U. S. 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: AUGUST 31, 1996

                                            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: 0-18247

                             RETAIL PROPERTY INVESTORS, INC.
                  (Exact name of registrant as specified in its charter)

        Virginia                                               04-3060233
(State of organization)                                     (I.R.S. Employer
                                                           Identification  No.)

1285 Avenue of the Americas, New York, New York                     10019
    (Address of principal executive office)                       (Zip Code)

Registrant's telephone number, including area code              (212) 713-4264
                                                                --------------

        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:

                         Shares of Common Stock, $.01 Par Value
                                    (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____

Shares of common  stock  outstanding  as of August 31,  1996:  5,010,050.  The
aggregate  sales  price of the  shares  sold was  $100,201,000.  This does not
reflect market value.  There is no current market for these shares.

                     DOCUMENTS INCORPORATED BY REFERENCE
           Documents                                        Form 10-K Reference
Original Offering Prospectus of registrant                  Part IV
dated October 6, 1989, as supplemented




<PAGE>


                       RETAIL PROPERTY INVESTORS, INC.
                                1996 FORM 10-K

                              TABLE OF CONTENTS


Part I                                                                  Page

Item  1     Business                                                    I-1

Item  2     Properties                                                  I-4

Item  3     Legal Proceedings                                           I-7

Item  4     Submission of Matters to a Vote of Security Holders         I-8


Part  II

Item  5     Market for the Registrant's Shares and Related 
               Stockholder 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-8

Item  9     Changes in and Disagreements with Accountants on Accounting
               and Financial Disclosure                                II-8


Part III

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

Item 11     Executive Compensation                                    III-3

Item 12     Security Ownership of Certain Beneficial Owners 
               and Management                                         III-4

Item 13     Certain Relationships and Related Transactions            III-4


Part  IV

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

Signatures                                                             IV-2

Index to Exhibits                                                      IV-3

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



<PAGE>

                                    PART I

Item 1.  Business

    Retail Property Investors, Inc. (the "Company"), formerly PaineWebber Retail
Property Investments,  Inc., is a corporation organized on August 9, 1989 in the
Commonwealth  of Virginia  for the purpose of investing in a portfolio of retail
shopping  centers located  throughout the midwestern,  southern and southeastern
United  States.  The Company has elected to qualify to be taxed as a Real Estate
Investment  Trust ("REIT") under the Internal  Revenue Code of 1986, as amended,
for each taxable  year of  operations.  As a REIT,  the Company is allowed a tax
deduction  for  the  amount  of  dividends  paid  to its  shareholders,  thereby
effectively  subjecting the distributed net income of the Company to taxation at
the  shareholder  level only.  On October 23,  1989,  the Company  commenced  an
initial  public  offering of up to  10,000,000  shares of its Common  Stock (the
"Shares"),  priced at $10 per Share, pursuant to a Registration  Statement filed
on Form S-11  under  the  Securities  Act of 1933  (Registration  Statement  No.
33-29755). The initial offering closed during the second quarter of fiscal 1991,
after 10,020,100 shares had been sold (including the sale of 20,100 shares to an
affiliate,   PaineWebber   Group,   Inc.),   representing   gross   proceeds  of
$100,201,000. Effective September 7, 1993, the Company's shareholders approved a
resolution  to  complete  a 1 for  2  reverse  stock  split.  Consequently,  the
resulting outstanding shares, which number 5,010,050, have an effective original
issue  price of $20 per  share.  As of  November  1, 1996,  PaineWebber  and its
affiliates  held 111,601 shares of the Company's  common stock.  The Company was
originally  organized  as a  finite-life,  non-traded  REIT  that  had a  stated
investment policy of investing exclusively in shopping centers in which Wal-Mart
Stores, Inc. ("Wal-Mart") was or would be an anchor tenant. The Company invested
the net proceeds of the initial public offering in 22 Wal-Mart anchored shopping
centers, as discussed in more detail below. In September 1993 and November 1994,
the Company's shareholders approved certain amendments to the Company's Articles
of Incorporation  and Bylaws as part of a plan to reposition the Company to take
advantage  of  the  liquidity  and  potentially  attractive  source  of  capital
available in the market for publicly  held REITs which had existed at that time.
As discussed further in Item 7, however,  due to changes in interest rate levels
and other market factors which adversely affected the market for new public REIT
equity  offerings  during the latter half of calendar 1994 and the first half of
calendar 1995, the Company did not complete the final phase of its restructuring
plans.  In view of the then existing  capital market  conditions,  the Company's
Board of Directors  engaged the investment  banking firm of Lehman Brothers Inc.
("Lehman")  in  June  of 1995 to act as its  financial  adviser  and to  provide
financial and strategic  advisory  services to the Board of Directors  regarding
other  options  available  to the  Company.  The  strategic  options  considered
included,  among other things, a recapitalization  of the Company,  sales of the
Company's assets and the exploration of merger opportunities.  In November 1995,
Lehman  presented a summary to the Board of the proposals  which it had received
to date, all of which were indications of interest from third parties to buy the
Company's  real  estate  assets.  The  Board  concluded  that it would be in the
shareholders'  best interests to immediately  initiate the process of soliciting
firm  offers  to  purchase  the  Company's  portfolio  of  operating  investment
properties.  The  Directors  instructed  Lehman to work with the  various  third
parties that expressed an interest in such a transaction  to obtain  transaction
terms most favorable to the Company and its  shareholders.  As discussed further
in Item 7,  subsequent  to year end, in October 1996 the Company  completed  the
sale of its real  estate  assets  to  Glimcher  Realty  Trust  ("GRT").  As also
discussed  further  in  Item  7,  the  Company  expects  to  complete  a plan of
liquidation  prior to December 31, 1996 and to  distribute  all of the Company's
net cash assets to the shareholders prior to such date.

    As of August 31, 1996, the Company owned the investment  properties referred
to below:

Property Name                               Date of
and Location (1)     Type of Property       Investment         Size
----------------     ----------------       ----------         ----

Village Plaza        Shopping Center         8/16/89        490,970 Sq. Ft.
Augusta, GA

Logan Place          Shopping Center         1/18/90        114,748 Sq. Ft.
Russellville, KY



<PAGE>


Property Name                                Date of
and Location (1)     Type of Property        Investment         Size
----------------     ----------------        ----------         ----
(continued:

Piedmont Plaza       Shopping Center         1/19/90        249,052 Sq. Ft.
Greenwood, SC

Artesian Square      Shopping Center         1/30/90        177,428 Sq. Ft.
Martinsville, IN

Sycamore Square      Shopping Center         4/26/90         93,304 Sq. Ft.
Ashland City, TN

Audubon Village      Shopping Center         5/22/90        124,592 Sq. Ft.
Henderson, KY

Crossroads Centre    Shopping Center         6/15/90        242,430 Sq. Ft.
Knoxville, TN

East Pointe Plaza    Shopping Center         8/7/90         279,261 Sq. Ft.
Columbia, SC

Cross Creek Plaza    Shopping Center         12/19/90       237,765 Sq. Ft.
Beaufort, SC

Cypress Bay Plaza    Shopping Center         12/19/90       258,245 Sq. Ft.
Morehead City, NC

Walterboro Plaza     Shopping Center         12/19/90       132,130 Sq. Ft.
Walterboro, SC

Lexington Parkway    Shopping Center         3/5/91         210,150 Sq. Ft.
 Plaza
Lexington, NC

Roane County Plaza   Shopping Center         3/5/91         160,198 Sq. Ft.
Rockwood, TN

Franklin Square      Shopping Center         6/21/91        237,062 Sq. Ft.
Spartanburg, SC

Barren River Plaza   Shopping Center         8/9/91         234,795 Sq. Ft.
Glasgow, KY

Cumberland Crossing  Shopping Center         8/9/91         144,734 Sq. Ft.
LaFollette, TN

Applewood Village    Shopping Center         10/25/91       140,039 Sq. Ft.
Fremont, OH

Aviation Plaza       Shopping Center         8/31/92        174,715 Sq. Ft.
Osh Kosh, WI

Crossing Meadows     Shopping Center         8/31/92        233,984 Sq. Ft.
Onalaska, WI


<PAGE>



Property Name                                Date of
and Location (1)     Type of Property        Investment         Size
----------------     ----------------        ----------         ----
(continued)

Southside Plaza      Shopping Center         10/21/92       172,293 Sq. Ft.
Sanford, NC

College Plaza        Shopping Center         4/29/93        178,431 Sq. Ft.
Bluefield, VA

Marion Towne Center  Shopping Center         6/23/93        156,543 Sq. Ft.
Marion, SC

(1)  See Notes to the Financial  Statements  filed with this Annual Report for a
     description  of the  mortgage  debt  which  encumbered  these  real  estate
     investments.

    The 22 retail shopping  centers listed above are located in nine central and
eastern  states and  aggregate  approximately  4.4 million  square feet of gross
leasable area.  All of the  properties are or were anchored by Wal-Mart  stores.
The  typical  property  profile  for the  Company's  portfolio  was a  community
shopping  center of roughly  180,000 square feet (they range in size from 93,304
to 490,970  square feet)  anchored by Wal-Mart and a major  grocery chain store.
The Wal-Mart  anchors range in size from 41,000 to 149,000  square feet. At many
of the centers, in addition to the Wal-Mart and grocery anchors,  there are also
national  credit  tenants such as Sears,  JC Penney,  Goody's and Lowe's,  among
others.  All centers  contain a moderate amount of shop space which is leased to
both credit and non-credit tenants. Of the gross leasable space at the Company's
properties,  49% is leased to Wal-Mart and its  affiliates  and 40% is leased to
other national and regional credit tenants. The properties are generally located
on major  state and  federal  highways,  with many at  intersections  of primary
thoroughfares. The majority of the properties are located in county seat markets
with a few  located  in  smaller  metropolitan  areas or at the fringe of larger
metropolitan areas.

    Shopping  center  leases  typically  provide  for a minimum  base rental per
square foot which the tenant is  obligated  to pay in all cases  ("Minimum  Base
Rent"),  plus  additional  rentals  equal to a  negotiated  percentage  of gross
receipts or gross  sales above a stated  sales  volume  ("Percentage  Rentals").
Small tenants typically pay from 3% to 6% in Percentage Rentals.  Anchor tenants
or other significant tenants often pay lower Percentage  Rentals,  and sometimes
no Percentage Rentals. The typical Wal-Mart department store lease provides that
no  Percentage  Rentals will be paid during the first seven  years.  Thereafter,
Percentage  Rentals  will equal only .5% to .75% of gross  receipts in excess of
the gross  receipts  during the  seventh  year of the lease,  up to a maximum of
$1.00 per square foot. In addition to rentals,  tenants are ordinarily  required
to pay their pro rata share of real estate taxes,  certain  insurance  premiums,
and other common area maintenance costs.  However, the Wal-Mart leases generally
contain a limit on  Wal-Mart's  share of such  costs.  Certain  other  costs are
usually  not  paid  by  the  tenants.  For  example,  the  landlord  is  usually
responsible for maintaining roofs, exterior walls, foundations and parking areas
to some extent.

    Wal-Mart  remains  one of the  leading and  fastest  growing  discount  mass
merchandisers  in the  United  States.  An anchor  tenant  usually  commits to a
long-term lease with an initial term of 10 to 20 years or more with a succession
of renewal options.  All of the Company's Wal-Mart leases had an initial term of
20 years.  However,  as discussed further in Item 7, over the past several years
Wal-Mart has begun building  "supercenters",  which contain up to 200,000 square
feet and include a grocery  store  component in addition to a Wal-Mart  discount
store.  This practice reflects a broad trend among retailers to maximize selling
areas and reduce costs by  constructing  supercenters  or by emphasizing  larger
properties and closing smaller,  marginal stores.  In response to these changes,
which occurred during the Company's initial acquisition phase, management became
particularly  selective  in its  purchase  of  existing  centers in an effort to
address  Wal-Mart's  changing needs by generally  purchasing centers with larger
Wal-Mart  stores  which also had future  expansion  capabilities.  Despite  such
efforts to alter the Company's  acquisition  criteria to accommodate  Wal-Mart's
strategic  growth plans, at certain of the Company's  properties  management had
been unable to satisfy  Wal-Mart's  space and location  preferences and Wal-Mart
had either moved or expressed its intent to move from such properties.  Wal-Mart
would remain  obligated to pay rent and its share of operating  expenses through
the remaining  terms of the leases even upon vacating the  properties.  However,
unless a suitable replacement anchor tenant could be located,  such a relocation
of a Wal-Mart store would have a long-term  negative impact on renewals by other
tenants  and on the  long-term  performance  of the  affected  shopping  center.
Certain  tenants  of the  properties  have  co-tenancy  clauses  in their  lease
agreements  which  stipulate  that if the Wal-Mart  anchor space is vacant these
tenants are entitled to pay a reduced amount of rent and, in some cases,  retain
the right to terminate their lease  agreements.  Management  expected that there
would be additional Wal-Mart  relocation  vacancies at certain of its properties
as a result of this trend toward supercenter construction,  which was one of the
factors which  influenced  the Board of Directors to pursue a sale of the entire
portfolio of properties during fiscal 1995.

    The  Company  has  been  engaged  solely  in the  business  of  real  estate
investment.  Therefore, a presentation of information about industry segments is
not applicable.

    There  currently  are  four  directors  of the  Company,  none of  whom  are
affiliated with the Advisor. The Directors are subject to removal by the vote of
the  holders  of a  majority  of  the  outstanding  Shares.  The  Directors  are
responsible for the general  policies of the Company,  but they are not required
to conduct personally the business of the Company. Subject to the supervision of
the Company's  Board of Directors,  the business of the Company has been managed
to  date by  PaineWebber  Realty  Advisors,  L.P.  (the  "Advisor"),  a  limited
partnership composed of PaineWebber Properties Incorporated ("PWPI"), a Delaware
corporation,  and Properties  Associates,  L.P., a Virginia limited partnership.
Both partners of the Advisor are affiliates of PaineWebber Incorporated ("PWI").
PWI is a subsidiary of PaineWebber Group, Inc. ("PaineWebber").

    The terms of  transactions  between  the  Company  and the  Advisor  and its
affiliates  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 August 31, 1996, the Company owned directly,  or through a partnership
interest,  the  operating  properties  referred  to under  Item 1 above to which
reference is made for the description, name and location of such properties.

    Occupancy  figures  for each fiscal  quarter  during  1996,  along  with an
average for the year, are presented below for each property:


                                   Percent Leased At
                       -------------------------------------------------------
                                                                      Fiscal
                                                                      1996
                        11/30/95    2/28/96     5/31/96     8/31/96   Average
                        --------    -------     -------     -------   -------

Village Plaza            100%        99%        100%        100%        100%
Logan Place              100%        96%         96%         97%         97%
Piedmont Plaza            99%        99%         99%         99%         99%
Artesian Square          100%       100%         98%         99%         99%
Sycamore Square           89%        88%         89%         89%         89%
Audubon Village           94%        91%         91%         92%         92%
Crossroads Centre         98%        98%         98%         98%         98%
East Pointe Plaza         99%        99%         99%         99%         99%
Cross Creek Plaza         96%        97%         96%         96%         96%
Cypress Bay Plaza         97%        97%         97%         97%         97%
Walterboro Plaza          95%        97%         97%         96%         96%
Lexington Parkway Plaza   96%        96%         96%         96%         96%
Roane County Plaza       100%       100%        100%        100%        100%
Franklin Square          100%       100%        100%        100%        100%
Barren River Plaza       100%        99%         99%         99%         99%
Cumberland Crossing       98%        98%        100%         99%         99%
Applewood Village        100%        99%         99%         99%         99%
Aviation Plaza            99%       100%        100%        100%        100%
Crossing Meadows         100%       100%        100%        100%        100%
Southside Plaza          100%       100%        100%        100%        100%
College Plaza            100%       100%        100%        100%        100%
Marion Towne Center       96%        96%         96%         96%         96%

    The Village Plaza  shopping  center,  located in Augusta,  Georgia,  was the
Company's largest property, representing 10% of the Company's total assets as of
August  31,  1996 and 11% of the  Company's  total  revenues  for the year ended
August 31, 1996.  The Village Plaza  property was  encumbered by a mortgage loan
with a principal  balance of  $18,900,000  as of August 31, 1996.  The loan bore
interest  at 8% (after  the effect a loan  buydown  fee paid at  inception)  and
required monthly payments of  interest-only  through November 1996.  Thereafter,
monthly  payments of principal  and interest  totalling  $138,682 were to be due
through  maturity  on  November  1,  1999.  At  maturity,  a balloon  payment of
$18,401,949  would have been due. For calendar year 1996,  the Company owed real
estate  taxes with  respect  to Village  Plaza at a rate of $27.22 per $1,000 of
assessed  value.  Fiscal 1996 real  estate tax  expense  for the  Village  Plaza
property amounted to $108,098.

    Certain  information  concerning the Federal income tax basis of the Village
Plaza  property  and the methods of  depreciation  used for  Federal  income tax
purposes is summarized below (in thousands):

                                    Federal income
                                    tax basis            Method of
Property component                  as of 9/30/96        depreciation used
------------------                  -------------        -----------------

   Land                              $ 6,307              N/A
   Land improvements                   3,556              20 year straight-line
   Building                           14,321              40 year straight-line
   Personal property                     971              12 year straight-line
   Tenant improvements                    40              12 year straight-line
                                    --------
                                    $ 25,195
                                    ========

    As of August 31, 1996, three tenants leased greater than 10% of the leasable
square footage at Village Plaza. Certain information regarding these tenants and
their leases is summarized below:

                                          Annual      Lease
                              Square Feet Base        Expiration  Renewal
    Tenant       Merchandise  Occupied    Rent        Date        Options
    ------       -----------  --------    ----        ----        -------

    Wal-Mart      Discount    149,211    $ 396,764    10/28/08    5 successive
                  Department                                      5-year options
                  Store

    Sam's Club    Member      106,728    $ 547,358     7/11/08    5 successive
                  Warehouse                                       5-year options
                  (Wal-Mart
                    affiliate)

    Home Quarters Home        95,971     $ 434,874     1/31/09    4 successive
                  Improvements                                    5-year options


<PAGE>


    Scheduled  lease  expirations  at Village  Plaza over the next ten years are
summarized as follows:

                                    Square         Annual
                                    footage        base rent
    Year          Number            of             of             Percent
    ended         of leases         expiring       expiring       of total
    August 31     expiring          leases         leases         base rent
    ---------     --------          ------         ------         ---------

    1997            2               4,600          $  68,016          3%
    1998            8              63,460          $ 539,171         21%
    1999            2               6,800          $  70,166          3%
    2000            2               1,600          $  33,227          1%
    2001            -                   -                  -          -
    2002            1              23,000          $ 184,000          7%
    2003            -                   -                  -           -
    2004            -                   -                  -           -
    2005            -                   -                  -           -
    2006            -                   -                  -           -

    The average leased percentage and effective rent per square foot for Village
Plaza for each of the past five fiscal years is summarized as follows:

<TABLE>
<CAPTION>

         Fiscal 1992              Fiscal 1993              Fiscal 1994              Fiscal  1995            Fiscal 1996
     --------------------    ---------------------    ---------------------   --------------------     ---------------------

               Effective                  Effective              Effective              Effective                 Effective
               Rent                       Rent                   Rent                    Rent                     Rent
               per                        per                    per                     per                      per  
Average %      Square        Average %    Square     Average %   Square      Average %   Square       Average %   Square       
Leased         Foot *        Leased       Foot *     Leased      Foot *      Leased      Foot*        Leased      Foot*
------         ------        ------       ------     ------      ------      ------      -----        ------      -----
<S>            <C>           <C>          <C>        <C>         <C>         <C>          <C>         <C>          <C>


 98%           $5.61          100%        $  5.90    100%       $  5.95      100%       $  5.98       $100%       $6.00

</TABLE>

*  Effective  rent per square foot is  calculated as total  annualized  base and
   percentage  rent  divided  by average  occupied  square  feet.  The amount of
   occupied square feet used for this calculation excludes two expansions of the
   Wal-Mart  anchor store at Village Plaza because the expansions were not owned
   by the Company and, therefore,  were not covered under the terms of the lease
   agreement.

