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 MARCH 31, 1998

                                       OR

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

               For the transition period from ______ to _______ .


                         Commission File Number: 0-10995


                        PAINE WEBBER GROWTH PROPERTIES LP
                        ---------------------------------
             (Exact name of registrant as specified in its charter)


         Delaware                                      04-2772109
         --------                                      ----------
(State or other jurisdiction of                     (I.R.S. Employer
incorporation or organization)                      Identification No.)

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

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

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

                                            Name of each exchange on
Title of each class                             which registered
-------------------                         ------------------------
      None                                           None

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

                      UNITS OF LIMITED PARTNERSHIP INTEREST
                                (Title of class)

Indicate by check mark if disclosure of delinquent  filers  pursuant to Item 405
of Regulation  S-K is not contained  herein,  and will not be contained,  to the
best of registrant's  knowledge,  in definitive proxy or information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. |X|

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days. Yes |X| No |_|.

State the aggregate market value of the voting stock held by  non-affiliates  of
the registrant. Not applicable.

                       DOCUMENTS INCORPORATED BY REFERENCE

Documents                                      Form 10-K Reference
---------                                      -------------------

Prospectus of registrant dated                        Part IV
November 15, 1982, as supplemented

<PAGE>
                        PAINE WEBBER GROWTH PROPERTIES LP
                                 1998 FORM 10-K

                                TABLE OF CONTENTS


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

Item  1     Business                                              I-1

Item  2     Properties                                            I-3

Item  3     Legal Proceedings                                     I-3

Item  4     Submission of Matters to a Vote of Security Holders   I-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-2

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

Item  13    Certain Relationships and Related Transactions        III-3


Part IV
-------

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

Signatures                                                        IV-2

Index to Exhibits                                                 IV-3

Financial Statements and Supplementary Data                F-1 to F-27

<PAGE>

      This Form 10-K contains  forward-looking  statements within the meaning of
Section 27A of the  Securities  Act of 1933 and  Section  21E of the  Securities
Exchange Act of 1934. The  Partnership's  actual results could differ materially
from those set forth in the  forward-looking  statements.  Certain  factors that
might cause such a difference  are  discussed in Item 7 in the section  entitled
"Certain Factors Affecting Future Operating  Results"  beginning on page II-6 of
this Form 10-K.

                                    PART I

Item 1.  Business

      Paine  Webber  Growth  Properties  LP  (the  "Partnership")  is a  limited
partnership formed in August 1982, under the Uniform Limited  Partnership Act of
the State of  Delaware,  for the purpose of  investing  in a portfolio of rental
apartment properties which had potential for near-term capital appreciation.  It
is the  Partnership's  intention to enhance the value of the properties  through
the use of capital reserves and by reinvesting  cash flow from  operations.  The
Partnership  sold  $29,193,000  in Limited  Partnership  units  (29,193 units at
$1,000 per unit) from November 15, 1982 through September 30, 1983 pursuant to a
Registration  Statement  on Form S-11  filed  under the  Securities  Act of 1933
(Registration No. 2-78818). In addition, the Initial Limited Partner contributed
$1,000 for one unit (a "Unit") of Limited Partnership Interest. Limited Partners
will not be required to make any additional capital contributions.

      As of March  31,  1998,  the  Partnership  owned,  through  joint  venture
partnerships,  interests in the operating  properties set forth in the following
table:
<TABLE>
<CAPTION>

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


Rocky  Mountain  Partners          301           2/17/83     Fee  ownership  of land and  improvements
Tantra Lake Apartments             Units                     (through joint venture) 
Boulder, Colorado

Grouse Run Associates I & II       158           3/31/83     Fee  ownership  of land and improvements
Grouse Run Apartments              Units                     (through joint venture)
Stockton, California

Plano Chisholm Place               142           5/31/83     Fee  ownership  of land  and improvements
Associates                         Units                     (through joint venture)
Chisholm Place Apartments
Plano, Texas
</TABLE>
    
    (1)  See Notes to the Financial  Statements of the Partnership filed in Item
         14(a)(1)  of this  Annual  Report for a  description  of the  long-term
         mortgage  indebtedness secured by the Partnership's  operating property
         investments  and for a description of the agreements  through which the
         Partnership has acquired these real estate investments.

      The Partnership  originally  owned  interests in six operating  investment
properties.  In addition to the properties  listed above, the Partnership  owned
interests in the Parkwoods  Apartments,  the Northcastle  Apartments and the Nob
Hill Apartments.  On October 20, 1991, the 433-unit Parkwoods Apartments complex
was completely destroyed by a fire which devastated a large section of the hills
over Oakland, California. On May 27, 1992, the joint venture received a full and
final  insurance  settlement of  approximately  $29,361,000  for coverage on the
damage to the buildings and the loss of rental  income.  On April 15, 1994,  the
land at the former Parkwoods site was sold to an affiliate of the  Partnership's
co-venture  partner  for  $4,750,000.  See the  discussion  in the  notes to the
financial  statements of the Partnership  accompanying  this Annual Report for a
further  discussion of these events.  On December 23, 1994,  Austin  Northcastle
Partners,  a joint venture in which the  Partnership  had an interest,  sold its
operating investment property (Northcastle  Apartments) to an unaffiliated third
party for $6,100,000.  Final approval of the sale, which involved the assumption
of the  outstanding  first  mortgage loan secured by the property,  was received
from the Department of Housing and Urban  Development  on April 26, 1995.  After
transaction costs and the assumption of the outstanding first mortgage loan, the
joint venture received net proceeds of  approximately  $1,620,000 from the sale.
The Partnership's share of such proceeds was $1,581,000,  in accordance with the
terms of the joint  venture  agreement.  See the  discussion in the notes to the
financial  statements of the Partnership  accompanying  this Annual Report for a
further discussion of this transaction.  On February 7, 1997, Nob Hill Partners,
a joint venture in which the Partnership  had an investment,  sold its operating
investment  property,  the Nob Hill  Apartments,  a 368-unit  apartment  complex
located in San Antonio,  Texas,  to an unrelated  third party for $9.5  million.
Final approval of the sale,  which  involved the  assumption of the  outstanding
mortgage loan secured by the property, was received by the Department of Housing
and Urban  Development  on June 9, 1997.  The sale  generated  net  proceeds  of
approximately $2.3 million. In addition,  the venture had excess working capital
of  approximately  $360,000 at the time of the sale. All of the net proceeds and
excess working  capital were due to the  Partnership  under the terms of the Nob
Hill joint venture  agreement.  See the discussion in the notes to the financial
statements  of the  Partnership  accompanying  this Annual  Report for a further
discussion of this transaction.

      The Partnership is currently pursuing potential disposition strategies for
the three remaining  investments in its portfolio.  General  improvements in the
apartment  segment  of the real  estate  market  are  expected  to  provide  the
Partnership with the  opportunities to market and sell these three properties in
the near term. Active marketing efforts on all three properties began subsequent
to year-end. It is currently contemplated that the sales of the remaining assets
and a liquidation of the Partnership  could be accomplished  prior to the end of
calendar  year 1998.  There are no  assurances,  however,  that the sales of the
remaining assets and the liquidation of the Partnership will be completed within
this time frame.

      The Partnership's  principal  investment  objectives are to invest the net
cash proceeds from the offering of limited partnership units in rental apartment
properties with the goals of obtaining:

      (1) capital appreciation;
      (2) tax  losses  during  the  early  years of  operations  from deductions
          generated by investments;
      (3) equity  build-up  through  principal  repayments  of mortgage loans on
          Partnership properties; and
      (4) cash distributions from rental income.

      The  primary   investment   objective  of  the   Partnership   is  capital
appreciation.  The Partnership may sacrifice  attainment of its other objectives
to the extent  required  to achieve  the  capital  appreciation  objective.  The
Partnership has generated tax losses from operations since  inception.  However,
the  benefits of such losses to  investors  have been  significantly  reduced by
changes  in  federal  income  tax  law  subsequent  to the  organization  of the
Partnership.   Through  March  31,  1998,  the  Limited  Partners  had  received
cumulative cash distributions  totalling $20,954,000,  or approximately $718 per
original  $1,000  investment  for  the  Partnership's  earliest  investors.  The
cumulative cash returns  described above include special  distributions  made on
June 13,  1997 and June 15,  1995 of $115 and $90,  respectively,  per  original
$1,000 investment,  consisting of the Partnership's share of the net proceeds of
the Nob Hill and  Northcastle  sale  transactions,  along  with the  release  of
certain excess reserve funds. Such cumulative cash returns also include $312 per
original  $1,000  investment  from the  proceeds  from the  Parkwoods  insurance
settlement and the subsequent land sale and $60 per original  $1,000  investment
from the 1986  refinancing  of the Tantra Lake  Apartments.  The remaining  cash
distributions  have been paid from operating cash flow of the  Partnership.  The
Partnership  resumed regular  quarterly  distributions  with the payment made on
November 15, 1994 for the quarter  ended  September  30, 1994.  During the first
half of  fiscal  1997,  distributions  were  paid at a rate of 2% per annum on a
Limited  Partner's  remaining  capital  account  of  $538  per  original  $1,000
investment.  Effective for the quarter ended December 31, 1996, the distribution
rate  was  increased  to 3% per  annum.  Subsequent  to the sale of the Nob Hill
Apartments and the related  special  capital  distribution  to investors in June
1997, the Partnership's  annual  distribution rate was increased to 5% per annum
on a Limited  Partner's  remaining  capital  account of $423 per original $1,000
Unit. The Partnership  increased the  distribution  rate to 6% per annum for the
distribution  paid on May 15, 1998 for the quarter  ended March 31, 1998.  As of
March 31, 1998, the Partnership  retained an ownership  interest in three of its
six original  investment  properties.  The Partnership's  success in meeting its
capital  appreciation  objective will depend upon the proceeds received from the
final liquidation of the remaining investments,  which collectively comprise 37%
of the Partnership's original investment portfolio.  The amount of such proceeds
will ultimately depend upon the value of the underlying investment properties at
the time of such liquidations, which cannot presently be determined.

      All of the Partnership's  investment properties 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 and  amenities.  Apartment  properties  in all
markets also compete  with the local single  family home market for  prospective
tenants.  The  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 generally been
offset by the lack of significant new construction  activity in the multi-family
apartment market over most of this period. Over the past two years,  development
activity for  multi-family  properties  in many  markets,  including the greater
Dallas  area  when  the  Chisholm  Place  property  is  located,  has  escalated
significantly.  Development activity in the Boulder and Stockton markets,  where
the Tantra  Lake and Grouse run  properties  are  located,  has not been a major
factor to date.

      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").

      The general partners of the Partnership (the "General Partners") are First
PW  Growth  Properties,   Inc.  and  Properties  Associates.   First  PW  Growth
Properties,  Inc. (the "Managing General Partner"), a wholly-owned subsidiary of
PaineWebber  Group Inc.,  is the managing  general  partner of the  Partnership.
Properties Associates (the "Associate General Partner"), a Massachusetts general
partnership,  certain general  partners of which are officers of the Adviser and
the  Managing  General  Partner,   is  the  associate  general  partner  of  the
Partnership.

      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 March 31, 1998,  the  Partnership  had interests in three  operating
properties through joint venture  partnerships.  The joint venture  partnerships
and the related properties are referred to under Item 1 above to which reference
is made for the name, location, and description of each property.

      Occupancy  figures  for each fiscal  quarter  during  1998,  along with an
average for the year, are presented  below for each property owned during fiscal
1998:

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

Tantra Lake Apartments        91%         95%         94%         92%      93%

Grouse Run Apartments         95%         96%         96%         93%      95%

Chisholm Place Apartments     99%         99%         99%         98%      99%

Item 3.  Legal Proceedings

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

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

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

      In February 1996,  approximately  150 plaintiffs  filed an action entitled
Abbate v.  PaineWebber  Inc. in  Sacramento,  California  Superior Court against
PaineWebber   Incorporated  and  various  affiliated   entities  concerning  the
plaintiffs' purchases of various limited partnership interests,  including those
offered by the  Partnership.  The complaint  alleged,  among other things,  that
PaineWebber and its related entities committed fraud and  misrepresentation  and
breached  fiduciary  duties  allegedly  owed to the  plaintiffs  by  selling  or
promoting  limited   partnership   investments  that  were  unsuitable  for  the
plaintiffs and by overstating the benefits,  understating  the risks and failing
to state  material  facts  concerning  the  investments.  The  complaint  sought
compensatory  damages of $15 million plus punitive damages against  PaineWebber.
In September 1996 the court dismissed many of the  plaintiffs'  claims as barred
by applicable securities arbitration regulations.  Mediation with respect to the
Abbate  action  was held in  December  1996.  As a result of such  mediation,  a
settlement between PaineWebber and the plaintiffs was reached which provided for
the complete  resolution  of this action.  Final  releases and  dismissals  with
regard to this action were received during fiscal 1998.

      Based on the  settlement  agreements  discussed  above covering all of the
outstanding  unitholder  litigation,  management believes that the resolution of
these  matters will not have a material  impact on the  Partnership's  financial
statements, taken as a whole.

     Rocky Mountain  Partners,  a joint venture in which the  Partnership has an
interest,  was named as a defendant in a lawsuit brought in February 1998 by two
individuals and an entity,  among others,  who had previously  performed  repair
work at the Tantra Lake property.  The lawsuit alleges, among other things, that
the  individuals  were  exposed,  without their  knowledge,  to unsafe levels of
asbestos hazards in the course of performing work at the Tantra Lake Apartments.
The joint venture plans to vigorously  defend itself against the  allegations in
this lawsuit.  The joint venture's insurer has preliminarily denied coverage for
the costs of defending the lawsuit by citing a contract exclusion.  The eventual
outcome of this litigation and the  applicability of insurance  coverage related
thereto  cannot be  determined at this time.  Accordingly,  no liability for any
expenses  which might result from this  litigation  has been provided for in the
venture's financial statements.

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


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

      None.


<PAGE>
                                    
                                   PART II

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

      At March  31,  1998,  there  were  2,675  record  holders  of Units in the
Partnership.  There is no public market for the Units, and it is not anticipated
that a public market for Units will develop.  Upon request, the Managing General
Partner will endeavor to assist a Unitholder  desiring to transfer his Units and
may utilize the  services  of PWI in this  regard.  The price to be paid for the
Units will be subject to negotiation  by the  Unitholder.  The Managing  General
Partner will not redeem or repurchase Units.

