MCNEIL PACIFIC INVESTORS FUND 1972, 10-K405, 1996-03-29

MCNEIL PACIFIC INVESTORS FUND 1972
10-K405, 1996-03-29
OPERATORS OF NONRESIDENTIAL BUILDINGS

Previous: MLX CORP /MI, 10-K, 1996-03-29

Next: MCNEIL REAL ESTATE FUND V LTD, 10-K405, 1996-03-29

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K405

[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934

For the fiscal year ended December 31, 1995
--------------------------------------------------

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the transition period from ______________ to_____________

Commission file number 0-7162
-------

McNEIL PACIFIC INVESTORS FUND 1972
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)

California 94-6279375
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

13760 Noel Road, Suite 700, LB70, Dallas, Texas, 75240
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip code)

Registrant's telephone number, including area code (214) 448-5800
------------------------------

Securities registered pursuant to Section 12(b) of the Act: None
- ----------------------------------------------------------

Securities registered pursuant to Section 12(g) of the Act: Limited partnership
units
- ----------------------------------------------------------

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, and (2) has been subject to such filing requirements
for the past 90 days. Yes X No
--- ---

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 ]

13,702.5 of the registrant's 13,752.5 limited partnership units are held by
non-affiliates of this registrant. The aggregate market value of units held by
non-affiliates is not determinable since there is no public trading market for
limited partnership units and transfers of units are subject to certain
restrictions.

Documents Incorporated by Reference: See Item 14, page 32.

TOTAL OF 34 PAGES

<PAGE>
PART I

ITEM 1. BUSINESS
- ------- --------

ORGANIZATION
- ------------

McNeil Pacific Investors Fund 1972 (the "Partnership") was organized September
30, 1971 as a limited partnership under provisions of the California Uniform
Limited Partnership Act. The general partner of the Partnership is McNeil
Partners, L.P. (the "General Partner"), a Delaware limited partnership, an
affiliate of Robert A. McNeil ("McNeil"). The General Partner was elected at a
meeting of limited partners on March 30, 1992, at which time the Partnership's
restated certificate and agreement of limited partnership (the "Partnership
Agreement") was amended. Prior to March 30, 1992, Pacific Investors Corporation
(the "Corporate General Partner"), an affiliate of Southmark Corporation
("Southmark"), and McNeil were the general partners of the Partnership. The
principal place of business for the Partnership and the General Partner is 13760
Noel Road, Suite 700, LB70, Dallas, Texas, 75240.

On March 8, 1972, a Registration Statement on Form S-11 was declared effective
by the Securities and Exchange Commission whereby the Partnership offered for
sale $15,000,000 of limited partnership units ("Units"). The Units represent
equity interests in the Partnership and entitle the holders thereof to
participate in certain allocations and distributions of the Partnership. The
sale of Units closed on April 30, 1973 with 13,795 Units sold for gross proceeds
of $13,795,000 to the Partnership. The original general partners purchased 50
Units for $50,000. 37.5 and 5 Units were relinquished in 1994 and 1995,
respectively, leaving 13,752.5 Units outstanding at December 31, 1995.

SOUTHMARK BANKRUPTCY AND CHANGE IN GENERAL PARTNER
- --------------------------------------------------

On July 14, 1989, Southmark filed a voluntary petition for reorganization under
Chapter 11 of the U.S. Bankruptcy Code. Neither the Partnership, McNeil, nor the
Corporate General Partner were included in the filing. Southmark's
reorganization plan became effective August 10, 1990. Under the plan, most of
Southmark's assets, including Southmark's interest in the Corporate General
Partner, are being sold or liquidated for the benefit of creditors.

In accordance with Southmark's reorganization plan, Southmark, McNeil and
various of their affiliates entered into an asset purchase agreement on October
12, 1990, providing for, among other things, the transfer of control to McNeil
or his affiliates of 34 limited partnerships (including the Partnership) in the
Southmark portfolio.

On February 14, 1991, pursuant to the asset purchase agreement as amended on
that date: (a) an affiliate of McNeil purchased the Corporate General Partner's
economic interest in the Partnership; (b) McNeil became the managing general
partner of the Partnership pursuant to an agreement with the Corporate General
Partner that delegated management authority to McNeil; and (c) McNeil Real
Estate Management, Inc. ("McREMI"), an affiliate of McNeil, acquired the assets
relating to the property management and partnership administrative business of
Southmark and its affiliates.

<PAGE>

On March 30, 1992, the limited partners approved a proposal to (i) replace
McNeil and the Corporate General Partner as general partners of the Partnership
with the General Partner, and (ii) amend the Partnership Agreement to (a) extend
the term of the Partnership from December 31, 1992, until December 31, 2002, (b)
provide for a limitation on administrative operating expenses equal to 2% of
tangible asset value, as defined, and (c) provide for the establishment of an
oversight committee that will review and report on the Partnership's compliance
with the 2% limitation on administrative operating expenses.

CURRENT OPERATIONS
- ------------------

General:

The Partnership is engaged in real estate activities, including the ownership,
operation and management of residential rental real estate and other real estate
related assets. At December 31, 1995, the Partnership owned one income-producing
property as described in Item 2 - Property.

The Partnership does not directly employ any personnel. The General Partner
conducts the business of the Partnership directly and through its affiliates.
The Partnership is managed by the General Partner. In accordance with the
Partnership Agreement, the Partnership reimburses affiliates of the General
Partner for certain expenses incurred by the affiliates in connection with the
management of the Partnership. See Item 8 Note 2 - "Transactions With
Affiliates."