    The average  leased  percentage  and effective rent per square foot for each
property  (other than Village  Plaza) for each of the past three fiscal years is
summarized as follows:
<TABLE>

                         Fiscal 1994                Fiscal 1995                 Fiscal 1996
                      ------------------------    -----------------------    --------------------

                                     Effective                  Effective               Effective
                                      Rent                       Rent                    Rent
                                      per                        per                     per
                       Average %      Square       Average %     Square       Average %  Square
                       Leased         Foot *       Leased        Foot*        Leased     Foot*
                       ------         ------       ------        -----        ------     -----
<S>                    <C>              <C>         <C>          <C>            <C>     <C>
Logan Place              95%            $  3.99       98%        $  4.01         97%    $ 4.23
Piedmont Plaza          100%            $  5.50      100%        $  5.76         99%    $ 5.89
Artesian Square         100%            $  5.17      100%        $  5.23         99%    $ 5.20
Sycamore Square          86%            $  4.52       89%        $  4.54         89%    $ 4.83
Audubon Village          93%            $  5.25       94%        $  5.33         96%    $ 5.34
Crossroads Centre        99%            $  4.66      100%        $  4.70         98%    $ 4.71
East Pointe Plaza        76%            $  5.90       82%        $  5.86         99%    $ 5.00
Cross Creek Plaza        96%            $  5.94       98%        $  5.92         96%    $ 6.04
Cypress Bay Plaza        97%            $  5.38       98%        $  5.66         97%    $ 5.71
Walterboro Plaza         97%            $  5.17       95%        $  5.22         96%    $ 5.22
Lexington Parkway Plaza  98%            $  4.99       92%        $  4.98         96%    $ 5.14


<PAGE>


                         Fiscal 1994                Fiscal 1995                 Fiscal 1996
                      ------------------------    -----------------------    --------------------

                                     Effective                  Effective               Effective
                                      Rent                       Rent                    Rent
                                      per                        per                     per
                       Average %      Square       Average %     Square       Average %  Square
                       Leased         Foot *       Leased        Foot*        Leased     Foot*
                       ------         ------       ------        -----        ------     -----
<S>                    <C>              <C>         <C>          <C>            <C>     <C>


Roane County Plaza       99%            $  4.76      100%         $  4.80      100%    $ 4.90
Franklin Square         100%            $  5.18      100%         $  5.27      100%    $ 5.41
Barren River Plaza      100%            $  5.15      100%         $  5.26       99%    $ 5.31
Cumberland Crossing     100%            $  5.22      100%         $  5.32       99%    $ 5.27
Applewood Village       100%            $  5.09      100%         $  5.15       99%    $ 5.09
Aviation Plaza          100%            $  5.28       99%         $  5.31      100%    $ 5.31
Crossing Meadows        100%            $  5.49      100%         $  5.61      100%    $ 5.64
Southside Plaza         100%            $  5.91      100%         $  5.88      100%    $ 5.98
College Plaza           100%            $  6.26      100%         $  6.30      100%    $ 6.29
Marion Towne Center     100%            $  5.70      100%         $  5.64       96%    $ 5.60
</TABLE>

*  Effective  rent per square foot is  calculated as total  annualized  base and
   percentage  rent  divided  by average  occupied  square  feet.  The amount of
   occupied square feet used for this calculation excludes certain expansions of
   the Wal-Mart anchor stores at five of the properties  because such expansions
   were not owned by the Company  and,  therefore,  were not  covered  under the
   terms of the respective lease agreements.

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 interests and common stock, including
the  securities  offered by the  Company.  The  lawsuits  were  brought  against
PaineWebber Incorporated and Paine Webber Group, Inc. (together, "PaineWebber"),
among others,  by allegedly  dissatisfied  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  PaineWebber  Properties  Incorporated,
which is the General  Partner of the Advisor.  The Company is not a defendant in
the New York Limited  Partnership  Actions. 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,
among other things,  that,  in  connection  with the sale of common stock of the
Company,  the defendants (1) failed to provide adequate  disclosure of the risks
involved; (2) made false and misleading  representations about the safety of the
investments  and the  Company's  anticipated  performance;  and (3) marketed the
Company  to  investors  for  whom  such  investments  were  not  suitable.   The
plaintiffs,  who are not shareholders of the Company but were suing on behalf of
all persons who invested in the Company, also alleged that following the sale of
the  common  stock  of  the  Company  the  defendants  misrepresented  financial
information  about the Company's value and  performance.  The amended  complaint
alleged  that the  defendants  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  Company,  as well as  disgorgement  of all  fees and  other  income
derived by PaineWebber from the Company. In addition, the plaintiffs also sought
treble damages under RICO.

     In January 1996,  PaineWebber signed a memorandum of understanding with the
plaintiffs in this class action 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 a plan of allocation. On July 17, 1996, PaineWebber and
the class plaintiffs submitted a definitive  settlement agreement which has been
preliminarily  approved by the court and provides for the complete resolution of
the class action litigation,  including releases in favor of the Company and the
General  Partner  of  the  Advisor,  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 is scheduled to continue in November 1996.

     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 and REIT stocks,
including  those  offered by the Company.  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  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  seeks  compensatory
damages of $15 million  plus  punitive  damages.  In September  1996,  the court
dismissed  many of the  plaintiffs'  claims as barred by  applicable  securities
arbitration  regulations.  The  eventual  outcome  of  this  litigation  and the
potential impact, if any, on the Company's  shareholders cannot be determined at
the present time.

     In  June  1996,  approximately  50  plaintiffs  filed  an  action  entitled
Bandrowski v. PaineWebber Inc. in Sacramento,  California Superior Court against
PaineWebber   Incorporated  and  various  affiliated   entities  concerning  the
plaintiffs'  purchases of various limited partnership interests and REIT stocks,
including those offered by the Company.  The complaint is substantially  similar
to the complaint in the Abbate action described  above,  and seeks  compensatory
damages of $3.4 million plus punitive damages.

     In July 1996,  approximately 15 plaintiffs filed an action entitled Barstad
v.  PaineWebber  Inc.  in  Maricopa  County,   Arizona  Superior  Court  against
PaineWebber   Incorporated  and  various  affiliated   entities  concerning  the
plaintiffs'  purchases of various limited partnership interests and REIT stocks,
including those offered by the Company.  The complaint is substantially  similar
to the complaint in the Abbate action described  above,  and seeks  compensatory
damages of $752,000 plus  punitive  damages.  Mediation  hearings on the Abbate,
Bandrowski, and Barstad actions are scheduled to be held in December 1996.

     Under certain limited circumstances, pursuant to the Advisory Agreement and
other  contractual  obligations,  PaineWebber  affiliates  could be  entitled to
indemnification  for expenses and  liabilities in connection with the litigation
described  above.  However,  PaineWebber and its affiliates have formally waived
all such rights with regard to this litigation and any other similar  litigation
that has  been or may be  threatened,  asserted  or  filed  by or on  behalf  of
purchasers of the Company's common stock.  Thus, the Advisor believes that these
matters  will have no material  effect on the  Company's  financial  statements,
taken as a whole.

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

     During the fourth quarter of fiscal 1996, the Company's  Board of Directors
presented a proxy to the shareholders which recommended  approval of the sale of
substantially  all of the Company's real estate assets to Glimcher  Realty Trust
("GRT") and the  complete  and  voluntary  liquidation  and  dissolution  of the
Company pursuant to the Plan of Liquidation and Dissolution.  The proxy proposal
was voted on at a Special Meeting of Shareholders  which was held on October 16,
1996. The proposal  required an affirmative  vote of more than two-thirds of all
the votes entitled to be cast on the  transaction.  The proposal was approved at
the Special Meeting on October 16, 1996 by the required affirmative votes of the
shareholders.

The  following  table sets forth a summary of the votes cast with respect to the
proposal:

                                      Votes    Votes    Abstentions/  Total
                                      For      Against  Non-Votes     Votes
                                      -----    -------  ----------    -----
     Approval of the Transaction
      and the Plan of Liquidation 
      and Dissolution of the 
     Company                        3,807,939  90,714   83,379       3,982,032



<PAGE>

                                   PART II

Item 5.  Market for the Registrant's Shares and Related Stockholder Matters

      During the initial public offering period,  which commenced on October 23,
1989 and  closed in the  second  quarter  of fiscal  1991,  the  Company  issued
10,020,100 shares of common stock at a selling price of $10 per share. Effective
September 7, 1993, the Company's  shareholders approved a resolution to complete
a 1 for 2 reverse stock split.  Consequently,  the resulting outstanding shares,
which number 5,010,050, have an effective original issue price of $20 per share.
As of August 31, 1996, there were 5,885 record holders of the Company's  Shares.
There has been no established public market for the resale of the Shares.

      The Company is required to make distributions to shareholders in an amount
equal to at least 95% of its taxable income in order to continue to qualify as a
REIT. The Company incurred a taxable loss in fiscal 1996 and, therefore, was not
required to pay a cash dividend in order to retain its REIT status.

Item 6.  Selected Financial Data
                       RETAIL PROPERTY INVESTORS, INC.
                    (In thousands, except per share data)
            Years ended August 31, 1996, 1995, 1994, 1993 and 1992

                              1996      1995       1994     1993       1992
                              ----      ----       ----     ----       ----
Revenues                  $  25,513  $ 25,009   $ 24,590  $ 22,606   $ 18,582

Loss before 
 extraordinary gain       $ (3,677)  $ (6,364)  $ (6,070) $(1,732)   $ (1,990)

Extraordinary gain from
  forgiveness of debt     $  1,139   $      -   $      -  $     -    $      -

Net loss                  $ (2,538)  $ (6,364)  $ (6,070) $ (1,732)  $ (1,990)

Per share amounts:

   Loss before 
   extraordinary gain    $  (0.74)   $ (1.27)   $ (1.21)  $  (0.35)  $  (0.40)

   Extraordinary gain
    on forgiveness
    of debt              $   0.23    $     -    $     -   $      -   $      -

   Net loss              $  (0.51)   $ (1.27)   $ (1.21)  $  (0.35)  $   (0.40)

   Cash dividends 
     declared            $      -    $     -    $  0.80   $   1.60   $    1.60

Mortgage notes 
 payable, net            $155,483    $156,508   $157,599  $156,547   $ 135,978

Total assets               $198,164  $202,544   $208,910  $219,086   $ 207,619

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

    The above per share  amounts are based upon the weighted  average  number of
shares  outstanding  on a daily basis  during each of the years ended August 31,
1996,  1995,  1994,  1993 and 1992, of 5,010,050,  as  adjusted  for the 1 for 2
reverse stock split effective September 7, 1993.


<PAGE>



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

Liquidity and Capital Resources

     The  Company  was formed for the purpose of  investing  in a  portfolio  of
retail shopping centers anchored primarily by discount retailers and invested in
centers containing  Wal-Mart Stores,  Inc.  ("Wal-Mart") as the principal anchor
tenant. On October 23, 1989, the Company commenced an initial public offering of
up to 10,000,000  shares of its Common Stock (the  "Shares"),  priced at $10 per
Share,  pursuant  to a  Registration  Statement  filed on Form  S-11  under  the
Securities  Act of 1933  (Registration  Statement  No.  33-29755).  The  initial
offering  closed  during the second  quarter of fiscal  1991,  after  10,020,100
shares  had been  sold  (including  the sale of 20,100  shares to an  affiliate,
PaineWebber Group, Inc.), representing gross proceeds of $100,201,000. Effective
September 7, 1993, the Company's  shareholders approved a resolution to complete
a 1 for 2 reverse stock split.  Consequently,  the resulting outstanding shares,
which number 5,010,050, have an effective original issue price of $20 per share.
As of November 1, 1996,  PaineWebber  and its affiliates  held 111,601 shares of
the Company's common stock. The Company  completed the investment of the initial
net offering  proceeds in fiscal 1993 with the acquisition of the last of its 22
shopping  centers.  These centers,  which were financed with  approximately  75%
leverage,  contain  approximately  4.4 million square feet of leasable space and
include other national and regional credit tenants.  Of the total gross leasable
square  footage at the Company's  properties,  49% is leased to Wal-Mart and its
affiliates and 40% is leased to other national and regional credit tenants.  The
overall  portfolio  was 98%  leased as of  August  31,  1996.  The  Company  was
originally  organized as a finite-life,  non-traded  REIT. In September 1993 and
November 1994, the Company's  shareholders  approved  certain  amendments to the
Company's  Articles of Incorporation  and Bylaws as part of a plan to reposition
the Company to take advantage of the liquidity and potentially attractive source
of capital  available in the market for publicly held REITs which had existed at
that time. However, due to a deterioration in the public equity markets for REIT
stocks during the latter part of calendar 1994,  management delayed its plans to
proceed with a public  offering and subsequent  listing of the Company's  common
stock on a national  securities  exchange  pending an  improvement in the market
conditions.  Due to changes in  interest  rate levels and other  market  factors
which  continued  to  adversely  affect the market  for new public  REIT  equity
offerings  during the first half of calendar  1995, the Company did not complete
the final phase of its restructuring plans. In view of the then existing capital
market  conditions,  the  Company's  Board of Directors  engaged the  investment
banking firm of Lehman  Brothers  Inc.  ("Lehman") in June of 1995 to act as its
financial  adviser and to provide  financial and strategic  advisory services to
the Board of Directors  regarding  other options  available to the Company.  The
strategic options considered included, among other things, a recapitalization of
the  Company,  sales of the  Company's  assets  and the  exploration  of  merger
opportunities. Lehman's services included the solicitation and identification of
potential  transactions for the Company,  the evaluation of these  transactions,
and the  provision  of advice to the Board  regarding  them.  In November  1995,
Lehman  presented a summary to the Board of the proposals  which it had received
to date, all of which were indications of interest from third parties to buy the
Company's  real  estate  assets.  The  Board  concluded  that it would be in the
shareholders'  best interests to immediately  initiate the process of soliciting
firm  offers  to  purchase  the  Company's  portfolio  of  operating  investment
properties.  The  Directors  instructed  Lehman to work with the  various  third
parties that expressed an interest in such a transaction  to obtain  transaction
terms most favorable to the Company and its shareholders.

     In  March  1996,  the  Company  announced  the  execution  of a  definitive
agreement for the sale of its assets to Glimcher Realty Trust ("GRT"). Under the
original terms of the agreement, GRT was to have purchased the properties of the
Company  subject to certain  indebtedness  and leases for an aggregate  purchase
price of $203  million  plus  prepayment  penalties  on debt to be  prepaid  and
assumption fees on debt to be assumed, subject to certain adjustments. As of May
14,  1996,  the terms of the  purchase  contract  were  amended  to  reduce  the
aggregate  purchase  price  to  $197  million  plus  prepayment   penalties  and
assumption fees. The sale  transaction  closed into escrow on June 27, 1996 with
GRT depositing the net proceeds required to close the transaction in the form of
bank letters of credit.  Pursuant to the Company's Articles of Incorporation and
Virginia law, the sale of all or substantially  all of the Company's real estate
assets  required  approval  by vote of at least  two-thirds  of the  outstanding
shares of common stock. A proxy statement  describing the sale transaction and a
proposed subsequent  liquidation plan for the Company was mailed to shareholders
in August 1996 and received the requisite  vote of the  outstanding  shares at a
special  meeting of the  shareholders  held on October  16,  1996.  The  Company
received  votes  totalling  79%  of the  shares  outstanding,  and  shareholders
representing 76% of the shares outstanding voted to approve the sale transaction
and plan of liquidation.  Upon receiving the required shareholder approval,  the
Company finalized the closing of the sale transaction, which occurred on October
17, 1996.

     The Company  received net proceeds of  $36,371,000 on October 17, 1996 from
the final  closing  of the sale  transaction.  The net  proceeds  reflected  the
aggregate  sales price of  $197,000,000,  less selling  costs paid at closing of
$489,000,  capital improvement and repair allowances of $572,000,  mortgage debt
outstanding  of  $158,857,000  and other closing  prorations  and purchase price
adjustments of $711,000. During the escrow period in which the Company sought to
obtain the required  shareholder  approval,  the Company's operating  properties
were managed by GRT. Under the terms of the management agreement, GRT received a
base fee of 3% of the gross operating  revenues of the properties.  In addition,
GRT  earned  an  incentive  management  fee  equal to the net  cash  flow of the
properties  attributable to the period  commencing on May 14, 1996 and ending on
the  date of the  final  closing  of the  sale  transaction.  A  portion  of the
incentive  management  fee was paid to GRT out of the net closing  proceeds.  In
addition, the Company transferred to GRT at the time of the closing certain cash
balances, together with outstanding receivables and payables, related to the net
cash flow generated  subsequent to May 14, 1996. The total incentive  management
fee  through  the date of the sale  transaction  aggregated  approximately  $3.1
million. The Company received interest earnings from GRT beginning June 20, 1996
through the escrow period on a net equity amount of approximately $37,401,000 at
a rate equivalent to the published market rate on 6-month U.S. Treasury Bills as
of June 20,  1996 (5.39% per  annum).  The  interest  credit  totalled  $657,000
through the date of the sale  transaction and is included in the net proceeds of
$36,371,000  referred to above.  The incentive  management  fee and the interest
credit described above were treated as purchase price  adjustments in connection
with the sale and will be recorded in the Company's  financial  statements as of
the sale closing date. In addition to the net proceeds received upon the closing
of the sale transaction,  the Company retained an interest in tenant receivables
with a carrying value of  approximately  $878,000 as of October 17, 1996 (net of
an allowance for possible  uncollectible amounts of $162,000).  Such receivables
are  primarily  comprised  of  expense  reimbursements  for real  estate  taxes,
insurance and common area  maintenance  associated with the Company's  period of
ownership of the properties.  The majority of these  receivables are expected to
be collected over the next several months with the major portion  expected to be
received in early calendar year 1997 after the  preparation of the annual tenant
reconciliations  of common area charges is  completed.  However,  subsequent  to
year-end the Advisor agreed to buy the outstanding  receivables from the Company
at their net carrying  value so that the Company can  complete  its  liquidation
during  calendar 1996 without the need to establish a liquidating  trust for any
remaining non-cash assets.

