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, 1997

                                            OR

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

                           For the transition period from _____to _____ .

                             Commission File Number: 0-10995

                             PAINE WEBBER GROWTH PROPERTIES LP

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

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

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

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

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

                           UNITS OF LIMITED PARTNERSHIP INTEREST
                                     (Title of class)

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

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

Current Report on Form 8-K of
registrant dated
February 7, 1997                                                Part IV

<PAGE>
                             PAINE WEBBER GROWTH PROPERTIES LP
                                      1997 FORM 10-K

                                     TABLE OF CONTENTS


Part   I                                                                  Page

Item  1     Business                                                      I-1

Item  2     Properties                                                    I-3

Item  3     Legal Proceedings                                             I-3

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


Part  II

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

Item  6     Selected Financial Data                                       II-1

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

Item  8     Financial Statements and Supplementary Data                   II-7

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


Part III

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

Item  11    Executive Compensation                                        III-2

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

Item  13    Certain Relationships and Related Transactions                III-3


Part  IV

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

Signatures                                                                IV-2

Index to Exhibits                                                         IV-3

Financial Statements and Supplementary Data                        F-1 to F-33

<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,  1997,  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       
Location                             Size         of Interest    Type of 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'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,  1997,  the  Limited  Partners  had  received
cumulative cash distributions  totalling $16,973,000,  or approximately $581 per
original  $1,000  investment,  including  distributions  of $354,000 paid during
fiscal 1997.  The  cumulative  cash returns  described  above  include a special
distribution  made on June  15,  1995 of $90  per  original  $1,000  investment,
consisting  of the  Partnership's  share of the net proceeds of the  Northcastle
sale and the release of certain  excess  reserve  funds.  Such  cumulative  cash
returns also include $372 per original $1,000  investment from the proceeds from
the  Parkwoods  insurance  settlement,  the  subsequent  land  sale and 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. As discussed above, the Partnership  successfully  closed the sale of
the Nob Hill  Apartments on February 7, 1997.  Because the new owner assumed the
property's  existing  first  mortgage  loan provided  through the  Department of
Housing and Urban  Development  (HUD),  the sale required the formal approval of
HUD,  which was received on June 9, 1997. As a result,  the  Partnership  made a
Special  Distribution of $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  Partnership's  investment  in Nob Hill  and  $24.35  represented  a
distribution of Partnership reserves that exceeded expected future requirements.
After this special capital  distribution to investors,  the Partnership's annual
distribution  rate will be increased  to 4.25% per annum on a Limited  Partner's
remaining  capital  account of $423 per original  $1,000  Unit.  As of March 31,
1997,  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.  In the past 12 months,  development
activity   for   multi-family   properties   in  many   markets  has   escalated
significantly.

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

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

Tantra Lake Apartments     90%         95%         95%         95%      94%

Grouse Run Apartments      96%         93%         94%         97%      95%

Nob Hill Apartments (1)    90%         94%         93%         N/A      N/A

Chisholm Place Apartment   97%         98%         97%         99%      98%

(1) The Nob Hill Apartments was sold on February 7, 1997.

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 have 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  has not  occurred to date
pending the  resolution  of an appeal of the  settlement by two of the plaintiff
class members. As part of the settlement  agreement,  PaineWebber has 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  alleges,  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 subsequent to March 31, 1997.

     Based on the  settlement  agreements  discussed  above  covering all of the
outstanding unitholder  litigation,  and notwithstanding the appeal of the class
action  settlement  referred  to  above,  management  does not  expect  that the
resolution  of these  matters will have a material  impact on the  Partnership's
financial statements, taken as a whole.

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

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

     None.


<PAGE>


                                   PART II

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

    At  March  31,  1997,  there  were  2,723  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.  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 1997.

Item 6.  Selected Financial Data
                        Paine Webber Growth Properties LP
          For the years ended March 31, 1997, 1996, 1995, 1994 and 1993
                    (in thousands, except for per Unit data)

                         1997 (1)   1996        1995        1994        1993 (1)
                         --------   ----        ----        ----        -------

Revenues                 $ 2,825    $  2,446    $  2,471    $  2,393    $  2,235

Operating income 
  (loss)                 $  (559)   $  (422)    $  (324)    $     31    $     88

Partnership's share
  of gains on settlement 
  of insurance claims          -           -          -     $    225    $ 11,545

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

Partnership's share of
  unconsolidated
  ventures' income
  (losses)               $     94   $    96     $   644     $ (2,546)   $  (498)

Net income (loss)        $   (580)  $  (322)    $   325     $ (2,289)   $ 11,136

Per Limited
Partnership Unit:
  Net income (loss)      $(19.67)   $(10.93)    $  8.70     $ (77.63)   $ 377.63

  Cash distributions
    from operations      $ 12.12    $ 11.66     $  6.28            -    $  19.58

  Cash distributions
    from sale,
    refinancing and
    other capital 
    transactions               -    $ 90.00     $158.00            -    $ 154.00

Total assets             $ 4,422    $12,979     $16,086     $ 20,510    $ 21,436

Mortgage note payable          -    $ 6,890     $ 6,962     $  7,029    $  5,761

(1) During  fiscal  1993,  as further  discussed  in Note 4 to the  accompanying
    consolidated financial statements,  the Partnership assumed complete control
    of the joint  venture  which  owned and  operated  the Nob Hill  Apartments.
    Accordingly,  the  joint  venture,  which had been  accounted  for under the
    equity  method  in  prior  years,  was  consolidated  in  the  Partnership's
    financial  statements  beginning in fiscal 1993. The Nob Hill Apartments was
    sold to an unrelated third party on February 7, 1997.

    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.
<PAGE>

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

INFORMATION RELATING TO FORWARD-LOOKING STATEMENTS
--------------------------------------------------

      The following  discussion of financial condition includes  forward-looking
statements  which  reflect  management's  current  views with  respect to future
events and  financial  performance  of the  Partnership.  These  forward-looking
statements  are  subject to certain  risks and  uncertainties,  including  those
identified  below,  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,  1997 the  Partnership
retained interests in three operating investment properties. During fiscal 1997,
the  Partnership  completed  a sales  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.  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.