The business of the Partnership to date has involved only one industry segment.
See Item 8 - Financial Statements and Supplementary Data. The Partnership has no
foreign operations. The business of the Partnership is not seasonal.

Business Plan:

The Partnership's anticipated plan of operations for 1996 is to preserve or
increase the net operating income of its property whenever possible, while at
the same time making whatever capital expenditures are reasonable under the
circumstances in order to preserve and enhance the value of the Partnership's
property. The General Partner is evaluating market and other economic conditions
to determine the optimum time to commence an orderly liquidation of the
Partnership's property in accordance with the terms of the Partnership
Agreement. In conjunction therewith, the General Partner will continue to
explore potential avenues to enhance the value of the limited partners' Units in
the Partnership, which may include, among other things, asset sales or
refinancing of the Partnership's property followed by distributions. See Item 7
- - Management's Discussion and Analysis of Financial Condition and Results of
Operations.

<PAGE>

Competitive Conditions:

Since the principal business of the Partnership is to own and operate real
estate, the Partnership is subject to all of the risks incident to ownership of
real estate and interests therein, many of which relate to the illiquidity of
this type of investment. These risks include changes in general or local
economic conditions, changes in supply or demand for competing properties in an
area, changes in interest rates and availability of permanent mortgage funds
which may render the sale or refinancing of a property difficult or
unattractive, changes in real estate and zoning laws, increases in real property
tax rates and Federal or local economic or rent controls. The illiquidity of
real estate investments generally impairs the ability of the Partnership to
respond promptly to changed circumstances. The Partnership competes with
numerous established companies, private investors (including foreign investors),
real estate investment trusts, limited partnerships and other entities (many of
which have greater resources than the Partnership) in connection with the sale,
financing and leasing of properties. The impact of these risks on the
Partnership, including losses from operations and foreclosures of the
Partnership's properties, are described in Item 7 - Management's Discussion and
Analysis of Financial Condition and Results of Operations. See Item 2 - Property
for discussion of competitive conditions at the Partnership's property.

Other information:

The environmental laws of the Federal government and of certain state and local
governments impose liability on current property owners for the clean-up of
hazardous and toxic substances discharged on the property. This liability may be
imposed without regard to the timing, cause or person responsible for the
release of such substances onto the property. The Partnership could be subject
to such liability in the event that the property has such environmental
problems. The Partnership has no knowledge of any pending claims or proceedings
regarding such environmental problems.

In August 1995, High River Limited Partnership, a Delaware limited partnership
controlled by Carl C. Icahn ("High River"), made an unsolicited tender offer
(the "HR Offer") to purchase from holders of Units up to approximately 45% of
the outstanding Units of the Partnership for a purchase price of $110 per Unit.
In addition, High River made unsolicited tender offers for certain other
partnerships controlled by the General Partner. The Partnership recommended that
the limited partners reject the HR Offer made with respect to the Partnership
and not tender their Units pursuant to the HR Offer. The HR Offer terminated,
after numerous extensions, on October 6, 1995. The General Partner believes that
as of February 29, 1996, High River has purchased approximately 4.92% of the
outstanding Units pursuant to the HR Offer. In addition, all litigation filed by
High River, Mr. Icahn and his affiliates in connection with the HR Offer has
been dismissed without prejudice. See Item 3 - Legal Proceedings.

<PAGE>

ITEM 2. PROPERTY
- ------- --------

The following table sets forth the real estate investment portfolio of the
Partnership at December 31, 1995. The buildings and land on which they are
located are owned by the Partnership in fee, subject to a first lien deed of
trust as set forth more fully in Item 8 - Note 5 - "Mortgage Note Payable" and
Schedule III - "Real Estate Investments and Accumulated Depreciation." In the
opinion of management, the property is adequately covered by insurance.

<TABLE>
<CAPTION>
Net Basis 1995 Date
Property Description of Property Debt Property Tax Acquired
- -------- ----------- ----------- ---- ------------ --------
<S> <C> <C> <C> <C> <C>
Palm Bay Apartments
Orlando, FL 346 units $6,335,493 $2,161,204 $101,961 6/91
========= ========= =======
</TABLE>

The following table sets forth the occupancy rate and rent per square foot of
the Partnership's property for each of the last three years. This information is
not available for 1991 and 1990, the years before the Partnership reacquired the
property through foreclosure.

1995 1994 1993 1992
----- ----- ----- -----
Palm Bay
- --------
<S> <C> <C> <C> <C>
Occupancy Rate................... 86% 82% 77% 73%
Rent Per Square Foot............. $4.77 $4.58 $4.15 $3.71
</TABLE>

Occupancy rate represents all units leased divided by the total number of units
of the property as of December 31 of the given year. Rent per square foot
represents all revenue, except interest, derived from the property's operations
divided by the leasable square footage of the property.

Competitive Conditions - Palm Bay Apartments
- --------------------------------------------

The financial performance of Palm Bay Apartments has improved as a result of the
capital renovation program. Occupancy rates have risen from 63% at the date the
Partnership repossessed Palm Bay Apartments in 1992 to 86% at the end of 1995.
Occupancy rates for the local area average 89%. Rental rates have also improved
due to the renovation program. The renovation program has made the property much
more competitive in its market. The local area offers diverse competition from
high quality property to low quality subsidized housing. The property's location
and townhouse units give it a competitive edge in the market. Conversely,
several of the property's competitors offer tax-subsidized rental rates. An
interior upgrade program is addressing the dated appearance of the units'
interiors so that the property can compete effectively with the newer properties
in the area.