      The Company's original investment objectives were to (1) provide quarterly
cash distributions, a substantial portion of which was expected to have deferred
federal  income tax  liability;  (ii)  achieve  long-term  capital  appreciation
through potential  appreciation in the values of the Company's  properties;  and
(iii) preserve and protect the shareholders'  capital. The Company, for the most
part,  has not achieved these  original  objectives.  From its inception in 1989
through the end of fiscal 1993,  the Company was in the process of investing the
net proceeds of its initial  public  offering.  Delays in the  placement of such
proceeds in real estate assets  resulted from a number of unforeseen  changes in
the real estate and mortgage financing  markets.  Because the acquisition period
was longer  than  originally  anticipated  and because  there was a  significant
decline in short-term  reinvestment  rates during the  acquisition  period,  the
Company had lower than anticipated  earnings during this period.  In addition to
the extended acquisition period, the Company's earnings were affected by changes
in its acquisition  criteria.  As Wal-Mart  accelerated its in-house development
activity and increased the size of its prototype store, the Company attempted to
keep pace with these  developments by modifying its acquisition  criteria.  As a
result, acquisition costs exceeded the original budgets for legal and investment
analysis  expenses.  The  consequences of these  conditions are that the Company
supported a portion of its quarterly  dividend  payments to shareholders  during
this period by returning capital from cash reserves. The use of cash reserves in
this  manner,  along  with the need for  funds to pay for the  initial  costs of
pursuing the desired restructuring and recapitalization transactions, led to the
Directors' decision to suspend dividend payments in the second quarter of fiscal
1994. Through the date of the dividend  suspension in fiscal 1994,  shareholders
had received total dividend  payments of approximately  $30.8 million,  of which
approximately $9.7 million was from cash reserves.

     The Company did not achieve its capital appreciation  objective.  While the
$197 million  selling  price of the Company's  real estate assets  significantly
exceeded the book value of the assets,  net of accumulated  depreciation and the
reserve for  impairment  loss discussed  further below,  the amount is below the
aggregate price at which the 22 properties were purchased by the Company between
August 1989 and June 1993 of approximately  $224 million (including $6.7 million
of capitalized  acquisition fees and expenses). At the present time, real estate
values for retail shopping centers in many markets are being adversely  impacted
by the effects of overbuilding and corporate  restructurings  and consolidations
among retailers which have resulted in an oversupply of space. In addition,  the
adverse  conditions  in the capital  markets for public REIT stocks  referred to
above have resulted in a drop off in acquisition demand from large institutional
buyers  of  retail  properties.   Furthermore,   certain  strategic  changes  in
Wal-Mart's  corporate  growth plans appear to have resulted in potential  buyers
attributing a higher leasing risk to the Company's portfolio of properties. Over
the past  several  years,  Wal-Mart  has begun  building  "supercenters",  which
contain up to 200,000  square  feet and  include a grocery  store  component  in
addition to a Wal-Mart  discount  store.  This  practice  reflects a broad trend
among  retailers  to maximize  selling  areas and reduce  costs by  constructing
supercenters or by emphasizing  larger properties and closing smaller,  marginal
stores.  In response  to these  changes,  which  occurred  during the  Company's
initial  acquisition  phase,  management  became  particularly  selective in its
purchase of existing centers in an effort to address  Wal-Mart's  changing needs
by  generally  purchasing  centers  with larger  Wal-Mart  stores which also had
future  expansion  capabilities.  Despite  such  efforts to alter the  Company's
acquisition  criteria to  accommodate  Wal-Mart's  strategic  growth  plans,  at
certain  of the  Company's  properties  management  had been  unable to  satisfy
Wal-Mart's  space and  location  preferences  and  Wal-Mart  had either moved or
expressed  its  intent to move from such  properties.  As  previously  reported,
during the first  quarter of fiscal  1996  Wal-Mart  announced  plans to build a
200,000  square foot  Supercenter  on land  secured by the  Company  adjacent to
Audubon  Village,  subject to various  regulatory  approvals.  During the second
quarter of fiscal  1996,  the Planning  Board in  Henderson,  Kentucky  rejected
Wal-Mart's proposal to construct the Supercenter adjacent to the Company's site.
The Company and Wal-Mart had been discussing  potential options in light of this
development.  As discussed further in the 1995 Annual Report, it was anticipated
that  Wal-Mart  would  vacate its store at Applewood  Village in Fremont,  Ohio.
During the second  quarter of fiscal 1996,  Wal-Mart  vacated,  as expected,  to
relocate to a newly constructed Supercenter several miles away. During the first
quarter of fiscal 1996,  the Company  learned that  Wal-Mart is also expected to
relocate from Piedmont Plaza in Greenwood,  South Carolina to a new  Supercenter
currently under  construction in that market.  Wal-Mart remains obligated to pay
rent and its share of  operating  expenses  through the  remaining  terms of the
leases even upon vacating the properties. However, unless a suitable replacement
anchor tenant could be located, such a relocation of a Wal-Mart store would have
a long-term  negative  impact on renewals by other  tenants and on the long-term
performance of the affected  shopping center.  Certain tenants of the properties
have co-tenancy  clauses in their lease  agreements  which stipulate that if the
Wal-Mart  anchor  space is vacant  these  tenants are  entitled to pay a reduced
amount of rent and, in some  cases,  retain the right to  terminate  their lease
agreements.   Management  expected  that  there  would  be  additional  Wal-Mart
relocation  vacancies  at  certain of its  properties  as a result of this trend
toward supercenter  construction,  which was one of the factors which influenced
the Board of  Directors to pursue a sale of the entire  portfolio of  properties
during fiscal 1995.

     In addition to the general retail market conditions and Wal-Mart relocation
risk  discussed  above,  the  decision  by the  Board  to  pursue  a sale of the
Company's real estate assets was partly based on the  refinancing  risk to which
the Company has been and would remain  subject in the event that it continued to
hold the operating  properties  for  long-term  investment  purposes.  The first
mortgage loans secured by the College Plaza and Franklin  Square  properties are
held by the same lender and were  scheduled to mature  during  fiscal 1996.  The
College  Plaza loan with a  principal  balance of  $6,862,000,  had an  original
maturity  date of April 23,  1996.  The Franklin  Square loan,  with a principal
balance of $6,600,000,  had an original  maturity date of June 21, 1996.  During
the quarter ended May 31, 1996, the Company reached an agreement with the lender
of the  College  Plaza  and  Franklin  Square  notes on terms  for a  short-term
extension  of the two notes.  The  maturity  date of both notes was  extended to
March 31, 1997. Subsequent to the original maturity dates, the interest rate for
both  mortgage  notes was changed to a variable  rate equal to either prime plus
0.75% or LIBOR plus 2.75%,  as selected by the  Company.  Formal  closing of the
College Plaza and Franklin Square extension  agreements occurred in May 1996 and
August 1996,  respectively.  The next significant loan maturities were scheduled
to occur during fiscal 1998, when  approximately  $30 million of debt would have
needed to be repaid or  refinanced.  The  obligation  to repay the lenders  with
respect to the outstanding mortgage loans at the time of the sale transaction in
October 1996 was equal to the outstanding  mortgage  principal balances prior to
unamortized  loan buydown fees. In conjunction  with the sale  transaction,  the
amount of the remaining  unamortized  loan buydown fees, of  approximately  $3.5
million,  will be written off as a loss on the early  extinguishment  of debt in
the period in which the sale occurred.

     As previously reported,  in September 1993, in order to take advantage of a
negotiated  prepayment  right  which was due to expire,  PaineWebber  Properties
Incorporated (PWPI), the general partner of the Advisor,  purchased the mortgage
note  secured  by  Applewood  Village  from  the  original  lender  at  par  for
$5,175,000.  The Applewood Village mortgage loan was refinanced in June 1995 for
$4,000,000  leaving a balance  of  $1,175,000  which  PWPI  agreed to hold as an
unsecured note payable.  During fiscal 1996,  PWPI agreed to release the Company
from its remaining  obligation  under this  promissory  note.  Effective June 1,
1996, the outstanding balance of this note payable to affiliate,  of $1,136,000,
was forgiven,  together with the related accrued interest payable of $3,000. The
extraordinary  gain from  forgiveness of debt resulting from this transaction is
recognized in the Company's statement of operations for fiscal 1996.

     As a  result  of the  Company's  plan to  complete  the  sale of all of its
operating  investment  properties,  the accompanying  financial statements as of
August  31,  1996  and  1995  reflect  the  reclassification  of  the  operating
investment  properties  and  certain  related  assets  to  operating  investment
properties  held for sale and the writedown of the individual  properties to the
lower of adjusted cost or net realizable value. The Company recorded  impairment
losses for financial  reporting  purposes of $1,030,000 and $3,850,000 in fiscal
1996 and 1995,  respectively,  in connection with this accounting treatment. The
resulting writedowns apply only to the properties for which losses were expected
based on their  estimated  fair values.  The gains on properties  for which fair
value less costs to sell  exceeded the adjusted cost basis will be recognized in
the first quarter of fiscal 1997; the period in which the sale  transaction  was
completed.  The Company also incurred  portfolio  sale expenses of $1,834,000 in
fiscal 1996.  Portfolio sale related expenses consisted  primarily of legal fees
associated with  negotiating the sale agreement and preparing,  distributing and
soliciting the shareholder  proxy.  Such costs were expensed as incurred because
of the impairment issues discussed  further above and the uncertainty  regarding
the ability to complete the sale transaction  which existed until the subsequent
shareholder vote.

    As reported on the Company's  Statements of Cash Flows, net cash provided by
operating  activities  decreased  by  approximately  $639,000  in fiscal 1996 as
compared  to the prior  year.  The  decline in net cash  provided  by  operating
activities was primarily due to expenses  incurred in fiscal 1996 related to the
subsequent  sale of the operating  investment  properties.  Net cash provided by
investing  activities  totalled  $468,000  during  fiscal  1996,  as compared to
$114,000  for fiscal  1995.  The  increase  in net cash  provided  by  investing
activities  was  mainly  due  to the  transfer  of  cash  reserved  for  capital
improvements to cash and cash equivalents  during fiscal 1996 as a result of the
subsequent sale of the operating investment properties. The Company had net cash
used in  financing  activities  of  $2,039,000  in fiscal  1996,  as compared to
$2,928,000 for fiscal 1995. Net cash used in financing  activities was higher in
fiscal 1995 due to a number of mortgage loan refinancing  transactions completed
during the year.  The Company  generally is obligated to distribute  annually at
least 95% of its  taxable  income to its  shareholders  in order to  continue to
qualify as a REIT under the Internal  Revenue Code. The Company  incurred a loss
for both book and tax purposes in fiscal 1996 and,  therefore,  was not required
to pay a cash dividend in order to retain its REIT status.

    The accompanying  balance sheet as of August 31, 1996 reflects cash and cash
equivalents totalling $9,208,000.  A portion of such cash balance, in the amount
of $1,471,000,  relates to net cash flow of the operating properties  subsequent
to May 14,  1996 which was due to GRT as part of the  incentive  management  fee
calculation  described  above and was  transferred to GRT on October 17, 1996 in
conjunction  with the sale closing.  The  Company's  balance sheet at August 31,
1996 also  included  escrowed cash of  $1,379,000.  The majority of this amount,
which primarily  represented cash designated for real estate taxes and insurance
premiums,  was either  transferred  to GRT at the time of the sale or applied by
certain lenders against the respective mortgage debt liabilities.  The remaining
net cash  balance of  approximately  $7,737,000,  along with the net proceeds of
$36,371,000  received  at  closing,  $86,000 of  escrowed  cash  refunded to the
Company  subsequent  to the closing and a recovery of prepaid  insurance  in the
amount of $167,000 received subsequent to the closing, were available to be used
to pay for the expenses  associated  with winding up the Company's  business and
for liquidation  distributions to the  shareholders.  In addition,  as discussed
further above,  the Company retains  outstanding  tenant  receivables in the net
amount of $878,000  which the Advisor has agreed to purchase at carrying  value.
The Company also expects to receive  certain state tax refunds of  approximately
$109,000 and interest income of approximately  $441,000. From the available cash
and  receivables,  the  Company  expects to pay  expenses  totalling  $1,354,000
subsequent to August 31, 1996.  Such costs are  comprised of operating  expenses
through the date of the sale  transaction  of  approximately  $98,000,  expenses
related  to  the  sale  transaction  of  approximately  $930,000  and  estimated
liquidation  expenses of $326,000.  After these estimated expenses,  the Company
expects to have net assets totalling  approximately  $44.4 million available for
distribution to the shareholders.  From these net assets, the Company expects to
make a final liquidating distribution to the shareholders of approximately $8.80
per share in December 1996 which will be followed by the formal  liquidation  of
the Company by December 31, 1996.

Results of Operations
1996 Compared to 1995

      The Company  reported a net loss of  $2,538,000  for the year ended August
31,  1996,  as compared  to a net loss of  $6,364,000  for the prior  year.  The
decrease  in  net  loss  occurred  primarily  due  to  the  effects  of  certain
non-recurring  items:  a decrease in loss on  impairment of assets held for sale
and  a  $1,139,000  extraordinary  gain  recognized  in  fiscal  1996  from  the
forgiveness  of the unsecured  debt owed to an affiliate,  as discussed  further
above.  The decrease in loss on impairment of assets held for sale resulted from
the fiscal 1995  $3,850,000  writedown of the  Company's  assets to the lower of
cost or fair value less  estimated  selling costs  stemming from its decision to
market its  portfolio of assets for sale.  The fiscal 1995  impairment  loss was
partially offset by the additional loss of $1,030,000  recognized in the current
year, as discussed further above. Partially offsetting the effect on net loss of
these non-recurring  items were the expenses of $1,834,000  recognized in fiscal
1996 relating to the sale of the Company's assets, as discussed further above.

     Also  contributing  to the  decrease  in net  loss  for  fiscal  1996  were
increases  in revenues  combined  with  decreases in the  interest,  general and
administrative, financial and investor servicing and REIT management fee expense
categories.  Total  revenues  increased by $504,000 due to increases in interest
income and rental income and expense  reimbursements.  Interest income increased
by $176,000  due to the higher  average  invested  cash reserve  balances  which
resulted from the suspension of the Company's dividend payments to shareholders.
Rental income increased by $175,000 primarily due to an increase in occupancy at
Lexington  Parkway  Plaza and higher  percentage  rent  earned at Village  Plaza
during  the  current  year.  The  remainder  of  the  increase  in  revenues  is
attributable to higher recorded expense reimbursements in the current year which
corresponds to the increase in property expenses and real estate taxes discussed
below.  Interest expense decreased by $475,000 due to the reduction in effective
interest  rates  associated  with certain loans which were  refinanced in fiscal
1995.  General and  administrative  expenses decreased by $755,000 partly due to
costs  incurred in the prior year  related to an  independent  valuation  of the
Company's operating  properties which was commissioned in fiscal 1995 as part of
management's  refinancing  and  portfolio  management  efforts.  In addition,  a
decline  in other  required  professional  services  and  certain  non-recurring
expenses  incurred in fiscal 1995  related to a transfer of property  management
responsibilities  also contributed to the decline in general and  administrative
expenses.  REIT  management fees and financial and investor  servicing  expenses
declined by $236,000 due to the Advisor's  decision to waive  collection of such
amounts, effective March 1, 1995, as an accommodation to the Company in order to
maximize  earnings  and cash  flow  while  the  strategic  plans  regarding  the
Company's future operations were evaluated and implemented.

     Increases in property expenses,  real estate taxes, and bad debts partially
offset the overall decrease in net loss for the current year.  Property expenses
increased by $167,000 mainly due to an increase in snow removal costs at several
properties from the record  breaking  snowfall levels during the winter of 1996.
Real estate taxes increased by $124,000 mainly as a result of higher tax expense
recognized for the Piedmont Plaza and East Pointe Plaza properties.  At Piedmont
Plaza,  the taxing  authority  began billing the Company for taxes on the anchor
tenant  stores in 1996 as compared  to prior  years when these  amounts had been
billed  directly to the anchor tenants.  Such amounts are  recoverable  from the
tenants through the expense  reimbursement  revenues  referred to above. At East
Pointe  Plaza,  the prior year tax  expense  had been  reduced  to  correct  the
overaccrual  of taxes in fiscal 1994 as a result of a  successful  appeal of the
property's tax assessment.  Bad debt expense  increased  mainly due to the write
off of a note  which  was  deemed to be  uncollectible  due from a tenant of the
Aviation Plaza property that filed for bankruptcy protection during fiscal 1996.

1995 Compared to 1994

     The Company reported a net loss of $6,364,000 for the year ended August 31,
1995, as compared to a net loss of $6,070,000  for fiscal 1994.  The increase in
net loss occurred despite a decrease in non-recurring charges recorded in fiscal
1995 as compared to the prior year.  Due to the changing  conditions in the debt
and equity markets which impacted the Company's restructuring plans, the Company
took  significant  charges  against  earnings in fiscal 1994 to reflect  certain
costs incurred in connection with the  restructuring  plans which were either no
longer  expected to have future  economic  benefit or were no longer  deferrable
because the prospects for a second equity  offering were uncertain as of the end
of  fiscal  1994.  Acquisition  due  diligence  costs  totalling   approximately
$2,015,000 and  non-deferrable  offering  expenses of $1,561,000 were charged to
earnings in fiscal  1994.  In  addition,  interest  expense and related  fees in
fiscal 1994 included  $760,000 paid to one of the Company's  mortgage lenders to
extend  a debt  prepayment  agreement,  which  was  entered  into as part of the
Company's  restructuring  plans, but which was allowed to lapse due to increases
in market  interest  rates.  Such  non-recurring  charges,  which  totalled $4.3
million,  were  approximately  $400,000 greater than the  non-recurring  charges
reflected  in the  fiscal  1995  net  loss,  which  consisted  primarily  of the
writedown of the  Company's  assets to the lower of adjusted  cost or fair value
less  costs to sell at  August  31,  1995,  in the  amount of $3.9  million,  as
discussed further above.