      As previously reported,  as a result of increases in apartment development
activity  in the local  market as well as the  assumable  financing  obtained in
September 1993,  management began to market the Nob Hill Apartments property for
sale  during  the  spring of 1995.  During  fiscal  1997,  a  purchase  and sale
agreement  was  signed  with a  prospective  buyer for a  purchase  price of $10
million.  In the third quarter of fiscal 1997,  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.  The Partnership's  original investment in the Nob Hill joint venture
totalled  approximately  $5  million.  Despite  receiving  less  than 50% of the
Partnership's  original  investment,  management believes that the sale price is
reflective  of the market value of the  property and that it was an  appropriate
time to sell  the  investment  property.  While  the Nob Hill  property  was 93%
occupied for the quarter ended  December 31, 1996,  development of a significant
number of new multi-family units was underway at the time of the sale. Increased
competition  had begun to result in pressure to reduce  rental rates or use rent
concessions as leasing incentives to maintain occupancy levels and market share.
In addition,  despite the recent extensive  capital  improvement  program at the
property,  the property's age required that ongoing capital expenditures be made
to  maintain  the  property's  competitive  condition.  As  a  result  of  these
circumstances, management believed that the value of this 25-year-old, 368-unit,
San  Antonio,  Texas  apartment  complex was at or near its peak for the current
market  cycle.  While the sale had been executed and control of the property had
been transferred to the buyer on February 7, 1997, the sale remained  contingent
upon  receiving  the 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 will be
increased from 3% to 4.25% on a Limited  Partner's  capital  account of $423 per
original $1,000 Unit. The reasons for the increase 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 increased
distribution  rate will be  effective  for the  payment to be made on August 15,
1997 for the quarter ending June 30, 1997.

      The sale of the Nob Hill  Apartments has positioned the  Partnership for a
possible liquidation within the next 2-to-3 years. 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).  Management's hold versus sell decisions for
its  remaining  investments  will continue to be based upon an assessment of the
best  expected  overall  returns to the Limited  Partners.  The  Boulder  market
remains  strong at the  present  time due to a  history  of  healthy  population
growth, a stable  employment base and an established  public policy to limit new
apartment  construction.  As previously reported,  the Partnership received some
unsolicited  interest  from  prospective  buyers for the Tantra Lake  Apartments
during fiscal 1997.  Management has initiated discussions with local real estate
brokerage firms concerning  potential sale strategies for Tantra Lake.  However,
no  decision   has  been  made  to  formally   list  the   property   for  sale.
Notwithstanding  the current  situation,  it is possible that a formal marketing
process for a potential  sale of the property  could occur  during  fiscal 1998.
Capital  improvement  projects planned for the 1997 calendar year at Tantra Lake
include new roofs for specific  buildings and upgrades to the electrical system.
Other improvements budgeted at Tantra Lake for 1997 are the exterior painting of
ten  buildings,  siding  repairs and  landscape  enhancements.  Despite a fairly
significant  amount of new  construction  coming  on-line in the greater  Dallas
market during fiscal 1997, the performance of the Chisholm Place  Apartments has
remained strong due to the property's larger unit sizes, its excellent  location
and its well-maintained  physical appearance.  Management is currently analyzing
the  potential  for near term  appreciation  in the value of the Chisholm  Place
property to determine the appropriate  timing for the disposition of this asset.
The Chisholm  Place  property is in excellent  condition,  and the only physical
improvement  planned for the next year is the installation of 60 ceiling fans in
the apartment  interiors.  The occupancy  level at the Grouse Run  Apartments in
Stockton,  California,  averaged 97% for the quarter ended March 31, 1997, which
exceeds the prior quarter's average of 94% as well as the median occupancy level
of 95% reported ]in the property's local market.  The increase in the property's
average  occupancy level is  attributable  to a slight  improvement in the local
economy. Conditions in Stockton's apartment market have been generally soft over
the past year, and rental rates have remained  relatively  flat.  Because of the
property's   improved   occupancy   levels,   the  leasing  staff  has  recently
discontinued  the use of all  rental  concessions  and  discounts.  A program of
balcony  repairs begun at Grouse Run in fiscal 1997 is scheduled for  completion
by June 30, 1997. Additional  improvements scheduled for the Grouse Run property
in  calendar  year 1997  include  repairing  the  perimeter  fences  on  several
balconies,   painting  the  trim  on  building   exteriors   and  enhancing  the
landscaping.

      The $8.5 million first mortgage loan secured by the Tantra Lake Apartments
was  scheduled  to mature  on July 1,  1996.  Management  had  analyzed  several
refinancing  proposals from  potential new lenders in addressing  this scheduled
maturity.  Management's  goal  was to  structure  a  replacement  loan  with the
flexibility  to  permit  a  future  sale of the  property  in the  event  that a
liquidation  of the  Partnership  is achievable  over the next 2-to-3 years,  as
discussed further above. 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.

      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 has  subsequently  denied the joint  venture's  claim for a refund of the
remaining $300,000 in costs incurred. Management believes that the joint venture
is entitled to a full refund of the costs  incurred and  continues to vigorously
pursue the refund.  Presently,  there are no assurances that any amounts will be
recovered. Accordingly, no receivable for any such amounts has been reflected in
the joint venture's financial statements.

     At March 31, 1997, the Partnership and its  consolidated  joint venture had
available cash and cash equivalents of approximately  $4,118,000.  Such cash and
cash  equivalents  include the proceeds from the sale of the Nob Hill Apartments
as discussed  further  above.  As noted above, a special  distribution  of these
proceeds and excess Partnership  reserves  totalling  approximately $3.4 million
was made to the Limited  Partners on June 13, 1997.  The  remainder of 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.

Results of Operations
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 is  primarily  due to a
$138,000 loss  realized from the sale of the Nob Hill  Apartments on February 7,
1997, as discussed  further above, 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 the prior year.  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 the current year 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 the prior  year 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 the current  year.
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 the current year. Interest expense decreased due
to  the  August  1996   refinancing   of  Tantra  Lake's   mortgage  loan  which
significantly  reduced the venture's annual debt service,  as discussed  further
above.

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.

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

      The  Partnership  reported net income of $325,000 for the year ended March
31, 1995, as compared to a net loss of  $2,289,000  reported for the prior year.
The primary reason for the improvement in net operating  results was a favorable
change in the Partnership's share of unconsolidated  ventures'  operations.  The
Partnership  realized  net  income  from its share of  unconsolidated  ventures'
operations of $644,000 in fiscal 1995 as compared to net losses of $2,546,000 in
the prior year. The net income of the  unconsolidated  joint ventures for fiscal
1995 resulted from the net gain on the sales of the  Northcastle  Apartments and
the Parkwoods land. The sale of the Northcastle Apartments resulted in a gain of
$1,204,000  because the net sale proceeds exceeded the net carrying value of the
operating  investment  property.  The Parkwoods sale proceeds were less than the
net carrying value of the land by $163,000.  The Partnership's  share of the net
gain from these two transactions was $1,043,000.  The Partnership's share of the
unconsolidated  ventures' operating losses prior to the net gain described above
decreased  to $399,000  in fiscal  1995 from  $2,546,000  in fiscal  1994.  This
decrease was primarily the result of the $1,593,000  write down of the Parkwoods
investment  property to its net realizable  value which was recognized in fiscal
1994. In addition, increased rental income at the Chisholm Place and Tantra Lake
Apartments,  lower repairs and maintenance expenses at Grouse Run and a decrease
in  professional  fees at the  Parkwoods  joint venture all  contributed  to the
improved net operating results of the  unconsolidated  joint ventures for fiscal
1995.  Rental income at both Chisholm  Place and Tantra Lake improved by 6% over
the fiscal 1994 primarily due to increased rental rates.  Average occupancies at
both properties  remained  relatively  stable, in the mid-90's,  throughout both
years.  Repairs and maintenance expenses at Grouse Run were higher by $75,000 in
fiscal 1994 due to the painting of the  building  exteriors.  Professional  fees
incurred by the Parkwoods joint venture  declined by $174,000 during fiscal 1995
due to a decrease in required legal services.