<PAGE>

ITEM 3. LEGAL PROCEEDINGS
- ------- -----------------

1) High River Limited Partnership v. McNeil Partners, L.P., McNeil Investors,
Inc., McNeil Pacific Investors 1972, Ltd., McNeil Real Estate Fund V, Ltd.,
McNeil Real Estate Fund IX, Ltd., McNeil Real Estate Fund X, Ltd., McNeil
Real Estate Fund XI, Ltd., McNeil Real Estate Fund XIV, Ltd., McNeil Real
Estate Fund XV, Ltd., McNeil Real Estate Fund XX, L.P., McNeil Real Estate
Fund XXIV, L.P., McNeil Real Estate Fund XXV, L.P., Robert A. McNeil and
Carole J. McNeil (L95012) - High River ("HR") filed this action in the
United States District Court for the Southern District of New York against
McNeil Partners, L.P., McNeil Investors, Inc. and Mr. and Mrs. McNeil (as
defined in this Section 1, collectively, the "Defendants") requesting,
among other things, names and addresses of the limited partners in the
partnerships referenced above (as defined in this Section 1, the
"Partnerships"). The District Court issued a preliminary injunction against
the Partnerships requiring them to commence mailing materials relating to
the HR tender offer on August 14, 1995.

On August 18, 1995, the Defendants filed an Answer and Counterclaim. The
Counterclaim principally asserts (1) the HR tender offers have been
undertaken in violation of the federal securities laws, on the basis of
material, non-public, and confidential information, and (2) that the HR
offer documents omit and/or misrepresent certain material information about
the HR tender offers. The Counterclaim seeks a preliminary and permanent
injunction against the continuation of the HR tender offers and,
alternatively, ordering corrective disclosure with respect to allegedly
false and misleading statements contained in the tender offer documents.

This action was dismissed without prejudice in November 1995.

2) High River Limited Partnership v. McNeil Partners, L.P., McNeil Investors,
Inc., McNeil Pacific Investors 1972, Ltd., McNeil Real Estate Fund V, Ltd.,
McNeil Real Estate Fund IX, Ltd., McNeil Real Estate Fund X, Ltd., McNeil
Real Estate Fund XI, Ltd., McNeil Real Estate Fund XIV, Ltd., McNeil Real
Estate Fund XV, Ltd., McNeil Real Estate Fund XX, L.P., McNeil Real Estate
Fund XXIV, L.P., McNeil Real Estate Fund XXV, L.P., Robert A. McNeil and
Carole J. McNeil - United States District Court for the Southern District
of New York, (Case No. 95 Civ. 9488) (Second Action).

On November 7, 1995, High River filed a second complaint with the District
Court which alleges, inter alia, that McNeil Partners, L.P.'s (the "General
Partner") Schedule 14D-9 filed in connection with the High River tender
offers was materially false and misleading, in violation of Sections 14(d)
and 14(e) of the Securities Exchange Act of 1934, 15 U.S.C. Section 78n(d)
and (e), and the SEC Regulations promulgated thereunder; and that High
River further alleges that the General Partner has wrongfully refused to
admit High River as a limited partner to the ten partnerships referenced
above. Additionally, High River purports to assert claims derivatively on
behalf of McNeil Real Estate Fund IX, Ltd., McNeil Real Estate Fund XI,
Ltd., McNeil Real Estate Fund XV, Ltd., McNeil Real Estate Fund XXIV, L.P.
and McNeil Real Estate Fund XXV, L.P., for breach of contract and breach of
fiduciary duty, asserting that the General Partner has charged these
partnerships excessive fees. High River's complaint seeks, inter alia,
preliminary injunctive relief requiring the General Partner to admit High
River as a limited partner in each of the ten partnerships referenced above
and to transfer the tendered units of interest in the partnerships to High
River; an unspecified award of damages payable to High River and an
additional unspecified award of damages payable to certain of the
partnerships; an order that defendants must discharge their fiduciary
duties and must account for all fees they have received from certain of the
partnerships; and attorneys' fees.

<PAGE>

On January 31, 1996, this action was dismissed without prejudice.

3) Robert Lewis v. McNeil Partners, L.P., McNeil Investors, Inc., Robert A.
McNeil et al - In the District Court of Dallas County, Texas, A-14th
Judicial District, Cause No. 95-08535 (Class Action) - Plaintiff, Robert
Lewis, is a limited partner with McNeil Pacific Investors Fund 1972, Ltd.,
McNeil Real Estate Fund X, Ltd. and McNeil Real Estate Fund XV, Ltd.

Plaintiff brings this action on his own behalf and as a class action on
behalf of the class of all limited partners of McNeil Pacific Investors
Fund 1972, Ltd., McNeil Real Estate Fund V, Ltd., McNeil Real Estate Fund
IX, Ltd., McNeil Real Estate Fund X, Ltd., McNeil Real Estate Fund XI,
Ltd., McNeil Real Estate Fund XIV, Ltd., McNeil Real Estate Fund XV, Ltd.,
McNeil Real Estate Fund XX, L.P., McNeil Real Estate Fund XXIV, L.P. and
McNeil Real Estate Fund XXV, Ltd. (as defined in this Section 3, the
"Partnerships") as of August 4, 1995.

