Products  and  Trading.  Mr.  Sipes  holds a B.S.  in  Psychology  from
Memphis State University.

      Walter V. Arnold is Senior Vice President and Chief  Financial  Officer of
the  Managing  General  Partner and 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. He began his career in 1974 with Arthur Young & Company in Houston. Mr.
Arnold is a Certified Public Accountant licensed in the state of Texas.

      James A. Snyder is a Senior Vice President of the Managing General Partner
and a Senior  Vice  President  and  Member of the  Investment  Committee  of the
Adviser.  Mr. Snyder re-joined the Adviser in July 1992 having served previously
as an officer of PWPI from July 1980 to August  1987.  From January 1991 to July
1992, Mr. Snyder was with the Resolution  Trust  Corporation  where he served as
the Vice President of Asset Sales prior to re-joining  PWPI.  From February 1989
to October  1990,  he was  President  of Kan Am  Investors,  Inc., a real estate
investment  company.  During the period August 1987 to February 1989, Mr. Snyder
was Executive Vice President and Chief Financial  Officer of Southeast  Regional
Management Inc., a real estate development company.

      John B.  Watts III is a Senior  Vice  President  of the  Managing  General
Partner and a Senior Vice President of the Adviser which he joined in June 1988.
Mr. Watts has had over 16 years of experience in acquisitions,  dispositions and
finance of real  estate.  He  received  degrees  of  Bachelor  of  Architecture,
Bachelor of Arts and Master of Business  Administration  from the  University of
Arkansas.

      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  of the Managing  General  Partner
and a Vice  President and Manager of Financial  Reporting 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, 1995, all filing
requirements  applicable to the officers and  directors of the Managing  General
Partner and ten-percent beneficial holders were complied with.



<PAGE>


Item 11.  Executive Compensation

      The directors and officers of the  Partnership's  Managing General Partner
received 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  paid cash  distributions  to the  Limited  Partners on a
quarterly  basis  at a rate  equal  to 5% per  annum on  invested  capital  from
inception  through the first  quarter of fiscal 1991.  Effective for the quarter
ended  March  31,  1991,  such   distributions   were  suspended   indefinitely.
Furthermore, the Partnership's Limited Partnership Units 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,   Eighth  Income  Properties,   Inc.,  is  owned  by
PaineWebber. Properties Associates 1986, L.P., the Associate General Partner, is
a Virginia limited partnership,  the limited partners of which are also officers
of the Adviser and the Managing  General  Partner.  Properties  Associates 1986,
L.P. also is the Initial Limited  Partner.  An affiliate of the Managing General
Partner referred to below owned more than 5% of the outstanding Units of limited
partnership interest in the Partnership as of September 30, 1995.



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

Units of Limited       PaineWebber Incorporated 5,000,000         14.1%
Partnership            1285 Avenue of the Americas                Units
                       New York, NY  10019



      (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 limited 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 Eighth Income Properties, Inc.
(the "Managing General Partner"), a wholly-owned subsidiary of PaineWebber Group
Inc.  ("PaineWebber"),  and Properties  Associates  1986,  L.P. (the  "Associate
General Partner"),  a Virginia limited partnership,  certain limited partners of
which are also officers of the Managing General Partner. 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").

      PaineWebber owned 5,000,000 units of Limited  Partnership  interest in the
Partnership as of both September 30, 1995 and 1994.

      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.

      In connection  with the  acquisition of properties,  the Adviser  received
acquisition fees in an amount not greater than 5% of the gross proceeds from the
sale of Partnership  Units.  In connection  with the sale of each property,  the
Adviser  may  receive  a  disposition  fee,  payable  upon  liquidation  of  the
Partnership, in an amount equal to the lesser of 1% of the aggregate sales price
of the property or 50% of the standard  brokerage  commissions,  subordinated to
the payment of certain amounts to the Limited Partners.

      Pursuant  to the  terms of the  Partnership  Agreement,  as  amended,  any
taxable  income  or tax loss  (other  than from a  Capital  Transaction)  of the
Partnership  will  be  allocated   98.94802625%  to  the  Limited  Partners  and
1.05197375% 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 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 or tax
loss from a sale or refinancing  will be allocated  98.94802625%  to the Limited
Partners and  1.05197375%  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.

      All  distributable  cash,  as  defined,  for  each  fiscal  year  shall be
distributed quarterly in the ratio of 95% to the Limited Partners,  1.01% to the
General Partners and 3.99% to the Adviser, as an asset management fee.

      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 will be paid a basic  management  fee (3% of adjusted cash
flow, as defined in the Partnership  Agreement) and an incentive  management fee
(2% of adjusted cash flow  subordinated to a noncumulative  annual return to the
Limited Partners equal to 5% based upon their adjusted  capital  contributions),
in  addition  to the  asset  management  fee  referred  to above,  for  services
rendered.  The Adviser earned no management fees during the year ended September
30, 1995.

      Both  the   Managing   General   Partner  and  the  Adviser  will  receive
reimbursements  for actual amounts paid on the  Partnership's  behalf  including
offering and organization costs (not to exceed 5% of the gross offering proceeds
of the offering),  acquisition  expenses  incurred in investigating or acquiring
real property  investments and any other costs for goods or services used for or
by the Partnership.

      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, 1995 is $91,000 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 fees of $4,000 (included in general and
administrative  expenses)  for managing  the  Partnership's  cash assets  during
fiscal  1995.  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 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
                        Schedules at page F-1.

        (3)             Exhibits:

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


   (b)  No Current Reports on Form 8-K were filed during the last quarter of the
        period covered by this Report.

   (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 Schedules 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 EIGHT
                                        LIMITED PARTNERSHIP


                                  By:  Eighth Income Properties, Inc.
                                          Managing General Partner



                                  By:    /s/ Lawrence A. Cohen
                                     Lawrence A. Cohen
                                     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

Dated:  January 9, 1996

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/ Albert Pratt                             Date:January 9, 1996
   Albert Pratt
   Director






By: /s/ J. Richard Sipes                        Date:January 9, 1996
   J. Richard Sipes
   Director





<PAGE>


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

           PAINE WEBBER INCOME PROPERTIES EIGHT LIMITED PARTNERSHIP
                              INDEX TO EXHIBITS


                                                        Page Number in the
Exhibit No.       Description of Document               Report or Other
                                                        Reference
---------------   -----------------------------------   -----------------------

(3) and (4)       Prospectus of the Registrant dated    Filed     with     the
                  September 17, 1986, as supplemented,  Commission pursuant to
                  with particular reference to the      Rule 424(c) and
                  Restated Certificate and Agreement    incorporated herein by
                  of Limited Partnership.               reference.

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

(13)              Annual Report to Limited Partners     No Annual  Report  for
                                                        the year ended
                                                        September 30, 1995 
                                                        has been  sent to the
                                                        Limited Partners.  An
                                                        Annual  Report will be
                                                        sent to the Limited 
                                                        Partners subsequent  to 
                                                        this  filing.


(22)              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  the   last
                                                        page     of      EDGAR
                                                        submission   following
                                                        the          Financial
                                                        Statements         and
                                                        Financial    Statement
                                                        Schedule  required  by
                                                        Item 14.





<PAGE>



                          ANNUAL REPORT ON FORM 10-K
                       Item 14(a) (1) and (2) and 14(d)
           PAINE WEBBER INCOME PROPERTIES EIGHT LIMITED PARTNERSHIP
                        INDEX TO FINANCIAL STATEMENTS
                      AND FINANCIAL STATEMENT SCHEDULES



                                                                      Reference

Paine Webber Income Properties Eight Limited Partnership:

  Report of independent auditors                                          F-2

  Balance sheets as of September 30, 1995 and 1994                        F-3

  Statements of operations  for the years ended  
     September 30, 1995,  1994 and 1993                                   F-4

  Statements  of changes in  partners'  deficit for the years 
     ended  September 30, 1995, 1994 and 1993                             F-5

  Statements of cash flows for the years ended  September  30, 1995,
     1994 and 1993                                                        F-6

  Notes to financial statements                                           F-7

  Schedule III - Real Estate and Accumulated Depreciation                 F-21


  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  consolidated
financial statements, including the notes thereto.




<PAGE>



                        REPORT OF INDEPENDENT AUDITORS



The Partners of
PaineWebber Income Properties Eight Limited Partnership:

      We have audited the  accompanying  balance  sheets of  PaineWebber  Income
Properties Eight Limited  Partnership as of September 30, 1995 and 1994, and the
related statements of operations,  changes in partners' deficit,  and cash flows
for each of the three years in the period ended  September 30, 1995.  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 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  PaineWebber  Income
Properties  Eight Limited  Partnership  at September 30, 1995 and 1994,  and the
results of its  operations and its cash flows for each of the three years in the
period  ended  September  30,  1995,  in  conformity  with  generally   accepted
accounting  principles.  Also, in our opinion,  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.