      The improvement in the  Partnership's  share of  unconsolidated  ventures'
operations was offset by decreases in gain on settlement of insurance claims and
an  unfavorable  change  in  the  Partnership's  operating  income  (loss).  The
Partnership  realized a gain of $225,000 from the  settlement of a  supplemental
hazard  insurance  claim relating to the Parkwoods joint venture in fiscal 1994.
The  Partnership had an operating loss of $324,000 in fiscal 1995 as compared to
operating  income of  $31,000  in  fiscal  1994.  This  unfavorable  change  was
primarily due to an increase in the loss of the Partnership's consolidated joint
venture,  Nob Hill Partners,  of $433,000.  Nob Hill's net loss increased mainly
due to an increase in  interest  expense of $250,000  and an increase in repairs
and  maintenance  expenses of $118,000.  Interest  expense  increased due to the
September 1993  refinancing of the venture's  long-term debt which increased the
outstanding principal balance of the debt by approximately $1.3 million. Repairs
and  maintenance  expenses  increased  as a  result  of  the  start  of a  major
improvement program at the property  subsequent to the refinancing  transaction.
The increase in the net loss of the Nob Hill joint venture was partially  offset
by an  increase in  interest  income of  $245,000  due to an increase in average
outstanding  cash  balances  for fiscal 1995 due to the receipt of the  proceeds
from the sales of the Parkwoods and  Northcastle  properties  and an increase in
interest rates earned on such investments during the year.

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,  development  of new
multi-family properties has surged in the past 12 months. Existing properties in
such markets have generally  experienced  increased vacancy levels,  declines in
effective  rental rates and, in some cases,  declines in estimated market values
as a result of the increased  competition.  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 certain 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 fourteenth
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           37        8/22/96
Terrence E. Fancher     Director                         43        10/10/96
Walter V. Arnold        Senior Vice President and 
                          Chief Financial Officer        49        10/29/85
David F. Brooks         First Vice President and
                          Assistant Treasurer            54        7/20/82 *
Timothy J. Medlock      Vice President and Treasurer     36        6/1/88
Thomas W. Boland        Vice President                   34        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.


<PAGE>


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

    (f) None of the  directors  and officers  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,  1997,  all filing
requirements  applicable to the officers and  directors of the Managing  General
Partner and ten-percent beneficial holders were complied with.

Item 11.  Executive Compensation

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

    The  Partnership  is  required  to pay  certain  fees to the Adviser and the
General   Partners  are  entitled  to  receive  a  share  of  Partnership   cash
distributions,  and a share of profits and losses.  These items are described 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% for the payment  made on February 15, 1997 for the quarter
ended  December 31, 1996.  As discussed  further in Item 7, the  Partnership  is
expected to further increase the distribution rate to 4.25% for the distribution
to be paid on August 15, 1997 for the quarter ending June 30, 1997. 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.
<PAGE>

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 1997, based on additional  Distributable Cash paid
to the partners, management fees totalling $35,000 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, 1997 is $88,000,  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 $3,000  (included in general and  administrative  expenses)  for managing the
Partnership's  cash assets during fiscal 1997. 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)    A Current  Report on Form 8-K dated February 7, 1997 was filed during
           the  last   quarter  of  fiscal  1997  to  report  the  sale  of  the
           Partnership's Nob Hill Apartments  investment  property and is hereby
           incorporated by reference.

    (c)    Exhibits

                   See (a)(3) above.

    (d)    Financial Statement Schedules

                   The  response to this  portion of Item 14 is  submitted  as a
                   separate  section  of this  Report.  See  Index to  Financial
                   Statements and Financial Statement 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


Dated:  June 27, 1997

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 27, 1997
   ---------------------------                         -------------
   Bruce J. Rubin
   Director




By:/s/ Terrence E. Fancher                        Date: June 27, 1997
   -----------------------                             -------------
   Terrence E. Fancher
   Director


<PAGE>



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

                       PAINE WEBBER GROWTH PROPERTIES LP

                              INDEX TO EXHIBITS
<TABLE>
<CAPTION>


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

(3) and (4)        Prospectus of the Partnership          Filed  with the Commission
                   dated November 15, 1982, as            pursuant to Rule 424(c) and
                   supplemented, with particular          incorporated herein by
                   reference to the Restated              reference.
                   Certificate and Agreement of
                   Limited Partnership


(10)               Material contracts previously          Filed with the Commission
                   filed as exhibits to registration      pursuant to  Section 13 or
                   statements and amendments thereto      15(d) of the Securities Act
                   of the registrant together with        of 1934 and incorporated 
                   all such contracts filed as            herein by reference.
                   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  1997 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 I of this Report 
                                                          Page I-1, to which  
                                                          reference is hereby made.

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

</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, 1997 and 1996            F-3

   Consolidated  statements of operations  for the years ended
      March 31, 1997,1996 and 1995                                      F-4

   Consolidated  statements of changes in partners'  capital 
      (deficit) for the  years ended March 31, 1997, 1996 and 1995      F-5

   Consolidated  statements  of cash flows for the years ended
      March 31, 1997, 1996 and 1995                                     F-6

   Notes to consolidated financial statements                           F-7

   Schedule III - Real Estate and Accumulated Depreciation              F-21


Combined Joint Ventures of Paine Webber Growth Properties LP:

   Report of independent auditors                                       F-22

   Combined balance sheets as of December 31, 1996 and 1995             F-23

   Combined  statements  of  operations  and  changes  in  
     venturers'  capital (deficit) for the years ended 
     December 31, 1996, 1995 and 1994                                   F-24

   Combined  statements  of cash flows for the years ended
       December 31, 1996, 1995 and 1994                                 F-25

   Notes to combined financial statements                               F-26

   Schedule III - Real Estate and Accumulated Depreciation              F-33


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,  1997 and 1996,  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,  1997.
These  financial   statements  are  the   responsibility  of  the  Partnership's
management.  Our  responsibility  is to express  an  opinion on these  financial
statements based on our audits.

     We 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,  1997  and  1996,  and  the
consolidated  results of its operations and its cash flows for each of the three
years in the period ended March 31, 1997 in conformity  with generally  accepted
accounting principles.