Plaintiff alleges that McNeil Partners, L.P., McNeil Investors, Inc.,
Robert A. McNeil and other senior officers (as defined in this Section 3,
collectively, the "Defendants") breached their fiduciary duties by, among
other things, (1) failing to attempt to sell the properties owned by the
Partnerships (as defined in this Section 3, the "Properties") and extending
the lives of the Partnerships indefinitely, contrary to the Partnerships'
business plans, (2) paying distributions to themselves and generating fees
for their affiliates, (3) refusing to make significant distributions to the
class members, despite the fact that the Partnerships have positive cash
flows and substantial cash balances, and (4) failing to take steps to
create an auction market for equity interests of the Partnerships, despite
the fact that a third party bidder filed tender offers for approximately
forty-five percent (45%) of the outstanding units of each of the
Partnerships. Plaintiff also claims that Defendants have breached the
partnership agreements of the Partnerships by failing to take
steps to liquidate the Properties and by their alteration of the
Partnerships' primary purposes, their acts in contravention of these
agreements, and their use of the assets of the Partnerships for their own
benefit instead of for the benefit of the Partnerships.

The Defendants deny that there is any merit to Plaintiff's allegations and
intend to vigorously defend this action.

4) Alfred Napoletano v. McNeil Partners, L.P., McNeil Investors, Inc., Robert
A. McNeil, Carole J. McNeil, McNeil Pacific Investors Fund 1972, Ltd.,
McNeil Real Estate Fund V, Ltd., McNeil Real Estate Fund IX, Ltd., McNeil
Real Estate Fund X, Ltd., McNeil Real Estate Fund XI, Ltd., McNeil Real
Estate Fund XIV, Ltd., McNeil Real Estate Fund XV, Ltd., McNeil Real Estate
Fund XX, L.P., McNeil Real Estate Fund XXIV, L.P., McNeil Real Estate Fund
XXV, L.P. - Superior Court of the State of California, County of Los
Angeles, Case No. BC133849 (Class Action Complaint)

Plaintiff brings this class action on behalf of a class of all persons and
entities who are current owners of units and/or are limited partners in one
or more of the partnerships referenced above (as defined in this Section 4,
the "Partnerships"). Plaintiff alleges that McNeil Partners, L.P., McNeil
Investors, Inc., Robert A. McNeil and other senior officers (as defined in
this Section 4, collectively, the "Defendants") have breached their
fiduciary duties to the class members by, among other things, (1) taking
steps to prevent the consummation of the High River tender offers, (2)
failing to take steps to maximize unitholders' or limited partners' values,
including failure to liquidate the properties owned by the Partnerships,
(3) managing the Partnerships so as to extend indefinitely the present fee
arrangements, and (4) paying itself and entities owned and controlled by
the general partner excessive fees and reimbursements of general and
administrative expenses.

<PAGE>

The Defendants deny that there is any merit to Plaintiff's allegations and
intend to vigorously defend this action.

5) Warren Heller v. McNeil Partners, L.P., McNeil Investors, Inc., Robert A.
McNeil, Carole J. McNeil, McNeil Pacific Investors Fund 1972, Ltd., McNeil
Real Estate Fund V, Ltd., McNeil Real Estate Fund IX, Ltd., McNeil Real
Estate Fund X, Ltd., McNeil Real Estate Fund XI, Ltd., McNeil Real Estate
Fund XIV, Ltd., McNeil Real Estate Fund XV, Ltd., McNeil Real Estate Fund
XX, L.P., McNeil Real Estate Fund XXIV, L.P., McNeil Real Estate Fund XXV,
L.P. - Superior Court of the State of California, County of Los Angeles,
Case No. BC133957 (Class Action Complaint)

Plaintiff brings this class action on behalf of a class of all persons and
entities who are current owners of units and/or are limited partners in one
or more of the partnerships referenced above (as defined in this Section 5,
the "Partnerships"). Plaintiff alleges that McNeil Partners, L.P., McNeil
Investors, Inc., Robert A. McNeil and other senior officers (as defined in
this Section 5, collectively, the "Defendants") have breached their
fiduciary duties to the class members by, among other things, (1) taking
steps to prevent the consummation of the High River tender offers, (2)
failing to take steps to maximize unitholders' or limited partners' values,
including failure to liquidate the properties owned by the Partnerships,
(3) managing the Partnerships so as to extend indefinitely the present fee
arrangements, and (4) paying itself and entities owned and controlled by
the general partner excessive fees and reimbursements of general and
administrative expenses.

The Defendants deny that there is any merit to Plaintiff's allegations and
intend to vigorously defend this action.

For a discussion of the Southmark bankruptcy, see Item 1 - Business.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- ------- ---------------------------------------------------

None.

PART II

ITEM 5. MARKET FOR THE REGISTRANT'S UNITS OF LIMITED PARTNERSHIP AND
- ------- ------------------------------------------------------------
RELATED SECURITY HOLDER MATTERS
-------------------------------

(A) There is no established public trading market for limited partnership
units, nor is one expected to develop.

(B) Title of Class Number of Record Unit Holders
-------------- -----------------------------
Limited partnership units 1,285 as of February 16, 1996

(C) No distributions were paid to the partners in 1995 or 1994, and none
are anticipated in 1996. See Item 7 - Management's Discussion and
Analysis of Financial Condition and Results of Operations for a
discussion of the likelihood that the Partnership will resume
distributions to the partners.

<PAGE>

ITEM 6. SELECTED FINANCIAL DATA
- ------- -----------------------

The following table sets forth a summary of certain financial data for the
Partnership. This summary should be read in conjunction with the Partnership's
financial statements and notes thereto appearing in Item 8.