     As discussed in Notes 2 and 4 to the financial  statements,  in fiscal 1995
the Partnership  adopted  Statement of Financial  Accounting  Standards No. 121,
"Accounting for Impairment of Long-Lived  Assets and for Long-Lived Assets to Be
Disposed Of."






                               /s/ ERNST & YOUNG LLP
                               ERNST & YOUNG LLP




Boston, Massachusetts
December 28, 1995


<PAGE>


           PAINE WEBBER INCOME PROPERTIES EIGHT LIMITED PARTNERSHIP

                                BALANCE SHEETS
                         September 30, 1995 and 1994
                     (In thousands, except per Unit data)

                                    ASSETS

                                                           1995        1994
Operating investment property:
   Land                                                  $  5,488    $  6,664
   Buildings                                               21,377      25,791
   Equipment and improvements                               2,868       3,482
                                                         --------   ---------
                                                           29,733      35,937
   Less accumulated depreciation                           (9,733)     (8,840)
                                                        ----------  ---------
                                                           20,000      27,097

Investments in joint ventures, at equity                      412       1,058
Cash and cash equivalents                                   1,362       1,496
Cash reserved for capital expenditures                        618         758
Accounts receivable                                           240         286
Due from Marriott Corporation                                 680           -
Inventories                                                   124         138
Other assets                                                   50          51
Deferred expenses, net of accumulated amortization
 of $2,425 ($2,356 in 1994)                                   137         206
                                                      ----------- -----------
                                                         $ 23,623    $ 31,090
                                                         ========    ========

                      LIABILITIES AND PARTNERS' DEFICIT

Accounts payable and accrued expenses                  $      182  $      481
Accounts payable - affiliates                                   2           2
Accrued interest payable                                    1,242         287
Due to Marriott Corporation                                     -          12
Loan payable to Marriott Corporation                        6,328       5,728
Mortgage debt payable                                      36,060      35,237
                                                         --------    --------
      Total liabilities                                    43,814      41,747

Partners' deficit:
  General Partners:
   Capital contributions                                        1           1
   Cumulative net loss                                       (510)       (410)
   Cumulative cash distributions                              (86)        (86)

  Limited Partners ($1 per Unit; 35,548,976 
     Units subscribed and issued):
   Capital contributions, net of offering
      costs of $4,791                                      30,758      30,758
   Cumulative net loss                                    (44,635)    (35,201)
   Cumulative cash distributions                           (5,719)     (5,719)
                                                       ----------- ----------
      Total partners' deficit                             (20,191)    (10,657)
                                                        ---------   ----------
                                                         $ 23,623    $ 31,090
                                                         ========    ========


                           See accompanying notes.


<PAGE>


           PAINE WEBBER INCOME PROPERTIES EIGHT LIMITED PARTNERSHIP

                           STATEMENTS OF OPERATIONS
            For the years ended September 30, 1995, 1994 and 1993
                     (In thousands, except per Unit data)


                                                1995        1994        1993
                                                ----        ----        ----
Revenues:
   Hotel revenues                            $  8,512    $  8,122    $  7,969
   Interest and other income                      137          73          81
                                             --------    -------     --------
                                                8,649       8,195       8,050
Expenses:
   Hotel operating expenses                     5,550       6,266       6,234
   Interest expense                             4,389       2,968       2,887
   Depreciation and amortization                  962       1,529       1,695
   General and administrative                     336         372         212
   Loss due to impairment
     of operating investment property           6,369           -           -
                                            ---------    --------     -------
                                               17,606     11,135      11,028
                                             --------    --------    --------
Operating loss                                 (8,957)     (2,940)     (2,978)

Partnership's share of ventures' losses          (577)     (1,036)     (1,356)
                                          -----------  ----------   ---------

Net loss                                    $  (9,534)  $  (3,976)  $  (4,334)
                                            ==========  =========   ==========

Net loss per 1,000 Limited Partnership Unit   $(265.38)   $(110.68)   $(120.64)
                                              ========    ========    =========


   The above  net loss per 1,000  Limited  Partnership  Units is based  upon the
35,548,976 Limited Partnership Units outstanding during each year.

























                           See accompanying notes.


<PAGE>


           PAINE WEBBER INCOME PROPERTIES EIGHT LIMITED PARTNERSHIP

                  STATEMENTS OF CHANGES IN PARTNERS' DEFICIT
              For the years ended September 30, 1995, 1994 and 1993
                                (In thousands)

                                        General      Limited
                                        Partners     Partners     Total

Balance at September 30, 1992             $(407)     $(1,940)      $(2,347)

Net loss                                    (46)      (4,288)       (4,334)
                                       --------     --------      --------

Balance at September 30, 1993              (453)      (6,228)       (6,681)

Net loss                                    (42)      (3,934)       (3,976)
                                       --------   ----------    ----------

Balance at September 30, 1994              (495)     (10,162)      (10,657)

Net loss                                   (100)      (9,434)       (9,534)
                                      ----------  -----------   ----------

Balance at September 30, 1995             $(595)    $(19,596)     $(20,191)
                                          ======    =========     =========
































                           See accompanying notes.


<PAGE>


           PAINE WEBBER INCOME PROPERTIES EIGHT LIMITED PARTNERSHIP

                           STATEMENTS   OF  CASH  FLOWS
              For the years ended September 30, 1995, 1994 and 1993
               Increase (Decrease) in Cash and Cash Equivalents
                                (In thousands)

                                                1995        1994        1993
                                                ----        ----        ----
Cash flows from operating activities:
  Net loss                                    $(9,534)    $(3,976)    $(4,334)
  Adjustments to reconcile net loss to
  net cash used for operating activities:
   Interest expense                               600         543         492
   Depreciation and amortization                  962       1,529       1,695
   Amortization of deferred gain on 
     forgiveness of debt                         (324)       (768)       (675)
   Partnership's share of ventures' losses        577       1,036       1,356
   Loss due to impairment of
     operating investment property              6,369           -           -
   Changes in assets and liabilities:
     Accounts receivable                           46         (68)         13
     Due to/from Marriott Corporation            (692)         47        (149)
     Inventories                                   14          (6)         (4)
     Deferred expenses                              -           -         (71)
     Other assets                                   1           5           6
     Accounts payable and accrued expenses       (299)        263          53
     Accounts payable - affiliates                  -         (21)          3
     Accrued interest payable                     955         144         (44)
                                           ----------  ----------  -----------
         Total adjustments                      8,209       2,704       2,675
         Net cash used for operating
           activities                          (1,325)     (1,272)     (1,659)

Cash flows from investing activities:
  Additions to operating investment property     (165)       (536)          -
  Net (deposits to) withdrawals from capital
    expenditure reserve                           140          53        (200)
  Investments in joint ventures                  (152)          -         (60)
  Distributions from joint ventures               221         398         130
                                            ---------   ---------    --------
         Net cash provided by (used for)
           investing activities                    44         (85)       (130)

Cash flows from financing activities:
  Proceeds from issuance of long-term debt      1,147       1,371       1,482
                                            ---------   ---------    --------
         Net cash provided by
           financing activities                 1,147       1,371       1,482
                                            ---------    --------    --------

Net increase (decrease) in cash 
     and cash equivalents                        (134)         14        (307)

Cash and cash equivalents, beginning of year    1,496       1,482       1,789
                                            ---------   ---------    --------

Cash and cash equivalents, end of year       $  1,362    $  1,496    $  1,482
                                             ========    ========    ========

Cash paid during the year for interest       $  3,157    $  3,049    $  3,114
                                             ========    ========    ========





                           See accompanying notes.


<PAGE>


           PAINEWEBBER INCOME PROPERTIES EIGHT LIMITED PARTNERSHIP
                        Notes to Financial Statements

1.     Organization

      PaineWebber    Income   Properties   Eight   Limited    Partnership   (the
     "Partnership")  is a limited  partnership  organized  in April 1986 for the
     purpose of investing in a diversified  portfolio of  income-producing  real
     properties.  The Partnership  authorized the issuance of Partnership  units
     (the  "Units"),  at $1 per Unit, of which  35,548,976  were  subscribed and
     issued between September 17, 1986 and September 16, 1988.

2.    Summary of Significant Accounting Policies

      The   accompanying   financial   statements   include  the   Partnership's
     investments  in four joint venture  partnerships  which own five  operating
     properties.  The Partnership accounts for its investments in joint ventures
     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.  See Note 5 for a description of the
     joint venture investments.

      Through  September  30,  1994,  the  Partnership   carried  its  operating
      investment   property  at  the  lower  of  cost,  reduced  by  accumulated
      depreciation and guaranteed  payments  received from Marriott  Corporation
      (see Note 4), or net  realizable  value.  Effective  for fiscal 1995,  the
      Partnership  adopted Statement of Financial  Accounting  Standards No. 121
      (SFAS  121),  "Accounting  for  Impairment  of  Long-Lived  Assets and for
      Long-Lived  Assets  to Be  Disposed  Of," to  account  for  its  operating
      investment  properties,   including  those  owned  through  joint  venture
      partnerships. In accordance with SFAS 121, an impairment loss with respect
      to an  operating  investment  property is  recognized  when the sum of the
      expected future net cash flows (undiscounted and without interest charges)
      is less than the  carrying  amount of the  asset.  An  impairment  loss is
      measured as the amount by which the carrying  amount of the asset  exceeds
      its fair  value,  where  fair  value is defined as the amount at which the
      asset  could be bought or sold in a current  transaction  between  willing
      parties,  that is other than a forced or liquidation  sale. In conjunction
      with the application of SFAS 121, an impairment loss on the  Partnership's
      wholly-owned Hotel investment property was recognized in fiscal 1995. Such
      loss is described in more detail in Note 4.