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


Boston, Massachusetts
June 13, 1997


<PAGE>


                      PAINE WEBBER GROWTH PROPERTIES LP

                         CONSOLIDATED BALANCE SHEETS
                           March 31, 1997 and 1996
                   (In thousands, except for per Unit data)

                                    ASSETS
                                                       1997           1996
                                                       ----           ----

Operating investment property, at cost:
   Land                                            $     -        $   2,029
   Buildings improvements and equipment                  -           13,827
                                                   -------        ---------
                                                         -           15,856
   Less accumulated depreciation                         -           (6,263)
                                                   -------        ---------
                                                         -            9,593
Investments in unconsolidated joint
  ventures, at equity                                  304              987
Cash and cash equivalents                            4,118            1,323
Real estate tax and insurance
  escrow deposit                                         -              247
Capital improvement and replacement 
  escrow deposits                                        -              271
Accounts receivable                                      -                1
Deferred loan costs, net of accumulated
  amortization of $38 in 1996                            -              496
Other assets                                             -               61
                                                   -------        ---------
                                                   $ 4,422        $  12,979
                                                   =======        =========


                      LIABILITIES AND PARTNERS' CAPITAL

Accounts payable and accrued expenses              $    39        $     266
Accrued interest payable                                 -              211
Advances from consolidated venture                       -              250
Tenant security deposits                                 -               18
Other liabilities                                        4               27
Mortgage note payable                                    -            6,890
                                                   -------        ---------
      Total liabilities                                 43            7,662

Partners' capital:
  General Partners:
   Capital contributions                                 1               1
   Cumulative net income                                18              24
   Cumulative cash distributions                       (35)            (31)

  Limited Partners ($1,000 per Unit, 
    29,194 Units outstanding):
   Capital contributions, net 
     of offering costs                              26,345          26,345
   Cumulative net losses                            (4,977)         (4,403)
   Cumulative cash distributions                   (16,973)        (16,619)
                                                   -------        ---------
      Total partners' capital                        4,379           5,317
                                                   -------        --------
                                                   $ 4,422        $ 12,979
                                                   =======        ========




                           See accompanying notes.


<PAGE>


                        PAINE WEBBER GROWTH PROPERTIES LP

                      CONSOLIDATED STATEMENTS OF OPERATIONS
                For the years ended March 31, 1997, 1996 and 1995
                    (In thousands, except for per Unit data)


                                                1997         1996       1995
                                                ----         ----       ----
Revenues:
   Rental income                             $  2,251    $  2,021   $  1,869
   Reimbursements from affiliates                 176         189        215
   Interest and other income                      398         236        387
                                             --------    --------   --------
                                                2,825       2,446      2,471

Expenses:
   Loss due to impairment of long-lived assets    856           -          -
   Interest expense                               665         617        718
   Real estate taxes                              231         207        214
   Depreciation expense                           229         686        593
   Property operating expenses                  1,151         960        975
   Partnership management fees                     35          34         18
   General and administrative                     217         364        277
                                             --------    --------   --------
                                                3,384       2,868      2,795
                                             --------    --------   --------

Operating loss                                   (559)       (422)      (324)

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

Venture partner's share of consolidated 
  venture's  loss                                  23           4          5

Partnership's share of unconsolidated
   ventures' income                                94          96        644
                                             --------    --------   --------

Net income (loss)                            $   (580)   $   (322)  $    325
                                             ========    ========   ========

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

   Cash distributions                        $  12.12    $ 101.66   $ 164.28
                                             ========    ========   ========


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, 1997, 1996 and 1995
                                 (In thousands)

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

Balance at March 31, 1994                 $    (69)   $ 13,152    $ 13,083

Net income                                      71         254         325

Cash distributions                              (2)     (4,796)     (4,798)
                                          --------    --------    --------

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

























                            See accompanying notes


<PAGE>


                        PAINE WEBBER GROWTH PROPERTIES LP

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

                                                1997        1996         1995
                                                ----        ----         ----
Cash flows from operating activities:
  Net income (loss)                         $    (580)    $  (322)     $   325
  Adjustments to reconcile net income
   (loss) to net cash (used in) provided 
   by operating activities:
     Reimbursements from affiliates              (176)       (189)       (215)
     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)         (5)
     Partnership's share of unconsolidated
      ventures' losses                            (94)        (96)       (644)
     Depreciation expense                         229         686         593
     Amortization of deferred loan costs           18          17          18
     Changes in assets and liabilities:
      Accounts receivable                           1           7          78
      Advances from consolidated venture         (250)        250           -
      Real estate tax and insurance 
       escrow deposit                             247          (3)         (5)
      Deferred loan costs                           -           -          13
      Other assets                                 61         (21)         30
      Accounts payable and accrued expenses      (227)        (38)        (14)
      Accrued interest payable                   (211)         56         148
      Tenant security deposits                    (18)         (6)        (13)
                                            ---------     --------     -------
         Total adjustments                        551         659         (16)
                                            ---------     --------     -------
         Net cash (used in) provided by
           operating activities                   (29)        337          309

Cash flows from investing activities:
  Distributions from unconsolidated 
    joint ventures                                953         627       6,699
  Net withdrawals from capital improvement
   and replacement escrow                         146          58         703
  Additions to operating investment property     (158)       (149)       (978)
  Net proceeds from sale of operating
    investment property                          2,332          -           -
                                            ----------    --------     ------
         Net cash provided by investing
           activities                           3,273          536       6,424

Cash flows from financing activities:
  Repayment of long-term debt                     (91)        (72)        (67)
  Distributions to partners                      (358)     (2,971)     (4,798)
                                            ---------     -------      -------
         Net cash used in financing
           activities                            (449)     (3,043)     (4,865)
                                            ---------     -------      -------

Net increase (decrease) in cash and
 cash equivalents                                2,795     (2,170)       1,868

Cash and cash equivalents, 
 beginning of year                               1,323      3,493        1,625
           
                                            ----------    -------      -------

Cash and cash equivalents, end of year      $    4,118    $ 1,323      $ 3,493
                                            ==========    =======      =======

Supplemental Disclosures:

  Cash paid during the year for interest    $      781    $   511     $    516
                                            ==========    =======     ========

  Long-term debt assumed by buyer           $   (6,799)   $     -     $      -
                                            ==========    =======     ========



                           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, 1997, two of these
   investments had been sold and one was completely destroyed by fire. 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, 1997 and 1996 and revenues
   and  expenses for each of the three years in the period ended March 31, 1997.
   Actual results could differ from the estimates and assumptions used.

        The  accompanying   financial   statements   include  the  Partnership's
   investments  in  certain  joint  venture  partnerships  which  own  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 joint venture have been
   eliminated in consolidation,  except for lag-period cash transfers.  Such lag
   period transfers are accounted for as advances from  consolidated  venture on
   the  accompanying  balance  sheets.  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.