      The unfavorable  change in the Company's net operating  results for fiscal
1995 was primarily the result of increases in interest expense, depreciation and
amortization  and  general  and  administrative  expenses  during  fiscal  1995.
Interest  expense,  net of the prior year prepayment  extension fees referred to
above,  increased by $584,000  mainly due to the write-off of  unamortized  loan
buydown fees  totalling  $336,000 at the time of the  Lexington  Parkway,  Roane
County and Applewood Village mortgage loan  refinancings.  Interest expense also
increased due to additional  amortization of deferred loan costs associated with
the loans  refinanced  in fiscal 1995 and  increases in the prime  lending rate,
upon which the variable rate College Plaza loan was based. Non-cash depreciation
and  amortization  charges  increased by $161,000 due to property  expansion and
tenant improvement costs, as well as the related leasing commissions, which were
incurred in fiscal 1995 and 1994. General and administrative  expenses increased
by  $734,000  in fiscal  1995  partly as a result of  certain  costs,  totalling
approximately  $289,000,  which were incurred in connection  with an independent
valuation of the Company's operating properties which was commissioned in fiscal
1995  as part of  management's  ongoing  refinancing  and  portfolio  management
efforts.  In addition,  fiscal 1995 general and administrative  expenses include
certain professional fees and other costs, of approximately $258,000, which were
incurred  during the first  quarter in  connection  with the  Company's  planned
conversion to self-administration and self-management.

     An increase in revenues of $419,000 and decreases in bad debt expense, REIT
management fees and financial and investor servicing expenses for the year ended
August 31, 1995 served to partially  offset the unfavorable  changes referred to
above.  The  increase in revenues was mainly due to a 1% increase in base rental
income and a $179,000  increase in interest income.  The increase in base rental
income was  attributable to base rent increases on lease renewals as well as the
signing of several  new leases  during  fiscal  1995.  The  increase in interest
income was achieved due to the higher  average  invested  cash reserve  balances
which  resulted  from the  suspension  of the  Company's  dividend  payments  to
shareholders.  REIT  management  fees and financial and investor  servicing fees
declined  by a  total  of  $261,000  due  to the  Advisor's  decision  to  waive
collection of such amounts effective March 1, 1995.

1994 Compared to 1993

     The  Company  reported a net loss of  approximately  $6,070,000  for fiscal
1994, as compared to a net loss of approximately $1,732,000 for fiscal 1993. The
increase  in net loss was  due,  in large  part,  to the  expenses  incurred  in
pursuing certain shareholder  approvals and restructuring plans. As noted above,
due to the changing conditions in the debt and equity markets which impacted the
Company's  restructuring  plans,  the Company took  significant  charges against
earnings in fiscal 1994. Acquisition due diligence costs totalling approximately
$2,015,000  related to  certain  properties  that were  reviewed  for  potential
acquisition  as part of the planned public  offering,  but were withdrawn by the
sellers  due to  delays in the  timing  of the  offering,  were  written  off to
investment  analysis  expense  during  fiscal  1994.  All  expenses  incurred in
connection with the planned equity offering,  as well as a possible  securitized
debt  offering,  were  written  off to  non-deferrable  offering  expenses.  The
non-deferrable  offering  expenses,  which  totalled  approximately  $1,562,000,
included  legal,  regulatory  and rating agency  expenses,  in addition to costs
incurred in determining the  appropriate  terms for the proposed equity offering
and preparing required filings for regulatory purposes. Additionally,  extension
fees of $760,000  related to the debt  prepayment  agreement which lapsed during
fiscal 1994,  were included in the balance of interest  expense and related fees
in fiscal 1994.

     Net  operating  income  from  the  Company's   shopping   centers,   before
depreciation  expense and  amortization  of loan  buydown  fees  increased  from
approximately  $6,640,000 for fiscal 1993 to approximately $7,526,000 for fiscal
1994. The increase in net operating  income from the properties  resulted mainly
from the  additional  contribution  of operating  income from the three shopping
centers  purchased during fiscal 1993. In addition,  leasing gains at several of
the  properties  accounted  for a portion of the  increase in rental  income and
expense  reimbursements during fiscal 1994. As of August 31, 1994, the portfolio
was 99%  leased on  average.  Non-cash  depreciation  and  amortization  charges
increased by approximately  $764,000 in fiscal 1994, mainly due to acquisitions,
property expansions and tenant improvements.

Inflation

    The Company commenced operations on August 9, 1989 and completed its seventh
full year of operations in fiscal 1996.  The effects of inflation and changes in
prices on the  Company's  operating  results to date have not been  significant.
Inflation in future  periods is likely to have a minimal effect on the Company's
net cash flow as a result of the October 1996 sale of the Company's  real estate
assets and the Company's  plan of  liquidation,  which it expects to complete by
December 31, 1996.


Item 8.  Financial Statements and Supplementary Data

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

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

    None.


<PAGE>


                                   PART III

Item 10.  Directors and Executive Officers of the Registrant

      There  currently  are  four  directors  of the  Company,  none of whom are
affiliated with the Advisor. The directors are subject to removal by the vote of
the  holders  of a  majority  of  the  outstanding  shares.  The  directors  are
responsible for the general  policies of the Company,  but they are not required
to conduct personally the business of the Company.

      (a) and (b) The names and ages of the directors  and executive  officers
of the Company are as follows:

                                                                    Date Elected
      Name                       Office                       Age    to Office
      ----                       ------                       ---    ---------

Lawrence A. Cohen               President, Chief Executive 
                                  Officer and Director         43     5/15/91
Lawrence S. Bacow (1)           Director                       45     8/20/93
Joseph W. Robertson, Jr. (1)    Director                       49    10/20/89
J. William Sharman, Jr. (1)     Director                       56    10/20/89
Walter V. Arnold                Senior Vice President and
                                  Chief Financial Officer      49    10/20/89
James A. Snyder                 Senior Vice President          51      7/6/92
John B. Watts III               Senior Vice President          43     5/31/91
Timothy J. Medlock              Vice President and Treasurer   35    10/20/89
Rock M. D'Errico                Vice President                 40    11/01/89
Dorothy F. Haughey              Secretary                      70    10/20/89

(1) Member of the Audit  Committee.  The Board of  Directors  of the Company has
    established an Audit Committee that consists of the  Independent  Directors.
    Independent  Directors  are  those  Directors  who are not and have not been
    affiliated,  directly or indirectly,  with an affiliate of the Company.  The
    Audit  Committee was  established  to make  recommendations  concerning  the
    engagement of independent  public  accountants,  review with the independent
    public  accountants the plans and results of the audit  engagement,  approve
    professional services provided by the independent public accountants, review
    the independence of the independent public  accountants,  consider the range
    of audit fees and review the adequacy of the Company's  internal  accounting
    controls.

     (c) PaineWebber  Properties  Incorporated  ("PWPI"), the general partner of
the Advisor, assists the directors and officers of the Company in the management
and control of the Company's affairs.  The principal  executive officers of PWPI
are as follows:

      Name                      Office                                 Age
      ----                      ------                                 ---

Bruce J. Rubin          President and Chief Executive Officer          37
Walter V. Arnold        Senior Vice President and Chief
                          Financial Officer                            49
James A. Snyder         Senior Vice President                          51
David F. Brooks         First Vice President and
                          Assistant Treasurer                          54
Timothy J. Medlock      Vice President and Treasurer                   35
Thomas W. Boland        Vice President                                 34

    (d) There is no family  relationship among any of the foregoing directors or
officers.  All of the foregoing  directors and officers of the Company have been
elected to serve until the Company's next annual meeting.

    (e) The business  experience  of each of the  directors  and officers of the
Company, as well as the principal executive officers of PWPI, is as follows:

    Lawrence  A. Cohen has served as  President,  Chief  Executive  Officer and
Director of the Company  since 1991.  Mr. Cohen is also Vice Chairman and Chief
Financial  Officer of Capital  Senior Living Corp., a company that develops and
operates  senior  housing  facilities.   Mr.  Cohen  was  President  and  Chief
Executive  Officer of PWPI until August 1996.  Mr. Cohen joined PWPI in January
1989 as its Executive  Vice  President and Director of Marketing and Sales.  He
is a member  of the  Board  of  Directors  of  PaineWebber  Independent  Living
Mortgage Fund,  Inc.  ("PWIL I") and  PaineWebber  Independent  Living Mortgage
Inc.  II ("PWIL  II").  PWIL I and PWIL II are REITs that were formed to invest
in mortgage loans secured by rental  housing  projects for  independent  senior
citizens.   Mr.  Cohen  received  his  L.L.M.   (in  Taxation)  from  New  York
University  School of Law and his J.D. degree from St. John's University School
of Law.  Mr.  Cohen  received  his  B.B.A.  degree in  Accounting  from  George
Washington  University.  He is a member of the New York Bar and is a  Certified
Public Accountant.

    Lawrence S. Bacow  joined the Company as a director in August  1993.  He is
a professor at the  Massachusetts  Institute of Technology  ("M.I.T.") where he
is on the  faculty  of the  M.I.T.  Center  for  Real  Estate  and  the  M.I.T.
Department  of Urban Studies and  Planning.  Professor  Bacow joined the M.I.T.
faculty  in 1977 and served as a director  of the Center for Real  Estate  from
1990  until  1992.  While on leave  from  M.I.T.  from 1985 to 1987,  Professor
Bacow served as Chief Operating Officer of Spaulding  Investment Company, a New
England-based  real  estate  firm.  From 1990 to 1992,  he was a  principal  of
Artel  Associates,  Inc.,  a  provider  of real  estate  advisory  services  to
investment  entities.  Professor Bacow is a director of the LaSalle Street Fund
and Grubb & Ellis.  He received  his B.S. in economics  from  M.I.T.,  his J.D.
from  Harvard  Law  School,  and his Ph.D.  from  Harvard's  Kennedy  School of
Government.

    Joseph W.  Robertson,  Jr. has served as a director  of the  Company  since
1989. Mr.  Robertson is Executive Vice  President and Chief  Financial  Officer
of  Weingarten  Realty  Investors,  a REIT that  owns,  develops  and  operates
shopping  centers and other  commercial  real estate.  In 1971,  Mr.  Robertson
joined   Weingarten   Realty,   Inc.,  the  predecessor  of  Weingarten  Realty
Investors,  and served as Executive Vice President and Chief Financial  Officer
from 1980 to 1985 when Weingarten  Realty  Investors was formed.  Mr. Robertson
serves as a  trustee  of  Weingarten  Realty  Investors  and as a  director  of
Weingarten Properties, Inc.

     J.  William  Sharman,  Jr. is a director  of the  Company and has held such
position  since he was elected to the Board of Directors as of October 20, 1989.
Mr.  Sharman  is also a  director  of PWIL 1 and PWIL  II.  Mr.  Sharman  is the
Chairman of the Board and President of Lancaster Hotel Management, L.C., a hotel
management company, and Bayou Equities,  Inc., a hotel  development company. Mr.
Sharman  served  for ten years as  Chairman  of the Board and  President  of The
Lancaster Group, Inc., a real estate  development firm based in Houston,  Texas,
which is the predecessor of Lancaster Hotel Management, L.C. and Bayou Equities,
Inc. Mr.  Sharman is Vice  Chairman of Small Luxury  Hotels,  Ltd. of the United
Kingdom,  an  international  hotel  marketing  and  reservations  firm. He has a
Bachelor of Science  degree in Civil  Engineering  from the  University of Notre
Dame.

      John B. Watts III is a Senior Vice  President  of the Company  and,  until
August  1996,  he was a Senior  Vice  President  of PWPI which he joined in June
1988.  Mr.  Watts  has  had  over  16  years  of  experience  in   acquisitions,
dispositions  and finance of real  estate.  He  received  degrees of Bachelor of
Architecture,  Bachelor of Arts and Master of Business  Administration  from the
University of Arkansas.

    Bruce J. 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>


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

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

    David F.  Brooks is a First  Vice  President  and  Assistant  Treasurer  of
PWPI.  Mr.  Brooks  joined PWPI 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 Vice President and Treasurer of the Company and a Vice
President  and  Treasurer  of PWPI  which he joined  in 1986.  From June 1988 to
August 1989, Mr.  Medlock  served as the Controller of PWPI.  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.

    Rock M.  D'Errico is Vice  President of the Company and a Vice  President of
PWPI which he joined in 1986.  Previously he was associated  with First Winthrop
Corporation  and John  Hancock  Mutual Life  Insurance  Company as a Real Estate
Asset Manager.

    Thomas W. Boland is a Vice President and Manager of Financial  Reporting of
PWPI  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.

    Dorothy F.  Haughey is Secretary  of the  Company,  Assistant  Secretary of
PaineWebber  and Secretary of PWI and PWPI. Ms.  Haughey joined  PaineWebber in
1962.

    (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 Company,  and
persons who own more than ten  percent of a  registered  class of the  Company's
equity securities, 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 Company 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
Company  believes  that,  during the year  ended  August  31,  1996,  all filing
requirements  applicable to its officers,  directors and ten-percent  beneficial
holders were complied with.

Item 11.  Executive Compensation

    The three Independent  Directors each receive an annual fee of $12,000, plus
$1,000 for each meeting  attended,  and  reimbursement  for expenses incurred in
attending meetings and as a result of other work performed for the Company.

Item 12.  Security Ownership of Certain Beneficial Owners and Management

    (a) As of the date  hereof,  no  person  of  record  owns or is known by the
Registrant to own beneficially more than five percent of the outstanding  shares
of common stock of the Company.
<PAGE>
    (b) The following table sets forth the ownership of shares owned directly or
indirectly by the  Directors and principal  officers of the Company as of August
31, 1996:

                                                Number of Shares
                                                Beneficially         Percent
Title of Class      Name of Beneficial Owner    Owned                of  Class
--------------      ------------------------    ----------------     ---------


Shares of         Lawrence A. Cohen             350 Shares        Less than 1%
Common Stock

                  All Directors and Officers    350 Shares         Less than 1%
                  of the Company, as a group

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

Item 13.  Certain Relationships and  Related Transactions

   The Company has entered into an advisory  agreement with  PaineWebber  Realty
Advisors,  L.P. (the "Advisor") to perform  various  services in connection with
the sale of the Shares,  the  management  of the  Company  and the  acquisition,
management  and  disposition  of the  Company's  investments.  The  Advisor is a
limited partnership composed of PaineWebber Properties  Incorporated ("PWPI") as
the  general  partner  and  Properties  Associates,  L.P.  ("PA") as the limited
partner. Both partners of the Advisor are affiliates of PaineWebber Incorporated
("PWI"),  which  is  a  wholly  owned  subsidiary  of  PaineWebber  Group,  Inc.
("PaineWebber").  The advisory  agreement is renewable on an annual basis at the
discretion of the Company's Board of Directors.  The type of compensation due to
the Advisor and its affiliates  under the terms of the Advisory  Agreement is as
follows:

(i)  Under  the  Advisory   Agreement,   the  Advisor  has  specific  management
     responsibilities to perform day-to-day operations of the Company and to act
     as the investment advisor and consultant for the Company in connection with
     general policy and investment decisions.  The Advisor earns an annual Asset
     Management  Fee  and  an  Advisory   Incentive  Fee  of  0.25%  and  0.25%,
     respectively,  of the Capital  Contributions  of the Company.  The Advisory
     Incentive Fee is subordinated to the shareholders' receipt of distributions
     of net cash  sufficient  to provide a return equal to 8% per annum on their
     Invested Capital,  as defined.  During the quarter ended February 28, 1994,
     the payment of regular quarterly distributions was suspended.  Accordingly,
     the Advisor has not earned any Advisory  Incentive  Fees since  December 1,
     1993.  Effective  March 1, 1995, the Advisor agreed to waive its management
     fees indefinitely in order to maximize the Company's earnings and cash flow
     while the strategic  plans regarding the Company's  future  operations were
     evaluated  and  implemented.  Accordingly,  the  Advisor did not receive an
     asset management fee for the year ended August 31, 1996.

(ii) For  its  services  in  finding  and  recommending  investments,   and  for
     analyzing,  structuring  and  negotiating the purchase of properties by the
     Company,  PWPI received  non-recurring  Acquisition Fees equal to 3% of the
     Capital  Contributions.  PWPI received  acquisition fees in connection with
     the Company's real estate investments in the amount of $3,006,000.

(iii)Fees equal to 1/2 of 1% of any financing and 1% of any refinancing obtained
     by the Company for which the Advisor rendered substantial services, and for
     which no fees were paid to a third party, were to be paid to the Advisor as
     compensation  for such  services.  No such fees will be due to the  Advisor
     through the Company's expected liquidation date.

(iv) Upon  disposition  of the  Company's  investments,  the Advisor  could have
     earned sales  commissions and disposition  fees. These fees and commissions
     are  subordinated  to  the  repayment  to  shareholders  of  their  Capital
     Contributions plus certain minimum returns on their Invested Capital. In no
     event  were  the  disposition  fees to  exceed  an  amount  equal to 15% of
     Disposition  Proceeds  remaining  after the  shareholders  have received an
     amount  equal to their  Capital  Contributions  plus a return  on  Invested
     Capital of 6% per annum, cumulative and noncompounded.  No disposition fees
     or sales  commissions  will be due to the  Advisor  through  the  Company's
     expected liquidation date.

   An affiliate of the Advisor  performs  certain  accounting,  tax preparation,
securities law compliance and investor communications and relations services for
Company.  Total costs incurred by this affiliate in providing these services are
allocated  among several  entities,  including the Company.  Effective  March 1,
1995,  the Advisor  agreed that it would not be reimbursed  for providing  these
services to the  Company.  As with the  management  fees  discussed  above,  the
Advisor agreed to waive these  servicing fees  indefinitely in order to maximize
the  Company's  earnings and cash flow while the strategic  plans  regarding the
Company's future operations were evaluated and implemented. Accordingly, for the
year  ended  August  31,  1996 no  payments  were  made by the  Company  to this
affiliate for providing the above services to the Company.

   Mitchell  Hutchins  Institutional   Investors,   Inc.  ("Mitchell  Hutchins")
provides cash  management  services  with respect to the Company's  cash assets.
Mitchell Hutchins is a subsidiary of Mitchell  Hutchins Asset Management,  Inc.,
an independently  operated subsidiary of PaineWebber.  For the year ended August
31, 1996,  Mitchell  Hutchins  earned fees of $23,000 for managing the Company's
cash  assets.  Fees charged by Mitchell  Hutchins  are based on a percentage  of
invested cash  reserves  which varies based on the total amount of invested cash
which Mitchell Hutchins manages on behalf of PWPI.