      Depreciation  expense on the  operating  investment  property  is computed
     using the  straight-line  method  over an  estimated  useful life of thirty
     years for the  buildings,  and seven years for equipment and  improvements.
     Acquisition expenses,  including  professional fees and guaranty fees, have
     been  capitalized and are included in the cost of the operating  investment
     property.

      Inventories  are  valued at the  lower of cost or  market  on a  first-in,
     first-out  (FIFO)  basis.  Inventories  consist  of supply  inventories  of
     $111,000  ($120,000 in 1994) and food and beverage  inventories  of $13,000
     ($18,000 in 1994).

      Deferred expenses consist of capitalized  pre-opening costs related to the
     Newport Beach hotel property, prepaid management fees, non-competition fees
     paid to Marriott  Corporation  (see Note 4), and financing costs associated
     with the  Partnership's  mortgage  note payable.  These  expenses are being
     amortized  using  the   straight-line   method  primarily  over  three-  to
     seven-year periods.  Certain closing costs associated with the modification
     of the mortgage  note  payable  secured by the Newport  Beach  Marriott are
     being amortized over the remaining term of the loan.

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

      Certain prior year balances have been  reclassified to conform to the 1995
     presentation.

      No  provision  for income  taxes has been made as the  liability  for such
      taxes is that of the individual partners rather than the Partnership. Upon
      sale or disposition of the Partnership's investments,  the taxable gain or
      the tax loss incurred will be allocated among the partners. In cases where
      the disposition of the investment  involves the lender  foreclosing on the
      investment,  taxable income could occur without distribution of cash. This
      income  would  represent  passive  income to the  partners  which could be
      offset by each partners'  existing  passive losses,  including any passive
      loss carryovers from prior years.

3.    The Partnership Agreement and Related Party Transactions

      The General Partners of the Partnership are Eighth Income Properties, Inc.
     (the "Managing General Partner"), a wholly-owned  subsidiary of PaineWebber
     Group Inc.  ("PaineWebber"),  and  Properties  Associates  1986,  L.P. (the
     "Associate  General  Partner"),  a Virginia  limited  partnership,  certain
     limited  partners  of  which  are also  officers  of the  Managing  General
     Partner.  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").

      PaineWebber owned 5,000,000 units of Limited  Partnership  interest in the
     Partnership as of both September 30, 1995 and 1994.

      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.

      In connection  with the  acquisition of properties,  the Adviser  received
     acquisition  fees in an amount not  greater  than 5% of the gross  proceeds
     from the sale of  Partnership  Units.  In connection  with the sale of each
     property,   the  Adviser  may  receive  a  disposition  fee,  payable  upon
     liquidation of the  Partnership,  in an amount equal to the lesser of 1% of
     the aggregate sales price of the property or 50% of the standard  brokerage
     commissions,  subordinated to the payment of certain amounts to the Limited
     Partners.

      Pursuant  to the  terms of the  Partnership  Agreement,  as  amended,  any
     taxable income or tax loss (other than from a Capital  Transaction)  of the
     Partnership  will be  allocated  98.94802625%  to the Limited  Partners and
     1.05197375%  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 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 or tax loss from a sale or  refinancing  will be
     allocated  98.94802625%  to the Limited  Partners  and  1.05197375%  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.

      All  distributable  cash,  as  defined,  for  each  fiscal  year  shall be
     distributed quarterly in the ratio of 95% to the Limited Partners, 1.01% to
     the General Partners and 3.99% to the Adviser, as an asset management fee.

      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 will be paid a basic management fee
     (3% of adjusted cash flow, as defined in the Partnership  Agreement) and an
     incentive  management  fee (2% of  adjusted  cash  flow  subordinated  to a
     noncumulative  annual return to the Limited Partners equal to 5% based upon
     their adjusted capital contributions),  in addition to the asset management
     fee  referred  to above,  for  services  rendered.  The  Adviser  earned no
     management fees during the three-year period ended September 30, 1995.

      Both the Managing  General Partner and the Adviser receive  reimbursements
     for actual amounts paid on the Partnership's  behalf including offering and
     organization  costs (not to exceed 5% of the gross offering proceeds of the
     offering), acquisition expenses incurred in investigating or acquiring real
     property  investments and any other costs for goods or services used for or
     by the Partnership.

      Included  in  general  and  administrative  expenses  for the years  ended
     September  30,  1995,  1994 and 1993 is  $91,000,  $111,000  and  $122,000,
     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 fees of $4,000, $3,000
     and $2,000 (included in general and  administrative  expenses) for managing
     the   Partnership's   cash  assets  during  fiscal  1995,  1994  and  1993,
     respectively.

 4.   Operating Investment Property

    The  Partnership  acquired a 100%  interest  in the  Marriott  Suites  Hotel
    located  in  Newport  Beach,   California  from  the  Marriott   Corporation
    ("Marriott")  on August 10, 1988. The Hotel consists of 254 two-room  suites
    encompassing 201,606 square feet located on approximately 4.8 acres of land.
    It is managed by Marriott and its affiliates (the  "Manager"),  as described
    below.

    The Hotel has experienced  substantial  recurring losses after debt service.
    As discussed  further in Note 6, the  Partnership is currently in default of
    the  modified  terms of the first  mortgage  loan  agreement  secured by the
    Newport Beach Marriott  Suites Hotel.  During fiscal 1995,  the  Partnership
    reached  the limit on the debt  service  deferrals  imposed by the 1993 loan
    modification agreement. It is uncertain at this time whether the lender will
    agree to a further  modification  of the loan terms and an  extension of the
    August 1996 maturity  date.  In the event that an agreement  with the lender
    cannot be  reached,  the  result  could be a  foreclosure  on the  operating
    investment property.

    As discussed in Note 2, the  Partnership  elected early  application of SFAS
    121  effective  for  fiscal  1995.  The effect of such  application  was the
    recognition of an impairment loss on the  wholly-owned  Hotel property.  The
    impairment  loss resulted  because,  in management's  judgment,  the current
    default  status of the mortgage  loan  secured by the  property  referred to
    above and  discussed  further in Note 6, combined with the lack of near-term
    prospects for  sufficient  future  improvement  in market  conditions in the
    Orange County  market in which the property is located,  are not expected to
    enable the  Partnership  to recover the adjusted cost basis of the property.
    The  Partnership  recognized an impairment  loss of $6,369,000 to write down
    the operating investment property to its estimated fair value of $20,000,000
    as of September  30, 1995.  Fair value was  estimated  using an  independent
    appraisal  of  the  operating  property.  Such  appraisals  make  use  of  a
    combination of certain generally  accepted valuation  techniques,  including
    direct capitalization,  discounted cash flows and comparable sales analysis.
    Because  the net  carrying  value of the Hotel is below the  balance  of the
    nonrecourse  debt  obligation  secured by the property as of  September  30,
    1995,  the  Partnership  would  recognize a sizable  net gain for  financial
    reporting purposes upon a foreclosure of the operating  investment  property
    and settlement of the debt obligation.

    The   Partnership   purchased   the   operating   investment   property  for
    approximately $39,946,000,  including an acquisition fee paid by Marriott to
    the Adviser of $580,000 and a $325,000  guaranty  fee paid to Marriott.  The
    Hotel  was  acquired  subject  to a first  mortgage  loan  with  an  initial
    principal balance of $29,400,000 (see Note 6). In addition,  the Partnership
    provided an initial working capital reserve of approximately $554,000 to the
    Manager for Hotel operations.

    The  guaranty  fee was  paid in  exchange  for an  agreement  (the  "Payment
    Agreement")  by  Marriott  to fund,  for a  four-year  period,  the  amounts
    necessary  in the  event  that  revenues  generated  by the  Hotel  were not
    sufficient  to pay: (1) debt service  payments on the mortgage  loan;  (2) a
    cumulative  preferred  return  to  the  Partnership  equal  to  7.5%  of the
    Partnership's Net Investment,  as defined (the "Preferred Return");  and (3)
    operating  losses  incurred  by the Hotel;  if any,  up to  $5,000,000.  The
    Partnership has no obligation to reimburse Marriott for the first $1,500,000
    of funds so advanced.  Funds  advanced in excess of  $1,500,000  were in the
    form of non-recourse loans (the "Loans"). The Loans are payable to Marriott,
    with interest on the amounts  advanced  calculated  at a monthly  compounded
    rate of 10% per  annum,  only  under  certain  circumstances,  out of excess
    proceeds  generated  by  any  sale  or  refinancing  of the  Hotel.  Through
    September 30, 1991,  Marriott had  fulfilled  its  obligation by funding the
    full $5,000,000  under this  agreement.  At September 30, 1995 and 1994, the
    loan  payable  to  Marriott   Corporation  of  $6,328,000  and   $5,728,000,
    respectively,  represents advances from Marriott in excess of the $1,500,000
    ceiling,  plus  accrued  interest  calculated  per the terms of the  Payment
    Agreement.   The  payment  by  Marriott   Corporation   of  the   $1,500,000
    non-refundable advance has been accounted for as a reduction to the basis of
    the operating investment property.