        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 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. The Nob Hill venture  recognized
   an impairment  loss in fiscal 1997 prior to completing  the sale  transaction
   when it  became  apparent  that  the net  carrying  amount  of the  operating
   investment  property would not be recovered from the net proceeds of the sale
   transaction (see Note 4).

        Depreciation  expense was computed using the  straight-line  method over
   estimated useful lives of five-to-thirty years. 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.

        Deferred loan costs at March 31, 1996 consisted of expenses  incurred in
   connection  with  the  refinancing  of  the  debt  secured  by the  Nob  Hill
   Apartments  (see Note 6). Such costs,  prior to the date of sale,  were being
   amortized on a straight-line basis over the term of the loan. Amortization of
   deferred  loan  costs,  through  the date of sale,  was  included in interest
   expense on the accompanying statements of operations.

        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, 1997 and 1996 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 1997, 1996 and
   1995, based on additional Distributable Cash paid to the partners, management
   fees totalling $35,000, $34,000 and $18,000,  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, 1997, 1996 and 1995 is $88,000, $93,000 and $96,000,  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  $3,000,   $5,000  and  $6,000   (included  in  general  and
   administrative  expenses) for managing the  Partnership's  cash assets during
   fiscal 1997, 1996 and 1995, respectively.

4. Operating Investment Property

        As of March 31, 1996, the  Partnership  owned a majority and controlling
   interest in one joint venture which owned an operating  investment  property,
   the Nob Hill Apartments. As discussed in Note 2, the Partnership reported the
   operations of the Nob Hill joint venture on a three-month lag. 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 a 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.

        Nob Hill Partners
        -----------------

        On March 1,  1983  the  Partnership  acquired  an  interest  in Nob Hill
   Partners, a newly formed Texas general partnership  organized to purchase and
   operate Nob Hill  Apartments,  a 368-unit  apartment  complex in San Antonio,
   Texas. The property was purchased from an entity that was an affiliate of the
   original co-venturer on March 31, 1983. The Partnership was a general partner
   in the joint venture.  The Partnership's  original  co-venture partner was an
   affiliate of the Trammell Crow organization. Effective September 1, 1992, the
   Trammell Crow  affiliate's  interests and capital account were transferred to
   First PW  Growth  Properties,  Inc.,  the  Managing  General  Partner  of the
   Partnership. As a result, the Partnership assumed control over the affairs of
   the joint  venture.  An affiliate  of Trammell  Crow was retained as property
   manager  to conduct  the  day-to-day  operations  of the  property  under the
   direction of the Managing General Partner.

        The aggregate cash  investment by the  Partnership  for its interest was
   approximately  $4,961,000  (including an acquisition  fee of $344,000 paid to
   the  Adviser  of the  Partnership  and  fees  aggregating  $166,000  paid  to
   affiliates of the  co-venturer).  In addition,  acquisition  fees aggregating
   $171,000 were deferred and were to be paid to the Adviser from  distributable
   net cash flow from operations, if available, in twelve quarterly installments
   through June 1986.  The remaining  unpaid  deferred  acquisition  fees in the
   amount of $71,000  were paid in fiscal 1992 with the  proceeds of a loan from
   the Partnership.  The apartment complex was acquired subject to a nonrecourse
   mortgage with a balance of  $8,600,000  at the time of closing.  In September
   1993,  the joint venture  refinanced  its mortgage with the proceeds of a new
   nonrecourse  mortgage  note  payable  in  the  initial  principal  amount  of
   $7,034,000 which was scheduled to mature in November 2023 (see Note 6).

        As a result of increases in apartment  development activity in the local
   market as well as the attractive,  assumable  financing obtained in September
   1993,  management  began to market the Nob Hill Apartments  property for sale
   during the spring of 1995.  During fiscal 1997, a purchase and sale agreement
   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 sale remained contingent upon receiving
   the 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.

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

        Losses from the sale or refinancing of the property were 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 99% to the Partnership and 1% to the co-venturer.

        The joint venture had entered into a property management  agreement with
   an affiliate of the original  co-venturer,  cancellable at the  Partnership's
   option upon the occurrence of certain events. The management fee was equal to
   4% of gross receipts, as defined in the agreement.

        If additional  cash was required for any reason in  connection  with the
   joint venture,  it was to be provided 90% by the  Partnership  and 10% by the
   co-venturer  as additional  capital  contributions  or interim  borrowings in
   accordance  with  the  terms  of  the  joint  venture  agreement.  Additional
   contributions made by the Partnership from inception through the date of sale
   on February 7, 1997 totalled $2,554,000.


<PAGE>


        The following is a summary of property  operating expenses for the years
   ended December 31, 1996, 1995 and 1994.

                                               1996 (1)  1995     1994
                                               ----      ----     ----
           Property operating expenses:
             Salaries and related costs      $  301     $269     $274
             Repairs and maintenance            279      249      257
             Utilities                          152      121       91
             Insurance                          100       67       53
             Management fees                     92       84       79
             Administrative and other           227      170      221
                                             ------     ----     ----
                                             $1,151     $960     $975
                                             ======     ====     ====

           (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, 1997 and 1996.  As  explained in Note 4, the  Partnership  acquired
   control of the joint venture which owns the Nob Hill Apartments during fiscal
   1993 and,  accordingly,  this joint  venture is presented  on a  consolidated
   basis in the accompanying  financial  statements.  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.

        On December 23, 1994, Austin  Northcastle  Partners,  a joint venture in
   which the Partnership had an interest,  sold the 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.  The  venture  recognized  a gain  on the  sale  of  approximately
   $1,204,000 to the extent that the sales price  exceeded the net book value of
   the operating  investment property at the time of the sale. The Partnership's
   share of such  gain is  included  in  Partnership's  share of  unconsolidated
   ventures' income on the accompanying statement of operations for fiscal 1995.


<PAGE>


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

                      Condensed Combined Balance Sheets
                          December 31, 1996 and 1995
                                (in thousands)

                                    Assets
                                                            1996        1995
                                                            ----        ----

   Current assets                                        $  1,264    $  1,090
   Operating investment properties, net                    15,683      16,221
   Other assets                                               379         169
                                                         --------    --------
                                                         $ 17,326    $ 17,480
                                                         ========    ========

                      Liabilities and Venturers' Deficit

   Current liabilities                                   $    782    $  9,333
   Other liabilities                                        1,719       1,699
   Long-term mortgage debt, less current portion           16,065       7,266
   Partnership's share of combined deficit                 (1,068)       (705)
   Co-venturers' share of combined deficit                   (172)       (113)
                                                         --------    ---------
                                                         $ 17,326    $ 17,480
                                                         ========    ========

                    Condensed Combined Summary of Operations
              For the years ended December 31, 1996, 1995 and 1994
                                 (in thousands)
                                                 1996       1995        1994
                                                 ----       ----        ----

Revenues:
   Rental revenue                            $  4,830    $  4,763    $  5,726
   Interest and other income                      157         295         205
                                             --------    --------    --------
                                                4,987       5,058       5,931