      Reference is made to Item 6 below for a discussion  of cash  distributions
made to the Limited Partners during fiscal 1998.

Item 6.  Selected Financial Data
<TABLE>

                        Paine Webber Growth Properties LP
         For the years ended March 31, 1998, 1997, 1996, 1995 and 1994
                    (in thousands, except for per Unit data)

 <CAPTION>
                                   1998       1997        1996        1995        1994
                                   ----       ----        ----        ----        ----
<S>                                <C>        <C>         <C>         <C>         <C>

Revenues                           $   287    $ 2,825     $  2,446    $  2,471    $  2,393

Operating income (loss)            $   (16)   $  (559)    $   (422)   $   (324)   $     31

Partnership's share of gains
  on settlement of insurance
  claims                                 -          -            -           -    $    225

Loss on sale of operating
  investment property                    -    $  (138)           -           -           -

Partnership's share of
  unconsolidated
  ventures' income (losses)        $   202    $    94     $     96    $    644    $ (2,546)

Net income (loss)                  $   186    $  (580)    $   (322)   $    325    $ (2,289)

Per Limited Partnership Unit:
  Net income (loss)                $  6.29    $(19.67)    $ (10.93)   $   8.70    $ (77.63)

  Cash distributions
    from operations                $ 21.35    $ 12.12     $  11.66    $   6.28           -

  Cash distributions from sale,
    refinancing and other
    capital transactions           $115.00          -     $  90.00    $ 158.00           -

Total assets                       $ 1,034    $ 4,422     $ 12,979    $ 16,086    $ 20,510

Mortgage note payable                    -          -     $  6,890    $  6,962    $  7,029
</TABLE>


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

      The above per Limited  Partnership  Unit  information  is based upon the
29,194 Limited Partnership Units outstanding during each year.

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

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

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

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

     The Partnership  offered limited  partnership  interests to the public from
November 1982 to September 1983 pursuant to a Registration Statement filed under
the Securities Act of 1933.  Gross proceeds of $29,194,000  were received by the
Partnership   and,  after  deducting   selling   expenses  and  offering  costs,
approximately  $24,560,000 was initially  invested in joint venture interests in
six  operating  investment  properties.  As of March  31,  1998 the  Partnership
retained interests in three operating investment properties. During fiscal 1997,
the  Partnership  completed  a sale  transaction  with  respect  to the Nob Hill
Apartments and during fiscal 1995, the Partnership  completed sales transactions
with respect to the  Northcastle  Apartments  and the land at the former site of
the Parkwoods  Apartments.  While the sale of the Nob Hill  Apartments  had been
executed  and  control  of the  property  had been  transferred  to the buyer on
February 7, 1997, the  distribution of the net sale proceeds was delayed pending
the  receipt  of the  formal  consent  of the  Secretary  of  Housing  and Urban
Development  ("HUD") to the sale of the property and the  assumption of the loan
by the purchaser. Such final approval was received on June 9, 1997. As a result,
the  Partnership  made  a  special  distribution  to  the  Limited  Partners  of
approximately $3,357,000, or $115 per original $1,000 Unit, on June 13, 1997. Of
this amount, $90.65 represented the net proceeds and excess working capital from
the sale of the Nob Hill  Apartments and $24.35  represented a  distribution  of
Partnership  reserves,  which exceeded expected future requirements.  After this
special capital distribution to investors, the Partnership's annual distribution
rate  was  increased  from 3% to 5% on a  Limited  Partner's  remaining  capital
account of $423 per original $1,000 Unit. Subsequent to year-end,  the quarterly
distribution  was  increased  to  $6.35  per  original  $1,000  Unit,  which  is
equivalent to a 6% annualized rate of return on remaining capital, effective for
the distribution  paid on May 15, 1998 for the quarter ended March 31, 1998. The
reasons for the  increases in the  distribution  rate are the improved cash flow
being  generated by the Tantra Lake  Apartments  and the fact that nearly all of
Nob Hill's  operating  cash flow for the past several years had been used at the
property  for  repairs  and  improvements.  The  Partnership  does  not have any
commitments for additional capital expenditures or investments but may be called
upon to  advance  funds  to its  existing  investments  in  accordance  with the
respective joint venture  agreements.  The  Partnership's  primary objective has
been  to  maximize  the  capital   appreciation  of  its  operating   investment
properties.

      The  Partnership  has  ownership  interests in three  remaining  apartment
properties  located in the markets of Boulder,  Colorado (Tantra Lake),  greater
Dallas,  Texas  (Chisholm  Place) and Stockton,  California  (Grouse  Run).  The
Partnership is currently pursuing potential disposition strategies for the three
remaining  investments in its portfolio.  General  improvements in the apartment
segment of the real estate market are expected to provide the  Partnership  with
the opportunities to market and sell these three properties in the near term. As
discussed further below,  active marketing efforts on all three properties began
subsequent  to  year-end.  It is  currently  contemplated  that the sales of the
remaining  assets and a liquidation  of the  Partnership  could be  accomplished
prior to the end of calendar year 1998. There are no assurances,  however,  that
the sales of the remaining assets and the liquidation of the Partnership will be
completed within this time frame.

     As previously reported,  the Partnership received some unsolicited interest
from  prospective  buyers for the Tantra Lake Apartments  during fiscal 1997. In
response to this  interest,  management  initiated  discussions  with local real
estate  brokerage  firms  concerning  potential sale  strategies for Tantra Lake
during  fiscal  1998.  During  the fourth  quarter,  the  Partnership  solicited
marketing  proposals from three of these firms. After reviewing their respective
proposals  and  conducting  extensive  interviews,  the  Partnership  selected a
national brokerage firm that is a leading seller of apartment  properties in the
Denver area.  Subsequent  to year-end,  a marketing  package was  prepared,  and
comprehensive  sales efforts began in April.  In conjunction  with the marketing
program,  certain  improvements to the property are being implemented to enhance
the market value of the Tantra Lake property.  In addition to the fitness center
improvements  which were completed  during the third quarter of fiscal 1998, the
property's  management team recently  updated the property's  model  apartments,
completed  clubhouse  renovations,  and  installed new washers and dryers in the
laundry  facilities.  In the  first  quarter  of  fiscal  1999,  the  property's
management team plans to enhance the property's landscaping,  reseal the parking
areas and finish the painting projects to the interior hallways and exteriors of
the buildings.  Rocky Mountain Partners, the joint venture which owns the Tantra
Lake property, was named as a defendant in a lawsuit brought in February 1998 by
two individuals and an entity, among others, who had previously performed repair
work at the  property.  The  lawsuit  alleges,  among  other  things,  that  the
individuals were exposed,  without their knowledge, to unsafe levels of asbestos
hazards in the course of  performing  work at the Tantra  Lake  Apartments.  The
joint venture plans to vigorously  defend itself against the allegations in this
lawsuit.  The joint venture's insurer has preliminarily  denied coverage for the
costs of  defending  the lawsuit by citing a contract  exclusion.  The  eventual
outcome of this litigation and the  applicability of insurance  coverage related
thereto  cannot be  determined at this time.  Accordingly,  no liability for any
expenses  which might result from this  litigation  has been provided for in the
venture's financial statements.

      Although the performance of the Chisholm Place Apartments  remained strong
throughout  fiscal 1998 due to the property's  larger unit sizes,  its excellent
location and its well-maintained physical appearance,  the property's management
and leasing  team  reports  that visits by  qualified  prospective  tenants have
decreased from previous  quarters and the vacancy rate of 2.6% at March 31, 1998
was at the highest level since 1996. According to the property's  management and
leasing  team,  the  development  of several new  apartment  communities  in the
vicinity of Chisholm  Place appears to be affecting the market.  As noted above,
the  Partnership  is  formulating   disposition  strategies  for  its  remaining
investments  that could  result in the sale of Chisholm  Place in calendar  year
1998.  During  the  fourth  quarter  of fiscal  1998,  the  Partnership  and its
co-venture partner requested proposals from two real estate brokerage firms with
offices in Texas to market the Chisholm Place property for sale. After reviewing
their respective  proposals and conducting  interviews,  the Partnership and the
co-venturer  selected a local brokerage firm with extensive experience marketing
apartment  properties.   Sales  materials  have  been  prepared,  and  extensive
marketing efforts began subsequent to year-end.

      The occupancy level at the Grouse Run Apartments in Stockton,  California,
averaged 93% for the quarter  ended March 31,  1998,  down from 96% in the third
quarter  and down  from  97% for the  same  period  a year  ago.  Conditions  in
Stockton's  apartment  market have been  generally  soft over the past year, and
rental rates have  remained  relatively  flat.  The  property's  management  and
leasing team reports that its competition continues to offer leasing concessions
in the form of free  rent.  During  the  fourth  quarter  of  fiscal  1998,  the
Partnership  requested  proposals  from four  brokerage  firms  with  offices in
California  to market the Grouse Run property for sale.  After  reviewing  their
respective  proposals  and  conducting  in-depth  interviews,   the  Partnership
selected  a  national  brokerage  firm  that is a leading  seller  of  apartment
properties in the Stockton area.  Sales  materials  have been  prepared,  and an
extensive marketing campaign began subsequent to year-end.

      As previously reported, management had filed for a refund of approximately
$450,000 in costs incurred to secure the necessary  building  permits which were
obtained  prior  to the  sale  of  the  land  underlying  the  former  Parkwoods
Apartments from a federal agency  responsible for  administering  federal aid in
connection  with the 1991  Oakland  fire.  An agreement  was reached  during the
second quarter of fiscal 1996 to a release schedule for money previously  funded
by the Parkwoods  joint venture to pay for building  permits.  The joint venture
received a partial refund of such expenses totalling  approximately  $146,000 in
December  1995.  However,  the  federal  agency  subsequently  denied  the joint
venture's  claim  for a refund  of the  remaining  $300,000  in costs  incurred.
Management  believed that the joint venture was entitled to a full refund of the
costs incurred and had been pursuing such a refund.  However, during fiscal 1998
the federal agency denied the  Partnership's  appeal regarding the reimbursement
claim, and, at the present time, the Partnership does not plan any further legal
action. In addition, it is possible that the federal agency will seek the return
of the  $146,000  which was  disbursed in December  1995.  A liability  for this
potential  obligation is accrued on the Partnership's  balance sheet as of March
31, 1998. Assuming that the sales of the Partnership's  remaining assets proceed
as expected, as discussed further above, management will attempt to resolve this
matter fully during  calendar year 1998 in order to complete the  liquidation of
the Partnership as planned.

      At March 31, 1998, the Partnership and its consolidated  joint venture had
available cash and cash equivalents of approximately  $1,034,000.  Such cash and
cash  equivalents,   along  with  future  cash  flow   distributions   from  the
Partnership's  operating properties,  will be used for the working capital needs
of the  Partnership,  for the  funding  of the  Partnership's  share of  capital
improvements or operating deficits of the investment  properties,  if necessary,
and for distributions to the partners. Such sources of liquidity are expected to
be adequate to cover the Partnership's  needs on both a short-term and long-term
basis.  The source of future  liquidity  and  distributions  to the  partners is
expected to be through  proceeds  received from the sales or refinancings of the
three remaining investment properties.

      As noted above, the Partnership  expects to be liquidated  during calendar
year 1998.  Notwithstanding  this, the Partnership believes that it has made all
necessary modifications to its existing systems to make them year 2000 compliant
and does not expect that additional  costs associated with year 2000 compliance,
if any, will be material to the Partnership's results of operations or financial
position.

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

      The  Partnership  reported net income of $186,000 for the year ended March
31,  1998,  as  compared  to a net loss of  $580,000  for the prior  year.  This
$766,000 favorable change in net operating results is primarily due to a loss of
$138,000  realized  in the  prior  year  on the  final  sale  of  the  Nob  Hill
Apartments,  a  $543,000  decrease  in the  Partnership's  operating  loss and a
$108,000 increase in the Partnership`s share of unconsolidated ventures' income.
The loss on the final sale of the Nob Hill Apartments represented the difference
between the gross purchase  price of $9.5 million net of selling costs,  and the
net carrying  value of the operating  investment  property as of the date of the
sale. The  Partnership's  operating loss decreased mainly due to the sale of the
consolidated Nob Hill Apartments.  In the prior year, the Nob Hill joint venture
had net  operating  income of $69,000  before  recording an $856,000 loss on the
impairment of the consolidated venture's operating property.  Prior to the sale,
as of December 31, 1996,  the Nob Hill joint  venture  recognized  an impairment
loss to write down the net carrying value of the operating  investment  property
and related deferred expenses to management's estimate of the net proceeds which
were realizable from a sale transaction.

      The Partnership's  share of  unconsolidated  ventures' income increased in
fiscal 1998 due to a $161,000  increase in combined revenues which was partially
offset by a $46,000 increase in combined expenses. Revenues increased mainly due
to a $167,000  increase in rental  income.  While rental income  improved at all
three properties in the current year, the most significant  increase occurred at
the Tantra Lake Apartments  where rental revenue was up by more than 3% from the
prior year. Expenses increased,  despite a decrease in combined interest expense
of $163,000, mainly due to an increase in certain administrative expenses of the
Parkwoods  joint venture.  Interest  expense  decreased due to the full 12-month
effect of the August  1996  refinancing  of Tantra  Lake's  mortgage  loan which
significantly reduced the venture's annual debt service.