    The Partnership also paid to Marriott Corporation a $250,000 non-competition
    fee in exchange for which Marriott agreed not to operate, manage or commence
    construction  of any  other  first-class  suite  hotels  anywhere  within  a
    five-mile  radius of the Hotel with the exclusion of a Marriott Suites Hotel
    in Costa Mesa, California, through the earlier to occur of 1) August 9, 1993
    or 2) the date when  average  annual  occupancy of the Hotel shall have been
    75% or more for a period of two consecutive years.

    The Partnership has entered into an agreement with the Manager to manage the
    Hotel (the  "Agreement").  The initial  term of the  Agreement  runs through
    January 3, 1997,  after which the Agreement can be renewed for a total of 12
    successive  5-year periods at the option of the manager.  Under the terms of
    the Agreement, the Manager receives a base management fee equal to 2% of the
    gross  revenues  generated  by the  Hotel  during  the  initial  term of the
    Agreement.  Such fee increases to 3% of gross revenues in the event that any
    of the renewal  options are  exercised.  In addition to the base  management
    fee,  an  incentive  management  fee  equal to 50% of the  annual  Net House
    Profit, as defined, in excess of $4,000,000 is payable to Marriott under the
    terms of the Agreement. The incentive management fee is limited to an amount
    not to  exceed  25% of total  Net  House  Profit  for any  fiscal  year.  No
    incentive  management fees have been earned to date. The Partnership has the
    right to terminate the  Agreement  after the initial term if the Hotel fails
    to  generate  certain  minimum  cash  flow  levels  during  two out of three
    consecutive fiscal years commencing after fiscal 1994.

    A reserve for the replacement of equipment and improvements is funded out of
    gross revenues generated by the Hotel. This reserve was 3% of gross revenues
    for calendar 1991. As part of the debt modification  agreement  described in
    Note 6, the reserve was reduced to 2% of gross revenues for 1992 and will be
    equal to 3%  thereafter  through the  initial  term of the  Agreement.  Such
    reserve  increases  to 4% of gross  revenues  in the  event  that the  first
    renewal  option  is  exercised  and  then to 5% for any  subsequent  renewal
    periods.  Based on the Manager's  experience,  it is  anticipated  that this
    reserve should be sufficient to fund all ordinary replacements.  The balance
    of the cash  reserve  for  replacements  and  improvements  for the Hotel at
    September 30, 1995 and 1994 was $618,000 and $758,000, respectively.



<PAGE>


    The  following  is a summary  of the  Newport  Beach  Hotel's  revenues  and
    operating  expenses for the years ended  September 30, 1995,  1994 and 1993,
    respectively (in thousands):

                                          1995           1994           1993
                                          ----           ----           ----

   Revenues:
     Guest rooms                         $6,465         $6,121         $5,996
     Food and beverage                    1,621          1,604          1,568
     Other revenues                         426            397            405
                                       --------       --------       --------
                                         $8,512         $8,122         $7,969
                                         ======         ======         ======

   Operating expenses:
     Guest rooms                         $1,772         $1,681         $1,658
     Food and beverage:
      Cost of sales                         443            426            426
      Operating expenses                    883            928            906
     Other operating expenses               850            913            993
     Management fees - Manager              170            162            157
     Selling, general and administrative  1,370          1,325          1,267
     Repairs and maintenance                424            421            504
     Real estate taxes, net of 
       refunds of $731 in 1995             (362)           410            323
                                         $5,550         $6,266         $6,234
                                         ======         ======         ======

    The  operating  expenses  of  the  Hotel  noted  above  include  significant
    transactions  with the Manager.  All Hotel  employees  are  employees of the
    Manager and the related payroll costs are allocated to the Hotel  operations
    by the Manager.  A majority of the supplies and food purchased during fiscal
    1995,  1994 and 1993 were  purchased  from an affiliate  of the Manager.  In
    addition,  the Manager also allocates  certain  central  reservation  center
    expenses,  employee benefit costs, advertising costs and management training
    costs to the Hotel.

    Due from Marriott  Corporation at September 30, 1995 consists principally of
    a real estate tax refund  received by Marriott  Corporation on behalf of the
    Partnership.  Subsequent  to  year-end,  this  amount  was  remitted  to the
    mortgage  holder as  additional  debt  service (see Note 6). Due to Marriott
    Corporation  at September  30, 1994  represented  amounts  paid  directly by
    Marriott Corporation for the benefit of the Partnership's Hotel.

5.    Investments in Joint Venture Partnerships

     The  Partnership  has  investments  in four  joint  ventures  that own five
     operating  investment  properties.  These joint  ventures are accounted for
     under the equity method in the Partnership's  financial  statements.  Under
     the equity  method  the  investment  in a joint  venture is carried at cost
     adjusted for the Partnership's  share of the ventures'  earnings and losses
     and distributions.  Condensed combined financial  statements of these joint
     ventures follow.


<PAGE>


                      Condensed Combined Balance Sheets
                         September 30, 1995 and 1994
                                (in thousands)

                                    Assets
                                                       1995             1994
                                                       ----             ----

   Current assets                                  $     391        $     511
   Operating investment properties, net               19,741           20,848
   Other assets                                        1,226              273
                                                   ---------       ----------
                                                     $21,358          $21,632
                                                     =======          =======

                      Liabilities and Partners' Capital
   Current liabilities                                $  1,191       $  5,922
   Other liabilities                                     280              527
   Long-term debt, less current portion               19,600           14,246
   Partnership's share of combined capital               160              634
   Co-venturers' share of combined capital               127              303
                                                  ----------       ----------
                                                     $21,358          $21,632

                  Reconciliation of Partnership's Investment

                                                      1995              1994
                                                      ----              ----

   Partnership's share of capital, as shown above  $     160         $    634
   Partnership's share of ventures' liabilities            -              161
   Excess basis due to investment in ventures, 
     net (1)                                             252              263
                                                    --------         --------
   Investment in joint ventures, at equity           $   412           $1,058
                                                     =======           ======

(1) At September 30, 1995 and 1994,  the  Partnership's  investment  exceeds its
    share of the combined  joint venture  capital  accounts and  liabilities  by
    approximately  $252,000 and $263,000,  respectively.  These  amounts,  which
    relate to certain  expenses  incurred by the  Partnership in connection with
    acquiring  its  joint  venture   investments,   are  being  amortized  on  a
    straight-line basis over the estimated useful life of the properties.
                
                    Condensed Combined Summary of Operations
             For the years ended September 30, 1995, 1994 and 1993
                                 (in thousands)

                                                1995        1994        1993
                                                ----        ----        ----

   Rental revenues and expense recoveries     $ 3,954     $ 3,820     $ 3,323
   Interest income                                  2           3          33
                                          ----------- -----------  ----------
                                                3,956       3,823       3,356

   Interest expense                             1,609       1,559       1,490
   Property operating expenses                  2,048       2,177       2,044
   Depreciation and amortization                  864         976       1,024
                                            ---------   ---------    --------
                                                4,521       4,712       4,558
                                             --------    --------    --------
   Net loss                                  $   (565)   $   (889)    $(1,202)
                                             =========   ========     ========

   Net loss:
     Partnership's share of 
        combined operations                  $   (566)    $(1,025)    $(1,345)
     Co-venturers' share of 
        combined operations                         1         136         143
                                             ---------   --------    ---------
                                             $   (565)   $   (889)    $(1,202)
                                             =========   ========     =======

             Reconciliation of Partnership's Share of Operations

                                                1995        1994        1993
                                                ----        ----        ----

   Partnership's share of combined operations,
     as shown above                          $   (566)    $(1,025)    $(1,345)
   Amortization of excess basis                   (11)        (11)        (11)
                                           ----------- ----------  ----------
   Partnership's share of ventures' losses   $   (577)   $ (1,036)    $(1,356)
                                             =========   ========     =======


   The joint ventures are subject to partnership  agreements which determine the
   distribution of available  funds, the disposition of the ventures' 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.