Expenses:
   Property operating expenses                  2,053       1,975       2,612
   Depreciation and amortization                  794         848       1,110
   Interest expense                             1,555       1,594       2,010
   Administrative and other                       508         560         644
                                             --------    --------    --------
                                                4,910       4,977       6,376
                                             --------    --------    --------
Income (loss) before gain on
  sale of property                                77          81        (445)
Net gain on sales of investment
  properties                                       -           -        1,041
                                             --------    --------    --------
Net income                                   $     77    $     81    $    596
                                             ========    ========    ========

Net income (loss):
   Partnership's share of net income (loss)  $     94    $     96    $    644
   Co-venturers' share of net income (loss)       (17)        (15)        (48)
                                             --------    --------    --------
                                             $     77    $     81    $    596
                                             ========    ========    ========


<PAGE>


                  Reconciliation of Partnership's Investment
                           March 31, 1997 and 1996
                                (in thousands)

                                                            1997        1996
                                                            ----        ----

  Partnership's share of venturers' deficit
    at December 31, as shown above                      $ (1,068)   $   (705)
  Reimbursements of management fees and expenses
    receivable from joint ventures (1)                     1,769       1,742
  Timing differences due to contributions made
    and distributions received subsequent to
    December 31 (see Note 2)                                (397)        (50)
                                                        --------    ---------
          Investments in joint ventures, at equity,
            at March 31                                 $    304    $     987
                                                        ========    =========
                                                            

(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 $176,000, $189,000 and $215,000 for the years ended
    March 31, 1997, 1996 and 1995, 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  $1,769,000 and $1,742,000 at March 31,
    1997 and 1996, 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):
                                                       1997        1996
                                                       ----        ----

      Rocky Mountain Partners                      $  (1,339)  $  (1,048)
      Grouse Run Associates I and II                     295         499
      Plano Chisholm Place Associates                  1,151       1,324
      Parkwood Montclair Partners                        197         212
                                                   ---------   ---------
                                                   $     304   $     987
                                                   =========   =========


<PAGE>


       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, 1997, 1996 and 1995 are as follows
(in thousands):

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

      Rocky Mountain Partners             $   619    $   396    $    313
      Grouse Run Associates I and II          193         89         205
      Parkwood Montclair Partners               -          -       4,139
      Austin Northcastle Partners               -          -       1,937
      Plano Chisholm Place Associates         141        142         105
                                          -------    -------    --------
                                          $   953    $   627    $  6,699
                                          =======    =======    ========

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 $1,827,000 and $18,000, respectively, had been made from inception
    through December 31, 1996.

        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, 1996 totalling approximately
    $818,000 and $8,000, respectively.

(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 $3,109,000 as of December 31, 1996 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
    $848,000 from inception through December 31, 1996.

        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,  1996  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.


<PAGE>


          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,
    1996 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.  During
    fiscal 1996, the majority of the $250,000  settlement amount was paid out to
    the former tenants.

        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. The sale proceeds,
    net of the  building  permit  costs  referred  to  above,  was less than the
    carrying  value  of the  investment  property  at the  date  of the  sale by
    approximately  $163,000.  A loss equal to this amount was  recognized by the
    venture in calendar  1994.  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 has subsequently denied the joint
    venture's  claim for a refund of the remaining  $300,000 in costs  incurred.
    Management  believes  that the joint venture is entitled to a full refund of
    the costs incurred and continues to vigorously pursue the refund. Presently,
    there  are no  assurances  that  any  further  amounts  will  be  recovered.
    Accordingly,  no receivable  for any such amounts has been  reflected in the
    joint venture's financial statements.

        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.




<PAGE>


6.  Mortgage Note Payable

        Mortgage note payable at March 31, 1996  consisted of the following debt
    of Nob Hill  Partners,  the  Partnership's  consolidated  joint  venture (in
    thousands):
                                                                  1996
                                                                  ----
        Mortgage note payable secured by
     the Nob Hill operating property and
     insured by the U.S.  Department  of
     Housing   and   Urban   Development
     (HUD).  The loan bore  interest  at
     7.375% with monthly  principal  and
     interest  payments  of $49  through
     November 1, 2023. The fair value of
     this note payable  approximated its
     carrying  value as of December  31,
     1995. As discussed  further in Note
     4, on  February  7,  1997  Nob Hill
     Partners    sold   the   Nob   Hill
     Apartments  to an  unrelated  third
     party which assumed the outstanding
     mortgage loan.                                              $ 6,890
                                                                 ========

        In addition to the required monthly principal and interest payments, the
    Nob Hill joint  venture  submitted  monthly  escrow  deposits of $29,000 for
    taxes,  insurance and a replacement  reserve required under the terms of the
    HUD regulatory agreement.

7.  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 and REIT
    stocks,  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  ("PA"),  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 PA
    (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 PA
    misrepresented  financial  information  about  the  Partnership's  value and
    performance. The amended complaint alleged that PaineWebber, First PW Growth
    Properties,  Inc.  and PA  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  have 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 has
     not occurred to date pending the  resolution of an appeal of the settlement
     by two of the plaintiff class members. As part of the settlement agreement,
     PaineWebber  has  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 subsequent to March 31, 1997.

          Based on the settlement agreements discussed above covering all of the
     outstanding  unitholder  litigation,  and notwithstanding the appeal of the
     class action settlement referred to above,  management does not expect that
     the  resolution  of  these  matters  will  have a  material  impact  on the
     Partnership's financial statements, taken as a whole.

8.  Subsequent Events

    On May  15,  1997,  the  Partnership  distributed  $118,000  to the  Limited
    Partners and $1,000 to the General  Partners for the quarter ended March 31,
    1997.



<PAGE>

<TABLE>
<CAPTION>
Schedule III- Real Estate and Accumulated Depreciation

                                     PAINE WEBBER GROWTH PROPERTIES LP
                            Schedule of Real Estate and Accumulated Depreciation

                                               March 31, 1997
                                               (In thousands)

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

Apartment 
 Complex
San Antonio,
 TX               -     $ 2,029   $11,518       $2,467     -       -         -        -        1972-1974  3/31/83    5-30 yrs.

Notes:
(A) The  aggregate  cost of real estate  owned at December  31, 1996 for Federal income tax purposes was approximately $14,773,000.

(B) See Note 6 of Notes to Financial  Statements  for a description  of the mortgage debt  encumbering  the operating investment 
    property. 