<PAGE>
                                   PART IV



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

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

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

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

           (3)     Exhibits:

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

    (b)    No Current  Reports on Form 8-K were filed during the last quarter of
           fiscal 1996. A Current  Report on Form 8-K dated October 16, 1996 was
           filed  subsequent  to the  fiscal  year end to report the sale of the
           Company's 22 shopping  centers and the  shareholder-approved  plan of
           liquidation.


    (c)    Exhibits:

                   See (a)(3) above.

    (d)    Financial Statement Schedule:

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



<PAGE>



                                  SIGNATURES

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

                                         RETAIL PROPERTY INVESTORS, INC.



                                       By:   /s/ Lawrence A. Cohen
                                             Lawrence A. Cohen
                                             President, Chief Executive Officer
                                             and Director



                                       By    /s/ Walter V. Arnold
                                             Walter V. Arnold
                                             Senior Vice President and
                                             Chief Financial Officer
                                             (additionally functioning
                                             as chief accounting officer)



Dated:  November 27, 1996


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



By: /s/ Lawrence S. Bacow                       Date: November 27, 1996
    ------------------------                          -----------------
    Lawrence S. Bacow
    Director



By: /s/ Joseph W. Robertson, Jr.                Date: November 27, 1996
    -----------------------------                     -----------------
    Joseph W. Robertson, Jr.
    Director


By: /s/ J. William Sharman, Jr.                 Date: November 27, 1996
    ----------------------------                      -----------------
    J. William Sharman, Jr.
    Director



<PAGE>


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

                       RETAIL PROPERTY INVESTORS, INC.

                              INDEX TO EXHIBITS
<TABLE>
<CAPTION>
                                                            Page Number in the Report
Exhibit No.        Description of Document                  Or Other Reference
-----------        -----------------------                  ------------------
<S>                 <C>                                     <C>

(3) and (4)        Prospectus of the Registrant             Filed  with  the Commission
                   dated October 6, 1989, as                pursuant to Rule 424(c)
                   supplemented.                            and incorporated herein
                                                            by reference.


(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
                   of the  registrant together  with        Exchange Act of 1934 and 
                   all such contracts  filed as             incorporated  herein by 
                   exhibits of previously  filed            reference.  
                   Forms 8-K and  Forms  10-K are
                   hereby incorporated herein by
                   reference.


(13)               Annual Report to Stockholders            No  Annual   Report  for
                                                            the  year  ended  August
                                                            31,  1996 has been  sent
                                                            to  the   shareholders.
                                                            An  Annual  Report  will
                                                            be     sent    to    the
                                                            shareholders  subsequent
                                                            to this filing.

(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)

                       RETAIL PROPERTY INVESTORS, INC.

        INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE

                                                                     Reference

RETAIL PROPERTY INVESTORS, INC.:

   Report of Independent Accountants                                      F-2

   Balance sheets at August 31, 1996 and 1995                             F-3

   Statements  of  operations  for the years ended August 31,  
     1996,  1995 and 1994                                                 F-4

   Statements  of changes in  shareholders'  equity for the years ended
      August 31, 1996,  1995 and 1994                                     F-5

   Statements  of cash flows for the years  ended  August 31, 
      1996,  1995 and 1994                                                F-6

   Notes to financial statements                                          F-7

   Schedule III - Real Estate and Accumulated Depreciation                F-24



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



<PAGE>





                      REPORT OF INDEPENDENT ACCOUNTANTS







To the Board of Directors and
 Shareholders of Retail Property Investors, Inc.

    In our opinion, the financial statements listed in the index appearing under
Item 14(a)(1) and (2) on page F-1 present fairly, in all material respects,  the
financial position of Retail Property Investors,  Inc. (the "Company") at August
31, 1996 and 1995, and the results of its operations and its cash flows for each
of the three years in the period  ended  August 31,  1996,  in  conformity  with
generally accepted  accounting  principles.  These financial  statements are the
responsibility of the Company's management;  our responsibility is to express an
opinion on these  financial  statements  based on our audits.  We conducted  our
audits of these  statements  in  accordance  with  generally  accepted  auditing
standards which 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,   assessing  the
accounting  principles  used and significant  estimates made by management,  and
evaluating the overall  financial  statement  presentation.  We believe that our
audits provide a reasonable basis for the opinion expressed above.

    As  discussed  further in Note 8 to the  financial  statements,  the Company
completed the sale of all of its operating investment  properties on October 17,
1996 and adopted a plan of liquidation.







/s/ PRICE WATERHOUSE LLP
PRICE WATERHOUSE LLP



Boston, Massachusetts
November 22, 1996



<PAGE>


                       RETAIL PROPERTY INVESTORS, INC.

                                BALANCE SHEETS
                           August 31, 1996 and 1995
                   (In thousands, except per share amounts)

                                    ASSETS
                                                        1996           1995
                                                        ----           ----
Operating investment properties
   held for sale, net (Note 4)                      $  185,541     $  192,311
Cash and cash equivalents                                9,208          5,943
Escrowed cash                                            1,379          1,067
Accounts receivable, net of
   allowance for doubtful accounts of
   $162 ($80 in 1995)                                      640            170
Other assets                                                 1             77
Prepaid expenses                                           336            308
Capital improvement reserve                                  -          1,201
Deferred expenses, net of accumulated
   amortization of $856 ($446 in 1995)                   1,059          1,467
                                                    ----------     ----------
                                                    $  198,164     $  202,544
                                                    ==========     ==========


                     LIABILITIES AND SHAREHOLDERS' EQUITY

Accounts payable - affiliates                      $        4      $        4
Accounts payable and accrued expenses                    1,909          1,316
Mortgage interest payable                                  371            358
Note payable - affiliate                                     -          1,168
Security deposits and other liabilities                    513            768
Mortgage notes payable, net                            155,483        156,508
                                                   ------------    -----------
      Total liabilities                                158,280        160,122

Shareholders' equity (Note 2.I):
   Common stock, $.01 par value, 50,000,000 
     shares authorized, 5,010,050 shares issued
     and outstanding                                        50             50
   Additional paid-in capital, net of offering costs    87,181         87,181
   Accumulated deficit                                 (47,347)       (44,809)
                                                    ----------     ----------
      Total shareholders' equity                        39,884         42,422
                                                    ----------     ----------
                                                    $  198,164     $  202,544
                                                    ==========     ==========













               See accompanying notes to financial statements.


<PAGE>


                       RETAIL PROPERTY INVESTORS, INC.

                           STATEMENTS OF OPERATIONS
              For the years ended August 31, 1996, 1995 and 1994
                   (In thousands, except per share amounts)


                                               1996       1995        1994
                                               ----       ----        ----
Revenues:
    Rental income and expense 
     reimbursements                         $  25,010    $ 24,682     $24,442
    Interest income                               503         327         148
                                            ---------    --------     -------
                                               25,513      25,009      24,590

Expenses:
    Interest expense and related fees          14,808      15,283      15,459
    Depreciation and amortization               6,411       6,495       6,334
    Property expenses                           2,515       2,348       2,207
    Real estate taxes                           1,453       1,329       1,370
    Portfolio sale expenses                     1,834           -           -
    Loss on impairment of assets 
      held for sale                             1,030       3,850           -
    General and administrative                    947       1,702         968
    Bad debt expense                              169          21         241
    Cash management fees                           23           8           8
    Financial and investor 
     servicing expenses                             -         111         260
    REIT management fees                            -         125         237
    Non-deferrable offering expenses                -           -       1,561
    Investment analysis expense                     -         101       2,015
                                            ---------  ----------   ---------
                                               29,190      31,373      30,660
                                            ---------  ----------   ---------
Loss before extraordinary gain                 (3,677)     (6,364)     (6,070)

Extraordinary gain from 
 forgiveness of debt                            1,139           -            -
                                            ---------   ---------    ---------

Net loss                                    $  (2,538)  $  (6,364)   $ (6,070)
                                            =========   =========    ========

Per share amounts (Note 2.I):
     Loss before extraordinary gain          $  (0.74)  $  (1.27)    $  (1.21)
     Extraordinary gain from
       forgiveness of debt                       0.23          -            -
                                             --------   --------    --------
     Net loss                                $  (0.51)  $  (1.27)   $  (1.21)
                                             ========   ========    =========

     Cash dividends declared                 $      -   $      -    $   0.80
                                             ========   ========    ========













                See accompanying notes to financial statements.


<PAGE>


                        RETAIL PROPERTY INVESTORS, INC.

                 STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

               For the years ended August 31, 1996, 1995 and 1994
                    (In thousands, except per share amounts)


                         Common Stock        Additional
                          $.01 Par Value     Paid-in     Accumulated
                        Shares     Amount    Capital     Deficit       Total
                        ------     ------    -------     -------       -----

Shareholders' equity
  at August 31, 1993   5,010,050   $   50     $87,181     $(28,367)    $58,864

Cash dividends declared        -        -           -       (4,008)     (4,008)

Net loss                       -        -           -       (6,070)     (6,070)
                        --------   ------     -------     ---------    -------

Shareholders' equity
  at August 31, 1994   5,010,050       50      87,181      (38,445)     48,786

Net loss                       -        -           -       (6,364)     (6,364)
                       ---------   ------     -------     ---------    -------

Shareholders' equity
  at August 31, 1995   5,010,050       50      87,181      (44,809)     42,422

Net loss                       -        -           -       (2,538)     (2,538)
                      ----------   ------     -------     --------     -------

Shareholders' equity
  at August 31, 1996  5,010,050    $   50     $87,181     $(47,347)    $39,884
                      =========    ======     =======     ========     =======























               See accompanying notes to financial statements.


<PAGE>


                         RETAIL PROPERTY INVESTORS, INC.

                            STATEMENTS OF CASH FLOWS
               For the years ended August 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 loss                                                    $ (2,538)     $ (6,364)    $ (6,070)
  Adjustments to reconcile net
    loss to net cash provided by operating activities:
   Depreciation and amortization                                 6,411         6,495        6,334
   Amortization of loan buydown fees                               982         1,566        1,572
   Amortization of deferred financing costs                        392           265           29
   Loss on impairment of assets held for sale                    1,030         3,850            -
   Extraordinary gain from forgiveness of debt                  (1,139)            -            -
   Changes in assets and liabilities:
     Accounts receivable                                          (521)           22          543
     Other assets                                                   76            (8)         422
     Prepaid expenses                                              (28)          (48)          66
     Deferred expenses                                            (183)         (224)         238
     Accounts payable - affiliates                                   -           (63)        (578)
     Accounts payable and accrued expenses                         593           (27)         202
     Mortgage interest payable                                      16           191          (60)
     Security deposits and other liabilities                      (255)         (180)        (714)
                                                              --------      --------     --------
      Total adjustments                                          7,374        11,839        8,054
                                                              --------      --------     --------
      Net cash provided by operating activities                  4,836         5,475        1,984
                                                              --------      --------     --------

Cash flows from investing activities:
  Additions to operating investment properties                   (421)          (178)       (767)
  Use of (additions to) escrowed cash                            (312)           311          65
  Withdrawals from (additions to) capital 
     improvement reserve                                         1,201          (19)        (939)
  Master lease payments received                                     -            -          326
                                                            ----------     ---------      -------
      Net cash provided by (used in) 
          investing activities                                     468           114       (1,315)
                                                            ----------     ---------      -------    

Cash flows from financing activities:
  Dividends paid to shareholders                                     -             -       (4,008)
  Proceeds from issuance of mortgage notes payable                   -        45,825          100
  Payment of debt issuance costs                                     -        (1,439)           -
  Proceeds from issuance of unsecured note payable                   -         1,175            -
  Repayment of principal on mortgage notes payable              (2,007)      (48,482)        (620)
  Repayment of principal on unsecured note payable                (32)            (7)            -
                                                            ----------     ---------     ---------
      Net cash used in financing activities                    (2,039)       (2,928)       (4,528)
                                                            ---------       -------      ---------

Net increase (decrease) in cash and cash equivalents            3,265         2,661        (3,859)
Cash and cash equivalents, beginning of year                    5,943         3,282         7,141
                                                            ---------     ---------     ---------
Cash and cash equivalents, end of year                       $  9,208     $   5,943     $   3,282
                                                            =========     =========     =========

Supplemental Disclosure:
Cash paid during the year for interest                      $  13,421     $ 13,261       $ 13,917
                                                             =======      ========       ========


               See accompanying notes to financial statements.
</TABLE>

<PAGE>


                       RETAIL PROPERTY INVESTORS, INC.
                        Notes to Financial Statements


1.  Organization and Recent Business Developments

         Retail Property Investors,  Inc. (the "Company"),  formerly PaineWebber
    Retail Property  Investments,  Inc., is a corporation organized on August 9,
    1989 in the  Commonwealth  of  Virginia  for the purpose of  investing  in a
    portfolio of retail  shopping  centers  located  throughout the  midwestern,
    southern and southeastern  United States.  The Company  commenced an initial
    public  offering  of up to  10,000,000  shares  of  its  common  stock  (the
    "Shares"),  priced at $10 per  Share,  on October  23,  1989  pursuant  to a
    Registration  Statement  filed on Form S-11 under the Securities Act of 1933
    (Registration  Statement  No.  33-29755).  The  initial  offering  closed on
    December  24,  1990  after  10,020,100  shares had been  sold.  The  Company
    received  capital  contributions  of  $100,201,000,  of which  $201,000  was
    received from the sale of 20,100 shares to an affiliate,  PaineWebber Group,
    Inc.   ("PaineWebber").   Effective   September  7,  1993,   the   Company's
    shareholders  approved a  resolution  to  complete  a 1 for 2 reverse  stock
    split.   Consequently,   the  resulting  outstanding  shares,  which  number
    5,010,050,  have an effective  original issue price of $20 per share.  As of
    November 1, 1996,  PaineWebber and its affiliates held 111,601 shares of the
    Company's  common  stock.   The  Company  was  originally   organized  as  a
    finite-life,  non-traded  real  estate  investment  trust  that had a stated
    investment  policy of  investing  exclusively  in shopping  centers in which
    Wal-Mart  Stores,  Inc.  ("Wal-Mart")  was or would be an anchor tenant.  In
    September  1993 and  November  1994,  the  Company's  shareholders  approved
    certain  amendments to the Company's Articles of Incorporation and Bylaws as
    part of a plan to reposition  the Company to take advantage of the liquidity
    and  potentially  attractive  source of capital  available in the market for
    publicly  held  REITs  which had  existed at that  time.  However,  due to a
    deterioration in the public equity markets for REIT stocks during the latter
    part of calendar 1994, management delayed its plans to proceed with a public
    offering and subsequent  listing of the Company's common stock on a national
    securities  exchange pending an improvement in the market  conditions.  As a
    result of the delays in the timing of the planned public  offering which had
    been  contemplated  in fiscal  1994,  the Company took  significant  charges
    against  earnings  in fiscal  1994 to  reflect  certain  costs  incurred  in
    connection  with the  Company's  restructuring  plans  which were  either no
    longer expected to have future economic benefit or were no longer deferrable
    because  the  prospects  for  a  second  equity   offering  were  uncertain.
    Acquisition due diligence costs totalling  approximately  $2,015,000 related
    to certain  properties  that had been reviewed for potential  acquisition as
    part of the planned public offering were written off to investment  analysis
    expense  during fiscal 1994.  All expenses  incurred in connection  with the
    planned equity offering, as well as a possible securitized debt offering, in
    the  aggregate  amount of  approximately  $1,561,000,  were  written  off to
    non-deferrable offering expenses in fiscal 1994. In addition, extension fees
    of $760,000  related to a debt  prepayment  agreement  which  lapsed  during
    fiscal 1994 were written off to interest expense during that year.

         Due to changes in interest  rate levels and other market  factors which
    continued  to  adversely  affect  the  market  for new  public  REIT  equity
    offerings  during the first  half of  calendar  1995,  the  Company  did not
    complete  the final phase of its  restructuring  plans.  In view of the then
    existing capital market conditions, the Company's Board of Directors engaged
    the investment  banking firm of Lehman  Brothers Inc.  ("Lehman") in June of
    1995 to act as its financial  adviser and to provide financial and strategic
    advisory  services  to  the  Board  of  Directors  regarding  other  options
    available to the Company. The strategic options considered  included,  among
    other  things,  a  recapitalization  of the Company,  sales of the Company's
    assets  and the  exploration  of  merger  opportunities.  Lehman's  services
    included the solicitation and  identification of potential  transactions for
    the Company,  the  evaluation  of these  transactions,  and the provision of
    advice to the Board  regarding  them. In November 1995,  Lehman  presented a
    summary to the Board of the proposals  which it had received to date, all of
    which were  indications  of interest from third parties to buy the Company's
    real  estate  assets.   The  Board   concluded  that  it  would  be  in  the
    shareholders'  best  interests  to  immediately   initiate  the  process  of
    soliciting  firm offers to purchase  the  Company's  portfolio  of operating
    investment  properties.  The  Directors  instructed  Lehman to work with the
    various  third parties that  expressed an interest in such a transaction  to
    obtain transaction terms most favorable to the Company and its shareholders.

         In March 1996,  the Company  announced  the  execution  of a definitive
    agreement for the sale of its assets to Glimcher Realty Trust ("GRT"). Under
    the  original  terms  of the  agreement,  GRT  was  to  have  purchased  the
    properties of the Company subject to certain  indebtedness and leases for an
    aggregate  purchase price of $203 million plus prepayment  penalties on debt
    to be prepaid and assumption fees on debt to be assumed,  subject to certain
    adjustments.  As of May 14, 1996,  the terms of the purchase  contract  were
    amended  to  reduce  the  aggregate  purchase  price  to $197  million  plus
    prepayment  penalties and assumption fees. The sale transaction  closed into
    escrow on June 27, 1996 with GRT  depositing  the net  proceeds  required to
    close the transaction in the form of bank letters of credit. Pursuant to the
    Company's  Articles of  Incorporation  and Virginia  law, the sale of all or
    substantially  all of the Company's real estate assets required  approval by
    vote of at least  two-thirds of the  outstanding  shares of common stock.  A
    proxy statement  describing the sale  transaction and a proposed  subsequent
    liquidation  plan for the Company was mailed to  shareholders in August 1996
    and  received  the  requisite  vote of the  outstanding  shares at a special
    meeting of the  shareholders  held on October 16, 1996.  Upon  receiving the
    required shareholder approval, the Company finalized the closing of the sale
    transaction,  which  occurred on October 17, 1996.  See Note 8 for a further
    discussion of the net proceeds  realized from the sale of the Company's real
    estate assets, the expected liquidation distribution to the shareholders and
    the timing of the Company's  plan of  liquidation.  The Company's  financial
    statements  as of August 31, 1996 and 1995 reflect the  reclassification  of
    operating  investment  properties  and certain  related  assets as operating
    investment  properties  held for sale and the  writedown  of the  individual
    operating  properties to the lower of adjusted cost or net realizable value.
    The Company  recorded losses of $1,030,000 and $3,850,000 in fiscal 1996 and
    1995, respectively,  in connection with this accounting treatment. Since the
    sale  transaction and associated  liquidation  plan were contingent upon the
    receipt of the shareholder  vote, which did not occur until after August 31,
    1996, the accompanying  financial  statements  continue to reflect the going
    concern basis of accounting. The Company will adopt the liquidation basis of
    accounting effective as of October 16, 1996.