1997 Compared to 1996
---------------------

      The  Partnership  reported a net loss of $580,000 for the year ended March
31,  1997,  as  compared  to a net loss of  $322,000  for the prior  year.  This
$258,000  unfavorable  change in net  operating  results was  primarily due to a
$138,000 loss  realized from the sale of the Nob Hill  Apartments on February 7,
1997 and a $137,000  increase in the  Partnership's  operating loss. The loss on
the sale of the Nob Hill Apartments amounted to $138,000,  which represented the
difference  between  the gross  purchase  price of $9.5  million  net of selling
costs, and the net carrying value of the operating investment property as of the
date of the sale. The  Partnership's  operating loss increased due to a $516,000
increase  in  expenses  that was  partially  offset by a  $379,000  increase  in
revenues.  Expenses  increased  mainly due to an $856,000  loss  recorded on the
impairment of the consolidated venture's operating property.  Prior to the sale,
as of December 31, 1996,  the Nob Hill joint  venture  recognized  an impairment
loss to write down the net carrying value of the operating  investment  property
and related deferred expenses to management's estimate of the net proceeds which
were  realizable  from a sale  transaction.  The  additional  loss  on the  sale
referred to above, of $138,000, was recorded as of the date of the sale based on
the final negotiated  amount of the net proceeds.  Decreases in depreciation and
general and  administrative  expenses of $457,000  and  $147,000,  respectively,
partially  offset the  impairment  loss on the Nob Hill  property.  Depreciation
expense   decreased  as  the   consolidated   joint  venture  ceased   recording
depreciation  expense on the Nob Hill  property as of April 30, 1996 as it began
to actively market the property for sale.  General and  administrative  expenses
decreased largely due to a reduction in certain required  professional  services
when compared to fiscal 1996. In addition, property operating expenses increased
by $191,000. Due to the Partnership's  three-month reporting lag and the sale of
the Nob Hill Apartments on February 7, 1997, as discussed further in Notes 2 and
4 to the consolidated financial statements,  the Partnership reported operations
of the consolidated venture from January 1, 1997 through the date of sale in the
consolidated  fiscal  1997  operating  results.  Accordingly,  the  consolidated
statements  of  operations  for  fiscal  1997  reflect  slightly  more  than one
additional month of Nob Hill's operations.  Revenues increased due to a $230,000
increase in rental revenue and a $162,000 increase in interest and other income.
The increases in both revenue  categories  was primarily due to the inclusion of
the  additional  lag-period  operations  of the Nob Hill joint venture in fiscal
1997 results, as explained above.

      The Partnership's  share of  unconsolidated  ventures' income decreased by
$2,000 for fiscal 1997 when compared to the prior year. The Partnership's  share
of  unconsolidated  ventures'  income  decreased  due to a  $71,000  decline  in
combined  revenues which was partially  offset by a $67,000 decrease in combined
expenses.  Revenues  decreased mainly due to a $138,000 decrease in interest and
other income.  Interest and other income decreased primarily due to the $146,000
partial  refund  received  in fiscal  1996 for  costs  incurred  to  secure  the
necessary  building  permits which were  obtained  prior to the sale of the land
underlying  the former  Parkwoods  Apartments,  as discussed  further  above.  A
$67,000  increase in rental income partially offset the decrease in interest and
other income.  Rental  revenues  increased  mainly due to an increase in average
monthly rental rates at the Tantra Lake Apartments during fiscal 1997.  Expenses
decreased mainly due to reductions in combined depreciation expense and combined
interest  expense of $54,000 and  $39,000,  respectively.  Depreciation  expense
declined primarily due to a significant asset at Tantra Lake having become fully
depreciated  during fiscal 1997.  Interest  expense  decreased due to the August
1996 refinancing of Tantra Lake's mortgage loan which significantly  reduced the
venture's annual debt service.

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

      The  Partnership  reported a net loss of $322,000 for the year ended March
31, 1996, as compared to net income of $325,000 reported for the prior year. The
primary  reason  for the  unfavorable  change  in net  operating  results  was a
decrease in the  Partnership's  share of unconsolidated  ventures'  income.  The
Partnership  realized  net  income of $96,000  from its share of  unconsolidated
ventures' operations in fiscal 1996 as compared to net income of $644,000 in the
prior year. The net income of the unconsolidated  joint ventures during calendar
1994 included the net gain on the sales of the  Northcastle  Apartments  and the
Parkwoods land of $1,043,000.  The impact of this net gain on the  Partnership's
share of  unconsolidated  ventures' income was partially offset by rental income
increases at Tantra Lake and Chisholm Place in calendar 1995, mainly as a result
of rental rate increases. The Partnership achieved rental income increases of 4%
and 2% at Tantra Lake and  Chisholm  Place,  respectively,  for  calendar  1995.
Average  occupancy at Tantra Lake increased  slightly from 95% for calendar 1994
to 96% for calendar  1995.  Average  occupancy at Chisholm  Place was  unchanged
between calendar 1995 and 1994. Rental income was also up slightly at Grouse Run
due to an increase in average  occupancy  from 94% for calendar  1994 to 95% for
calendar  1995.  Rental rates at Grouse Run were  relatively  unchanged  between
calendar  1995 and 1994 as a result of soft  market  conditions  in the state of
California in general.

      The decrease in net income  during  fiscal 1996 was also partly the result
of an increase in the Partnership's operating loss of $98,000. This increase was
mainly due to increases in depreciation  expense and general and  administrative
expenses of $93,000 and $87,000, respectively, and a decrease in interest income
of $151,000.  Depreciation  expense  increased  due to  significant  fixed asset
additions to the Nob Hill  operating  investment  property  during  fiscal 1995.
General and administrative  expenses  increased  primarily due to an increase in
certain  required  professional  services  during fiscal 1996.  Interest  income
decreased in fiscal 1996 due to a  significant  decrease in average  outstanding
cash  balances for the year due to the receipt of the proceeds from the sales of
the Parkwoods and Northcastle properties during the prior year. The increases in
depreciation expense and general and administrative expenses and the decrease in
interest income were offset by a decrease in interest expense and an increase in
rental income in fiscal 1996.  Interest  expense  decreased due to the scheduled
principal  amortization  on the  mortgage  note and a decrease  in the  mortgage
insurance  premium for the Nob Hill loan. Rental income increased by $152,000 at
the  consolidated  Nob Hill  Apartments  for calendar 1995 due to an increase in
rental rates over the prior year.  Average occupancy  actually declined slightly
at Nob Hill from 93% for calendar 1994 to 92% for calendar 1995.

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

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

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

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

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

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

      Competition. The financial performance of the Partnership's remaining real
estate  investments  will be  significantly  impacted  by the  competition  from
comparable  properties  in their local market areas.  The  occupancy  levels and
rental rates  achievable at the  properties are largely a function of supply and
demand in the market. In many markets across the country,  including the greater
Dallas area in which the Chisholm Place property is located,  development of new
multi-family  properties  has increased  significantly  over the past two years.
Existing  properties in such markets  could be expected to experience  increased
vacancy levels,  declines in effective rental rates and, in some cases, declines
in estimated market values as a result of the increased competition. Development
activity in the Boulder and Stockton  markets,  where the Tantra Lake and Grouse
Run  properties are located,  has not been a major factor to date.  There are no
assurances  that  these  competitive  pressures  will not  adversely  affect the
operations  and/or market values of the Partnership's  investment  properties in
the future.

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

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

Inflation
---------

      The Partnership  commenced  operations in 1983 and completed its fifteenth
full year of operations in the current fiscal year. 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.  Tenants at the
Partnership's apartment properties have short-term leases, generally of one year
or less in duration.  Rental rates at these  properties  can be adjusted to keep
pace with inflation,  to the extent market  conditions  allow, as the leases are
renewed or turned over.  Such increases in rental income would be expected to at
least partially offset the  corresponding  increases in Partnership and property
operating expenses resulting from inflation.

Item 8.  Financial Statements and Supplementary Data

      The financial statements and supplementary data are included under Item 14
of the 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 First  PW  Growth
Properties, Inc., a Delaware corporation,  which is a wholly-owned subsidiary of
PaineWebber.  The Associate  General  Partner of the  Partnership  is Properties
Associates,  a Massachusetts  general  partnership,  certain general partners of
which are officers of the Adviser and the Managing General Partner. The Managing
General Partner has overall authority and  responsibility  for the Partnership's
operations,  however,  the day-to-day  business of the Partnership is managed by
the Adviser pursuant to an advisory contract.

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

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

Bruce J. Rubin          President and Director           38          8/22/96
Terrence E. Fancher     Director                         44          10/10/96
Walter V. Arnold        Senior Vice President and
                          Chief Financial Officer        50          10/29/85
David F. Brooks         First Vice President and
                          Assistant Treasurer            55          7/20/82 *
Timothy J. Medlock      Vice President and Treasurer     37          6/1/88
Thomas W. Boland        Vice President and Controller    35          12/1/91

*  The date of incorporation of the Managing General Partner

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

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

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

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

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

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

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

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

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

      (f) None of the directors  and officers was 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 March 31,  1998,  all filing
requirements  applicable to the officers and  directors of the Managing  General
Partner and ten-percent beneficial holders were complied with.

Item 11.  Executive Compensation

      The directors and officers of the  Partnership's  Managing General Partner
receive no current or proposed remuneration from the Partnership.

      The  Partnership  is required  to pay certain  fees to the Adviser and the
General   Partners  are  entitled  to  receive  a  share  of  Partnership   cash
distributions,  and a share of profits and losses.  These items are described in
Item 13.

      The Partnership  resumed paying regular quarterly  distributions  with the
payment made on November 15, 1994 for the quarter ended  September 30, 1994 at a
rate of 2% per annum on remaining invested capital. The annual distribution rate
was  increased  to 3% with the payment made on February 15, 1997 for the quarter
ended  December  31,  1996.  As  discussed  further  in Item 7, the  Partnership
increased  the  distribution  rate to 5% on remaining  invested  capital for the
distribution  paid on August 15, 1997 with the  quarter  ended June 30, 1997 and
then increased the distribution rate to 6% with the distribution paid on May 15,
1998 for the quarter ended March 31, 1998.  However,  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,  First  PW  Growth  Properties,  Inc.  is  owned  by
PaineWebber.   Properties  Associates,  the  Associate  General  Partner,  is  a
Massachusetts  general  partnership,  certain general partners of which are also
officers of the Adviser and the Managing General Partner.  Properties Associates
is also the  Initial  Limited  Partner of the  Partnership  and owns one Unit of
Limited Partnership  interest. No limited partner is known by the Partnership to
own beneficially more than 5% of the outstanding interests of the Partnership.

      (b) Neither directors and officers of the Managing General Partner nor the
general partners of the Associate General Partner,  individually,  own any Units
of limited  partnership  interest of the Partnership.  No director or officer of
the Managing General Partner,  nor any general partner of the Associate  General
Partner,  possesses a right to acquire beneficial  ownership of Units of Limited
Partnership Interest of the Partnership.

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

Item 13.  Certain Relationships and Related Transactions

      The General  Partners of the Partnership  are First PW Growth  Properties,
Inc. (the "Managing General Partner"), a wholly-owned  subsidiary of PaineWebber
Group Inc.  ("PaineWebber"),  and Properties  Associates (the "Associate General
Partner"),  a Massachusetts  general  partnership,  certain general  partners of
which are officers of PaineWebber  Properties  Incorporated  (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 pursuant to
an advisory  contract.  The Adviser is a wholly-owned  subsidiary of PaineWebber
Incorporated  ("PWI"),  a wholly-owned  subsidiary of  PaineWebber.  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.
The Managing  General  Partner,  the Adviser and their affiliates are reimbursed
for their direct expenses relating to the offering of Units, the  administration
of the Partnership and the acquisition and operations of the Partnership's  real
property investments.

      All  distributable  cash,  as  defined,  for  each  fiscal  year  shall be
distributed  quarterly in the ratio of 99% to the Limited Partners and 1% to the
General  Partners.  All sale or  refinancing  proceeds  shall be  distributed in
varying  proportions  to the Limited and General  Partners,  as specified in the
Partnership Agreement.

      Pursuant to the terms of the Partnership Agreement,  taxable income or tax
losses of the Partnership  will be allocated 99% to the Limited  Partners and 1%
to the  General  Partners.  Taxable  income or tax loss  arising  from a sale or
refinancing  of  investment  properties  will be  allocated  to the  Limited and
General Partners in proportion to the amount of sale or refinancing  proceeds to
which  they are  entitled;  that is, as much as 99% but not less than 85% to the
Limited Partners.  However, the General Partners shall be allocated an amount of
taxable income from a capital transaction at least sufficient to eliminate their
deficit capital account balance.  If there are no sale or refinancing  proceeds,
tax losses and taxable income from a sale or  refinancing  will be allocated 99%
to the Limited  Partners  and 1% to the  General  Partners.  Allocations  of the
Partnership's  operations  between the General Partners and the Limited Partners
for  financial  accounting  purposes  have  been  made in  conformity  with  the
allocations of taxable income or tax loss.

      Under  the  advisory  contract,   the  Adviser  has  specific   management
responsibilities; to administer day-to-day operations of the Partnership, and to
report  periodically  the performance of the Partnership to the Managing General
Partner.  The Adviser is due to be paid an annual  management fee equal to 1% of
the gross offering proceeds.  However, the cumulative amount of acquisition fees
and  management  fees which can be paid to the  Adviser is limited to the sum of
18% of the gross offering proceeds plus 10% of Distributable Cash, as defined in
the  Prospectus.  During  1986,  this  limitation  was reached and, as a result,
future   management   fee  payments  are  limited  to  10%  of  any   additional
Distributable Cash. In fiscal 1998, based on additional  Distributable Cash paid
to the partners, management fees totalling $62,000 were paid to the Adviser.

      In connection  with  investing  Partnership  capital,  the Adviser  earned
acquisition  fees  totalling  $2,248,000,  of which  $1,664,000  was paid to the
Adviser at the time the  Partnership  acquired its  interests  in the  operating
investment  properties  and  $584,000  was  deferred  and was  payable  from the
distributable net cash flow of the operating investment properties,  as defined.
As of March 31, 1992, all deferred acquisition fees had been paid in full. Total
acquisition  fees to be  received by the Adviser was limited to not more than 9%
of the gross offering proceeds per the terms of the Prospectus.  The Adviser may
receive  a real  estate  brokerage  commission,  in an amount of up to 1% of the
selling  prices  of  properties   sold,  upon  the  disposition  of  Partnership
investments.  Payment of such fee will be subordinated to the payment of certain
amounts to the Limited Partners.

      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 March 31, 1998 is $95,000,  representing  reimbursements  to this
affiliate of the Managing  General  Partner for  providing  such services to the
Partnership.

      The  Partnership  uses the  services  of Mitchell  Hutchins  Institutional
Investors,  Inc. ("Mitchell Hutchins") 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 $6,000  (included in general and  administrative  expenses)  for managing the
Partnership's  cash assets during fiscal 1998. 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 the
Adviser.





<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
           fiscal 1998.

    (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 GROWTH PROPERTIES LP


                                  By:  First PW Growth Properties, Inc.
                                       --------------------------------
                                       Managing General Partner


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


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


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


Dated:  June 26, 1998

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following  persons on behalf of the Partnership and
in the capacities and on the dates indicated.