   Investment in joint ventures,  at equity on the balance sheet is comprised of
   the following joint venture investments (in thousands):

                                                     1995              1994
                                                     ----              ----

   Daniel Meadows II General Partnership        $      19            $    (38)
   Spinnaker Bay Associates                        (1,082)               (539)
   Maplewood Drive Associates                         548                 702
   Norman Crossing Associates                         927                 933
                                                ---------            --------
                                                 $    412             $ 1,058
                                                 ========             =======

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

                                                1995        1994         1993
                                                ----        ----         ----

     Daniel Meadows II General Partnership   $     61     $   200   $       -
     Spinnaker Bay Associates                     160           -           -
     Maplewood Drive Associates                     -         198          85
     Norman Crossing Associates                     -           -          45
                                           ---------- -----------    --------
                                              $   221     $   398      $  130
                                              =======     =======      ======

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

      Daniel Meadows II General Partnership

    On October 15, 1987 the Partnership  acquired a general partnership interest
    in Daniel Meadows II General  Partnership (the "Joint Venture"),  a Virginia
    general partnership which was formed to develop, own and operate The Meadows
    in the Park Apartments,  a 200-unit apartment complex located in Birmingham,
    Alabama.  The  Partnership's  co-venture  partner is an  affiliate of Daniel
    Realty Company.

    The  aggregate  cash  investment  by the  Partnership  for its  interest was
    approximately  $3,754,000  (including an acquisition fee of $223,000 paid to
    the Adviser).  On July 20, 1989, the Partnership paid $215,000 in additional
    capital  contributions  to the joint  venture  pursuant  to the terms of the
    Partnership  agreement.  These funds were subsequently paid to Daniel Realty
    Company in final settlement of the contingent  portion of the purchase price
    of the property.  The project is encumbered by a nonrecourse  first mortgage
    loan with a principal  balance of approximately  $5,468,000 at September 30,
    1995.  The  nonrecourse  mortgage  note  payable  secured  by the  operating
    property at September  30, 1994 was scheduled to mature on November 1, 1994.
    During the first quarter of fiscal 1995,  the venture  obtained an extension
    of the  maturity  date from the lender to  January  1,  1995.  Delays in the
    closing  process  for a new loan  resulted  in the  inability  to repay  the
    mortgage loan upon the expiration of the forbearance  period.  On January 3,
    1995,  the  mortgage  lender  sent a formal  default  notice to the  venture
    stating that a default  interest rate of 15.5% per annum would be applied to
    the loan effective  January 1, 1995. On February 7, 1995, the venture closed
    on a new loan and fully repaid the prior mortgage debt  obligation.  The new
    debt, in the initial  principal  amount of  $5,500,000,  bears interest at a
    variable  rate equal to the 30-day  LIBOR rate plus 2.25%  (equivalent  to a
    rate of  approximately  8.125% per annum as of September 30, 1995). The loan
    has a 5-year term and requires monthly interest and principal payments based
    on a 25-year amortization schedule.

    During fiscal 1991, the Partnership  discovered that certain  materials used
    to construct the operating property were manufactured  incorrectly and would
    require substantial  repairs.  During fiscal 1992, the Meadows joint venture
    engaged local legal counsel to seek recoveries from the venture's  insurance
    carrier,  as well as various  contractors  and suppliers,  for the venture's
    claim of damages,  which are estimated at between $1.6 and $2.1 million, not
    including  legal fees and other  incidental  costs.  During fiscal 1993, the
    insurance  carrier deposited  approximately  $522,000 into an escrow account
    controlled by the venture's  mortgage lender in settlement of the undisputed
    portion of the venture's  claim.  During fiscal 1994,  the insurer agreed to
    enter into non-binding  mediation towards  settlement of the disputed claims
    out of court.  On October  3, 1994,  the joint  venture  verbally  agreed to
    settle  its  claims  against  the  insurance  carrier,  architect,   general
    contractor and the surety/completion  bond insurer for $1,714,000,  which is
    in addition to the $522,000 previously paid by the insurance carrier.  These
    settlement  proceeds have been escrowed with the mortgage holder,  which has
    agreed to release such funds as needed for structural renovations.  The loan
    will be fully recourse to the joint venture and to the partners of the joint
    venture until the repairs are completed, at which time the entire obligation
    will become  non-recourse.  As of  September  30,  1995,  $995,510  had been
    disbursed for  renovations,  leaving  $718,490 in escrow for future repairs.
    All of the repair work is expected to be  completed  in fiscal  1996.  There
    should be minimal  disruption to the  property's  tenants during this repair
    process  and the  situation,  once  corrected,  is not  expected  to have an
    adverse  effect  on the  future  market  value of the  investment  property.
    Included  in rental  income  on the  above  condensed  combined  summary  of
    ventures'  operations is $165,000 of income attributed to rent loss recovery
    for  the  apartment  units  taken  out  of  service  to  complete   interior
    renovations.  During  the first  quarter  of fiscal  1992,  the  Partnership
    advanced  $250,000 to the joint  venture to be used to pay for costs of some
    initial repair work and to provide funds to pursue the aforementioned  legal
    remedies. During 1994, $200,000 of this capital contribution was returned to
    the Partnership.

    The Joint Venture  Agreement  provides that from available cash flow,  after
    the repayment of any optional  loans made by the partners,  the  Partnership
    will  receive  an 8% per annum  cumulative  preferred  return on its  funded
    capital  contributions  ($3,788,000 at September 30, 1995) during the period
    from  October  14,  1987 to  April  30,  1990  (the  "Guaranty  Period"),  a
    cumulative  preferred return of 8% from May 1, 1990 to September 30, 1990; a
    cumulative preferred return of 9% from October 1, 1990 to September 30, 1992
    and a 10% cumulative  preferred return  thereafter.  The general partners of
    the co-venturer  personally  guaranteed payment of the Partnership's  return
    through  April  30,  1990.  Under the terms of the  Agreement,  the  general
    partners of the co-venturer were required to contribute  capital of $141,562
    to fund deficits in the  Partnership's  preference return during fiscal 1990
    (through the end of the Guaranty  Period).  As of  September  30, 1995,  the
    co-venturer  was  obligated  to make  additional  capital  contributions  of
    $96,822 with respect to shortfalls which accumulated  through the expiration
    of the Guaranty  Period.  Any excess cash  remaining,  after  payment to the
    Partnership of its preferred  distribution,  will be distributed  60% to the
    Partnership  and 40% to the  co-venturer.  In addition,  the  Partnership is
    entitled to receive $2,500 annually as an investor servicing fee.

    The Joint Venture Agreement  generally  provides that net sale proceeds,  as
    defined,  shall be  distributed  (after  payment of mortgage  debt and other
    indebtedness  of the Joint Venture) as follows and in the following order of
    priority: (1) to repay accrued interest and principal, in that order, on any
    optional loans made by the partners, (2) to the Partnership in the amount of
    any unpaid  cumulative  preferred  return  ($1,794,000  as of September  30,
    1995), (3) to the Partnership until it has received cumulative distributions
    equal to 115% of its funded capital  contributions,  (4) 100% to co-venturer
    until  they  receive  distributions  equal  to  $375,000,  (5)  70%  to  the
    Partnership and 30% to co-venturer  until  $2,000,000 has been  cumulatively
    distributed and (6) thereafter,  the balance, if any, 60% to the Partnership
    and 40% to the co-venturer.

    Taxable  income  from  operations  in each year  shall be  allocated  to the
    Partnership and the co-venturer in accordance with distributions of cash, to
    the extent of such distributions, and then 60% to the Partnership and 40% to
    the co-venturer,  respectively.  Through the date upon which the Partnership
    has been allocated tax losses equal to $3,515,000,  losses will be allocated
    98% to the Partnership and 2% to the co-venturer,  respectively. However, if
    the  co-venturer  has a positive  capital  balance and the Partnership has a
    zero or  negative  capital  balance,  then  100% of the tax  losses  will be
    allocated to the  co-venturer  until its capital balance is reduced to zero.
    Thereafter,  net tax losses are allocated 60% to the  Partnership and 40% to
    the  co-venturer.  Allocations  of income and loss for financial  accounting
    purposes have been made in conformity with the allocations of taxable income
    or tax loss.

    Generally,  gains and losses  arising  from the sale or  disposition  of the
    property are allocated first on the basis of the partners'  capital balances
    after  consideration  of any cash  distributions  generated from the sale or
    disposition; thereafter, remaining gains and losses are allocated 60% to the
    Partnership and 40% to the co-venturer.

    If additional  working  capital is required in connection with the operating
    property,  it may be provided as optional loans by the  Partnership  and the
    co-venturer in the proportion of 60% and 40%, respectively.

    The Joint  Venture  entered  into a  property  management  contract  with an
    affiliate of the  co-venturer,  cancellable at the option of the Partnership
    upon the  occurrence of certain  events.  The  management fee is 5% of rents
    collected  from the property  and certain  other  income,  as defined in the
    management agreement.

      Spinnaker Bay Associates

    On June 10, 1988 the Partnership  acquired a general partnership interest in
    Spinnaker  Bay  Associates  (the  "Joint  Venture"),  a  California  general
    partnership, which was formed to own and operate the Bay Club Apartments and
    Spinnaker  Landing   Apartments,   two  complexes  located  in  Des  Moines,
    Washington   comprised  of  88  units  and  66  units,   respectively.   The
    Partnership's co-venture partner is an affiliate of Pacific Union Investment
    Corporation.