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  August  31,  1996  and 1995 and
    revenues and expenses for each of the three years in the period ended August
    31, 1996.  Actual  results could differ from the  estimates and  assumptions
    used.

         The  Company's  significant   accounting  policies  are  summarized  as
follows:

    A.   INCOME TAXES

         The  Company  has  elected  to  qualify  to be taxed  as a Real  Estate
         Investment  Trust ("REIT") under the Internal  Revenue Code of 1986, as
         amended, for each taxable year of operations. As a REIT, the Company is
         allowed  a tax  deduction  for  the  amount  of  dividends  paid to its
         shareholders, thereby effectively subjecting the distributed net income
         of the Company to taxation at the shareholder  level only,  provided it
         distributes  at least 95% of its real estate  investment  trust taxable
         income and meets certain other  requirements  for qualifying as a REIT.
         The  Company  incurred a loss for both book and tax  purposes in fiscal
         1996 and 1995 and,  therefore,  was not required to pay a cash dividend
         in order to retain its REIT status.

    B.   OPERATING INVESTMENT PROPERTIES

         Operating  investment  properties  are  carried  at the  lower of cost,
         reduced  by  guaranteed   master  lease   payments  (see  Note  4)  and
         accumulated  depreciation,  or net realizable value. The net realizable
         value of a property held for long-term  investment purposes is measured
         by the  recoverability  of the Company's  investment  through  expected
         future  cash  flows on an  undiscounted  basis,  which may  exceed  the
         property's current market value. The net realizable value of a property
         held for sale  approximates  its current  market  value,  less disposal
         costs,  plus  depreciation  through  the  expected  date  of  sale.  As
         discussed  further  in  Notes 1 and 4, all of the  Company's  operating
         investment  properties  were  held for sale as of August  31,  1996 and
         1995.   Accordingly,   the  Company  has   reclassified  the  operating
         properties  and  certain   related   assets  to  operating   investment
         properties held for sale and has recorded each property at the lower of
         adjusted cost or net  realizable  value at August 31, 1996 and 1995. In
         March 1995, the Financial  Accounting  Standards Board issued Statement
         of Financial Accounting  Standards No. 121 (SFAS 121),  "Accounting for
         Impairment  of  Long-Lived  Assets  and  for  Long-Lived  Assets  To be
         Disposed  Of." In  accordance  with SFAS 121, an  impairment  loss with
         respect to an operating  investment property is recognized when the sum
         of the  expected  future  net  cash  flows  (undiscounted  and  without
         interest  charges) is less than the  carrying  amount of the asset.  An
         impairment  loss is measured as the amount by which the carrying amount
         of the assets  exceeds its fair  value,  where fair value is defined as
         the  amount  at which  the  asset  could be bought or sold in a current
         transaction  between  willing  parties,  that is other than a forced or
         liquidation  sale.  Due to the  subsequent  sale of the Company's  real
         estate  assets in October  1996,  FAS No. 121,  which is effective  for
         financial  statements for years beginning after December 15, 1995, will
         not have a material effect on the Company's financial statements.

         Depreciation  expense has been computed using the straight-line  method
         over an  estimated  useful  life of forty years for the  buildings  and
         improvements,  twenty years for land  improvements and twelve years for
         personal  property.  Certain costs and fees  (including the acquisition
         fees paid to an  affiliate,  as  described  in Note 3)  related  to the
         acquisition of the properties have been capitalized and are included in
         the cost of the operating  investment  properties.  Major additions and
         betterments  are  capitalized,  while minor repairs and maintenance are
         charged to expense.

    C.   CASH AND CASH EQUIVALENTS

         For purposes of reporting cash flows, cash and cash equivalents include
         cash on hand,  amounts  held in banks and  money  market  accounts  and
         overnight,  investment-grade  commercial paper investments administered
         by Mitchell Hutchins Institutional
         Investors, Inc. (see Note 3).

    D.   ESCROWED CASH

         Escrowed  cash consists of various  lender  escrows and real estate tax
         and insurance premium escrows.  The lender escrows were amounts held by
         various  mortgage lenders to be released upon the completion of certain
         construction  projects  and other  events  relating  to the  individual
         property  refinancings  or  acquisitions.  The  balance  of the  lender
         escrows amounted to  approximately  $75,000 at both August 31, 1996 and
         1995. The lender escrows were refunded to the Company subsequent to the
         closing  of the sale of the  Company's  real  estate  assets in October
         1996.  The Company  maintained  separate  real estate tax and insurance
         premium  escrows for each  property.  The balance of these  escrows was
         approximately  $1,304,000  and  $992,000  at August 31,  1996 and 1995,
         respectively.  Such funds were  generally used to pay the Company's pro
         rated share of real estate tax expenses  upon the sale of the Company's
         real estate assets in October 1996.

    E.   CAPITAL IMPROVEMENT RESERVE

         The Company had elected to fund a capital  improvement reserve to cover
         the potential  cost of future  capital  improvement  expenditures.  The
         balance of the  capital  improvement  reserve  at August  31,  1995 was
         approximately  $1,201,000.  The Company  funded $.06 per square foot of
         leasable  space owned  (approximately  4.4 million  square feet) to the
         reserve  through August 31, 1995. The capital  improvement  reserve was
         not  restricted  by any third  parties.  Due to the pending sale of the
         Company's investment properties, the balance of the capital improvement
         reserve was  reclassified to cash and cash equivalents as of August 31,
         1996.

    F.   DEFERRED EXPENSES

         Deferred expenses as of August 31, 1996 and 1995 include costs incurred
         in connection with the mortgage notes payable,  leasing commissions and
         computer software. Capitalized loan costs have been amortized using the
         straight-line  method over the term of the related  loans,  which range
         from 3 to 20 years (see Note 5). The  amortization of capitalized  loan
         costs is included in interest expense on the accompanying statements of
         operations.   Leasing   commissions   have  been  amortized  using  the
         straight-line method over the term of the related lease, generally 3 to
         5 years.  Software  costs have been amortized  using the  straight-line
         method over a 60-month period.  As discussed  further in Note 4, due to
         the  Company's  plans  to  pursue  a sale of its  operating  investment
         properties, deferred leasing commissions as of August 31, 1996 and 1995
         were  reclassified  as  part of the  balance  of  operating  investment
         properties  held for sale for purposes of measuring the expected losses
         to be incurred upon disposal.  The  unamortized  balance of capitalized
         loan costs will be written off as a loss on the early extinguishment of
         debt effective as of October 17, 1996 due to the subsequent sale of the
         Company's real estate assets.

    G.   OFFERING COSTS

         Offering costs consist primarily of selling commissions and other costs
         such as printing and mailing costs,  legal fees,  filing fees and other
         marketing costs associated with the initial offering of Shares. Selling
         commissions  incurred in connection  with the Company's  initial public
         offering were equal to  approximately  8% of the gross proceeds raised.
         Commissions totalling $7,984,000 were paid to PaineWebber  Incorporated
         in connection with the sale of Shares from the initial public offering.
         All of the offering costs  associated  with the initial public offering
         are  shown  as  a  reduction  of  additional  paid-in  capital  on  the
         accompanying balance sheets.

    H.   REVENUE RECOGNITION

         Rental revenue is recognized on a straight-line  basis over the life of
         the related lease agreements. The revenue recognition method takes into
         consideration scheduled rent increases. As of August 31, 1996 and 1995,
         the difference between the revenue recorded on the straight-line method
         and the payments made in accordance with the lease agreements  totalled
         $356,000 and $305,000,  respectively.  As discussed  further in Note 4,
         due to the Company's plans to pursue a sale of its operating investment
         properties, deferred rent receivable as of August 31, 1996 and 1995 was
         reclassified as part of the balance of operating investment  properties
         held for sale for  purposes  of  measuring  the  expected  losses to be
         incurred  upon  disposal.  The  Company  uses the  allowance  method to
         account for bad debt expense on its tenant receivables.

    I.   COMMON STOCK AND EARNINGS PER SHARE OF COMMON STOCK

         The earnings and cash  dividends  declared per share of common stock on
         the  accompanying  statements of operations are based upon the weighted
         average  number of shares  outstanding  on a daily basis during each of
         the three years in the period ended August 31, 1996, of 5,010,050.

    J.   FAIR VALUE DISCLOSURES

         FASB  Statement  No. 107,  "Disclosures  about Fair Value of  Financial
         Instruments"   ("SFAS   107"),   requires   disclosure  of  fair  value
         information about financial  instruments,  whether or not recognized in
         the balance sheet,  for which it is practicable to estimate that value.
         In cases where quoted market prices are not available,  fair values are
         based on estimates using present value or other  valuation  techniques.
         SFAS 107 excludes  certain  financial  instruments and all nonfinancial
         instruments  from  its  disclosure   requirements.   Accordingly,   the
         aggregate fair value amounts  presented do not represent the underlying
         value of the Company.

         The  following  methods  and  assumptions  were used by the  Company in
         estimating its fair value disclosures for financial instruments:

         Cash and cash equivalents:  The carrying amount reported on the balance
         sheet for cash and cash equivalents  approximates its fair value due to
         the short-term maturities of such instruments.

         Escrowed  cash: The carrying  amount  reported on the balance sheet for
         escrowed  cash  approximates  its  fair  value  due to  the  short-term
         maturities of such instruments.

         Mortgage  notes payable:  Due to the  subsequent  sale of the Company's
         real estate  assets in October 1996 and the related  settlement  of the
         Company's outstanding mortgage loan liabilities,  the fair value of the
         Company's  mortgage  indebtedness was deemed to equal its face value as
         of August 31, 1996.

         The  carrying  amounts  and  fair  values  of the  Company's  financial
         instruments at August 31, 1996 are as follows (amounts in thousands):

                                              Carrying Amount   Fair Value
                                              ---------------   ----------

              Cash and cash equivalents         $    9,208      $    9,208
              Escrowed cash                     $    1,379      $    1,379
              Mortgage notes payable, net       $  155,483      $  159,144

3.  The Advisory Agreement and Related Party Transactions

         The Company has entered  into an advisory  agreement  with  PaineWebber
    Realty  Advisors,  L.P.  (the  "Advisor")  to perform  various  services  in
    connection  with the sale of the Shares,  the  management of the Company and
    the  acquisition,  management and disposition of the Company's  investments.
    The  Advisor is a limited  partnership  composed of  PaineWebber  Properties
    Incorporated ("PWPI") as the general partner and Properties Associates, L.P.
    ("PA") as the limited  partner.  Both partners of the Advisor are affiliates
    of PaineWebber  Incorporated ("PWI"),  which is a wholly owned subsidiary of
    PaineWebber Group, Inc. ("PaineWebber"). The advisory agreement is renewable
    on an annual basis at the  discretion of the  Company's  Board of Directors.
    The type of  compensation  due to the Advisor and its  affiliates  under the
    terms of the Advisory Agreement is as follows:

(i)  Under  the  Advisory   Agreement,   the  Advisor  has  specific  management
     responsibilities to perform day-to-day operations of the Company and to act
     as the investment advisor and consultant for the Company in connection with
     general policy and investment decisions.  The Advisor earns an annual Asset
     Management  Fee  and  an  Advisory   Incentive  Fee  of  0.25%  and  0.25%,
     respectively,  of the Capital  Contributions  of the Company.  The Advisory
     Incentive Fee is subordinated to the shareholders' receipt of distributions
     of net cash  sufficient  to provide a return equal to 8% per annum on their
     Invested Capital,  as defined.  During the quarter ended February 28, 1994,
     the payment of regular quarterly distributions was suspended.  Accordingly,
     the Advisor has not earned any Advisory  Incentive  Fees since  December 1,
     1993. Furthermore, during the quarter ended May 31, 1994 the Advisor agreed
     to waive its  rights to the  collection  of  previously  deferred  Advisory
     Incentive Fees in the aggregate amount of $76,000. This amount is reflected
     as a reduction  of  management  fee  expense for the year ended  August 31,
     1994.  Effective  March 1, 1995, the Advisor agreed to waive its management
     fees indefinitely in order to maximize the Company's earnings and cash flow
     while the strategic  plans regarding the Company's  future  operations were
     evaluated and implemented.  Accordingly no management fees were paid during
     the year ended August 31, 1996. The Advisor  received total management fees
     of $125,000 and $237,000 for the period  September 1, 1994 through February
     28, 1995 and the year ended August 31, 1994, respectively.

(ii) For  its  services  in  finding  and  recommending  investments,   and  for
     analyzing,  structuring  and  negotiating the purchase of properties by the
     Company,  PWPI received  non-recurring  Acquisition Fees equal to 3% of the
     Capital  Contributions.  PWPI received  acquisition fees in connection with
     the  Company's  real  estate  investments  in  the  amount  of  $3,006,000.

(iii)Fees equal to 1/2 of 1% of any financing and 1% of any refinancing obtained
     by the Company for which the Advisor rendered substantial services, and for
     which no fees were paid to a third party, were to be paid to the Advisor as
     compensation  for such  services.  No such fees will be due to the  Advisor
     through the Company's expected liquidation date.

(iv) Upon  disposition  of the  Company's  investments,  the Advisor  could have
     earned sales  commissions and disposition  fees. These fees and commissions
     are  subordinated  to  the  repayment  to  shareholders  of  their  Capital
     Contributions plus certain minimum returns on their Invested Capital. In no
     event  were  the  disposition  fees to  exceed  an  amount  equal to 15% of
     Disposition  Proceeds  remaining  after the  shareholders  have received an
     amount  equal to their  Capital  Contributions  plus a return  on  Invested
     Capital of 6% per annum, cumulative and noncompounded.  No disposition fees
     or sales  commissions  will be due to the  Advisor  through  the  Company's
     expected liquidation date.

       Financial and investor servicing expenses represent  reimbursements to an
    affiliate of the Advisor for providing  certain  financial,  accounting  and
    investor communication services to the Company. Effective March 1, 1995, the
    Advisor agreed that it will not be reimbursed  for providing  these services
    to the Company.  As with the management  fees described  above,  the Advisor
    agreed to waive these  servicing fees  indefinitely in order to maximize the
    Company's  earnings and cash flow while the  strategic  plans  regarding the
    Company's future operations were evaluated and implemented.  Accordingly, no
    servicing  fees were paid  during the year ended  August 31,  1996.  For the
    period September 1, 1994 through February 28, 1995 and the year ended August
    31, 1994,  the Company paid  $111,000 and  $260,000,  respectively,  to this
    affiliate for providing such services to the Company.

    Mitchell  Hutchins  Institutional  Investors,   Inc.  ("Mitchell  Hutchins")
    provides cash management services with respect to the Company's cash assets.
    Mitchell  Hutchins is a subsidiary of Mitchell  Hutchins  Asset  Management,
    Inc., an  independently  operated  subsidiary of PaineWebber.  For the years
    ended  August 31,  1996,  1995 and 1994,  Mitchell  Hutchins  earned fees of
    $23,000,  $8,000 and $8,000,  respectively,  for managing the Company's cash
    assets.  Accounts  payable -  affiliates  at both  August 31,  1996 and 1995
    consists of $4,000 payable to Mitchell Hutchins.

         The Company had engaged the services of a  consulting  firm for certain
    professional   services   related  to  its  mortgage  loan  refinancing  and
    acquisition  due  diligence   activities  prior  to  August  31,  1995.  The
    consulting  firm was a partnership  in which Mr. Robert J. Pansegrau was one
    of two partners.  Mr.  Pansegrau is formerly a Senior Vice  President of the
    Company who resigned  effective March 31, 1993. The consulting firm received
    fee compensation  from the Company  totalling  $186,000 and $282,000 for the
    years ended August 31, 1995 and 1994, respectively. The consulting firm also
    received  reimbursement for  out-of-pocket  expenses of $79,000 and $167,000
    for the years ended August 31, 1995 and 1994, respectively.

         In June 1995, the Company  secured a new mortgage loan in the amount of
    $4,000,000 to repay a portion of the first mortgage loan held by PWPI, which
    was secured by the Applewood  Village operating  property,  in the amount of
    $5,175,000  (see  Note 5).  PWPI  agreed to make an  unsecured  loan for the
    difference,  in the  amount of  $1,175,000,  which  had a  15-year  term and
    carried an interest rate tied to PWPI's cost of funds,  not to exceed 8% per
    annum.  The  note  was to be fully  amortizing  over  its term and  required
    monthly  payments of principal and interest  through  maturity in June 2010.
    The  balance of this note  payable to  affiliate  as of August 31,  1995 was
    $1,168,000.  On June 1,  1996,  PWPI  forgave  the  entire  balance  on this
    unsecured loan of $1,136,000  plus accrued  interest of $3,000.  The Company
    recorded this transaction as an extraordinary  gain from forgiveness of debt
    in the fiscal 1996 statement of operations. Interest expense incurred by the
    Company under the terms of this note agreement  totalled $53,000 and $12,000
    in fiscal 1996 and 1995, respectively.