By:/s/ Bruce J. Rubin                 Date: June 26, 1998
   ---------------------------              -------------
   Bruce J. Rubin
   Director




By:/s/ Terrence E. Fancher            Date: June 26, 1998
   ---------------------------              -------------
   Terrence E. Fancher
   Director



<PAGE>

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

                       PAINE WEBBER GROWTH PROPERTIES LP

                              INDEX TO EXHIBITS

<CAPTION>

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

      (3) and (4)    Prospectus of the Partnership          Filed with the Commission
                     dated November 18, 1982, as            pursuant to Rule 424(c) and
                     supplemented, with particular          incorporated herein by reference.
                     reference to the Amended and
                     Restated Certificate and
                     Agreement of Limited Partnership


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


      (13)           Annual Report to Limited Partners      No Annual Report for fiscal year
                                                            1998 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 I of Part 1 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.
</TABLE>
                             

<PAGE>

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

                      PAINE WEBBER GROWTH PROPERTIES LP

       INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES


                                                                   Reference
                                                                   ---------

Paine Webber Growth Properties LP:

   Report of independent auditors                                       F-2

   Consolidated balance sheets as of March 31, 1998 and 1997            F-3

   Consolidated  statements of operations  for the years ended 
     March 31, 1998, 1997 and 1996                                      F-4

   Consolidated  statements of changes in partners' capital 
     (deficit) for the years ended March 31, 1998, 1997 and 1996        F-5

   Consolidated  statements  of cash flows for the years ended
      March 31, 1998, 1997 and 1996                                     F-6

   Notes to consolidated financial statements                           F-7

Combined Joint Ventures of Paine Webber Growth Properties LP:

   Report of independent auditors                                       F-17

   Combined balance sheets as of December 31, 1997 and 1996             F-18

   Combined  statements of operations and changes in venturers'  
     deficit for the years ended December 31, 1997, 1996 and 1995       F-19

   Combined  statements  of cash flows for the years ended  
     December 31, 1997, 1996 and 1995                                   F-20

   Notes to combined financial statements                               F-21

   Schedule III - Real Estate and Accumulated Depreciation              F-27


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


<PAGE>


                        REPORT OF INDEPENDENT AUDITORS



The Partners
Paine Webber Growth Properties LP:

      We have  audited the  accompanying  consolidated  balance  sheets of Paine
Webber  Growth  Properties  LP as of March 31,  1998 and 1997,  and the  related
consolidated  statements of operations,  changes in partners' capital (deficit),
and cash flows for each of the three years in the period  ended March 31,  1998.
Our audits also included the financial statement schedule listed in the Index at
Item 14(a).  These financial  statements and schedule are the  responsibility of
the  Partnership's  management.  Our  responsibility is to express an opinion on
these financial statements and schedule based on our audits.

      We 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 consolidated  financial  statements referred to above
present fairly, in all material respects, the consolidated financial position of
Paine  Webber  Growth  Properties  LP at  March  31,  1998  and  1997,  and  the
consolidated  results of its operations and its cash flows for each of the three
years in the period ended March 31, 1998, 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.








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


Boston, Massachusetts
June 12, 1998


<PAGE>


                      PAINE WEBBER GROWTH PROPERTIES LP

                         CONSOLIDATED BALANCE SHEETS
                           March 31, 1998 and 1997
                   (In thousands, except for per Unit data)

                                    ASSETS
                                                           1998      1997
                                                           ----      ----

Investments in unconsolidated joint
  ventures, at equity                                    $      -   $     304
Cash and cash equivalents                                   1,034       4,118
                                                         --------   ---------
                                                         $  1,034   $   4,422
                                                         ========   =========


                      LIABILITIES AND PARTNERS' CAPITAL

Losses from unconsolidated joint ventures in excess of
  investments and advances                               $    266   $       -
Accounts payable and accrued expenses                          44          39
Other liabilities                                             146           4
                                                         --------   ---------
      Total liabilities                                       456          43

Partners' capital:
  General Partners:
   Capital contributions                                        1           1
   Cumulative net income                                       20          18
   Cumulative cash distributions                              (41)        (35)

  Limited Partners ($1,000 per Unit, 29,194 
     Units outstanding):
   Capital contributions, net of offering costs            26,345      26,345
   Cumulative net losses                                   (4,793)     (4,977)
   Cumulative cash distributions                          (20,954)    (16,973)
                                                        ---------   ---------
      Total partners' capital                                 578       4,379
                                                        ---------   ---------
                                                        $   1,034   $   4,422
                                                        =========   =========




                           See accompanying notes.


<PAGE>


                        PAINE WEBBER GROWTH PROPERTIES LP

                      CONSOLIDATED STATEMENTS OF OPERATIONS
                For the years ended March 31, 1998, 1997 and 1996
                    (In thousands, except for per Unit data)


                                                1998         1997       1996
                                                ----         ----       ----
Revenues:
   Rental income                              $     -    $  2,251   $  2,021
   Reimbursements from affiliates                 182         176        189
   Interest and other income                      105         398        236
                                              -------    --------   --------
                                                  287       2,825      2,446

Expenses:
   Loss due to impairment of long-lived
      assets                                        -         856          -
   Interest expense                                 -         665        617
   Real estate taxes                                -         231        207
   Depreciation expense                             -         229        686
   Property operating expenses                      -       1,151        960
   Partnership management fees                     62          35         34
   General and administrative                     241         217        364
                                              -------    --------   --------
                                                  303       3,384      2,868
                                              -------    --------   --------

Operating loss                                    (16)       (559)      (422)

Loss on sale of operating investment
  property                                          -        (138)         -

Venture partner's share of consolidated
   venture's  loss                                  -          23          4

Partnership's share of unconsolidated
   ventures' income                               202          94         96
                                              -------    --------   --------

Net income (loss)                             $   186    $   (580)  $   (322)
                                              =======    ========   ========

Per Limited Partnership Unit:
   Net income (loss)                          $  6.29    $ (19.67)  $ (10.93)
                                              =======    ========   ========

   Cash distributions                         $136.35    $  12.12   $ 101.66
                                              =======    ========   ========


   The above per Limited  Partnership  Unit information is based upon the 29,194
Units of Limited Partnership Interest outstanding during each year.










                           See accompanying notes.


<PAGE>


                        PAINE WEBBER GROWTH PROPERTIES LP

        CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)
                For the years ended March 31, 1998, 1997 and 1996
                                 (In thousands)

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

Balance at March 31, 1995                   $     -    $  8,610    $  8,610

Net loss                                         (3)       (319)       (322)

Cash distributions                               (3)     (2,968)     (2,971)
                                            -------    --------    --------

Balance at March 31, 1996                       (6)       5,323       5,317

Net loss                                        (6)        (574)       (580)

Cash distributions                              (4)        (354)       (358)
                                           -------     --------    --------
Balance at March 31, 1997                      (16)       4,395       4,379

Net income                                       2          184         186

Cash distributions                              (6)      (3,981)     (3,987)
                                           -------     --------    --------
Balance at March 31, 1998                  $   (20)    $    598    $    578
                                           =======     ========    ========

























                            See accompanying notes


<PAGE>
<TABLE>


                        PAINE WEBBER GROWTH PROPERTIES LP

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
               For the years ended March 31, 1998, 1997 and 1996
                Increase (Decrease) in Cash and Cash Equivalents
                                 (In thousands)
<CAPTION>


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

Cash flows from operating activities:
  Net income (loss)                                           $   186     $  (580)    $  (322)
  Adjustments to reconcile net income (loss) to net cash
   (used in) provided by operating activities:
     Reimbursements from affiliates                              (182)       (176)       (189)
     Loss due to impairment of long-lived assets                    -         856           -
     Loss on sale of operating investment property                  -         138           -
     Venture partner's share of consolidated venture's loss         -         (23)         (4)
     Partnership's share of unconsolidated ventures' income      (202)        (94)        (96)
     Depreciation expense                                           -         229         686
     Amortization of deferred loan costs                            -          18          17
     Changes in assets and liabilities:
      Accounts receivable                                           -           1           7
      Advances from consolidated venture                            -        (250)        250
      Real estate tax and insurance escrow deposit                  -         247          (3)
      Other assets                                                  -          61         (21)
      Accounts payable and accrued expenses                         5        (227)        (38)
      Accrued interest payable                                      -        (211)         56
      Tenant security deposits                                      -         (18)         (6)
      Other liabilities                                            (4)          -           -
                                                              -------     -------     -------
         Total adjustments                                       (383)        551         659
                                                              -------     -------     -------
         Net cash (used in) provided by operating activities     (197)        (29)        337
                                                              -------     -------     -------

Cash flows from investing activities:
  Distributions from unconsolidated joint ventures              1,100         953         627
  Net withdrawals from capital improvement
   and replacement escrow                                           -         146          58
  Additions to operating investment property                        -        (158)       (149)
  Net proceeds from sale of operating investment property           -       2,332           -
                                                              -------     -------     -------
         Net cash provided by investing activities              1,100       3,273         536
                                                              -------     -------     -------

Cash flows from financing activities:
  Repayment of long-term debt                                       -         (91)        (72)
  Distributions to partners                                    (3,987)       (358)     (2,971)
                                                              -------     -------     -------
         Net cash used in financing activities                 (3,987)       (449)     (3,043)
                                                              -------     -------     -------

Net (decrease) increase in cash and cash equivalents           (3,084)      2,795      (2,170)

Cash and cash equivalents, beginning of year                    4,118       1,323       3,493
                                                              -------     -------     -------

Cash and cash equivalents, end of year                        $ 1,034     $ 4,118     $ 1,323
                                                              =======     =======     =======

Supplemental Disclosures:

  Cash paid during the year for interest                      $     -     $   781     $   511
                                                              =======     =======     =======

  Long-term debt assumed by buyer                             $     -     $(6,799)    $     -
                                                              =======     =======     =======
</TABLE>



                           See accompanying notes.



<PAGE>
                      PAINE WEBBER GROWTH PROPERTIES LP
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


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

      Paine  Webber  Growth  Properties  LP  (the  "Partnership")  is a  limited
partnership  organized  pursuant  to the laws of the State of Delaware in August
1982 for the purpose of investing in a portfolio of rental apartment  properties
which  have  potential  for  near-term  capital  appreciation.  The  Partnership
authorized  the  issuance  of Units (at  $1,000 per Unit) of which  29,194  were
subscribed and issued between November 15, 1982 and September 30, 1983.

      The net proceeds of the Partnership's offering were originally invested in
six  operating  investment  properties.  Through  March 31,  1998,  two of these
investments  had  been  sold  and one was  completely  destroyed  by  fire.  The
Partnership is currently pursuing potential disposition strategies for the three
remaining  investments in its portfolio.  General  improvements in the apartment
segment of the real estate market are expected to provide the  Partnership  with
the  opportunities  to market and sell these three  properties in the near term.
Active  marketing  efforts on all three properties began subsequent to March 31,
1998. It is currently  contemplated that the sales of the remaining assets and a
liquidation  of the  Partnership  could  be  accomplished  prior  to the  end of
calendar  year 1998.  There are no  assurances,  however,  that the sales of the
remaining assets and the liquidation of the Partnership will be completed within
this time  frame.  See Notes 4 and 5 to the  financial  statements  for  further
discussions of the Partnership's investments.

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

      The  accompanying  financial  statements have been prepared on the accrual
basis of accounting in accordance with generally accepted accounting  principles
which  requires  management to make  estimates and  assumptions  that affect the
reported amounts of assets and liabilities and disclosures of contingent  assets
and liabilities as of March 31, 1998 and 1997 and revenues and expenses for each
of the three years in the period  ended March 31,  1998.  Actual  results  could
differ from the estimates and assumptions used.

      The   accompanying   financial   statements   include  the   Partnership's
investments in certain joint venture  partnerships  which own or owned operating
properties.  Except  as  described  below,  the  Partnership  accounts  for  its
investments  in joint venture  partnerships  using the equity method because the
Partnership  does not have majority  voting  control in the ventures.  Under the
equity method,  the ventures are carried at cost adjusted for the  Partnership's
share  of  the  ventures'   earnings,   losses  and  distributions  and  certain
reimbursements  receivable  from the  ventures  (see Note 5). The  Partnership's
joint venture  investees are required to maintain their accounting  records on a
calendar  year  basis for  income  tax  reporting  purposes.  As a  result,  the
Partnership  recognizes  its share of the  ventures'  income or losses  based on
financial  information  which  is  three  months  in  arrears  to  that  of  the
Partnership.  See Note 5 for a description of the  unconsolidated  joint venture
partnerships.

      As further  discussed in Note 4, the Partnership  acquired  control of Nob
Hill Partners, which owned the Nob Hill Apartments, in fiscal 1993. Accordingly,
the accompanying financial statements present the financial position, results of
operations  and cash flows of Nob Hill  Partners  on a  consolidated  basis.  As
discussed above,  the joint ventures have December 31 year-ends,  and operations
of the consolidated venture were reported on a three-month lag until the date of
the sale of the venture's operating investment property in February 1997. Due to
the Partnership's policy of accounting for significant  lag-period  transactions
in the period in which they occur,  the loss on this  transaction was recognized
in fiscal  1997.  All  material  transactions  between the  Partnership  and the
consolidated  joint venture have been  eliminated in  consolidation,  except for
lag-period  cash  transfers.  See Note 4 for a description  of the  consolidated
joint venture  partnership and a discussion of the  significant  lag-period sale
transaction which was recorded in fiscal 1997.

      Prior to its sale during fiscal 1997, the operating investment property of
the  consolidated  joint  venture  was carried at cost,  reduced by  accumulated
depreciation,  or an amount  less than cost if  indicators  of  impairment  were
present in accordance with statement of Financial  Accounting  Standards  (SFAS)
No. 121,  "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets  to Be  Disposed  Of."  SFAS No.  121  requires  impairment  losses to be
recorded on long-lived  assets used in operations  when indicators of impairment
are present and the  undiscounted  cash flows estimated to be generated by those
assets are less than the assets carrying amount. SFAS No. 121 also addresses the
accounting  for  long-lived  assets that are expected to be disposed of. The Nob
Hill  venture  recognized  an  impairment  loss in  fiscal  1997  when it became
apparent that the net carrying amount of the operating investment property would
not be recovered from the net proceeds of a pending sale  transaction  (see Note
4).