     The  aggregate  cash  investment  by the  Partnership  for its interest was
     approximately  $2,415,000 (including an acquisition fee of $310,000 paid to
     the Adviser). The projects are encumbered by two nonrecourse mortgage loans
     with an aggregate  balance of  approximately  $4,794,000  at September  30,
     1995. Construction-related defects were discovered at both the Bay Club and
     Spinnaker Landing apartment  complexes during fiscal 1991. The deficiencies
     and damages included lack of adequate fire blocking  materials in the walls
     and other areas and  insufficient  structural  support,  as required by the
     Uniform Building Code. During 1991,  Spinnaker Bay Associates  participated
     as a  plaintiff  in a lawsuit  filed  against  the  developer,  which  also
     involved  certain other properties  constructed by the developer.  The suit
     alleged,  among other things,  that the  developer  failed to construct the
     buildings in accordance  with the plans and  specifications,  as warranted,
     used substandard materials and provided inadequate  workmanship.  The joint
     venture's  claim against the  developer was settled  during fiscal 1991 for
     $1,350,000.  Such funds were received in December of 1991 and were recorded
     by the  joint  venture  as a  reduction  in  the  basis  of  the  operating
     properties.  From the  proceeds of this  settlement,  $450,000  was paid to
     legal counsel in connection  with the litigation and was  capitalized as an
     addition to the carrying value of the operating properties.  In addition to
     the cash  received at the time of the  settlement,  the venture  received a
     note in the amount of $161,500  from the  developer  which was due in 1994.
     During fiscal 1993,  the venture  agreed to accept a discounted  payment of
     $113,050 in full  satisfaction  of the note if payment was made by December
     31, 1993. The developer made this discounted  payment to the venture in the
     first quarter of fiscal 1994.  In addition,  during fiscal 1994 the venture
     received additional  settlement proceeds totalling  approximately  $351,000
     from  its  pursuit  of  claims  against  certain   subcontractors   of  the
     development company and other responsible  parties.  Additional  settlement
     proceeds  totalling  approximately  $402,000 were  collected  during fiscal
     1995.  No  significant  further  litigation  proceeds  are  expected at the
     present time.

     As part of the initial  settlement,  the  venture  also  negotiated  a loan
     modification  agreement which provided the majority of the additional funds
     needed to complete the repairs to the operating properties and extended the
     maturity date for repayment of the obligation to December  1996.  Under the
     terms of the loan  modification,  which was executed in December  1991, the
     lender  agreed to loan to the joint venture 80% of the  additional  amounts
     necessary  to  complete  the  repair of the  properties  up to a maximum of
     $760,000.  Advances  through the  completion  of the repair  work  totalled
     approximately  $617,000.  The loan modification agreement also required the
     lender  to defer  all  past due  interest  and all of the  interest  due in
     calendar 1992.  During 1993,  the joint venture was not in compliance  with
     the loan  modification  agreement  with  respect to  scheduled  payments of
     principal and interest due to negative cash flow from operations.  However,
     on  November 1, 1993 a second  loan  modification  was reached in which the
     lender agreed to an additional  deferral of debt service payments,  through
     July 1, 1993, which would be added to the loan principal.  The execution of
     this second  modification  agreement  cured any defaults on the part of the
     joint  venture.  Additional  amounts  owed to the lender as a result of the
     deferred payments,  after the effect of the second  modification  agreement
     and  including  accrued  interest,   total  approximately   $1,181,000  and
     $1,073,000 as of September 30, 1995 and 1994, respectively.  The repairs to
     the operating  investment  properties,  which were completed  during fiscal
     1994,  net of  insurance  proceeds,  have been  capitalized  or expensed in
     accordance  with the joint  venture's  normal  accounting  policy  for such
     items.

     The Joint Venture  Agreement  currently  provides that from  available cash
     flow, the  Partnership  will receive a 10% per annum  cumulative  preferred
     return on $2,050,000, payable monthly until the termination and dissolution
     of the Partnership.  Such preferred return shall be cumulative from year to
     year. After the guaranty  period,  available cash is distributed 50% to the
     co-venturer  to  the  extent  necessary  to  repay  principal  and  accrued
     preference  return on any guaranty  period  preference  loan,  37.5% to the
     Partnership  and  12.5%  to the  co-venturer.  After  all  guaranty  period
     preference  loans  have  been  paid  in  full,  50% is  distributed  to the
     Partnership to pay any accrued  preference,  37.5% to the  Partnership  and
     12.5% to the co-venturer.  Thereafter, the Partnership will receive 75% and
     the co-venturer will receive 25%.

     Capital  proceeds,   as  defined,  are  to  be  distributed  first  to  the
     Partnership,  to the extent of its aggregate preference return, then to the
     Partnership  and to the  co-venturer  until all  outstanding  advances  and
     guaranty period capital loans,  including accrued  preference  return,  are
     paid off.  Proceeds are next to be distributed to the Partnership  until it
     has  received an amount  equal to the  Partnership's  net  investment  plus
     $310,000,   then  to  the  co-venturer  until  all  principal  and  accrued
     preference  return on guaranty period  preference loans and guaranty period
     operating loans have been repaid. Thereafter, the Partnership is to receive
     80%, and the co-venturer 20%, of remaining proceeds.

    Taxable income from operations is to be allocated in accordance with the net
    cash flow  distributions  described above. Tax losses from operations are to
    be allocated  between the  Partnership  and the co-venturer in proportion to
    net cash flow actually  distributed or distributable during any fiscal year.
    Interest  expense  on  loans  from the  venture  partners  are  specifically
    allocated to the respective venture partners. Allocations of income and loss
    for financial  accounting  purposes  have been made in  conformity  with the
    allocations of taxable income or tax loss.

    Generally,  gains and losses  arising  from a sale of the property are to be
    allocated first on the basis of the partners' capital balances;  thereafter,
    remaining  gains and losses are to be allocated 80% to the  Partnership  and
    20% to the co-venturer.

    If additional  working  capital is required in connection with the operating
    property,  it may be provided as  additional  capital  contributions  by the
    Partnership   and  the  co-venturer  in  the  proportion  of  80%  and  20%,
    respectively.

    The Joint  Venture  entered  into a  property  management  contract  with an
    affiliate of the  co-venturer,  cancellable at the option of the Partnership
    upon the  occurrence of certain  events.  The management fee is equal to the
    greater of 5% of gross rents  collected from the property or $3,000 a month.
    In  addition,  under an  amendment  to the joint  venture  agreement  and as
    consideration  for  services  provided in  conjunction  with the  litigation
    discussed  above,  the venture paid the manager a fee of $29,000 and $21,000
    during fiscal 1995 and 1994, respectively.

    Maplewood Drive Associates

    On June 14, 1988 the Partnership  acquired a general partnership interest in
    Maplewood Drive Associate (the "Joint  Venture") which was formed to own and
    operate Maplewood Park Apartments,  a 144-unit  apartment complex located in
    Manassas,  Virginia.  The  Partnership's  co-venture  partner  is  Maplewood
    Associates Limited Partnership, an affiliate of Amurcon
    Corporation of Virginia.

    The original  aggregate cash  investment by the Partnership for its interest
    was  approximately  $2,563,000  paid  to the  Joint  Venture.  Approximately
    $800,000 of such amount was used to fund the  Guaranty  Escrow,  $50,000 was
    placed  in a reserve  to pay for the cost of  certain  improvements  and the
    remaining  portion of such amount was  distributed to the  co-venturer.  The
    Partnership  also  paid the  Adviser  an  acquisition  fee in the  amount of
    $143,000 in  connection  with  acquiring  the  investment.  The  property is
    encumbered by a nonrecourse first mortgage note with a balance of $5,635,000
    at September 30, 1995.  This mortgage loan is currently  scheduled to mature
    in June 1997.

    The  co-venturer  unconditionally  guaranteed,  for a 60-month  period  (the
    Guaranty  Period),  to fund cash to the Joint Venture in an amount necessary
    to fund any Joint Venture negative net cash flows, as defined, and to ensure
    that  the  Joint  Venture  had   sufficient   funds  to  distribute  to  the
    Partnership,  on a monthly  basis,  no less  than an 8% per annum  preferred
    return  on  the   Partnership's   Net  Investment  of  $2,350,000.   Amounts
    contributed by the co-venturer  pursuant to the foregoing  guaranty  through
    June 14, 1991 were treated as  Non-Refundable  Capital  Contributions.  From
    June 15, 1991 to June 14, 1993, amounts contributed by the co-venturer under
    the terms of the guaranty are treated as Refundable Guaranty  Contributions,
    bearing  interest  at  10%  per  annum.  Refundable  Guaranty  Contributions
    totalled  $532,129  through the end of the guaranty  period.  After June 14,
    1993,  when the Joint  Venture  requires  funds to meet its cash needs,  the
    Partnership  and  the   co-venturer   must  contribute  the  funds  required
    ("Additional   Contributions")   in  the   proportions   of  70%  and   30%,
    respectively. Such contributions will bear interest at 1% per annum over the
    prime rate of a certain bank.