(C) Reconciliation of real estate owned:

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

      Balance at beginning of year                                 $15,856           $15,707           $14,729
      Acquisitions and improvements                                    158               149               978
      Decrease due to sale of operating investment property (1)    (16,014)                -                 -
                                                                   -------           -------           -------
      Balance at end of year                                       $     -           $15,856           $15,707
                                                                   =======           =======           =======

(D) Reconciliation of accumulated depreciation:

      Balance at beginning of year                                 $ 6,263          $  5,577          $  4,984
      Depreciation expense                                             229               686               593
      Decrease due to sale of operating investment property (1)     (6,492)                -                 -
                                                                   -------          --------          --------
      Balance at end of year                                       $     -          $  6,263          $  5,577
                                                                   =======          ========          ========

(1) See Note 4 to the Financial  Statements for a discussion of the sale of the Nob Hill Apartments on February 7, 1997.


</TABLE>


<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, 1996 and
1995,  and  the  related  combined  statements  of  operations  and  changes  in
venturers' capital (deficit),  and cash flows for each of the three years in the
period ended December 31, 1996. 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,
1996 and 1995, and the combined results of their operations and their cash flows
for each of the three years in the period ended December 31, 1996, 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
February 14, 1997


<PAGE>


                           COMBINED JOINT VENTURES OF
                        PAINE WEBBER GROWTH PROPERTIES LP

                             COMBINED BALANCE SHEETS
                           December 31, 1996 and 1995
                                 (In thousands)

                                     Assets
                                                            1996        1995
                                                            ----        ----

Current assets:
   Cash and cash equivalents                            $     957   $   1,007
   Accounts receivable                                          2          13
   Prepaid expenses                                           195          70
   Deposit for repair and improvements                        110           -
                                                        ----------  ---------
         Total current assets                               1,264       1,090

Operating investment properties:
   Land                                                     4,325       4,325
   Buildings, improvements and equipment                   22,949      22,693
                                                        ---------   ---------
                                                           27,274      27,018
   Less: accumulated depreciation                         (11,591)    (10,797)
                                                        ---------   ---------
                                                           15,683      16,221

Reserves for repairs and capital improvements                  78          64
Deferred expenses, net of accumulated amortization
 of $110 in 1996 ($196 in 1995)                               301         105
                                                        ---------   ---------
                                                        $  17,326   $  17,480
                                                        =========   =========

                       Liabilities and Venturers' Deficit

Current liabilities:
   Accounts payable and other liabilities               $     266   $     256
   Accrued real estate taxes                                  246         246
   Accrued interest                                             -          74
   Accrued management fee                                      16          16
   Tenant security deposits                                   200         209
   Current portion of long-term debt                           54       8,532
                                                        ---------   ---------
         Total current liabilities                            782       9,333

Reimbursements payable to Venturer                          1,719       1,699

Long-term debt                                             16,065       7,266

Venturers' deficit                                         (1,240)       (818)
                                                        ---------   ---------
                                                        $  17,326   $  17,480
                                                        ==========  =========






                             See accompanying notes.


<PAGE>


                           COMBINED JOINT VENTURES OF
                        PAINE WEBBER GROWTH PROPERTIES LP

  COMBINED STATEMENTS OF OPERATIONS AND CHANGES IN VENTURERS' CAPITAL (DEFICIT)
              For the years ended December 31, 1996, 1995 and 1994
                                 (In thousands)


                                                1996        1995        1994
                                                ----        ----        ----
Revenues:
   Rental income                             $  4,830     $ 4,763    $  5,726
   Interest and other income                      157         295         205
                                             --------     -------    --------
                                                4,987       5,058       5,931
Expenses:
   Interest expense                             1,555       1,594       2,010
   Depreciation expense                           794         848       1,110
   Salaries                                       508         496         562
   Repairs and maintenance                        610         573         671
   Property operating expenses                    459         441         586
   Real estate taxes                              306         304         454
   General and administrative                     165         164         231
   Management fees                                246         245         339
   Reimbursements to partner                      170         193         209
   Professional fees                               97         119         204
                                            ---------      ------    --------
                                                4,910       4,977       6,376
                                            ---------      ------    --------

Operating income (loss)                            77          81        (445)

Net gain on sales of investment properties          -           -       1,041
                                            ---------     -------    --------

Net income                                         77          81         596

Contributions from venturers                        -           -         154

Distributions to venturers                       (499)       (664)     (5,237)

Venturers' capital (deficit), 
 beginning of year                               (818)       (235)      4,252
                                            ---------     -------   ---------

Venturers' deficit, end of year             $  (1,240)    $  (818)  $    (235)
                                            =========     =======   =========







                             See accompanying notes.


<PAGE>


                           COMBINED JOINT VENTURES OF
                        PAINE WEBBER GROWTH PROPERTIES LP

                        COMBINED STATEMENTS OF CASH FLOWS
              For the years ended December 31, 1996, 1995 and 1994
                Increase (Decrease) in Cash and Cash Equivalents
                                 (In thousands)
<TABLE>
<CAPTION>


                                                             1996        1995       1994
                                                             ----        ----       ----
<S>                                                          <C>         <C>        <C>  

Cash flows from operating activities:
   Net income                                              $   77      $    81     $     596
   Adjustments to reconcile net income to
     net cash provided by (used in) 
     operating activities:
      Net gain on sales of investment properties                -            -        (1,041)
      Depreciation expense                                    794          848         1,110
      Amortization of loan acquisition costs                   44           30            30
      Changes in assets and liabilities:
         Accounts receivable                                   11        1,581           (2)
         Prepaid expenses                                    (125)           6           50
         Other assets                                           -            -          166
         Accounts payable and other liabilities                10         (130)        (169)
         Accrued interest                                     (74)          74         (111)
         Accrued real estate taxes                              -            5            2
         Accrued management fees                                -            1           (3)
         Tenant security deposits                              (9)          18           (8)
         Due to venturers                                       -       (1,619)           -
         Reimbursements payable to partner                      20          70         (693)
                                                         ---------      ------      -------
            Total adjustments                                  671         884         (669)
                                                         ---------      ------      -------
            Net cash provided by (used in) 
              operating activities                             748         965          (73)
                                                         ---------     -------      --------

Cash flows from investment activities:
   Net proceeds from sales of investment properties              -          -         9,110
   Additions to operating investment properties              (256)       (228)       (1,136)
   Increase in reserve for capital expenditures              (124)        (15)          (14)
                                                         --------     -------      --------
            Net cash (used in) provided by 
              investing activities                           (380)       (243)        7,960
                                                         ---------    --------     ---------

Cash flows from financing activities:
   Repayment of long-term debt                              (8,529)      (159)      (4,525)
   Distributions to venturers                                 (499)      (664)      (4,151)
   Repayments of operating loans payable to venturers            -          -         (106)
   Refund of debt issuance costs                                 -          -           83
   Proceeds from issuance of long-term debt                  8,850          -            -
   Financing fees                                            (240)          -            -
                                                        ---------     -------      -------
            Net cash used in financing activities            (418)      (823)       (8,699)
                                                        ---------     -------      -------

Net decrease in cash and cash equivalents                     (50)      (101)        (812)

Cash and cash equivalents, beginning of year                 1,007     1,108         1,920
                                                        ---------    -------       -------

Cash and cash equivalents, end of year                  $     957    $ 1,007       $ 1,108
                                                        =========    =======       =======

Cash paid during the year for interest                  $   1,585   $  1,478       $ 2,023
                                                       ==========   ========       =======

                             See accompanying notes.