      Depreciation  expense was computed using the straight-line method over the
estimated useful lives of the operating  investment  properties,  generally five
years for the  furniture  and fixtures and thirty  years for the  buildings  and
improvements.  Costs and fees (including the acquisition fee paid to PaineWebber
Properties  Incorporated)  related to the  acquisition  of the property had been
capitalized and were included in the cost of the operating  investment property.
Maintenance and repairs were charged to expense when incurred.  The consolidated
venture  ceased  recording  depreciation  expense on the Nob Hill property as of
April 30, 1996 as it began to actively market the property for sale.

      The  consolidated  joint venture leased  apartment units under leases with
terms  generally  of one year or less.  Rental  income was  recorded  monthly as
earned.

      For purposes of reporting cash flows, the Partnership considers all highly
liquid  investments  with  original  maturities  of 90  days  or less to be cash
equivalents.

      The cash and cash equivalents  appearing on the accompanying  consolidated
balance  sheets  represent  financial  instruments  for purposes of Statement of
Financial  Accounting  Standards  No.  107,  "Disclosures  about  Fair  Value of
Financial  Instruments."  The carrying amount of these cash and cash equivalents
approximates their fair value as of March 31, 1998 and 1997 due
to the short-term maturities of these instruments.

      No  provision  for  income  taxes  is made in the  accompanying  financial
statements as the  liability for such taxes is that of the partners  rather than
the Partnership.

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

      The General  Partners of the Partnership  are First PW Growth  Properties,
Inc. (the "Managing General Partner"), a wholly-owned  subsidiary of PaineWebber
Group Inc.  ("PaineWebber"),  and Properties  Associates (the "Associate General
Partner"),  a Massachusetts  general  partnership,  certain general  partners of
which are officers of PaineWebber  Properties  Incorporated  (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 pursuant to
an advisory  contract.  The Adviser is a wholly-owned  subsidiary of PaineWebber
Incorporated  ("PWI"),  a wholly-owned  subsidiary of  PaineWebber.  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.
The Managing  General  Partner,  the Adviser and their affiliates are reimbursed
for their direct expenses relating to the offering of Units, the  administration
of the Partnership and the acquisition and operations of the Partnership's  real
property investments.

      All  distributable  cash,  as  defined,  for  each  fiscal  year  shall be
distributed  quarterly in the ratio of 99% to the Limited Partners and 1% to the
General  Partners.  All sale or  refinancing  proceeds  shall be  distributed in
varying  proportions  to the Limited and General  Partners,  as specified in the
Partnership Agreement.

      Pursuant to the terms of the Partnership Agreement,  taxable income or tax
losses of the Partnership  will be allocated 99% to the Limited  Partners and 1%
to the  General  Partners.  Taxable  income or tax loss  arising  from a sale or
refinancing  of  investment  properties  will be  allocated  to the  Limited and
General Partners in proportion to the amount of sale or refinancing  proceeds to
which  they are  entitled;  that is, as much as 99% but not less than 85% to the
Limited Partners.  However, the General Partners shall be allocated an amount of
taxable income from a capital transaction at least sufficient to eliminate their
deficit capital account balance.  If there are no sale or refinancing  proceeds,
tax losses and taxable income from a sale or  refinancing  will be allocated 99%
to the Limited  Partners  and 1% to the  General  Partners.  Allocations  of the
Partnership's  operations  between the General Partners and the Limited Partners
for  financial  accounting  purposes  have  been  made in  conformity  with  the
allocations of taxable income or tax loss.

      Under  the  advisory  contract,   the  Adviser  has  specific   management
responsibilities; to administer day-to-day operations of the Partnership, and to
report  periodically  the performance of the Partnership to the Managing General
Partner.  The Adviser is due to be paid an annual  management fee equal to 1% of
the gross offering proceeds.  However, the cumulative amount of acquisition fees
and  management  fees which can be paid to the  Adviser is limited to the sum of
18% of the gross offering proceeds plus 10% of Distributable Cash, as defined in
the  Prospectus.  During  1986,  this  limitation  was reached and, as a result,
future   management   fee  payments  are  limited  to  10%  of  any   additional
Distributable  Cash.  In  fiscal  1998,  1997  and  1996,  based  on  additional
Distributable  Cash paid to the partners,  management  fees  totalling  $62,000,
$35,000 and $34,000, respectively, were paid to the Adviser.

      The Adviser may receive a real estate brokerage  commission,  in an amount
of up to 1% of the selling prices of properties  sold,  upon the  disposition of
Partnership investments. Payment of such fee will be subordinated to the payment
of certain amounts to the Limited Partners.

      Included in general and administrative  expenses for the years ended March
31,  1998,  1997  and  1996  is  $95,000,  $88,000  and  $93,000,  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") 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 $6,000,  $3,000 and $5,000 (included in general and administrative  expenses)
for managing the  Partnership's  cash assets during fiscal 1998,  1997 and 1996,
respectively.

4.  Sale of Nob Hill Apartments
    ---------------------------

      On February 7, 1997, the joint venture which owned the Nob Hill Apartments
sold the operating  investment  property to an unrelated third party. Due to the
Partnership's  policy of accounting for significant  lag-period  transactions in
the period in which they occur,  the loss on this  transaction was recognized in
fiscal 1997.  Accordingly,  in addition to the  operations for the twelve months
ended  December 31, 1996,  the  operations of the Nob Hill joint venture for the
period  January 1, 1997  through  the date of sale on  February 7, 1997 are also
reflected in the accompanying consolidated financial statements. Such operations
in calendar  1997  reflected  total  revenues of $224,000 and total  expenses of
$290,000 for a net operating loss of $66,000,  of which the Partnership's  share
was  $65,000.  Prior  to  the  sale,  the  consolidated  venture  recognized  an
impairment  loss of  $856,000  to  write  down  the net  carrying  value  of the
operating  investment  property and related  deferred  expenses to  management's
estimate  of the net  proceeds  which  were  realizable  from the  pending  sale
transaction.  An additional loss on the sale totalling  $138,000 was recorded as
of the  date  of the  sale  based  on the  final  negotiated  amount  of the net
proceeds.

     During fiscal 1997, a purchase and sale  agreement on the Nob Hill property
was signed with a  prospective  buyer for a purchase  price of $10  million.  In
October 1996,  the terms of the agreement were amended to reflect a reduction in
the purchase price to $9.5 million as a result of certain  required  repair work
at the property. The transaction closed in the fourth quarter of fiscal 1997, on
February 7, 1997,  and the  Partnership  received net proceeds  from the sale of
approximately $2.3 million. In addition,  the venture had excess working capital
of  approximately  $360,000 at the time of the sale. All of the net proceeds and
excess working  capital were  distributed to the  Partnership in accordance with
the  terms of the Nob Hill  joint  venture  agreement.  While  the sale had been
executed  and  control  of the  property  had been  transferred  to the buyer on
February 7, 1997, the  distribution of the net sale proceeds was delayed pending
the  receipt  of the  formal  consent  of the  Secretary  of  Housing  and Urban
Development  ("HUD") to the sale of the property and the  assumption of the loan
by the purchaser. Such final approval was received on June 9, 1997. As a result,
the  Partnership  made  a  special  distribution  to  the  Limited  Partners  of
approximately $3,357,000, or $115 per original $1,000 Unit, on June 13, 1997. Of
this amount, $90.65 represented the net proceeds and excess working capital from
the sale of the Nob Hill  Apartments and $24.35  represented a  distribution  of
Partnership reserves which exceeded expected future requirements.

      The  following is a summary of property  operating  expenses for the years
ended December 31, 1996 and 1995.

                                                      1996 (1)   1995
                                                      --------   ----
           Property operating expenses:
             Salaries and related costs               $  301     $269
             Repairs and maintenance                     279      249
             Utilities                                   152      121
             Insurance                                   100       67
             Management fees                              92       84
             Administrative and other                    227      170
                                                      ------     ----
                                                      $1,151     $960
                                                      ======     ====

      (1)Due to the Partnership's  three-month reporting lag and the sale of the
         Nob Hill  Apartments  on  February 7, 1997,  as  discussed  above,  the
         Partnership  reported  operations  of  the  consolidated  venture  from
         January 1, 1997  through the date of sale in the results for the twelve
         months ended  December 31, 1996.  Accordingly,  the property  operating
         expenses summarized above for the twelve months ended December 31, 1996
         reflect  slightly more than one  additional  month of operations  which
         amounted to approximately $216,000.

5.  Investments in Unconsolidated Joint Ventures
    --------------------------------------------

      The Partnership had investments in four  unconsolidated  joint ventures at
March 31, 1998 and 1997. The unconsolidated  joint ventures are accounted for on
the equity method in the  Partnership's  financial  statements.  As discussed in
Note 2, these joint ventures report their operations on a calendar year basis.

      Condensed  combined  financial  statements  of  the  unconsolidated  joint
ventures, for the periods indicated, are as follows:

                      Condensed Combined Balance Sheets
                          December 31, 1997 and 1996
                                (in thousands)

                                    Assets
                                                            1997        1996
                                                            ----        ----

   Current assets                                        $  1,152    $  1,264
   Operating investment properties, net                    15,182      15,683
   Other assets                                               297         379
                                                         --------    --------
                                                         $ 16,631    $ 17,326
                                                         ========    ========

                      Liabilities and Venturers' Deficit

   Current liabilities                                   $    848    $    782
   Other liabilities                                        1,833       1,719
   Long-term mortgage debt, less current portion           16,007      16,065
   Partnership's share of combined deficit                 (1,824)     (1,068)
   Co-venturers' share of combined deficit                   (233)       (172)
                                                         --------    --------
                                                         $ 16,631    $ 17,326
                                                         ========    ========

                    Condensed Combined Summary of Operations
              For the years ended December 31, 1997, 1996 and 1995
                                 (in thousands)

                                                 1997       1996        1995
                                                 ----       ----        ----
Revenues:
   Rental revenue                            $  4,997    $  4,830    $  4,763
   Interest and other income                      151         157         295
                                             --------    --------    --------
                                                5,148       4,987       5,058

Expenses:
   Property operating expenses                  2,084       2,053       1,975
   Depreciation                                   815         794         848
   Interest expense                             1,392       1,555       1,594
   Administrative and other                       665         508         560
                                             --------    --------    --------
                                                4,956       4,910       4,977
                                             --------    --------    --------
   Net income                                $    192    $     77    $     81
                                             ========    ========    ========

Net income (loss):
   Partnership's share of net 
     income (loss)                           $    202    $     94    $     96
   Co-venturers' share of net 
     income (loss)                                (10)        (17)        (15)
                                             --------    --------    --------
                                             $    192    $     77    $     81
                                             ========    ========    ========

                  Reconciliation of Partnership's Investment
                           March 31, 1998 and 1997
                                (in thousands)
                                                            1998        1997
                                                            ----        ----

   Partnership's share of venturers' deficit
     at December 31, as shown above                     $  (1,824)  $  (1,068)
   Reimbursements of management fees and expenses
     receivable from joint ventures (1)                     1,873       1,769
   Timing differences due to contributions made and
     distributions received subsequent to December
      31 (see Note 2)                                        (315)      (397)
                                                        ---------   --------
   
        Investments in joint ventures, at equity,
          at March 31                                   $    (266)  $    304
                                                        =========   ========

      (1)The  Partnership  records as income  reimbursements  due from the joint
         ventures for the Partnership  management fee and certain  out-of-pocket
         expenses as specified in the respective joint venture  agreements.  The
         Partnership  earned  reimbursements  totalling  $182,000,  $176,000 and
         $189,000  for  the  years  ended  March  31,   1998,   1997  and  1996,
         respectively.   The   Partnership's   joint  venture  investees  record
         comparable  reimbursement  expenses in their  statements of operations,
         which are  reflected in the  Partnership's  share of ventures'  losses.
         Accordingly, the accounting for these reimbursements has no significant
         effect on the  Partnership's  net capital or its results of operations.
         These  reimbursements  are paid from cash flow of the joint ventures as
         available,  or from sale or refinancing proceeds, and are cumulative to
         the extent not paid currently.  Such cumulative  reimbursements payable
         to the Partnership totalled $1,873,000 and $1,769,000 at March 31, 1998
         and 1997, respectively. These amounts have been included in the balance
         of investments in joint ventures on the accompanying balance sheets.

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

      Investments  in   unconsolidated   joint  ventures,   at  equity,  on  the
accompanying  balance sheets is comprised of the following  investment  carrying
values (in thousands):
                                                       1998         1997
                                                       ----         ----

      Rocky Mountain Partners                       $ (1,700)   $ (1,339)
      Grouse Run Associates I and II                     281         295
      Plano Chisholm Place Associates                    971       1,151
      Parkwood Montclair Partners                        182         197
                                                    --------    --------
                                                    $   (266)   $    304
                                                    ========    ========

       Cash distributions received (including  reimbursements of management fees
and out-of-pocket expenses) from the Partnership's  unconsolidated joint venture
investments  during the years ended March 31, 1998, 1997 and 1996 are as follows
(in thousands):

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

      Rocky Mountain Partners             $   935   $    619     $   396
      Grouse Run Associates I and II            -        193          89
      Plano Chisholm Place Associates         165        141         142
                                          -------   --------     -------
                                          $ 1,100   $    953     $   627
                                          =======   ========     =======

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

      (a)  Rocky Mountain Partners
           -----------------------

      On  February  1, 1983,  the  Partnership  acquired  an  interest  in Rocky
Mountain Partners, a Colorado limited partnership which owns and operates Tantra
Lake  Apartments,  a  301-unit  apartment  complex  in  Boulder,  Colorado.  The
Partnership  is a  general  partner  in the  joint  venture.  The  Partnership's
co-venture  partner is an affiliate of Sares Regis Group  (formerly  Regis Homes
Corporation). The property was purchased on February 17, 1983.