    During the life of the joint venture,  with certain limited exceptions,  the
    co-venturer's  share of any  distributable  funds,  as  defined in the Joint
    Venture Agreement, shall be deposited in an escrow account to be used solely
    to make required principal payments on the joint venture's outstanding debt.
    Amounts  actually used from such escrow account to make  principal  payments
    shall   be   considered   capital    contributions    ("Mandatory    Capital
    Contributions").  No Mandatory Contributions were made during the three-year
    period ended  September 30, 1995. To the extent that the total cost of debt,
    as defined in the Joint Venture Agreement, exceeds a simple interest rate of
    8.25% per annum,  the co-venturer is obligated to make  contributions in the
    amount of such excess ("Interest Rate Contributions").

    Net cash  flow from  operations  of the Joint  Venture  will be  distributed
    monthly in the following  order of priority:  (1) 100% to the co-venturer to
    the extent  that the cost of debt to the Joint  Venture is less than  8.25%;
    (2) 100% to the Partnership until the Partnership has received distributions
    pursuant to the Partnership  Agreement  equal to an 8% per annum  cumulative
    return on the  Partnership's  Net Investment of  $2,350,000;  (3) during the
    Guaranty  Period only,  100% to the co-venturer to the extent of the excess,
    if any, of $15,667 over the amount distributed to the Partnership during any
    month  from the  Guaranty  Escrow;  (4) 100% to the  Partnership  until  the
    Partnership  has  received   certain   cumulative   distributions   per  the
    Partnership  Agreement;  (5)  100% to pay  accrued  interest  on  Additional
    Contributions  and (6) the balance,  if any, will be distributed  70% to the
    Partnership and 30% to the co-venturer.

    Taxable income,  after certain  specific  allocations of income and expense,
    will be generally  allocated to the  Partnership  and the co-venturer in any
    year  to  the  extent  of  and  in  the  same  proportions  as  actual  cash
    distributions from operations, with any remaining income being allocated 70%
    to the  Partnership  and 30% to the  co-venturer.  In the event there are no
    distributable funds from operations, net income will be allocated 70% to the
    Partnership  and  30% to the  co-venturer.  Tax  losses  will  be  generally
    allocated 99% to the Partnership and 1% to the  co-venturer.  Allocations of
    income  and  loss  for  financial  reporting  purposes  have  been  made  in
    conformity with the allocations of taxable income or loss.

    Net  proceeds  from  the  sale  or  refinancing  of  the  Property  will  be
    distributed in the following order of priority:  (1) 100% to the co-venturer
    to repay accrued interest and principal on any Additional  Contributions (2)
    100%  to  repay  accrued  interest  and  principal  on  Refundable  Guaranty
    Contributions,  as  defined,  made to the  Joint  Venture;  (3)  100% to the
    Partnership to the extent of any unpaid cumulative  preference  return;  (4)
    100% to the  Partnership in an amount equal to  $2,605,000;  (5) 100% to the
    co-venturer in the amount of any  previously  unreturned  Mandatory  Capital
    Contributions  made to the Joint Venture;  (6) 100% to the co-venturer in an
    amount  equal  to  $150,000;  and  (7)  the  balance,  if  any,  70%  to the
    Partnership and 30% to the co-venturer.

    The Joint Venture  entered into a management  contract  with Amurcon  Realty
    Corporation,  an affiliate of the  co-venturer,  which is cancellable at the
    option  of the  Partnership  upon  the  occurrence  of  certain  events.  In
    consideration  for their services,  the property  manager will receive:  (i)
    during the Guaranty Period, a base monthly management fee equal to 2 1/2% of
    gross rents collected,  plus an incentive  management fee equal to all Joint
    Venture cash flow, calculated on an annualized basis, in excess of $206,800,
    but in no event shall such  incentive  management fee be in excess of 2 1/2%
    of gross rents collected for such month, and (ii) after the Guaranty Period,
    a monthly management fee equal to 5% of gross rents collected. To the extent
    the incentive management fee is not earned in any month, it shall lapse with
    respect to such period.

    Norman Crossing Associates

    On  September  15,  1989 the  Partnership  acquired  a  general  partnership
    interest  in Norman  Crossing  Associates  (the  "Joint  Venture"),  a North
    Carolina general  partnership which was formed to own and operate the Norman
    Crossing  Shopping  Center,  a 52,000 square foot shopping center located in
    Charlotte,  North  Carolina.  The  Partnership's  co-venture  partner  is an
    affiliate of the Paragon Group.

     The aggregate cash  investment by the Partnership for its interest in Phase
     I was  approximately  $1,261,000  (including an acquisition  fee of $71,000
     paid to the Adviser).  The project is  encumbered  by a  nonrecourse  first
     mortgage  loan of  approximately  $2,744,000  at September  30, 1995.  This
     mortgage loan is scheduled to mature in November 2002. In October 1993, the
     property's  anchor tenant vacated the shopping  center.  The tenant,  which
     occupied  25,000 square feet of the  property's net leasable area, is still
     obligated  under the terms of their lease which runs through the year 2007.
     To date, all rents due from this tenant have been  collected.  Nonetheless,
     the anchor tenant vacancy has resulted in several tenants  receiving rental
     abatements  during fiscal 1995 and has had an adverse effect on the ability
     to lease other  vacant shop space.  During the last quarter of fiscal 1995,
     the former anchor  tenant  reached an agreement to sub-lease its space to a
     new tenant.  The sublease  tenant is scheduled to take occupancy in January
     1996.  It is  uncertain  at this time what  impact,  if any, the new anchor
     tenant will have on the property. The joint venture may have to continue to
     make significant tenant  improvements and grant rental concessions in order
     to maintain a high occupancy level.  Funding for such  improvements,  along
     with any  operating  cash flow  deficits  incurred  during  this  period of
     re-stabilization  for the shopping center,  would be provided  primarily by
     the  Partnership.  During  fiscal 1995,  the  Partnership  funded cash flow
     deficits  of  approximately  $56,000.  Management  is  prepared to fund the
     Partnership's share of any additional amounts required in the near-term.

    The Joint  Venture  Agreement  provides  that from  available  cash flow the
    Partnership  will receive an 8% per annum  cumulative  preference  return on
    $1,115,000  during the period from  September 15, 1989 to September 14, 1992
    (the "Guaranty Period"); a cumulative preference return of 9% from September
    15, 1992 to  September  14, 1993;  and a 10%  cumulative  preference  return
    thereafter,  payable  monthly  from  available  cash flow,  as defined.  The
    general  partners  of the  co-venturer  have  personally  guaranteed  a 7.5%
    minimum return on the  Partnership's  net  investment of $1,115,000  through
    September  14,  1992.  Any  excess  cash  remaining,  after  payment  to the
    Partnership of its distribution, will first be used to pay interest, but not
    principal,  compounded  annually on additional loans made by the Partnership
    and the co-venturer. Any remaining cash flow shall be distributed 80% to the
    Partnership and 20% to the co-venturer.  As of September 30, 1995, there was
    a cumulative  unpaid  distribution  of $307,000.  The  cumulative  preferred
    distribution  will be paid to the Partnership if and when there is available
    future cash flow.

    The Joint Venture Agreement generally provides that net sale and refinancing
    proceeds,  as defined,  shall be distributed (after payment of mortgage debt
    and other indebtedness of the Joint Venture) as follows and in the following
    order of priority: (1) to the Partnership until the Partnership has received
    the cumulative  annual  preference  return not  previously  paid, (2) to the
    Partnership  until it has received an amount equal to its gross  investment,
    (3) to the  Partnership  and to the  co-venturer in proportion to additional
    loans made until both have received the return of all additional  loans plus
    unpaid  interest  and  (4)  thereafter,  the  balance,  if  any,  80% to the
    Partnership and 20% to the co-venturer.

    Taxable  income  from  operations  in each year  shall be  allocated  to the
    Partnership  and  the  co-venturer  as  follows:   (1)  all  deductions  for
    depreciation  with  respect  to  the  property  shall  be  allocated  to the
    Partnership (2) income up to the amount of net cash flow distributed in each
    year shall be allocated to the Partnership and the co-venturer in proportion
    to the amount of the distributions to each partner for such year. Tax losses
    will be allocated each year up to the sum of the positive  capital  accounts
    of the  Partnership  and  co-venturer to the partners with positive  capital
    accounts in proportion to such positive capital  accounts.  All other income
    and  losses  will  be  allocated  80%  to  the  Partnership  and  20% to the
    co-venturer.  Allocations  of  income  and  loss  for  financial  accounting
    purposes have been made in conformity with the allocations of taxable income
    or tax loss.