</TABLE>

<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;   Austin  Northcastle   Partners,   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 a majority  interest in each of the joint ventures  mentioned below. As
    further described in Note 2, Austin Northcastle  Partners sold its operating
    investment  property and suspended its operations  effective on December 23,
    1994. Also, 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
    Austin Northcastle Partners                  September 30, 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,  1996 and 1995 and
    revenues  and  expenses  for each of the  three  years in the  period  ended
    December 31,  1996.  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  buildings,  improvements  and  equipment,
    generally,  five to thirty  years.  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 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
                                                   1996             1995
                                                   ----             ----

      Reserve for tenant security deposit        $   65            $    65
      Reserve for insurance and tax deposits        126                121
                                                 ------            -------
                                                 $  191            $   186
                                                 ======            =======

        In addition, the previous mortgage loan of the Tantra Lake joint venture
    provided that, effective July 1991, the venture must maintain a cash balance
    in the amount of  $100,000  restricted  for the  payment  of future  capital
    expenditures.  To the extent  that the  venture  did not expend a minimum of
    $100,000 in annual  capital  improvements,  the loan  agreement  required an
    increase in the amount to be held in the restricted account. Such restricted
    cash  amounts  totalled  $100,000 at December 31, 1995 which was included in
    the balance of cash and cash equivalents on the accompanying  balance sheet.
    As discussed further in Note 5 to the combined  financial  statements,  this
    loan was refinanced in August 1996.

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

         The carrying  amounts of cash and cash  equivalents  and cash  reserves
    approximate  their fair values as of  December  31, 1996 and 1995 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.

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

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


<PAGE>


    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. As further described in
        Note 5, the $8.5  million  mortgage  loan  secured  by the  Tantra  Lake
        Apartments  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.

    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.  Austin Northcastle Partners
        ---------------------------

        The joint venture owned and operated Northcastle Apartments,  a 170-unit
        apartment complex located in Austin, Texas. On December 23, 1994, Austin
        Northcastle Partners sold the 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. PWGP's
        share of such proceeds was  $1,581,000,  in accordance with the terms of
        the joint venture  agreement.  The venture recognized a gain on the sale
        of approximately  $1,204,000 to the extent that the sales price exceeded
        the net book value of the operating  investment  property at the time of
        the sale.

    e.  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.  During 1995, the majority
        of this $250,000 settlement amount was paid out to the former tenants.

        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
        has  subsequently  denied the joint  venture's claim for a refund of the
        remaining $300,000 in costs incurred. Management believes that the joint
        venture is entitled to a full refund of the costs incurred and continues
        to vigorously pursue the refund. Presently, there are no assurances that
        any additional amounts will be recovered.  Future amounts which might be
        recovered,  if any,  will be  recorded  as income in the period in which
        such funds are received.

        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.


<PAGE>


    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  $170,000,  $193,000 and $209,000 for the years ended December 31,
    1996,  1995  and  1994,   respectively.   Cumulative  unpaid  reimbursements
    aggregated  $1,719,000  and  $1,699,000  at  December  31,  1996  and  1995,
    respectively.

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, 1996 and 1995, the amount of capitalized  expenditures have exceeded the
    amounts of the  required  deposits to such  reserves.  Accordingly,  no such
    reserve balances were required.



<PAGE>


5.  Long-term debt

        Long-term  debt at December 31, 1996 and 1995  consists of the following
(in thousands):

                                                             1996       1995
                                                             ----       ----

     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 its carrying
     value as of December 31, 1996.  See
     discussion   below   regarding  the
     August 1996 refinancing.                              $8,850      $    -

     Nonrecourse  mortgage  note secured
     by a  first  deed of  trust  on the
     Tantra  Lake  Apartments.  The loan
     bore  interest  at 10.5% per annum,
     monthly  payments of principal  and
     interest  of $84 were made  through
     July 1,  1996  when  the  remaining
     unpaid  balance  was due.  The fair
     value of this note approximated its
     carrying  value as of December  31,
     1995 due to the short-term maturity
     of the loan. See  discussion  below
     regarding August 1996  refinancing.                         -      8,482

     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, 1996 and
     1995.                                                  1,377       1,399

     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,  1996  and  1995.                    1,732       1,757


<PAGE>


                                                             1996       1995
                                                             ----       ----


     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
     $4,449  and  $4,547 as of  December
     31,  1996 and  1995,  respectively.                    4,160       4,160
                                                         --------    --------

      Total long-term debt                                 16,119      15,798

      Less:  current portion                                  (54)     (8,532)
                                                         --------    --------
                                                         $ 16,065    $  7,266
                                                         ========    ========

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

        1997           $    54
        1998                58
        1999                63
        2000                68
        2001            13,083
        Thereafter       2,793
                      --------
                      $ 16,119
                      ========

            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 the
        venture's cash flow. 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.



<PAGE>

<TABLE>
<CAPTION>

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, 1996
                                 (In thousands)

                                                  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     $  194    $1,744  $  6,444   $ 8,188  $  3,021    1982       5/31/83    5-30 yrs.

Apartment 
 Complex
Stockton, CA    3,109        545      4,914        539       545     5,453     5,998     2,759    1980       3/31/83    5-30 yrs.

Apartment 
 Complex
Boulder, CO     8,850      2,036      8,747      2,305     2,036    11,052    13,088     5,811    1974       2/17/83    5-30 yrs.
              -------     ------    --------   -------    ------  --------   -------   -------


              $16,119    $ 4,325    $19,911    $3,038     $4,325   $22,949    $27,274   $11,591
              =======    =======    =======    ======     ======   =======    =======   =======
Notes:
(A) The  aggregate  cost of real estate  owned at December  31, 1996 for Federal income tax  purposes is approximately $27,308,000.
(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,
                                                  1996                   1995              1994
                                                  ----                   ----              ----

      Balance at beginning of year             $27,018                 $ 26,790          $ 38,581
      Acquisitions and improvements                256                      228             1,136
      Dispositions                                   -                        -           (12,927)
                                               -------                 --------          --------
      Balance at end of year                   $27,274                 $ 27,018          $ 26,790
                                               =======                 ========          ========

(C) Reconciliation of accumulated depreciation:
      Balance at beginning of year            $ 10,797                $   9,949          $ 11,066
      Depreciation expense                         794                      848             1,110
      Dispositions                                   -                        -            (2,227)
                                             ---------                ---------          --------
      Balance at end of year                 $  11,591                $ 10,797           $  9,949
                                             =========                ========           ========

</TABLE>