4.  Operating Investment Properties

       Through  August 31, 1996,  the Company had acquired 22 Wal-Mart  anchored
    shopping  centers.  The  ownership  of the  Company's  operating  properties
    described  below was legally held by four limited  partnerships in which the
    Company is the sole  general  partner.  These  partnerships  were created in
    order to, among other things,  facilitate  the  communication  of income tax
    information  to the  Company's  shareholders.  The  limited  partner  of the
    partnerships is PaineWebber Properties  Incorporated ("PWPI"),  which is the
    general  partner of the Advisor (see Note 3). The economic  interest of PWPI
    in the  partnerships  was  generally  limited  to a share  of the  Company's
    Disposition  Proceeds,  as  defined,  to which the  Advisor  was  originally
    entitled through the Disposition  Fee, as defined in the Company's  original
    offering  prospectus.  Per the terms of the limited partnership  agreements,
    all distributions of operating cash flow and sale proceeds generated through
    the  disposition of the operating  properties in October 1996 were allocated
    to the Company. Furthermore, as a limited partner in the partnerships,  PWPI
    had no control over the operations of the  partnerships  or of the operating
    properties,  other than in its  capacity  as a partner of the  Advisor.  The
    legal  ownership of the  Company's  operating  investment  properties by the
    partnerships has had virtually no impact on the Company's financial position
    or results of operations.  Accordingly,  the  partnerships  are consolidated
    with the Company for financial  reporting  purposes.  The name, location and
    size of the  acquired  properties,  along  with  information  related to the
    respective  purchase  prices and adjusted  cost basis as of August 31, 1996,
    are as follows (in thousands):
<TABLE>
<CAPTION>
                                                            Costs
Name                                         Acquisition    Capitalized         Master               Adjusted
Location             Date        Purchase    Fees and       Subsequent to       Lease                Cost at
Size                 Acquired    Price       Expenses (1)   Acquisition         Payments (2)         8/31/96
----                 --------    -----       ------------   -----------         ------------         -------
<S>                  <C>         <C>          <C>           <C>                 <C>                 <C>
Village Plaza       8/16/89     $23,975      $394           $ 826               $618                $ 24,577
Augusta, GA
490,970
square feet

Logan Place         1/18/90       4,917       189             16                 232                   4,890
Russellville, KY
114,748
square feet

Piedmont Plaza      1/19/90      13,500       263             29                 107                  13,685
Greenwood, SC
249,052
square feet

Artesian Square     1/30/90       6,990       203            989                 392                   7,790
Martinsville, IN
177,428
square feet

Sycamore Square       4/26/90     4,970       172            23                  130                5,035
Ashland City, TN
93,304
square feet

Audubon Village       5/22/90     6,350       215            30                    -                6,595
Henderson, KY
124,592
square feet

Crossroads Centre     6/15/90     9,914       246            42                    -               10,202
Knoxville, TN
242,430
square feet

East Pointe Plaza     8/07/90    13,936       269           737                   306              14,636
Columbia, SC
279,261
square feet

Walterboro Plaza -   12/19/90     6,645       284            18                   136               6,811
Phases I and II
Walterboro, SC
132,130
square feet

Cypress Bay Plaza    12/19/90    12,235       215            88                   522              12,016
Morehead City, NC
258,245
square feet

Cross Creek Plaza    12/19/90    13,565       302            20                   525              13,362
Beaufort, SC
237,801
square feet

Lexington Parkway
    Plaza            3/05/91     10,290       251           115                   208              10,448
Lexington, NC
210,190
square feet




<PAGE>
                                                            Costs
Name                                         Acquisition    Capitalized         Master               Adjusted
Location             Date        Purchase    Fees and       Subsequent to       Lease                Cost at
Size                 Acquired    Price       Expenses (1)   Acquisition         Payments (2)         8/31/96
----                 --------    -----       ------------   -----------         ------------         -------
<S>                  <C>         <C>          <C>           <C>                 <C>                 <C>

Roane County
    Plaza           3/05/91      7,000         197           -                    43                7,154
Rockwood, TN
160,198
square feet

Franklin Square     6/21/91      9,018         232          45                    26                9,269
Spartanburg, SC
237,062
square feet

Barren River Plaza  8/09/91     11,788         412          49                    57               12,192
Glasgow, KY
234,795
square feet

Cumberland
    Crossing        8/09/91     7,458          370          39                    116               7,751
LaFollette, TN
144,734
square feet

Applewood Village   10/25/91    6,965          389           -                      -               7,354
Fremont, OH
140,039
square feet

Aviation Plaza     8/31/92     8,349          337            -                       -              8,686
Oshkosh, WI
174,715
square feet

Crossing
  Meadows Plaza    8/31/92    12,100          356            6                       -              12,462
Onalaska, WI
233,984
square feet

Southside Plaza    10/21/92   9,200          356            7                        -              9,563
Sanford, NC
172,293
square feet




<PAGE>
                                                            Costs
Name                                         Acquisition    Capitalized         Master               Adjusted
Location             Date        Purchase    Fees and       Subsequent to       Lease                Cost at
Size                 Acquired    Price       Expenses (1)   Acquisition         Payments (2)         8/31/96
----                 --------    -----       ------------   -----------         ------------         -------
<S>                  <C>         <C>          <C>           <C>                 <C>                 <C>

College Plaza       4/29/93     9,900          461           -                     2                 10,359
Bluefield, VA
178,431
square feet

Marion Towne       6/23/93     7,907          624            27                    -                  8,558
  Center
Marion, SC
156,558
square feet


                             $216,972      $6,737       $ 3,106                 $ 3,420            $ 223,395
                             ========      ======        =======                =======            =========

</TABLE>
    (1)  Acquisition  fees and expenses include the 3% fee payable to PWPI (see
         Note 3) and other  capitalized  costs incurred in connection  with the
         acquisition of the properties (e.g. legal fees,  appraisal fees, other
         closing  costs,  etc.).   Certain  expenses  incurred  to  investigate
         potential  investments  were  recorded  as other  assets  pending  the
         closing of a transaction and were  reclassified  after  acquisition to
         the cost basis of the related  property.  Expenses  incurred to review
         potential  investments  which were  subsequently  not  acquired by the
         Company were charged to investment  analysis  expense once the Company
         stopped pursuing the acquisition.

    (2)  The Company  originally  entered into master lease agreements with the
         sellers and certain of their affiliates (the  "Guarantors") of each of
         the  operating  properties  acquired.   The  master  lease  agreements
         generally  provided  that,  for a  period  of  up  to 36 to 60  months
         (depending on the credit  status of the tenant in occupancy)  from the
         date of the  acquisition  of the operating  property,  the  Guarantors
         guaranteed  that the aggregate cash flow from all  non-anchor  tenants
         would  not be less  than the  aggregate  pro-forma  net cash flow from
         non-anchor  tenants  projected  at the  time of the  purchase.  In the
         event  that  the  actual  aggregate  net cash  flow was less  than the
         guaranteed   amount,  the  Guarantors  were  obligated  to  make  cash
         payments  to the  Company  equal  to any  such  deficit.  All  amounts
         earned  under the master  lease  agreements  were  treated as purchase
         price  adjustments  and recorded as reductions to the carrying  values
         of the related operating  property for financial  reporting  purposes.
         Certain  of  the  Guarantors   secured  their   guarantees  with  cash
         collateral  held by the  Company or with  letters  of  credit.  During
         fiscal 1995, the Company  entered into settlement  agreements  related
         to the outstanding  master lease  obligations on the Southside  Plaza,
         College Plaza,  Aviation  Plaza and Crossing  Meadows  properties.  As
         part of these settlement  agreements,  the Company agreed to the early
         termination of the respective  master leases and to the release of the
         related  cash  collateral  or  letters  of credit  in  return  for the
         agreement of the related  management  agent to certain  changes to the
         property  management  contracts.  As of  August  31,  1996,  Applewood
         Village was the only property  remaining  under a master lease and was
         not  generating  any master  lease  payments  based on the  property's
         leasing  level.  The  Applewood  Village  master lease was  terminated
         subsequent  to year-end in  connection  with the October  1996 sale of
         the Company's real estate assets.

         As  discussed  in Note 1, as a result of the  decision  by the Board of
    Directors to pursue a sale of the  Company's  portfolio of  properties,  the
    accompanying  statements  of  operations  for fiscal  1996 and 1995  include
    losses of $1,030,000 and $3,850,000,  respectively, to reflect the writedown
    of the individual operating investment properties and certain related assets
    to the lower of adjusted cost or net realizable  value as of August 31, 1996
    and 1995.  Such losses apply only to the  properties  for which losses were
    expected  based on the estimated  fair values.  The gains on properties  for
    which the estimated fair value less costs to sell exceeded the adjusted cost
    basis will be  recognized  in the period in which the sale  transaction  was
    completed.  The Company also incurred  portfolio sale expenses of $1,834,000
    in fiscal 1996. Portfolio sale related expenses consisted primarily of legal
    fees  associated   with   negotiating  the  sale  agreement  and  preparing,
    distributing and soliciting the shareholder  proxy. Such costs were expensed
    as incurred because of the impairment issues discussed further above and the
    uncertainty  regarding  the ability to complete the sale  transaction  which
    existed until the  subsequent  shareholder  vote.  The Company  continued to
    recognize  depreciation  on its  assets  held for sale  through  the date of
    disposal.  Operating investment properties held for sale on the accompanying
    balance  sheets as of August 31, 1996 and 1995 is comprised of the following
    amounts (in thousands):
<PAGE>
                                                       1996        1995
                                                       ----        ----

            Land                                   $  37,845   $  37,845
            Buildings and improvements               175,874     175,453
            Furniture and equipment                    9,676       9,676
                                                   ---------   ---------
                                                     223,395     222,974
            Less:  accumulated depreciation          (33,666)    (27,409)
                                                   ---------   ---------
                                                     189,729     195,565
            Deferred rent receivable                     356         305
            Deferred leasing commissions, net            336         291
                                                   ---------   ---------
                                                     190,421     196,161
            Less:  Allowance for possibl
                   impairment loss                    (4,880)    (3,850)
                                                   ---------   ---------
                                                   $ 185,541   $ 192,311
                                                   =========    ========

5.  Mortgage Notes Payable

       Mortgage  notes payable,  reduced by  unamortized  loan buydown fees (see
    below),  at  August  31,  1996  and  1995  consisted  of the  following  (in
    thousands):
                                                           1996         1995
                                                           ----         ----

   Mortgage   notes   payable   to  a                $ 49,005      $ 49,005
   financial   institution   which                     (2,034)       (2,504)
   were  secured  by Village  Plaza,                 --------      --------
   Piedmont Plaza,  Artesian  Square,                  46,971        46,501 
   Logan Place,  Sycamore  Square and
   Crossroads Centre.  These mortgage
   notes required monthly payments of
   interest  only at 8% for the first
   seven years and then principal and
   interest  at  8%  until  maturity,
   which ranged from November 1, 1999
   to  July  1,  2000.   These  notes
   contained  certain  cross  default
   and cross  collateral  provisions.
   See    discussion   of   effective
   interest  rates  and loan  buydown
   fees below.
<PAGE>


    (continued)                                              1996        1995
                                                             ----        ----

   Mortgage   notes   payable   to  a                       24,426      24,678 
   financial  institution  which were                         (875)     (1,022)
   secured  by  East  Pointe   Plaza,                       ------    -------- 
   Cumberland   Crossing  and  Barren                       23,551      23,656 
   River Plaza.  The mortgage note on                                          
   East Pointe Plaza, in the original                      
   principal   amount   of   $11,150,                       
   called for monthly  interest  only
   payments  at 8% per annum  through
   June  1996.  The  balance of these
   mortgage  notes  required  monthly
   payments of principal and interest
   at 8% through June 1996. Effective
   June 10,  1996,  all  three  notes
   required   monthly   payments   of
   principal  and  interest  at 8.75%
   per annum through maturity on June
   10,  2001.  These notes  contained
   certain  cross  default  and cross
   collateral     provisions.     See
   discussion  of effective  interest
   rates and loan buydown fees below.


   Mortgage  note  payable  to a bank                       13,439      13,498 
   secured  by  Franklin  Square  and                            -         (83)
   College  Plaza.  The Franklin note                       ------     -------
   required   monthly  interest  only                       13,439      13,415
   payments  at 8%  per  annum  until                      
   maturity,   which  was  originally                       
   scheduled   for  June  21,   1996.
   Interest on the College Plaza note
   accrued  at prime  plus  0.75% per
   annum.  Monthly  payments equal to
   the  greater  of  $58  or  accrued
   interest   for  such   month  were
   payable until maturity,  which was
   originally scheduled for April 23,
   1996. The Company  obtained a loan
   modification  on both these loans,
   effective  as of their  respective
   maturity dates,  extending the due
   dates  to  March  31,  1997.  Both
   loans  required  monthly  interest
   payments   based  on  a   variable
   interest   rate  equal  to  either
   prime  plus  0.75% or  LIBOR  plus
   2.75%, as selected by the Company.
   The   College   Plaza   loan  also
   required     monthly     principal
   payments of $7.5.


   Mortgage   note   payable   to   a                       22,840      23,680
   financial  institution  secured by
   Cross  Creek  Plaza,  Cypress  Bay
   Plaza and Walterboro Plaza (Phases
   I and II). The loan bore  interest
   at a variable rate equal to 30-day
   LIBOR plus 3.50% per annum for the
   first twelve months,  30-day LIBOR
   plus  3.75%  for the  next  twelve
   months  (9.25%  as of  August  31,
   1996), and 30-day LIBOR plus 4.25%
   for  the  final   twelve   months.
   Monthly  payments of interest  and
   principal   (based  on  a  15-year
   amortization  schedule)  were  due
   until  maturity  on  December  10,
   1997.

<PAGE>


    (continued):
                                                             1996        1995
                                                             ----        ----

   Mortgage   notes   payable   to  a                       17,110      17,487
   financial  institution  secured by
   Audubon Village, Lexington Parkway
   Plaza and Roane County Plaza.  The
   notes secured by the Lexington and
   Roane  properties bore interest at
   a fixed  rate of 9.125%  per annum
   and required  monthly  payments of
   principal and interest aggregating
   $119 through  maturity on March 1,
   2015.  The note secured by Audubon
   Village bore interest at 8.75% per
   annum   and    required    monthly
   payments of principal and interest
   of $43 through maturity on June 1,
   2000.


   Mortgage   notes   payable   to  a                       16,139      16,321  
   financial  institution  which were                         (621)       (815)
   secured  by  Aviation   Plaza  and                      -------      ------
   Crossing Meadows.  Monthly payment                       15,518      15,506  
   terms  for  the  loan  secured  by                                      
   Aviation  Plaza,  in the principal                  
   amount  of   $6,800,   called  for                  
   interest  only  payments at 8% per
   annum  through  August 1, 1995 and
   principal and interest payments at
   8% thereafter until maturity.  The
   loan  secured by Crossing  Meadows
   required     monthly     payments,
   including   interest   at  8%  per
   annum, of $71 until maturity. Both
   notes were  scheduled to mature on
   June 1, 1999.  See  discussion  of
   effective  interest rates and loan
   buydown fees below.

   Mortgage   note   payable   to   a                        6,583       6,686
   financial  institution  which  was                         (131)       (219
   secured by  Southside  Plaza.  The                       ------     ------
   note  required  monthly  payments,                        6,452       6,467
   including  interest  at 6.83%  per                                        
   annum,  of $46 until  maturity  on                       
   November 5, 1997.  See  discussion                       
   of  effective  interest  rates and
   loan buydown fees below.

   Mortgage   note   payable   to   a                        5,757       5,817
   financial  institution  which  was
   secured  by Marion  Towne  Center.
   The note, which was issued on June
   23,   1993,   called  for  monthly
   payments, including interest at 8%
   per annum,  of $44 until  maturity
   on July 1,  2002.  The  lender had
   the option, upon 120 days' written
   notice,  to call  the  loan due at
   the end of each of the third  year
   and the sixth year of the loan. If
   the  loan was not  called  at such
   time,  the  interest  rate  on the
   loan was  subject  to  adjustment.
   During  fiscal  1996,  the  lender
   adjusted  the  interest   rate  to
   7.375%,   thereby   reducing   the
   monthly   principal  and  interest
   payments to $41 effective with the
   August 1, 1996 payment.

<PAGE>


    (continued):
                                                             1996        1995
                                                             ----        ----

   Mortgage   note   payable   to   a                        3,845       3,979
   financial  institution  secured by
   Applewood  Village.  The note bore
   interest   at  9%  per  annum  and
   required  monthly   principal  and
   interest  payments  of  $41  until
   maturity on June 10, 2010.                             -------     --------

    Total mortgage notes payable, net                     $155,483    $156,508
                                                          ========    ========

Summary of outstanding mortgage notes payable

    Total outstanding mortgage principal
      balances as of  August 31, 1996 and
      August 31, 1995                                     $159,144    $161,151
    Aggregate unamortized loan buydown fees                 (3,661)     (4,643)
                                                          --------    --------
    Total mortgage notes payable, net                     $155,483    $156,508
                                                          ========    ========

         At the time of the  closing  of certain of the  mortgage  notes  listed
    above,  the  Company  paid fees to the  lenders in return  for the  lenders'
    agreement  to reduce the stated  interest  rate on the loans to 8% per annum
    (6.83% in the case of Southside Plaza) over the terms of the loans. The fees
    have been recorded as reductions of the  outstanding  principal  amounts and
    have been amortized,  using the effective interest method, over the terms of
    the respective  loans.  The effective  interest  rates on these  outstanding
    loans  ranged  from  7.38% to 9.80%  per  annum as of August  31,  1996.  As
    discussed further in Note 1, the Company completed the sale of the operating
    investment properties which serve as collateral for the above mortgage loans
    subsequent  to year end, on October 17, 1996.  The  obligation  to repay the
    lenders with respect to such loans at the time of the sale  transaction  was
    equal to the outstanding  mortgage  principal  balances prior to unamortized
    loan buydown fees. In conjunction with the sale  transaction,  the amount of
    the remaining  unamortized buydown fees will be written off as a loss on the
    early extinguishment of debt in the period in which the sale occurred.

         During  fiscal  1996  and  1995,  the  Company  was  not  in  technical
    compliance  with provisions in certain of the above mortgage loan agreements
    which required formal lender  approval of all property  expansions and lease
    modifications.  Under the terms of the loan  agreements,  failure  to comply
    with such terms could have  constituted  events of default.  Management  had
    been  working  with the  lenders  to obtain  the  necessary  approvals  and,
    subsequent to year end, all instances of non-compliance  were cured prior to
    the final closing of the sale transaction referred to above.

         As of August 31, 1996, aggregate scheduled maturities of mortgage notes
    payable  for  the  next  five  years  and  thereafter  were as  follows  (in
    thousands):

         Year ended August 31:
         ---------------------
            1997                $   15,590
            1998                    29,895
            1999                    17,286
            2000                    52,945
            2001                    24,037
            Thereafter              19,391
                                ----------
                                $  159,144
                                ==========


<PAGE>


6.  Rental income

         The  Company has earned  rental  income from  leasing  shopping  center
    space.  All  of the  Company's  leasing  agreements  were  operating  leases
    expiring  in  one  to  twenty  years.  Base  rental  income  of  $22,271,000
    $22,183,000  and $21,958,000 was earned for the years ended August 31, 1996,
    1995 and 1994,  respectively.  The following is a schedule of minimum future
    lease payments from  noncancellable  operating  leases as of August 31, 1996
    (in thousands):

    Year ended August 31:
    ---------------------
            1997                $   21,463
            1998                    19,805
            1999                    18,461
            2000                    16,535
            2001                    15,068
            Thereafter             117,293
                                ----------
                                $  208,625
                                ==========

       Total minimum future lease payments do not include percentage rentals due
    under  certain  leases,   which  are  based  upon  lessees'  sales  volumes.
    Percentage  rentals of  approximately  $247,000,  $160,000  and $92,000 were
    earned for the years ended  August 31,  1996,  1995 and 1994,  respectively.
    Virtually all tenant leases also required lessees to pay all or a portion of
    real estate taxes and certain property operating costs.