      The  aggregate  cash  investment by the  Partnership  for its interest was
approximately  $4,698,000  (including  an  acquisition  fee  of  $300,000  and a
consulting  fee of  $20,000  paid to the  Adviser of the  Partnership,  and fees
totalling $210,000 paid to affiliates of the co-venturer). In addition, deferred
acquisition  fees  aggregating  $95,000  have  been  paid  to the  Adviser  from
distributable  net cash flow.  The  apartment  complex was  acquired  subject to
mortgages  totalling  $6,582,000  at the time of closing.  On June 4, 1986,  the
joint venture  refinanced the property by replacing the original mortgages which
had remaining balances of approximately  $6,299,000 with an $8,900,000 new first
mortgage.  The Partnership received a distribution totalling $2,275,000 from the
refinancing   proceeds  in  1986.  The  outstanding   first  mortgage  loan  was
nonrecourse to the venture,  had a balance of $8,482,000 as of December 31, 1995
and was scheduled to mature on July 1, 1996. On August 6, 1996, the  Partnership
closed on a new loan for the Tantra Lake joint  venture and the  existing  first
mortgage loan was repaid in full. The new mortgage loan, in the principal amount
of  $8,850,000,  bears  interest  at 7.68%  per  annum,  requires  interest-only
payments  throughout  its term and is  scheduled to mature on September 1, 2001.
The terms of the new loan reduce Tantra Lake's  required  annual debt service by
more than $300,000 which has significantly improved cash flow to the Partnership
from this  investment.  In addition,  the new loan is assumable  upon a sale and
allows for prepayment in full at any time. A penalty tied to a yield maintenance
calculation  would be charged for any  prepayment  in the first two years of the
term.  Thereafter,  a penalty equal to 1% of the outstanding  principal  balance
would be due in conjunction with any prepayment transaction.

      The joint venture agreement  provides that distributable net cash flow, as
defined,  will be allocated  first to the payment of interest  and  principal on
certain  interim  borrowings,  if such  borrowings  have been made, and then any
remaining  amounts are to be distributed  99% to the  Partnership  and 1% to the
co-venturer.  Distributions  to the Partnership  and the  co-venturer  totalling
$2,718,000  and  $27,000,  respectively,  had been made from  inception  through
December 31, 1997.

      Taxable  income  and tax loss  from  operations  is  allocated  99% to the
Partnership  and  1% to  the  co-venturer.  Allocations  of  the  joint  venture
operations between the partners for financial accounting purposes have been made
in conformity with the allocations of taxable income or loss.

      Upon sale or refinancing the  Partnership  will receive an amount equal to
its initial investment in the property plus $732,000 as a first priority,  after
payment  of  mortgage  debt and other  indebtedness  of the joint  venture.  The
remaining  proceeds will be split between the Partnership and the co-venturer in
varying proportions, in accordance with the joint venture agreement.

      Taxable  income and tax loss  resulting  from a sale of the property  will
generally be allocated  between the  Partnership  and the  co-venturer  as sales
proceeds are distributed.

      The joint venture  entered into a property  management  agreement  with an
affiliate of the co-venturer,  cancellable at the Partnership's  option upon the
occurrence  of  certain  events.  The  management  fee is  equal  to 5% of gross
receipts, as defined in the agreement.

      In the  event the  joint  venture  requires  additional  funds,  the first
$100,000  was to be provided  by the  Partnership.  Thereafter,  funds are to be
provided  90%  by  the  Partnership  and  10%  by  the  co-venturer  as  capital
contributions  or interim  borrowings in accordance  with the terms of the joint
venture  agreement.  The agreement has been informally  modified by the partners
resulting in additional  contributions  by the  Partnership  and the Co-Venturer
from inception  through December 31, 1997 totalling  approximately  $818,000 and
$8,000, respectively.

     Rocky  Mountain  Partners was named as a defendant in a lawsuit  brought in
February 1998 by two individuals and an entity, among others, who had previously
performed repair work at the Tantra Lake property.  The lawsuit  alleges,  among
other things,  that the individuals were exposed,  without their  knowledge,  to
unsafe levels of asbestos hazards in the course of performing work at the Tantra
Lake Apartments. The joint venture plans to vigorously defend itself against the
allegations  in this  lawsuit.  The joint  venture's  insurer has  preliminarily
denied  coverage  for the costs of  defending  the  lawsuit by citing a contract
exclusion.  The eventual  outcome of this  litigation and the  applicability  of
insurance   coverage   related  thereto  cannot  be  determined  at  this  time.
Accordingly,  no  liability  for any  expenses  which  might  result  from  this
litigation has been provided for in the venture's financial statements.

      (b)  Grouse Run Associates I and II
           ------------------------------

      On December 15, 1982, the  Partnership  acquired an interest in Grouse Run
Associates I and Grouse Run Associates II, two California  general  partnerships
organized to purchase and operate Grouse Run  Apartments,  a 158-unit  apartment
complex in Stockton, California. The Partnership is a general partner in each of
the joint  ventures.  The  Partnership's  co-venture  partner is an affiliate of
Sares Regis Group (formerly Regis Homes Corporation).  The property was acquired
on March 31, 1983.

      The aggregate  cash  investment by the  Partnership  for its interests was
approximately  $2,192,000  (including  an  acquisition  fee  of  $125,000  and a
consulting  fee of  $10,000  paid to the  Adviser  of the  Partnership  and fees
aggregating  $90,000  paid  to  affiliates  of the  co-venturer).  In  addition,
deferred  acquisition fees aggregating $38,000 have been paid from distributable
net cash flow to the Adviser.  The apartment complex was acquired subject to two
nonrecourse  first mortgages with balances  totalling  $3,557,000 at the time of
closing.  The  mortgage  loans had an  aggregate  balance  of  $3,055,000  as of
December  31, 1997 and are  scheduled  to mature in February  2019 and  February
2020.

      The joint venture  agreement  provides that the net cash flow, as defined,
will be  allocated  first to the payment of interest  and  principal  on certain
interim  borrowings,  if such  borrowings have been made, and then any remaining
amounts are to be distributed 99% to the Partnership and 1% to the  co-venturer.
This joint  venture  agreement  has been  informally  modified  by the  partners
resulting in distributions to the Partnership  totalling $981,000 from inception
through December 31, 1997.

      Taxable  income  and tax loss  from  operations  is  allocated  99% to the
Partnership  and  1% to  the  co-venturer.  Allocations  of  the  joint  venture
operations between the partners for financial accounting purposes have been made
in conformity with the allocations of taxable income or loss.

      Upon sale or refinancing,  the Partnership will receive an amount equal to
its initial investment in the property plus $310,000 as a first priority,  after
payment of mortgage debt and other indebtedness of the joint venture.  Remaining
proceeds will be split between the  Partnership  and the  co-venturer in varying
proportions in accordance with the joint venture agreement.

      Taxable income and tax loss resulting from a sale of the apartment complex
will be allocated between the Partnership and the co-venturer generally as sales
proceeds are distributed.

      The joint venture  entered into a property  management  agreement  with an
affiliate of the co-venturer,  cancellable at the Partnership's  option upon the
occurrence  of  certain  events.  The  management  fee is  equal  to 5% of gross
receipts, as defined in the agreement.

      In the  event the  joint  venture  requires  additional  funds,  the first
$40,000  was to be  provided  by the  Partnership.  Thereafter,  funds are to be
provided  90%  by  the  Partnership  and  10%  by  the  co-venturer  as  capital
contributions  or interim  borrowing in  accordance  with the terms of the joint
venture agreement.  Additional contributions from inception through December 31,
1997 totalling approximately $380,000 have been made 100% by the Partnership.

      (c)  Plano Chisholm Place Associates
          --------------------------------

      On March 1, 1983, the  Partnership  acquired an interest in Plano Chisholm
Place Associates,  a Texas general partnership organized to purchase and operate
Chisholm Place Apartments,  a 142-unit  apartment  complex in Plano,  Texas. The
Partnership  is a  general  partner  in the  joint  venture.  The  Partnership's
co-venture  partner is an affiliate of The Horn-Barlow  Companies.  The property
was acquired on May 31, 1983.

      On September 9, 1991,  an Amended and Restated  Partnership  Agreement was
entered into in connection  with a refinancing  of the venture's  mortgage debt.
The mortgage lender agreed to accept a discount on an immediate repayment of the
outstanding  obligations,  which included a principal balance of $6,993,000.  In
return for a payment of $4,200,000,  the lender forgave the resulting  principal
balance of  $2,793,000  and  accrued  interest of  $975,000.  The payment to the
lender and  transaction  closing costs were funded by a new mortgage loan in the
amount of $4,160,000 and contributions  totalling  $211,000 from the Partnership
and its co-venture partner made in the ratios of 80% and 20%, respectively.  The
outstanding  mortgage  loan is  nonrecourse  to the venture and is  scheduled to
mature on October 1, 2001. The  co-venturer was not obligated under the terms of
the  original  joint  venture  agreement  to make  additional  contributions  in
connection  with  the  refinancing,  but  agreed  to  do so in  return  for  the
Partnership's  agreement to certain modifications to the venture agreement which
would allow the  co-venturer to recover its additional  investment,  plus earn a
current return thereon.

      The original aggregate cash investment by the Partnership for its interest
was approximately  $2,233,000  (including an acquisition fee of $150,000 paid to
the Adviser of the Partnership and consulting fees  aggregating  $20,000 paid to
an affiliate of the  co-venturer).  In addition,  acquisition  fees  aggregating
$75,000 were deferred and were to be paid to the Adviser from  distributable net
cash flow from  operations,  if  available,  in  twelve  quarterly  installments
commencing June 1984.  Unpaid  acquisition fees were to be payable no later than
the  earlier  of  September  30,  1989 or upon  the sale or  refinancing  of the
investment  property.  During fiscal 1992,  the joint venture paid the remaining
deferred  acquisition  fee of  $75,000 to the  Adviser  from the  proceeds  of a
capital contribution by the Partnership.

      The  amended  joint  venture  agreement  provides  that net cash flow,  as
defined,  will be allocated  first,  to the partners until they have received an
aggregate  amount  equal to the  deferred  fees  payable to the  partners  as of
January 1, 1991;  second,  to the payment of interest  and  principal on certain
interim borrowings,  if such borrowings have been made; third, to the payment of
any  reimbursements  of management  fees and expenses  owed to the  Partnership;
fourth,  80% to the  Partnership  and  20% to the  co-venturer  until  each  has
received the amount of its  contribution of New Net Equity,  as defined,  plus a
10% simple return thereon;  and fifth, any remaining amounts are to be allocated
80% to the Partnership and 20% to the co-venturer.

      Taxable income and tax loss from operations in each year are allocated 80%
to the Partnership and 20% to the co-venturer.  Allocations of the joint venture
operations between the partners for financial accounting purposes have been made
in conformity with the allocations of taxable income or tax loss.

      Sale or refinancing  proceeds will be distributed to the  Partnership  and
the  co-venturer  in varying  proportions  in  accordance  with the terms of the
amended joint venture agreement.

      Profits  resulting  from the sale or  refinancing  of the property will be
first allocated to the Partnership and the co-venturer on a proportionate  basis
to restore any negative  capital  accounts to zero.  Any remaining  gain will be
allocated to the  Partnership  and the  co-venturer  in a manner similar to cash
distributions. Losses from the sale or refinancing of the property will be first
allocated to the Partnership and the co-venturer on a proportionate basis to any
positive  capital  balances after giving effect to the  distribution of proceeds
described above, and then 95% to the Partnership and 5% to the co-venturer.

      The joint venture  entered into a property  management  agreement  with an
affiliate of the co-venturer,  cancellable at the Partnership's  option upon the
occurrence  of  certain  events.  The  management  fee is  equal  to 5% of gross
receipts,  as defined.  In addition,  the management  agreement  provides for an
incentive  management fee of 1% of gross receipts,  as defined. The 1% incentive
management fee is payable only from distributable net cash flow, as defined.

      If additional cash is required for any reason in connection with the joint
venture,  it is to be  provided  by  the  Partnership  and  the  co-venturer  as
additional  capital  contributions  or operating or default  loans in accordance
with the terms of the amended joint venture agreement.  Additional contributions
made  by  the  Partnership  from  inception  through  December  31,  1997  total
approximately $254,000.

      (d)  Parkwood Montclair Partners
           ---------------------------

      On September 30, 1983,  the  Partnership  acquired an interest in Parkwood
Montclair Partners,  a California general partnership  organized to purchase and
operate  Parkwoods   Apartments,   a  433-unit  apartment  complex  in  Oakland,
California.  The  Partnership  is a general  partner in the joint  venture.  The
Partnership's  co-venture partner is an affiliate of Sares Regis Group (formerly
Regis Homes  Corporation).  The property was purchased on October 31, 1983.  The
aggregate cash investment by the Partnership for its interest was  approximately
$8,153,000  (including an  acquisition  fee of $570,000 and a consulting  fee of
$45,000 paid to the Adviser of the Partnership and fees totalling  $308,000 paid
to an affiliate of the co-venturer).  In addition,  acquisition fees aggregating
$135,000 and $53,000  were  deferred and paid to the Adviser and an affiliate of
the co-venturer, respectively, from the cash flow of the venture.

      On October 20, 1991, the Parkwoods  Apartments was completely destroyed by
a  firestorm  that  devastated  a  large  section  of the  hills  over  Oakland,
California. Subsequent to the fire, on May 27, 1992, the joint venture reached a
full and final insurance  settlement,  which called for the venture to receive a
total of  approximately  $29,361,000 for coverage on the damage to the buildings
and the loss of rental  income.  Additionally,  in September of 1993,  the joint
venture  entered  into a cash  settlement  of $250,000  with  another  insurance
carrier  related to  supplemental  hazard  insurance.  In June 1992, the venture
partners decided not to rebuild the operating  property and agreed to distribute
the net insurance proceeds after the repayment of the outstanding  mortgage loan
and certain  other  liabilities.  The mortgage loan balance of  $19,000,000  was
repaid  in full on June  24,  1992  with a  portion  of the  proceeds  from  the
insurance  settlement.  Approximately  $5 million of the remaining net insurance
proceeds  was used or set  aside  to pay for  post-fire  clean up and  operating
expenses of the Parkwoods  joint venture and the costs  associated with pursuing
the  redevelopment  permits discussed further below. The remaining $5 million of
net  proceeds  was  paid to the  Partnership  under  the  terms  of the  venture
agreement.  Approximately $4,500,000 of the proceeds received by the Partnership
was distributed to the Limited Partners in August 1992.

      During fiscal 1994, the joint venture was successful in obtaining approval
for the  construction of a condominium  complex on the land. The  reconstruction
plans  were for a project  of  similar  size and  density  to that of the former
Parkwood Apartment complex. Management believed that obtaining these condominium
conversion and site plan  approvals  would  substantially  facilitate the future
sale of the land.  During  calendar 1994,  the joint venture paid  approximately
$500,000 to secure certain  building  permits  required in order to proceed with
the  planned  reconstruction.   In  connection  with  obtaining  the  site  plan
approvals, the joint venture entered into a settlement agreement with the former
tenants of the  operating  investment  property  related to their  rights in the
condominium  conversion.  Under the terms of this  agreement,  the joint venture
agreed to pay the former  tenants  approximately  $250,000 and to offer  certain
discounts  to former  tenants  who wish to  purchase a  condominium  unit in the
redeveloped project.