Statements of Years Ended December 31,
Operations 1995 1994 1993 1992 1991
- ------------------ ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Rental revenue............... $ 1,376,148 $ 1,475,264 $ 1,894,385 $ 1,815,723 $ 632,703
Gain on disposition of
real estate............... - 574,701 - - -
Total revenue................ 1,439,428 2,095,660 1,908,162 1,870,452 1,170,484
Loss on foreclosure of
mortgage note
receivable................ - - - - (95,864)
Write-down for
permanent impairment
of real estate............ - - 2,700,000 - -
Net income (loss)............ (285,886) 433,544 (3,102,551) (816,851) 25,183

Net income (loss) per
limited partnership unit.. $ (20.79) $ 48.52 $ (224.90) $ (59.21) $ 1.83
========== ========== ========== ========== ==========

As of December 31,
Balance Sheets 1995 1994 1993 1992 1991
- -------------- ----------- ----------- ----------- ----------- -----------

Real estate investments, net... $ 6,335,493 $ 6,239,081 $ 5,814,474 $11,528,672 $11,631,995
Asset held for sale, net....... - - 3,209,269 - -
Total assets................... 6,993,903 7,516,368 9,405,117 12,665,342 13,504,953
Mortgage notes payable......... 2,161,204 2,287,341 4,523,714 4,738,775 4,865,866
Partners' equity............... 4,714,982 5,000,868 4,567,324 7,669,875 8,486,726

</TABLE>

See Item 7 - Management's Discussion and Analysis of Financial Condition and
Results of Operations. The following property was sold by the Partnership.

Property Date Sold
-------- ---------

Pacesetter Apartments March 17, 1994

<PAGE>

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
- ------- ---------------------------------------------------------------
RESULTS OF OPERATIONS
---------------------

FINANCIAL CONDITION
- -------------------

Since the sale of Pacesetter Apartments on March 17, 1994, the focus of the
Partnership's efforts have been directed to the renovation program at Palm Bay
Apartments (formerly known as Greentree Apartments). From the three year period
ending December 31, 1995, the Partnership has completed capital renovation
projects totaling $1,555,223. To date, occupancy at Palm Bay Apartments has not
recovered as much as was hoped. As the capital renovation program winds down,
the focus of the Partnership will turn to leasing the restored units and
increasing operating efficiencies at the property.

RESULTS OF OPERATIONS
- ---------------------

1995 compared to 1994:

Revenue:

Rental revenues for 1995 decreased $99,116 or 6.7% compared to 1994. The
decrease is principally due to the sale of Pacesetter Apartments in March 1994.
Rental revenue from Palm Bay Apartments increased $54,794 or 4.1%. The
Partnership was able to increase both occupancy and base rental rates due to the
major capital improvements undertaken at Palm Bay Apartments. The occupancy rate
at December 31, 1995 was 86%, up from 82% at December 31, 1994. The Partnership
increased rental rates at Palm Bay Apartments an average of 2.9% in 1995.

The Partnership has not been able to increase occupancy rates or base rental
rates as quickly as was hoped. Several apartment communities in the immediate
area have also undergone major rehabilitation, and several of the competing
apartment communities are able to offer their units at rates that have been
subsidized by various government programs. The effect of the competition has
restricted the increase in rental revenue that was otherwise expected from Palm
Bay Apartments. Management is implementing various marketing strategies to
attempt to improve the revenue growth of the property.

Revenues for 1994 also include the one-time gain on sale of Pacesetter
Apartments in the amount of $574,701.

Expenses:

Partnership expenses increased $63,198 or 3.8% in 1995 compared to 1994.
However, after excluding expenses pertaining to Pacesetter Apartments, expenses
increased $238,253 or 18% in 1995 compared to 1994. Increased expenses were
concentrated in depreciation, repair and maintenance, other property operating,
and general and administrative.

The largest increase, on both an absolute and percentage basis, was the increase
in depreciation expense. Depreciation expense at Palm Bay Apartments increased
$121,331 or 54% in 1995 compared to 1994. The increase in depreciation expense
is due to the continuing investment of Partnership resources into capital
improvements. For the year 1995, the Partnership invested $440,906 in capital
improvements. These capital improvements are generally being depreciated over
lives ranging from five to ten years.

<PAGE>

Repair and maintenance expenses at Palm Bay increased $54,740 or 19% in 1995 as
compared to 1994. The increased level of repair and maintenance expenses are
attributable to costs incurred preparing vacant units for rental. Repair and
maintenance expenses will likely continue to increase until Palm Bay's occupancy
rate stabilizes.

Other property operating expenses increased substantially at Palm Bay
Apartments. Efforts to refurbish down units and intensive leasing activity have
increased a number of expense categories to unusually high levels. The General
Partner anticipates that these expenses will moderate after the restored units
have been leased. The increase in other property operating expenses at Palm Bay
Apartments totaled $61,564 or 47%.

Property management fees - affiliates at Palm Bay Apartments increased $14,390
or 22% in 1995 compared to 1994. An increase in rental receipts, upon which such
fees are based, and the increase in the management fee percentage to 6% from 5%
(effective January 1, 1995) were the reasons for the increase.

General and administrative for 1995 increased $34,678 or 116% compared to 1994.
The Partnership incurred $44,554 of costs relating to the evaluation and
dissemination of information regarding an unsolicited tender offer.

General and administrative - affiliates increased $14,312 or 22% in 1995
compared to 1994. Reimbursements to affiliates are based, in part, on a
declining number of properties managed by affiliates of the General Partner.