       Rental income of approximately $7,990,000,  $7,913,000 and $7,913,000 was
    received  from leases with Wal-Mart and its  affiliates  for the years ended
    August 31, 1996, 1995 and 1994  respectively.  Such amounts comprised 36% of
    total  base  rental  income  for each of those  years.  No other  tenant has
    accounted for more than 10% of the Company's rental income during any period
    since inception.

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
     interests  and  common  stock,  including  the  securities  offered  by the
     Company.  The lawsuits were brought against  PaineWebber  Incorporated  and
     Paine Webber  Group,  Inc.  (together,  "PaineWebber"),  among  others,  by
     allegedly  dissatisfied  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   PaineWebber   Properties
     Incorporated,  which is the General Partner of the Advisor.  The Company is
     not a defendant in the New York  Limited  Partnership  Actions.  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,  among other things,  that, in connection  with the sale of common
     stock of the  Company,  the  defendants  (1)  failed  to  provide  adequate
     disclosure  of  the  risks   involved;   (2)  made  false  and   misleading
     representations  about the  safety  of the  investments  and the  Company's
     anticipated performance; and (3) marketed the Company to investors for whom
     such   investments  were  not  suitable.   The  plaintiffs,   who  are  not
     shareholders  of the  Company  but are suing on behalf of all  persons  who
     invested in the Company, also alleged that following the sale of the common
     stock of the Company the defendants  misrepresented  financial  information
     about the Company's value and performance.  The amended  complaint  alleged
     that  the  defendants   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  Company,  as well as  disgorgement  of all fees  and  other
     income derived by PaineWebber from the Company. In addition, the plaintiffs
     also sought treble damages under RICO.

         In January 1996,  PaineWebber signed a memorandum of understanding with
     the  plaintiffs  in this class action  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 a plan of allocation.
     On  July  17,  1996,  PaineWebber  and the  class  plaintiffs  submitted  a
     definitive  settlement  agreement which has been preliminarily  approved by
     the court and  provides  for the  complete  resolution  of the class action
     litigation,  including  releases  in favor of the  Company  and the General
     Partner of the Advisor,  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  is scheduled to
     continue in November 1996.

         Under certain limited circumstances, pursuant to the Advisory Agreement
     and other contractual obligations, PaineWebber affiliates could be entitled
     to  indemnification  for expenses and  liabilities in connection  with this
     litigation.  However,  by written agreement dated April 1, 1996 PaineWebber
     and its  affiliates  have  waived  all  such  rights  with  regard  to this
     litigation  and  any  other  similar  litigation  that  has  been or may be
     threatened,  asserted  or  filed  by or on  behalf  of  purchasers  of  the
     Company's common stock.  Thus, the Advisor believes that these matters will
     have no material effect on the Company's financial  statements,  taken as a
     whole.

       The  Company  is a party to  certain  other  legal  actions in the normal
     course of  business.  Management  believes  these  actions will be resolved
     without  material  adverse  effect on the Company's  financial  statements,
     taken as a whole.

8.  Subsequent Events

         In March 1996,  the Company  announced  the  execution  of a definitive
    agreement  for the sale of its real estate  assets to Glimcher  Realty Trust
    ("GRT").  Under  the  original  terms  of the  agreement,  GRT  was to  have
    purchased the properties of the Company subject to certain  indebtedness and
    leases for an  aggregate  purchase  price of $203  million  plus  prepayment
    penalties on debt to be prepaid and  assumption  fees on debt to be assumed,
    subject  to  certain  adjustments.  As of May 14,  1996,  the  terms  of the
    purchase  contract  were amended to reduce the aggregate  purchase  price to
    $197  million  plus  prepayment  penalties  and  assumption  fees.  The sale
    transaction  closed into escrow on June 27, 1996  pending the receipt of the
    approval  of  the  transaction  by the  Company's  shareholders,  which  was
    received on October 16,  1996.  On October 17,  1996,  the sale  transaction
    closed out of escrow and the Company  received net proceeds of  $36,371,000.
    The net proceeds  reflected the aggregate sales price of $197,000,000,  less
    selling costs paid at closing of $489,000,  capital  improvement  and repair
    allowances of $572,000,  mortgage debt outstanding of $158,857,000 and other
    closing  prorations and purchase price  adjustments of $711,000.  During the
    escrow period in which the Company sought to obtain the required shareholder
    approval,  the Company's operating properties were managed by GRT. Under the
    terms of the  management  agreement,  GRT  received  a base fee of 3% of the
    gross  operating  revenues of the  properties.  In  addition,  GRT earned an
    incentive  management  fee  equal  to the net  cash  flow of the  properties
    attributable to the period commencing on May 14, 1996 and ending on the date
    of the final  closing of the sale  transaction.  A portion of the  incentive
    management fee was paid to GRT out of the net closing proceeds. In addition,
    the  Company  transferred  to GRT at the time of the  closing  certain  cash
    balances, together with outstanding receivables and payables, related to the
    net cash flow  generated  subsequent  to May 14, 1996.  The total  incentive
    management  fee  through  the  date  of  the  sale  transaction   aggregated
    approximately $3.1 million.  The Company received interest earnings from GRT
    beginning  June 20, 1996 through the escrow period on a net equity amount of
    approximately  $37,401,000 at a rate equivalent to the published market rate
    on 6-month U.S.  Treasury  Bills as of June 20, 1996 (5.39% per annum).  The
    interest credit totalled  $657,000  through the date of the sale transaction
    and is included in the net proceeds of  $36,371,000  referred to above.  The
    incentive  management  fee and the  interest  credit  described  above  were
    treated as purchase price  adjustments in connection  with the sale and will
    be recorded in the  Company's  financial  statements  as of the sale closing
    date. In addition to the net proceeds  received upon the closing of the sale
    transaction,  the Company retained an interest in tenant  receivables with a
    carrying value of  approximately  $878,000 as of October 17, 1996 (net of an
    allowance for possible uncollectible amounts of $162,000).  Such receivables
    are  primarily  comprised of expense  reimbursements  for real estate taxes,
    insurance and common area  maintenance  associated with the Company's period
    of  ownership  of the  properties.  The  majority of these  receivables  are
    expected to be collected over the next several months with the major portion
    expected to be received in early calendar year 1997 after the preparation of
    the annual  tenant  reconciliations  of common  area  charges is  completed.
    However,  subsequent to year-end the Advisor  agreed to buy the  outstanding
    receivables from the Company at their net carrying value so that the Company
    can  complete  its  liquidation  during  calendar  1996  without the need to
    establish a liquidating trust for any remaining non-cash assets.

        The  accompanying  balance sheet as of August 31, 1996 reflects cash and
     cash equivalents totalling  $9,208,000.  A portion of such cash balance, in
     the  amount  of  $1,471,000,  relates  to net  cash  flow of the  operating
     properties  subsequent  to May 14, 1996 which was due to GRT as part of the
     incentive management fee calculation described above and was transferred to
     GRT on October 17, 1996 in conjunction with the sale closing. The Company's
     balance sheet at August 31, 1996 also included escrowed cash of $1,379,000.
     The majority of this amount,  which primarily  represented  cash designated
     for real estate taxes and insurance premiums, was either transferred to GRT
     at the  time  of the  sale  or  applied  by  certain  lenders  against  the
     respective  mortgage  debt  liabilities.  The remaining net cash balance of
     approximately  $7,737,000,  along  with  the net  proceeds  of  $36,371,000
     received  at  closing,  $86,000 of  escrowed  cash  refunded to the Company
     subsequent to the closing and a recovery of prepaid insurance in the amount
     of $167,000 received  subsequent to the closing,  were available to be used
     to pay for the expenses  associated with winding up the Company's  business
     and for liquidation  distributions  to the  shareholders.  In addition,  as
     discussed further above, the Company retains outstanding tenant receivables
     in the net amount of  $878,000  which the Advisor has agreed to purchase at
     carrying  value.  The Company  also  expects to receive  certain  state tax
     refunds of  approximately  $109,000  and interest  income of  approximately
     $441,000.  From the available cash and receivables,  the Company expects to
     pay expenses totalling $1,354,000 subsequent to August 31, 1996. Such costs
     are  comprised  of  operating   expenses  through  the  date  of  the  sale
     transaction  of  approximately  $98,000,   expenses  related  to  the  sale
     transaction of approximately $930,000 and estimated liquidation expenses of
     $326,000.  After these estimated expenses,  the Company expects to have net
     assets totalling  approximately $44.4 million available for distribution to
     the  shareholders.  From these net assets,  the  Company  expects to make a
     final liquidating  distribution to the shareholders of approximately  $8.80
     per share in December 1996 which will be followed by the formal liquidation
     of the Company by December 31, 1996.



<PAGE>

<TABLE>
Schedule III - Real Estate and Accumulated Depreciation

                         RETAIL PROPERTY INVESTORS, INC.

              SCHEDULE OF REAL ESTATE AND ACCUMULATED DEPRECIATION
                                 August 31, 1996
                                 (In thousands)
<CAPTION>


                          Initial Cost to                  Gross Amount at Which Carried at                           Life on Which
                             Partnership    Costs           Close of period                                            Depreciation
                              Buildings     Capitalized          Buildings,   Total, less                                 in Latest
                              Improvements  (Removed)            Improvements Allowance for                               Income
                                & Personal  Subsequent to     & Personal   Impair-   Accumulated  Date of      Date       Statement
Description  Encumbrances Land  Property    Acquisition   Land   Property  ment (C)  Depreciation Construction Acquired is Computed
-----------  -----------  ----  --------    -----------   ----   --------    -----   ------------ ------------ -------- -----------
<S>             <C>       <C>      <C>         <C>         <C>      <C>       <C>      <C>          <C>         <C>       <C> 

Shopping Center $ 18,900 $ 6,307  $ 18,062   $  208   $ 6,307 $ 18,270 $ 24,577     $4,359          1988        8/16/89 12 - 40 yrs.
Augusta, GA

Shopping Center   10,125   1,532    12,231      (78)    1,532   12,153   13,685      2,639          1990        1/19/90 12 - 40 yrs.
Greenwood, SC

Shopping Center    3,715     448     4,659     (313)      448    4,442    4,890        964          1988        1/18/90 12 - 40 yrs.
Russellville, KY                                                            (96)
                                                                        -------
                                                                          4,794

Shopping Center    5,340     730     6,464      596       730    7,060    7,790      1,504          1989        1/30/90 12 - 40 yrs.
Martinsville, IN

Shopping Center    3,595     616     4,527     (789)      616    4,419    5,035      1,048          1990        4/26/90 12 - 40 yrs.
Ashland City, TN                                                           (681)
                                                                        -------
                                                                          4,354

Shopping Center    4,506     704     5,860     (226)      704    5,891    6,595      1,190          1989        5/22/90 12 - 40 yrs.
Henderson, KY                                                              (257)
                                                                        -------
                                                                          6,338

Shopping Center    7,330   1,813     8,347      (76)    1,813    8,389   10,202      1,713          1990        6/15/90 12 - 40 yrs.
Knoxville, TN                                                              (118)
                                                                        -------
                                                                         10,084

Shopping Center   11,150   4,244     9,965      (57)    4,244   10,392   14,636      2,216          1990        8/7/90  12 - 40 yrs.
Columbia, SC                                                               (484)
                                                                        -------
                                                                         14,152


<PAGE>

Schedule III - Real Estate and Accumulated Depreciation (continued)

                         RETAIL PROPERTY INVESTORS, INC.

              SCHEDULE OF REAL ESTATE AND ACCUMULATED DEPRECIATION
                                 August 31, 1996
                                 (In thousands)
<CAPTION>


                          Initial Cost to                  Gross Amount at Which Carried at                           Life on Which
                             Partnership    Costs           Close of period                                            Depreciation
                          Buildings         Capitalized          Buildings,   Total, less                                 in Latest
                              Improvements  (Removed)            Improvements Allowance for                               Income
                                & Personal  Subsequent to     & Personal   Impair-   Accumulated  Date of      Date       Statement
Description  Encumbrances Land  Property    Acquisition   Land   Property  ment (C)  Depreciation Construction Acquired is Computed
-----------  -----------  ----  --------    -----------   ----   --------    -----   ------------ ------------ -------- -----------
<S>             <C>       <C>      <C>         <C>         <C>      <C>       <C>      <C>          <C>         <C>       <C> 

Shopping Center    9,785   3,292    10,578     (508)    3,292   10,070      13,362      1,846      1990       12/19/90 12 - 40 yrs.
Beaufort, SC

Shopping Center    9,002   1,104    11,346     (434)    1,104   10,912      12,016      2,055      1989       12/19/90 12 - 40 yrs.
Morehead City, NC

Shopping Center    4,893     929     6,001     (357)      929    5,882       6,811        981      1989       12/19/90 12 - 40 yrs.
Walterboro, SC                                                                (238)
                                                                           -------
                                                                             6,573

Shopping Center    7,729   2,438     8,103     (230)    2,438    8,010      10,448      1,569      1990        3/5/91  12 - 40 yrs.
Lexington, NC                                                                 (137)
                                                                           -------
                                                                            10,311

Shopping Center    5,252   1,280     5,918      (44)    1,280    5,874       7,154      1,125      1989        3/5/91  12 - 40 yrs.
Rockwood, TN

Shopping Center    6,600   2,361     6,888       20     2,361    6,908       9,269      1,277      1987        6/21/91 12 - 40 yrs.
Spartanburg, SC

Shopping Center    8,279     929    11,275     (152)      929   11,263      12,192      1,879      1990        8/9/91  12 - 40 yrs.
Glasgow, KY                                                                   (140)
                                                                           -------
                                                                            12,052

Shopping Center    5,249     737     7,093     (169)      737    7,014       7,751      1,199      1990        8/9/91  12 - 40 yrs.
LaFollette, TN                                                                 (90)
                                                                           -------
                                                                             7,661


<PAGE>
Schedule III - Real Estate and Accumulated Depreciation (continued)

                         RETAIL PROPERTY INVESTORS, INC.

              SCHEDULE OF REAL ESTATE AND ACCUMULATED DEPRECIATION
                                 August 31, 1996
                                 (In thousands)
<CAPTION>


                          Initial Cost to                  Gross Amount at Which Carried at                           Life on Which
                             Partnership    Costs           Close of period                                            Depreciation
                          Buildings         Capitalized          Buildings,   Total, less                                 in Latest
                              Improvements  (Removed)            Improvements Allowance for                               Income
                                & Personal  Subsequent to     & Personal   Impair-   Accumulated  Date of      Date       Statement
Description  Encumbrances Land  Property    Acquisition   Land   Property  ment (C)  Depreciation Construction Acquired is Computed
-----------  -----------  ----  --------    -----------   ----   --------    -----   ------------ ------------ -------- -----------
<S>             <C>       <C>      <C>         <C>         <C>      <C>       <C>      <C>          <C>         <C>       <C> 

Shopping Center    3,979     728     6,626   (1,989)      728    6,626    7,354      1,023         1990      10/25/91   12 -40 yrs.
Fremont, OH                                                              (1,989)
                                                                         ------
                                                                          5,365

Shopping Center    6,795   1,806     6,880        -     1,806    6,880    8,686        905         1990       8/31/92   12 -40 yrs.
Osh Kosh, WI

Shopping Center    9,526   2,570     9,886        6     2,570    9,892   12,462      1,261         1991       8/31/92   12 -40 yrs.
Onalaska, WI

Shopping Center    6,686   1,274     8,282     (274)    1,274    8,289    9,563      1,049         1991     10/21/92    3 - 40 yrs.
Sanford, NC                                                                (281)
                                                                         ------
                                                                          9,282

Shopping Center    6,898   1,626     8,735       (2)    1,626    8,733   10,359        980         1992     4/29/93    12 - 40 yrs.
Bluefield, VA

Shopping Center    5,817     377     8,153     (341)      377    8,181     8,558       884         1992     6/23/93    12 - 40 yrs.
Marion, SC                                                                  (369)
                                                                          ------
                                                                           8,189
                --------  ------  --------  -------   ------- --------  --------   -------     
                $161,151 $37,845  $185,879  $(5,209)  $37,845 $185,550 $218,515    $33,666
                ======== =======  ========  =======   ======= ======== ========    =======


<PAGE>


Schedule III - Real Estate and Accumulated Depreciation (continued)                                   
                         RETAIL PROPERTY INVESTORS, INC.

                   SCHEDULE OF REAL ESTATE AND ACCUMULATED DEPRECIATION
                                 August 31, 1996
                                 (In thousands)


Notes
(A) See Note 5 of Notes to Financial  Statements  for a description  of the
    debt encumbering the properties.

(B)Included  in  Costs  Capitalized  (Removed)  Subsequent  to  Acquisition  are
   certain master lease payments  earned that were recorded as reductions in the
   cost basis of the properties for financial reporting purposes.  See Note 4 to
   the financial  statements for a further  description of these payments.  Also
   included in Costs  Capitalized  (Removed)  Subsequent to  Acquisition  is the
   provision for impairment loss described in Note C below.

(C)The gross amount  reflected  above includes  impairment  losses of $1,030 and
   $3,850  recognized  in fiscal 1996 and 1995,  respectively,  to writedown the
   operating  investment  properties  to  the  lower  of  adjusted  cost  or net
   realizable  value.  See  Notes  1,  2 and 4 for  a  further  discussion.  The
   aggregate cost of real estate owned at August 31, 1996 for Federal income tax
   purposes is approximately $226,815,000.

(D) Reconciliation of real estate owned:
                                                    1996       1995            1994
                                                    ----       ----            ----
   Balance at beginning of year                  $219,124      $222,814     $222,373
   Acquisitions and improvements                      421           178          767
   Disposal of fully depreciated tenant 
     improvements                                       -           (18)           -
   Reduction of basis due to master
     lease payments received                            -             -         (326)
   Provision for loss on impairment of
     assets held for sale                          (1,030)       (3,850)           -
                                                ---------      --------     --------
   Balance at end of year                       $ 218,515      $219,124     $222,814
                                                =========      ========     ========

(E) Reconciliation of accumulated depreciation:

   Balance at beginning of year                 $  27,409     $  21,080    $  14,863
   Depreciation expense                             6,257         6,347        6,217
   Disposal of fully depreciated tenant
      improvements                                      -          (18)            -
                                               ----------     --------      --------
   Balance at end of year                      $   33,666     $  27,409     $ 21,080
                                               ==========     =========     ========
</TABLE>