      On April 15, 1994, subsequent to obtaining the building permits, the joint
venture sold the Parkwoods  land to an affiliate of the  co-venture  partner for
$4,750,000.  Terms of the sale  allow  for the  aforementioned  discounts  to be
provided to the former tenants.  After transaction  costs, net proceeds from the
sale totalled approximately  $4,699,000.  A portion of the proceeds was retained
by the joint  venture  to pay for the  ongoing  costs  associated  with  certain
outstanding legal claims.  The remaining portion of the proceeds was distributed
to the  venture  partners  in  accordance  with the terms of the  joint  venture
agreement,  with the  Partnership  receiving  approximately  $4,139,000  and the
co-venturer receiving approximately $49,000. Due to the outstanding legal claims
involving the joint venture, the joint venture was not liquidated at the time of
the sale of the land.  Except as discussed below, such legal claims had all been
settled as of December 31, 1996.

      Management  had  filed  for a refund of  approximately  $450,000  in costs
incurred to secure the necessary  building  permits which were obtained prior to
the sale of the land underlying the former  Parkwoods  Apartments from a federal
agency  responsible  for  administering  federal aid in connection with the 1991
Oakland fire. An agreement was reached  during the second quarter of fiscal 1996
to a release schedule for money previously funded by the Parkwoods joint venture
to pay for building  permits.  The joint  venture  received a partial  refund of
these  amounts  totalling  approximately  $146,000 in December  1995,  which was
recorded as income by the joint venture in calendar 1995.  However,  the federal
agency  subsequently  denied  the  joint  venture's  claim  for a refund  of the
remaining $300,000 in costs incurred. Management believed that the joint venture
was entitled to a full refund of the costs incurred and had been pursuing such a
refund.  However, during fiscal 1998 the federal agency denied the Partnership's
appeal  regarding  the  reimbursement  claim,  and,  at the  present  time,  the
Partnership does not plan any further legal action. In addition,  it is possible
that the federal agency will seek the return of the $146,000 which was disbursed
in December  1995. A liability for this  potential  obligation is accrued on the
Partnership's balance sheet as of March 31, 1998.

      Per the terms of the joint venture  agreement,  taxable income or tax loss
from operations is allocated 99% to the  Partnership and 1% to the  co-venturer.
Taxable income or tax loss  resulting from the sale or other  disposition of the
apartment  complex was allocated  between the  Partnership  and the  co-venturer
generally  as  proceeds  were  distributed.  Allocations  of the  joint  venture
operations between the partners for financial accounting purposes have been made
in conformity with the allocations of taxable income or tax loss.

6.  Subsequent Events
    -----------------

      On May 15,  1998,  the  Partnership  distributed  $185,000  to the Limited
Partners  and $1,800 to the General  Partners  for the  quarter  ended March 31,
1998.


<PAGE>

                        REPORT OF INDEPENDENT AUDITORS



The Partners
Paine Webber Growth Properties LP:

      We have audited the  accompanying  combined balance sheets of the Combined
Joint Ventures of Paine Webber Growth  Properties LP as of December 31, 1997 and
1996,  and  the  related  combined  statements  of  operations  and  changes  in
venturers' deficit,  and cash flows for each of the three years in the
period ended December 31, 1997. Our audits also included the financial statement
schedule  listed in the Index at Item  14(a).  These  financial  statements  and
schedule  are  the   responsibility   of  the  Partnership's   management.   Our
responsibility  is to  express  an opinion  on these  financial  statements  and
schedule based on our audits.

      We 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  combined  financial  statements  referred  to above
present fairly, in all material respects, the combined financial position of the
Combined  Joint  Ventures of Paine Webber  Growth  Properties LP at December 31,
1997 and 1996, and the combined results of their operations and their cash flows
for each of the three years in the period ended December 31, 1997, 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.





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

Boston, Massachusetts
March 4, 1998


<PAGE>


                          COMBINED JOINT VENTURES OF
                      PAINE WEBBER GROWTH PROPERTIES LP

                           COMBINED BALANCE SHEETS
                          December 31, 1997 and 1996
                                (In thousands)

                                    Assets
                                                          1997        1996
                                                          ----        ----

Current assets:
   Cash and cash equivalents                           $      915   $     957
   Accounts receivable                                          1           2
   Prepaid expenses                                           236         195
   Deposit for repair and improvements                          -         110
                                                       ----------   ---------
         Total current assets                               1,152       1,264

Operating investment properties:
   Land                                                     4,325       4,325
   Buildings, improvements and equipment                   23,263      22,949
                                                       ----------   ---------
                                                           27,588      27,274
   Less: accumulated depreciation                         (12,406)    (11,591)
                                                       ----------   ---------
                                                           15,182      15,683

Reserves for repairs and capital improvements                  60          78
Deferred expenses, net of accumulated amortization
 of $174 in 1997 ($110 in 1996)                               237         301
                                                       ----------   ---------
                                                       $   16,631   $  17,326
                                                       ==========   =========

                      Liabilities and Venturers' Deficit

Current liabilities:
   Accounts payable and other liabilities              $      350   $     266
   Accrued real estate taxes                                  251         246
   Accrued management fee                                      10          16
   Tenant security deposits                                   179         200
   Current portion of long-term debt                           58          54
                                                       ----------   ---------
         Total current liabilities                            848         782

Reimbursements payable to Venturer                          1,833       1,719

Long-term debt                                             16,007      16,065

Venturers' deficit                                         (2,057)     (1,240)
                                                       ----------   ---------
                                                       $   16,631   $  17,326
                                                       ==========   =========







                           See accompanying notes.


<PAGE>
                           COMBINED JOINT VENTURES OF
                        PAINE WEBBER GROWTH PROPERTIES LP

       COMBINEDSTATEMENTS OF OPERATIONS AND CHANGES IN VENTURERS' DEFICIT
              For the years ended December 31, 1997, 1996 and 1995
                                 (In thousands)


                                                1997        1996        1995
                                                ----        ----        ----
Revenues:
   Rental income                             $  4,997    $  4,830     $ 4,763
   Interest and other income                      151         157         295
                                             --------    --------     -------
                                                5,148       4,987       5,058
Expenses:
   Interest expense                             1,392       1,555       1,594
   Depreciation expense                           815         794         848
   Salaries                                       518         508         496
   Repairs and maintenance                        537         610         573
   Property operating expenses                    479         459         441
   Real estate taxes                              315         306         304
   General and administrative                     337         165         164
   Management fees                                256         246         245
   Reimbursements to partner                      191         170         193
   Professional fees                              116          97         119
                                             --------    --------     -------
                                                4,956       4,910       4,977
                                             --------    --------     -------

Net income                                        192          77          81

Contributions from venturers                      146           -           -

Distributions to venturers                     (1,154)       (499)       (664)

Venturers' deficit, beginning of year          (1,241)       (818)       (235)
                                             --------    --------     -------
Venturers' deficit, end of year              $ (2,057)   $ (1,240)    $  (818)
                                             =========   ========     =======



















                           See accompanying notes.


<PAGE>
                           COMBINED JOINT VENTURES OF
                        PAINE WEBBER GROWTH PROPERTIES LP

                        COMBINED STATEMENTS OF CASH FLOWS
              For the years ended December 31, 1997, 1996 and 1995
                Increase (Decrease) in Cash and Cash Equivalents
                                 (In thousands)

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

Cash flows from operating activities:
  Net income                                        $   192    $   77   $    81
  Adjustments to reconcile net income  to net
    cash provided by operating activities:
   Depreciation expense                                 815       794       848
   Amortization of loan acquisition costs                64        44        30
   Changes in assets and liabilities:
     Accounts receivable                                  1        11     1,581
     Prepaid expenses                                   (41)     (125)        6
     Accounts payable and other liabilities              84        10      (130)
     Accrued interest                                     -       (74)       74
     Accrued real estate taxes                            5         -         5
     Accrued management fees                             (6)        -         1
     Tenant security deposits                           (21)       (9)       18
     Due to venturers                                     -         -    (1,619)
     Reimbursements payable to partner                  114        20        70
                                                    -------    ------   -------
      Total adjustments                               1,015       671       884
                                                    -------    ------   -------
      Net cash provided by operating activities       1,207       748       965
                                                    -------    ------   -------
           

Cash flows from investment activities:
   Additions to operating investment properties        (314)     (256)     (228)
   Decrease (increase) in reserve for capital 
    expenditures                                        128      (124)      (15)
                                                    -------    ------   -------
      Net cash used in investing activities            (186)     (380)     (243)
                                                    -------    ------   -------
           

Cash flows from financing activities:
   Repayment of long-term debt                          (54)   (8,529)     (159)
   Contributions from venturers                         146         -         -
   Distributions to venturers                        (1,155)     (499)     (664)
   Proceeds from issuance of long-term debt               -     8,850         -
   Financing fees                                         -      (240)        -
                                                    -------    ------   -------
      Net cash used in financing activities          (1,063)     (418)     (823)
                                                    -------    ------   -------
           

Net decrease in cash and cash equivalents               (42)      (50)     (101)
          

Cash and cash equivalents, beginning of year            957     1,007     1,108
                                                    -------    ------   -------
              

Cash and cash equivalents, end of year              $   915    $  957   $ 1,007
                                                    =======    ======   =======

Cash paid during the year for interest              $ 1,327    $1,585   $ 1,478
                                                    =======    ======   =======





                           See accompanying notes.


<PAGE>
                           COMBINED JOINT VENTURES OF
                        PAINE WEBBER GROWTH PROPERTIES LP
                     NOTES TO COMBINED FINANCIAL STATEMENTS



1.  Summary of significant accounting policies
    ------------------------------------------
      Organization
      ------------

      The  accompanying  financial  statements of the Combined Joint Ventures of
PaineWebber  Growth  Properties,  LP  include  the  accounts  of Rocky  Mountain
Partners,  a  Colorado  general  partnership;  Grouse Run  Associates  I and II,
California  general  partnerships;  Plano  Chisholm  Place  Associates,  a Texas
general  partnership;  and Parkwood  Montclair  Partners,  a California  general
partnership.  The  financial  statements  of the  Combined  Joint  Ventures  are
presented in combined form due to the nature of the relationship between each of
the  co-ventures  and  PaineWebber  Growth  Properties,  LP (PWGP) which owns an
interest in each of the joint ventures  mentioned below. As further described in
Note 2,  Parkwood  Montclair  Partners  sold the land at the former  site of the
Parkwood Apartments on April 15, 1994 to an affiliate of the co-venture partner.
Due to certain  outstanding  legal claims involving the Parkwoods joint venture,
the venture was not liquidated subsequent to the sale of the land (see Note 2).

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

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

    Rocky Mountain Partners                      February 17, 1983
    Grouse Run Associates I and II               March 31, 1983
    Plano Chisholm Place Associates              May 31, 1983
    Parkwood Montclair Partners                  October 31, 1983

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

      The  accompanying  financial  statements have been prepared on the accrual
basis of accounting in accordance with generally accepted accounting  principles
which  requires  management to make  estimates and  assumptions  that affect the
reported amounts of assets and liabilities and disclosures of contingent  assets
and  liabilities  as of December 31, 1997 and 1996 and revenues and expenses for
each of the three years in the period ended  December 31, 1997.  Actual  results
could differ from the estimates and assumptions used.

      Certain of the records of the Combined  Joint  Ventures are  maintained on
the  income  tax  basis  of  accounting  and  are  adjusted,   principally   for
depreciation,  to conform with  generally  accepted  accounting  principles  for
financial reporting purposes.

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

      The  operating  investment  properties  are  carried  at cost,  reduced by
accumulated  depreciation,  or  an  amount  less  than  cost  if  indicators  of
impairment  are present in  accordance  with  statement of Financial  Accounting
Standards  (SFAS) No. 121,  "Accounting for the Impairment of Long-Lived  Assets
and for Long-Lived  Assets to Be Disposed Of." SFAS No. 121 requires  impairment
losses to be recorded on long-lived assets used in operations when indicators of
impairment are present and the undiscounted cash flows estimated to be generated
by those  assets are less than the  assets  carrying  amount.  SFAS No. 121 also
addresses the accounting for long-lived  assets that are expected to be disposed
of.

      Depreciation  expense  is  computed  on a  straight-line  basis  over  the
estimated useful lives of the operating  investment  properties,  generally five
years for the  equipment  and fixtures and thirty  years for the  buildings  and
improvements.  Professional fees (including deferred acquisition fees paid to an
affiliate  of the  general  partner - see Note 3), and other  costs  incurred in
connection with the acquisition of the properties have been  capitalized and are
included in the cost of the land and buildings.

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

      Deferred expenses consist primarily of loan fees which are being amortized
on a straight-line basis, which approximates the effective interest method, over
the terms of the  related  loans.  Such  amortization  expense  is  included  in
interest expense on the accompanying statements of operations.

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

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

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

      For purposes of the statement of cash flows,  the Combined  Joint Ventures
consider all highly liquid  investments with original  maturity dates of 90 days
or less to be cash equivalents.

      In accordance with certain of the joint venture agreements,  specific cash
balances are  restricted for  insurance,  real estate taxes and tenant  security
deposits.  However,  should cash be required  for  operating  expenditures,  the
partners may modify the joint venture agreements.  Included in the cash and cash
equivalents balance are the following restricted amounts:

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

        Reserve for tenant security deposits      $     69          $     65
        Reserve for insurance and tax deposits         149               126
                                                  --------          --------
                                                  $    218          $    191
                                                  ========          ========

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

      The  carrying  amounts  of cash and  cash  equivalents  and cash  reserves
approximate  their  fair  values  as of  December  31,  1997 and 1996 due to the
short-term maturities of these instruments. It is not practicable for management
to  estimate  the fair  value of  reimbursements  payable  to  Venturer  without
incurring excessive costs due to the unique nature of such obligations. The fair
value of long-term  debt is estimated  using a  discounted  cash flow  analysis,
based on the current  market rate for similar  types of  borrowing  arrangements
(see Note 5).