1994 compared to 1993:

Revenue:

Rental revenues for 1994 decreased $419,121 or 22% compared to 1993. The
decrease is entirely attributable to the sale of Pacesetter Apartments in March
1994. Rental revenue from Palm Bay Apartments increased $125,713 or 10.5%. The
Partnership was able to increase both occupancy and base rental rates due to the
major capital improvements undertaken at Palm Bay Apartments. Occupancy has
improved to 82%, and rental rates were increased 10.4%.

The sale of Pacesetter Apartments in March 1994 generated a $574,701 gain on
disposition of real estate in 1994. Proceeds from the sale of Pacesetter
Apartments substantially increased the amounts of Partnership cash invested in
interest-bearing accounts. Interest revenue increased by $31,918 to $45,695 in
1994.

Expenses:

Total Partnership expenses decreased $3,348,597 or 67% in 1994 compared to 1993.
However, most of the decrease was due to the $2.7 million write-down for
permanent impairment of real estate recorded by the Partnership during 1993.
Expenses also decreased due to the sale of Pacesetter Apartments in March 1994.
Excluding these items, expenses increased $41,611 or 3.0% in 1994 compared to
1993.

Interest expense decreased $159,483 or 39% in 1994 compared to 1993. Interest
expense on the Palm Bay mortgage note decreased 4.5% as regular monthly debt
service payments continue to reduce the outstanding principal balance of the
Palm Bay mortgage note. The rest of the decrease is attributable to the sale of
Pacesetter Apartments in March 1994.

<PAGE>

The extensive capital improvements placed in service at Palm Bay Apartments
during 1994 and 1993 have increased charges for depreciation. Depreciation at
Palm Bay Apartments increased $34,841 or 18.5% in 1994 compared to 1993.
However, due to the sale of Pacesetter Apartments, depreciation charges for the
Partnership decreased $13,651 or 5.0%.

The Partnership has benefited from decreased property tax assessments at Palm
Bay Apartments. The poor condition of the property at the time the Partnership
repossessed the property was reflected in property value assessments during
1994. Property taxes remitted to local taxing jurisdictions decreased 21% in
1994. It is probable that property tax assessments will increase in future years
if the capital improvement program underway at Palm Bay Apartments restores the
value of the property to its former levels.

Personnel expenses at Palm Bay Apartments increased $26,046 or 11.8% in 1994
compared to 1993. Personnel expenses are expected to continue to increase due to
the Partnership's effort to increase occupancy rates by the continuous
refurbishment of residential units and upgrading of services offered to tenants.
Such improvements are partially achieved through higher maintenance standards
that require additional personnel and maintenance expenditures. Higher personnel
expenses can also be attributed to on-site personnel performing certain
maintenance procedures that were formerly contracted to vendors.

Repairs and maintenance expenses at Palm Bay Apartments increased $24,574 or
9.2% in 1994 compared to 1993. Increases in repairs and maintenance expense are
attributable to costs incurred preparing vacant units for rental. Repairs and
maintenance expenses will likely continue to increase for as long as Palm Bay's
occupancy rate continues to increase. Similarly, property management fees -
affiliates at Palm Bay Apartments will continue to increase as rental revenues
increase. For 1994, Palm Bay Apartments recorded an 11.5% increase in property
management fees - affiliates, in line with the 10.5% increase in rental
revenues.

General and administrative expense for 1994 decreased $6,393 or 17.6% compared
to 1993. This decrease was due to savings the Partnership achieved through a new
tax processing and reporting system and a reduction in legal fees. General and
administrative expenses paid to affiliates decreased $38,429 or 37% during 1994
compared to 1993. Partnership administrative expenses paid to affiliates are
based, in large part, on the number of properties owned by the Partnership and
other affiliated Partnerships. The sale of Pacesetter Apartments in 1994 led to
a decrease in these expenses.

LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------

The Partnership generated $28,071 from operating activities in 1995, a decrease
of $134,292 from the $162,363 provided by operating activities in 1994. Cash
paid to affiliates in 1995 included an $81,000 brokerage commission on the sale
of Pacesetter Apartments that was incurred in 1994 but not paid until 1995.

The Partnership used its cash reserves to fund $440,906 of capital improvements
to Palm Bay Apartments during 1995. An additional $126,137 was expended to repay
the Palm Bay mortgage note through monthly debt service payments. These payments
will gradually pay down the mortgage note balance until June 1997, when the Palm
Bay mortgage note matures.

<PAGE>

Short-term liquidity:

During the three year period ended December 31, 1995, the Partnership
experienced losses totaling $2,954,893. Cash used by operations during the three
year period totaled $44,925. An additional $1.56 million of cash was invested in
capital improvements at the Partnership's properties. The Partnership has used
its cash reserves and the sale of Pacesetter Apartments to fund these
expenditures. The sale of Pacesetter Apartments simultaneously provided a
substantial addition to the Partnership's cash reserves as well as removed a
substantial drain on Partnership resources.

Due to the sale of Pacesetter Apartments, the Partnership entered 1995 with
adequate cash reserves. A substantial portion of the proceeds from the sale of
Pacesetter Apartments has been invested in capital improvements at Palm Bay
Apartments. The Partnership has budgeted $90,000 of capital improvements for
1996 in addition to the $1.56 million of capital improvements made during the
three-year period ended December 31, 1995. The capital improvements at Palm Bay
Apartments are necessary to allow the property to increase its rental revenues
and become competitive in the Orlando sub-market where the property is located.