    The Joint  Venture  entered  into a  property  management  contract  with an
    affiliate of the  co-venturer,  cancellable at the option of the Partnership
    upon the  occurrence of certain  events.  The  management fee is 4% of rents
    collected  from the property  and certain  other  income,  as defined in the
    management agreement.

6.    Mortgage Debt Payable

    Mortgage  debt  payable at  September  30,  1995 and 1994  consists of (in
    thousands):
                                                            1995         1994
    Permanent mortgage loan secured
    by the Marriott Suites  Hotel-Newport
    Beach  (see Note 4), bearing interest
    at 10.09% per annum from disbursement through
    August 10,  1992.  Interest  accrues 
    at 9.59% per annum from August 11, 1992
    through August 10, 1995 and at a variable 
    rate of adjusted LIBOR (5.9141% at
    September  30, 1995),  as defined,  
    plus 2.5% per annum from August 11, 1995
    until  maturity.  On August 11, 1996 
    the balance of principal  together with
    all  accrued  but  unpaid  interest  
    thereon  shall be due.  See  discussion
    regarding
    modification below.                                   $32,060     $32,060

     Add:   Unamortized  deferred  gain  from
         forgiveness of debt                                    -         324
                                                      -----------  ----------
                                                           32,060      32,384

    Nonrecourse senior promissory notes 
    payable,  bearing interest at a variable
    rate of adjusted  LIBOR  (5.9141% and
    5.875% at September 30, 1995 and 1994,
    respectively),  as defined, plus one 
    percent per annum. Payments on the loan
    are to be made from available cash 
    flow of the Newport Beach Marriott Suites
    Hotel (see discussion below).                           4,000       2,853
                                                        ---------   ---------
                                                          $36,060     $35,237

    On January 25,  1993,  the  Managing  General  Partner and the lender on the
    Newport Beach Marriott Hotel finalized an agreement on a modification of the
    first mortgage loan secured by the Hotel which was retroactive to August 11,
    1992. Per the terms of the  modification,  the maturity date of the loan was
    extended one year to August 11, 1996.  The principal  amount of the loan was
    adjusted  to  $32,060,518  (the  original   principal  of  $29,400,000  plus
    $2,660,518 of unpaid interest and fees). The outstanding balance of the loan
    bears  interest at a rate of 9.59% through August 11, 1995 and at a variable
    rate of the adjusted  LIBOR  index,  as defined  (5.9141% at  September  30,
    1995),  plus 2.5% from August 11, 1995 through the final  maturity date. The
    Partnership  will pay to the lender on a monthly basis as debt  service,  an
    amount  equal  to  Hotel  Net  Cash,  as  defined  in the  Hotel  management
    agreement.  In order to increase Hotel Net Cash,  Marriott  agreed to reduce
    its Base  Management Fee by one percent of total revenue  through January 3,
    1997.  In  addition,  the  reserve  for the  replacement  of  equipment  and
    improvements,  which  is  funded  out  of a  percentage  of  gross  revenues
    generated by the Hotel, was reduced to two percent of gross revenues in 1992
    and will be equal to three  percent  of gross  revenues  thereafter  through
    January 3, 1997.  As part of the  modification  agreement,  the  Partnership
    agreed  to make  additional  debt  service  contributions  to the  lender of
    $400,000,  of which $50,000 was paid at the closing of the  modification and
    the  balance  will be payable on a monthly  basis in arrears  for  forty-two
    months.  Under the terms of the  modification,  events  of  default  include
    payment  default with respect to the  Partnership's  additional debt service
    contributions  to  the  lender,   failure  of  the  Hotel  to  meet  certain
    performance  tests,  as  defined,  plus  additional  default  provisions  as
    specified in the modification agreement.

      An additional  loan facility from the existing  lender of up to $4,000,000
     was  available to be used to pay expected  debt  service  shortfalls  after
     August 11, 1992. This additional loan facility bears interest at a variable
     rate of adjusted  LIBOR (5.9141% and 5.875% at September 30, 1995 and 1994,
     respectively),  as defined, plus one percent per annum. Interest on the new
     loan  facility is payable  currently  only to the extent of available  cash
     flow from Hotel operations.  Interest deferred due to the lack of available
     cash flow could be added to the principal balance of the new loan until the
     loan balance reached the $4,000,000  limitation.  As of March 31, 1995, the
     Partnership  had exhausted the entire  $4,000,000 of this  additional  loan
     facility. On April 11, 1995, the Partnership received a default notice from
     the lender.  Under the terms of the loan  agreements,  as of April 25, 1995
     additional  default  interest accrues at a rate of 4% per annum on the loan
     amount of $32,060,518  and the additional  loan facility of $4,000,000.  At
     September 30, 1995,  approximately  $1,242,000 of accrued  interest on this
     additional  loan  facility   remained   unpaid  and  default   interest  of
     approximately  $637,000 had accrued. After preliminary  discussions,  it is
     unclear   whether   the  lender  will  be  willing  to  allow  for  further
     modifications  to the loan and an  extension  of the August  1996  maturity
     date. The estimated value of the Hotel property is substantially  less than
     the obligation to the mortgage lender at the present time. Accordingly, the
     Partnership would only agree to provide  additional debt service support if
     the lender agreed to grant  significant  concessions which would afford the
     Partnership the opportunity to recover such additional  investments  plus a
     portion  of its  original  investment  in the  Hotel.  In the event that an
     agreement  with  the  lender  cannot  be  reached,  the  result  could be a
     foreclosure on the operating investment property.  Under any circumstances,
     the  operating   results  of  the  Hotel  which   represents   36%  of  the
     Partnership's original investment portfolio,  will have to continue to show
     dramatic  improvement  in order for the  Partnership  to recover any of its
     original net  investment  in the Newport Beach  Marriott  Suites Hotel (see
     Note 4). The eventual  outcome of this matter  cannot be  determined at the
     present time.

      The  restructuring  of the  mortgage  note  payable  in  fiscal  1993  was
    accounted for in accordance with Statement of Financial Accounting Standards
    No.  15,   "Accounting   by  Debtors  and   Creditors   for  Troubled   Debt
    Restructurings".   Accordingly,   the   forgiveness   of  debt   aggregating
    $1,766,609,  which  represented the difference  between accrued interest and
    fees recorded  under the original loan  agreement and the agreed upon amount
    of the  outstanding  interest  and fees of  $2,660,518  per the terms of the
    modification  at  September  30,  1992,  was  deferred  and  amortized  as a
    reduction of interest expense  prospectively,  using the effective  interest
    method. During fiscal 1995, this deferred gain was fully amortized.

7.  Contingencies

      The Partnership is involved in certain legal actions. The Managing General
     Partner  believes  that these  actions  will be resolved  without  material
     adverse effect on the Partnership's financial statements, taken as a whole.


<PAGE>


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<TABLE>





Schedule III - Real Estate and Accumulated Depreciation

                                PAINE WEBBER INCOME PROPERTIES EIGHT LIMITED PARTNERSHIP

                                  SCHEDULE OF REAL ESTATE AND ACCUMULATED DEPRECIATION
                                                      September 30, 1995
                                                        (In thousands)
<CAPTION>
                          Initial Cost to                 Gross Amount at Which Carried at                           Life  on Which
                          Partnership            Costs          Close of period                                        Depreciation
                                Buildings      Capitalized        Buildings,                                             in Latest
                                Improvements  (Removed)           Improvements                                             Income
                               & Personal     Subsequent to       & Personal         Accumulated   Date of     Date      Statement
Description Encumbrances  Land  Property      Acquisition  Land   Property     Total Depreciation Construction Acquired  is Computed
<S>         <C>           <C>   <C>           <C>          <C>    <C>           <C>   <C>          <C>         <C>       <C>

Marriott
 Hotel
Newport
 Beach,
 CA       $37,302        $ 6,950  $29,952    $(7,169)     $ 5,488  $24,245    $29,733  $9,733      1987        8/10/88   7-30 yrs.

Notes
(A) The  aggregate  cost of real estate owned at September  30, 1995 for Federal
income tax purposes is approximately $36,760,000.
(B) See Notes 4 and 6 of Notes to Financial  Statements.  
(C)  Reconciliation of real estate owned:
                                                1995           1994            1993
                                                ----           ----            ----

      Balance at beginning of year           $ 35,937        $ 35,401       $ 35,401
      Additions                                   165             536              -
      Write-down due to permanent
        impairment (1)                         (6,369)              -              -
                                           ----------        --------       --------
      Balance at end of year                 $ 29,733        $ 35,937       $ 35,401
                                             ========        ========       ========

(D)       Reconciliation of accumulated depreciation:

      Balance at beginning of year          $   8,840       $   7,434       $  5,929
      Depreciation expense                        893           1,406          1,505
                                           ----------       ---------       --------
      Balance at end of year                $   9,733       $   8,840       $  7,434
                                            =========       =========       ========


<FN>

   (1) See Note 4 of Notes to Financial  Statements  for a discussion of the  impairment  write-down  recorded in fiscal
   1995.
</FN>
                                                    

</TABLE>