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

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

2.  Joint Ventures
    --------------

      See Note 5 to the financial statements of PWGP in this Annual Report for a
more detailed description of the joint venture partnerships. Descriptions of the
ventures' properties are summarized below:

      a.  Rocky Mountain Partners
          -----------------------

     The joint  venture owns and  operates  Tantra Lake  Apartments,  a 301-unit
apartment  complex  located in Boulder,  Colorado.  Rocky Mountain  Partners was
named as a defendant in a lawsuit  brought in February  1998 by two  individuals
and an entity,  among others,  who had previously  performed  repair work at the
Tantra  Lake  property.  The  lawsuit  alleges,  among  other  things,  that the
individuals were exposed,  without their knowledge, to unsafe levels of asbestos
hazards in the course of  performing  work at the Tantra  Lake  Apartments.  The
joint venture plans to vigorously  defend itself against the allegations in this
lawsuit.  The joint venture's insurer has preliminarily  denied coverage for the
costs of  defending  the lawsuit by citing a contract  exclusion.  The  eventual
outcome of this litigation and the  applicability of insurance  coverage related
thereto  cannot be  determined at this time.  Accordingly,  no liability for any
expenses  which might result from this  litigation  has been provided for in the
venture's financial statements.

      b.  Grouse Run Associates I and II
          ------------------------------

      The joint venture owns and operates  Grouse Run  Apartments - Phases I and
II, a 158-unit apartment complex located in Stockton, California.

      c.  Plano Chisholm Place Associates
          -------------------------------

      The joint venture owns and operates Chisholm Place Apartments,  a 142-unit
apartment complex located in Plano, Texas.

      d.  Parkwood Montclair Partners
          ---------------------------

      The joint  venture  owned and operated  Parkwoods  Apartments,  a 433-unit
apartment  complex  located in Oakland,  California.  The  operating  investment
property was entirely  destroyed by fire on October 20, 1991.  The joint venture
had in place sufficient  insurance coverage on the investment property as of the
date of the fire.  In May 1992,  the joint  venture  and the  insurance  carrier
agreed  on the  extent of the  losses  and  entered  into a cash  settlement  of
$29,361,000.  In September 1993, the joint venture and another insurance carrier
entered  into a cash  settlement  of  $250,000  related to  supplemental  hazard
insurance.  The net settlement proceeds were used as follows: (i) $19,000,000 in
full  payment  of first  mortgage  loan,  (ii)  $1,418,000  ($65,000  of accrued
interest) in full payment of operating loans payable to PWGP,  (iii) $171,000 in
payment of reimbursements  payable to PWGP, (iv) $4,691,000 distributed to PWGP,
and (v) $2,547,000 retained by the joint venture.

      During 1993,  the joint venture was  successful in obtaining  approval for
the construction of a condominium complex on the land. The reconstruction  plans
were for a project of similar  size and  density to that of the former  Parkwood
Apartment  complex.   Management   believed  that  obtaining  these  condominium
conversion and site plan  approvals  would  substantially  facilitate the future
sale of the land.  During  calendar 1994,  the joint venture paid  approximately
$500,000 to secure certain  building  permits  required in order to proceed with
the  planned  reconstruction.   In  connection  with  obtaining  the  site  plan
approvals, the joint venture entered into a settlement agreement with the former
tenants of the  operating  investment  property  related to their  rights in the
condominium conversion. Under the terms of this agreement, the venture agreed to
pay the former tenants approximately  $250,000 and to offer certain discounts to
former  tenants  who wish to  purchase  a  condominium  unit in the  redeveloped
project.

      On April 15, 1994, Parkwood Montclair Partners sold the land on the former
site of the Parkwoods  Apartments to an affiliate of PWGP's co-venture  partner.
The property was sold for  $4,750,000.  After paying all closing costs,  the net
sales proceeds amounted to approximately $4,699,000. Parkwood Montclair Partners
retained  a  portion  of the  proceeds  to pay the  $250,000  settlement  amount
pursuant to the agreement  with the former  tenants of the Parkwoods  Apartments
and to fund ongoing costs associated with certain  outstanding legal claims. The
remaining  portion of the proceeds was  distributed  to the venture  partners in
accordance  with the terms of the joint venture  agreement,  with PWGP receiving
approximately  $4,139,000 and the co-venturer receiving  approximately  $49,000.
The net sales price of the land was less than its net carrying value at the date
of the  sale  by  approximately  $163,000.  A loss  equal  to  such  amount  was
recognized in 1994. Due to the outstanding  legal claims  involving the venture,
Parkwood  Montclair  Partners was not  liquidated at the time of the sale of the
land.  Except as discussed  below,  such legal claims had all been settled as of
December 31, 1996.

      Management  had  filed  for a refund of  approximately  $450,000  in costs
incurred to secure the necessary  building  permits which were obtained prior to
the sale of the land underlying the former  Parkwoods  Apartments from a federal
agency  responsible  for  administering  federal aid in connection with the 1991
Oakland  fire. An agreement  was reached  during 1995 to a release  schedule for
money  previously  funded by the  Parkwood  joint  venture  to pay for  building
permits.  The joint venture received a partial refund of these amounts totalling
approximately $146,000 in December 1995. Such amount is recorded as other income
on the accompanying  1995 statement of operations.  However,  the federal agency
subsequently  denied  the joint  venture's  claim for a refund of the  remaining
$300,000  in costs  incurred.  Management  believed  that the joint  venture was
entitled to a full refund of the costs incurred had been pursuing such a refund.
However,  during  fiscal 1998 the federal  agency  denied the  venture's  appeal
regarding the reimbursement claim, and at the present time, the venture does not
plan any further  legal  action.  In addition,  it is possible  that the federal
agency  will seek the return of the  $146,000  which was  disbursed  in December
1995.  The venture  recorded an expense in 1997 for the amount of this potential
liability.

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

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

      The joint venture agreements provide that taxable income and tax loss from
operations  in each year are generally to be allocated 99% to PWGP and 1% to the
co-venturers.  During  1991,  the  terms of the  Chisholm  Place  joint  venture
agreement were amended in  conjunction  with the debt  refinancing  described in
Note 5. Taxable  income and tax loss from  operations  are now  allocated 80% to
PWGP and 20% to the  co-venturer.  Gains or losses resulting from sales or other
dispositions  of the  projects  shall be  allocated  as  specified  in the joint
venture  agreements.  Allocations  of income  and loss for  financial  reporting
purposes have been made in accordance  with the allocations of taxable income or
loss.

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

      The joint venture  agreements provide that distributable net cash flow, as
defined,  will  generally  be  allocated  first to the  payment of the  deferred
acquisition and consulting  fees payable to affiliates of the general  partners,
then to the payment of interest and principal on certain interim borrowings,  if
such  borrowings  have  been  made,  and then any  remaining  amounts  are to be
distributed  99% to PWGP  and 1% to the  co-venturers.  In  accordance  with the
amendment  to the  Chisholm  Place joint  venture  agreement  referred to above,
beginning  in 1991,  cash flow of this  venture,  after the  payment  of certain
priority  distributions,  is to be  distributed  80%  to  PWGP  and  20%  to the
co-venturer.

      Distribution  of proceeds  resulting  from the sale or  refinancing of the
property shall be made in accordance with formulas provided in the joint venture
agreements.

      Additional cash
      ---------------

      Additional  cash  required  by  the  Joint  Ventures  is  generally  to be
provided,  either in the form of capital  contributions or as loans to the joint
ventures, 90% by PWGP and 10% by the co-venturers.

3.  Related party transactions
    --------------------------

      The  Combined  Joint  Ventures  originally  executed  property  management
agreements  with  affiliates  of the  co-venturers,  cancellable  at  the  joint
ventures' option upon the occurrence of certain events.  The management fees are
equal to 4% to 5% of gross receipts, as defined in the agreements.

      The joint venture  agreements provide that the co-venturers will reimburse
PWGP  for  their  proportionate  share of  PWGP's  management  fees and  certain
out-of-pocket   expenses  incurred  by  PWGP  in  connection  with  the  general
management of the joint ventures.  Such  reimbursements  are payable only to the
extent of available  cash flow from  operations and are cumulative to the extent
not  paid.  The  Combined  Joint  Ventures  owed PWGP  reimbursements  totalling
$191,000,  $170,000 and $193,000 for the years ended December 31, 1997, 1996 and
1995, respectively.  Cumulative unpaid reimbursements  aggregated $1,833,000 and
$1,719,000  at  December  31,  1997 and 1996,  respectively,  which  amounts are
accrued on the accompanying balance sheets.

4.  Reserves for repairs and capital improvements
    ---------------------------------------------

      Under the terms of certain joint venture  agreements,  the joint  ventures
are required to maintain a cash reserve for capital  expenditures  consisting of
an initial  amount to be increased for each month of operations of the operating
investment  property by the joint ventures by an amount equal to 2% of the gross
rents. Unless otherwise  determined by the joint ventures,  the principal amount
of funds in the capital  reserve shall only be expended for capital  repairs to,
or replacement of, portions of the operating properties as set forth in a budget
or approved by the joint ventures.  As of December 31, 1997 and 1996, the amount
of capitalized  expenditures  have exceeded the amounts of the required deposits
to such reserves. Accordingly, no such reserve balances were required.

5.  Long-term debt
    --------------

      Long-term  debt at December 31, 1997 and 1996  consists of the following
(in thousands):

                                                         1997       1996
                                                         ----       ----

     Nonrecourse  mortgage  note secured
     by a  first  deed of  trust  on the
     Tantra   Lake    Apartments    (see
     discussion  below).  The loan bears
     interest   at  7.68%   per   annum,
     monthly  interest-only  payments of
     $57 will be made through  September
     1, 2001 when the  remaining  unpaid
     balance  is due.  The fair value of
     this note  approximated it carrying
     value as of  December  31, 1997 and
     1996.                                             $ 8,850     $ 8,850

     Nonrecourse  mortgage  note secured
     by a deed of  trust  on the  Grouse
     Run  I   operating   property   and
     guaranteed  by the Federal  Housing
     Administration.   The  loan   bears
     interest  at a  rate  of  7.5%  per
     annum  and is  payable  in  monthly
     principal and interest installments
     of  $11.   The   remaining   unpaid
     balance  is due  February  1, 2019.
     The  fair  value  of this  mortgage
     note   approximated   its  carrying
     value as of  December  31, 1997 and
     1996.                                               1,352       1,377

     Nonrecourse  mortgage  note secured
     by a deed of  trust  on the  Grouse
     Run  II   operating   property  and
     guaranteed  by the Federal  Housing
     Administration.   The  loan   bears
     interest  at a  rate  of  7.5%  per
     annum  and is  payable  in  monthly
     principal and interest installments
     of $13  with the  remaining  unpaid
     balance due  February 1, 2020.  The
     fair  value of this  mortgage  note
     approximated  its carrying value as
     of  December  31,  1997  and  1996.                 1,703       1,732

     Real  estate   lien  note   payable
     secured  by  the   Chisholm   Place
     operating     property    and    an
     assignment  of  rents.  The note is
     nonrecourse,  bears interest on the
     unpaid principal  balance at a rate
     of 10% per annum and is  payable in
     monthly interest-only installments,
     with the entire  principal  balance
     due on October  1,  2001.  The fair
     value  of  this  note  approximated
     $4,394  and  $4,449 as of  December
     31,  1997 and  1996,  respectively.                 4,160       4,160
                                                       -------     -------

      Total long-term debt                              16,065      16,119

      Less:  current portion                               (58)        (54)
                                                       -------     -------
                                                       $16,007     $16,065
                                                       =======     =======

       Maturities  of  long-term  debt  for  each of the  next  five  years  and
   thereafter are as follows:

        1998             $     58
        1999                   63
        2000                   68
        2001               13,083
        2002                   79
        Thereafter          2,714
                         --------
                         $ 16,065
                         ========




<PAGE>
<TABLE>

Schedule III - Real Estate and Accumulated Depreciation
                           COMBINED JOINT VENTURES OF
                        PAINE WEBBER GROWTH PROPERTIES LP
              Schedule of Real Estate and Accumulated Depreciation
                                December 31, 1997
                                 (In thousands)
<CAPTION>

                                                    Costs
                                                  Capitalized                                                          Life on Which
                                                  (Removed)                                                            Depreciation
                             Initial Cost to     Subsequent to    Gross Amount at Which Carried at                     in Latest
                               Partnership         Acquisition               End of Year                               Income
                                 Buildings &  Buildings &       Buildings &        Accumulated  Date of      Date      Statement
Description Encumbrances(B) Land Improvements Improvements Land Improvements Total Depreciation Construction Acquired  is Computed
----------- --------------- ----- ----------- ------------ ---- ------------ ----- ------------ ------------ --------  ------------
<S>            <C>          <C>    <C>        <C>          <C>      <C>        <C>        <C>       <C>       <C>        <C>

COMBINED JOINT VENTURES:

Apartment
Complex
Plano, TX     $ 4,160       $1,744   $ 6,250     $  197     $1,744   $ 6,447    $ 8,191  $ 3,239    1982      5/31/83    5-30 yrs

Apartment 
Complex
Stockton, CA    3,055          545     4,914        564        545     5,478      6,023    2,929    1980      3/31/83    5-30 yrs

Apartment 
Complex
Boulder, CO     8,850        2,036     8,747      2,591      2,036    11,338     13,374    6,238    1974      2/17/83    5-30 yrs
              -------       ------   -------     ------     ------   -------  - -------  -------
              $16,065       $4,325   $19,911     $3,352     $4,325   $23,263    $27,588  $12,406
              =======       ======   =======     ======     ======   =======    =======  =======
Notes:
(A) The  aggregate  cost of real estate  owned at December  31, 1997 for Federal income  tax  purposes  is  approximately  $27,588.
(B) See  Note 5 of  Notes to Financial  Statements  for a description of the debt  encumbering  the operating
    investment properties.
(C) Reconciliation of real estate owned:
                                                       December 31       December 31,      December 31,
                                                          1997              1996              1995
                                                          ----              ----              ----

      Balance at beginning of year                     $27,274           $27,018           $26,790
      Acquisitions and improvements                        314               256               228
                                                       -------           -------          --------
      Balance at end of year                           $27,588           $27,274           $27,018
                                                       =======           =======           =======

(D) Reconciliation of accumulated depreciation:
      Balance at beginning of year                     $11,591           $10,797          $  9,949
      Depreciation expense                                 815               794               848
                                                       -------           -------           -------
      Balance at end of year                           $12,406           $11,591           $10,797
                                                       =======           =======           =======
</TABLE>