At December 31, 1995, the Partnership held $523,389 of cash and cash
equivalents, down $538,972 from the balance at the end of 1994. The General
Partner anticipates that cash generated from operations in 1996 will be
sufficient to pay the Partnership's operating expenses, debt service, and
budgeted capital improvements. The Partnership will use its cash reserves to
fund any shortfall if operating cash flow should prove insufficient to meet all
the Partnership's expected expenditures. The General Partner considers the
Partnership's cash reserves adequate for anticipated operations for 1996.

The General Partner has established a revolving credit facility not to exceed
$5,000,000 in the aggregate that is available on a "first-come, first-served"
basis to the Partnership and other affiliated partnerships if certain conditions
are met. Borrowings under the facility may be used to fund deferred maintenance,
refinancing obligations and working capital needs. There is no assurance that
the Partnership will receive additional funds under the facility because no
amounts will be reserved for any particular partnership. As of December 31,
1995, $2,662,819 remains available from the facility; however, additional funds
could become available as other partnerships repay borrowings. This commitment
will terminate on March 30, 1997.

Long-term liquidity:

For the long term, property operations will remain the primary source of funds.
While the present outlook for the Partnership's liquidity is favorable, market
conditions may change and property operations may deteriorate. The General
Partner expects that the capital improvements at Palm Bay Apartments will yield
improved cash flow from operations in 1996. Furthermore, the Partnership has
budgeted an additional $90,000 of capital improvements for 1996. If the
Partnership's cash position deteriorates, the General Partner may elect to defer
certain of the capital improvements, except where such improvements are expected
to increase the competitiveness or marketability of the Partnership's property.

As an additional source of liquidity, the General Partner may attempt to
refinance the Palm Bay mortgage note. The General Partner estimates that such a
refinancing could yield proceeds to the Partnership in excess of the amount
needed to retire the current mortgage note. However, there can be no guarantee
that the Partnership will be able to obtain such mortgage refinancing on terms
or in amounts favorable to the Partnership, or that the cash proceeds from such
refinancing could be timed to coincide with the liquidity needs of the
Partnership.

<PAGE>

Distributions:

Distributions to partners have been suspended as part of the General Partner's
policy of maintaining adequate cash reserves. Distributions to Unit holders will
remain suspended for the foreseeable future. The General Partner will continue
to monitor the cash reserves and working capital needs of the Partnership to
determine when cash flows will support distributions to the Unit holders.

<PAGE>

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
- ------- -------------------------------------------

<TABLE>
<CAPTION>
Page
Number
------
INDEX TO FINANCIAL STATEMENTS

Financial Statements:

<S> <C>
Report of Independent Public Accountants..................... 13

Balance Sheets at December 31, 1995 and 1994................. 14

Statements of Operations for each of the three years in the
period ended December 31, 1995............................. 15

Statements of Partners' Equity for each of the three years
in the period ended December 31, 1995...................... 16

Statements of Cash Flows for each of the three years in the
period ended December 31, 1995............................. 17

Notes to Financial Statements................................ 19

Financial Statement Schedule:

Schedule III - Real Estate Investment and Accumulated
Depreciation........................................... 27

</TABLE>

All other schedules are omitted because they are not applicable or the financial
information required is included in the financial statements or the notes
thereto.

<PAGE>

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Partners of
McNeil Pacific Investors Fund 1972:

We have audited the accompanying balance sheets of McNeil Pacific Investors Fund
1972 (a California limited partnership) as of December 31, 1995 and 1994, and
the related statements of operations, partners' equity and cash flows for each
of the three years in the period ended December 31, 1995. These financial
statements and the schedule referred to below are the responsibility of the
Partnership's management. Our responsibility is to express an opinion on these
financial statements and the schedule based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

As further discussed in Note 5 to the financial statements, the mortgage note
secured by the Partnership's only property is due and payable on June 1, 1997.
Management's current projections indicate that there will not be sufficient cash
flow from operations to fund that obligation. Management is currently analyzing
the Partnership's options, including refinancing the mortgage note or marketing
the property for sale.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of McNeil Pacific Investors Fund
1972 as of December 31, 1995 and 1994, and the results of its operations and its
cash flows for each of the three years in the period ended December 31, 1995, in
conformity with generally accepted accounting principles.

Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule listed in the index to
financial statements is presented for purposes of complying with the Securities
and Exchange Commission's rules and is not a part of the basic financial
statements. This schedule has been subjected to the auditing procedures applied
in our audits of the basic financial statements and, in our opinion, fairly
states in all material respects the financial data required to be set forth
therein in relation to the basic financial statements taken as a whole.

/s/ Arthur Andersen LLP

Dallas, Texas
March 13, 1996

<PAGE>

McNEIL PACIFIC INVESTORS FUND 1972

BALANCE SHEETS

December 31,
-------------------------------
1995 1994
------------ -----------
ASSETS
- ------
<S> <C> <C>
Real estate investment:
Land..................................................... $ 2,336,000 $ 2,336,000
Buildings and improvements............................... 5,010,483 4,569,577
---------- ----------
7,346,483 6,905,577
Less: Accumulated depreciation.......................... (1,010,990) (666,496)
---------- ----------
6,335,493 6,239,081

Cash and cash equivalents................................... 523,389 1,062,361
Cash segregated for security deposits....................... 43,885 36,309
Accounts receivable......................................... 3,849 3,741
Prepaid expenses and other assets........................... 23,220 24,594
Escrow deposits............................................. 49,353 125,181
Deferred borrowing costs, net of accumulated
amortization of $37,220 and $26,833 at
December 31, 1995 and 1994, respectively................. 14,714 25,101
---------- ----------

$ 6,993,903 $ 7,516,368
========== ==========

LIABILITIES AND PARTNERS' EQUITY
- --------------------------------

Mortgage note payable....................................... $ 2,161,204 $ 2,287,341
Accounts payable............................................ 20,363 31,328
Accrued interest............................................ 10,076 16,679
Other accrued expenses...................................... 24,853 38,685
Payable to affiliates - General Partner..................... 15,227 93,329
Security deposits and deferred rental revenue............... 47,198 48,138
---------- ----------
2,278,921 2,515,500
---------- ----------

Partners' equity:
Limited partners - 15,000 limited partnership units
authorized; 13,752.5 and 13,757.5 limited partnership
units issued and outstanding at December 31, 1995 and
1994, respectively..................................... 4,405,038 4,690,924
General Partner.......................................... 309,944 309,944
---------- ----------
4,714,982 5,000,868
---------- ----------

$ 6,993,903 $ 7,516,368
========== ==========

</TABLE>

See accompanying notes to financial statements.

<PAGE>

McNEIL PACIFIC INVESTORS FUND 1972

STATEMENTS OF OPERATIONS

For the Years Ended December 31,
----------------------------------------------------
1995 1994 1993
-------------- -------------- ---------------
<S> <C> <C> <C>
Revenue:
Rental revenue.......................... $ 1,376,148 $ 1,475,264 $ 1,894,385
Interest and other revenue.............. 63,280 45,695 13,777
Gain on disposition of real estate...... - 574,701 -
------------- ------------- --------------
Total revenue......................... 1,439,428 2,095,660 1,908,162
------------- ------------- --------------

Expenses:
Interest................................ 198,948 249,827 409,310
Depreciation............................ 344,494 257,825 271,476
Property taxes.......................... 101,961 123,227 195,994
Personnel expenses...................... 242,331 293,231 366,775
Repairs and maintenance................. 345,524 316,627 466,537
Property management fees -
affiliates............................ 79,474 72,765 92,490
Utilities............................... 81,054 86,617 162,959
Other property operating expenses....... 186,282 165,741 204,094
General and administrative.............. 64,649 29,971 36,364
General and administrative -
affiliates............................ 80,597 66,285 104,714
Write-down for permanent
impairment of real estate............. - - 2,700,000
------------- ------------- --------------
Total expenses........................ 1,725,314 1,662,116 5,010,713
------------- ------------- --------------

Net income (loss).......................... $ (285,886) $ 433,544 $ (3,102,551)
============= ============= ==============

Net income (loss) allocated to
limited partners........................ $ (285,886) $ 667,558 $ (3,102,551)
Net loss allocated to General Partner...... - (234,014) -
------------- ------------- --------------

Net income (loss).......................... $ (285,886) $ 433,544 $ (3,102,551)
============= ============= ==============

Net income (loss) per limited
partnership unit........................ $ (20.79) $ 48.52 $ (224.90)
============= ============= ==============

</TABLE>

See accompanying notes to financial statements.

<PAGE>

McNEIL PACIFIC INVESTORS FUND 1972

STATEMENTS OF PARTNERS' EQUITY

For the Years Ended December 31, 1995, 1994 and 1993

<TABLE>
<CAPTION>
Total
General Limited Partners'
Partner Partners Equity
--------------- --------------- ---------------
<S> <C> <C> <C>
Balance at December 31, 1992.............. $ 543,958 $ 7,125,917 $ 7,669,875

Net loss.................................. - (3,102,551) (3,102,551)
-------------- -------------- --------------

Balance at December 31, 1993.............. 543,958 4,023,366 4,567,324

Net income (loss)......................... (234,014) 667,558 433,544
-------------- -------------- --------------

Balance at December 31, 1994.............. 309,944 4,690,924 5,000,868

Net loss.................................. - (285,886) (285,886)
-------------- -------------- --------------

Balance at December 31, 1995.............. $ 309,944 $ 4,405,038 $ 4,714,982
============== ============== ==============

</TABLE>

See accompanying notes to financial statements.

<PAGE>

McNEIL PACIFIC INVESTORS FUND 1972

STATEMENTS OF CASH FLOWS

Increase (Decrease) in Cash and Cash Equivalents

For the Years Ended December 31,
-----------------------------------------------------
1995 1994 1993
-------------- -------------- ----------------
<S> <C> <C> <C>
Cash flows from operating activities:
Cash received from tenants.............. $ 1,333,612 $ 1,466,270 $ 1,854,350
Cash paid to suppliers.................. (909,351) (923,620) (1,193,122)
Cash paid to affiliates................. (238,173) (63,881) (194,294)
Interest received....................... 63,280 45,695 13,777
Interest paid........................... (195,164) (255,305) (416,206)
Property taxes paid..................... (26,133) (106,796) (299,864)
------------- ------------- --------------
Net cash provided by (used in)
operating activities................... 28,071 162,363 (235,359)
------------- ------------- --------------

Cash flows from investing activities:
Additions to real estate
investments........................... (440,906) (647,770) (466,547)
Proceeds from sale of real estate
investment............................ - 3,749,308 -
------------- ------------- --------------
Net cash provided by (used in)
investing activities................... (440,906) 3,101,538 (466,547)
------------- ------------- --------------

Cash flows from financing activities:
Principal payments on mortgage
notes payable......................... (126,137) (142,238) (215,061)
Advances from affiliates................ - - 50,000
Repayment of advances from
affiliates............................ - (50,000) -
Retirement of mortgage note
payable............................... - (2,094,135) -
------------- ------------- --------------
Net cash used in financing activities...... (126,137) (2,286,373) (165,061)
------------- ------------- --------------

Net increase (decrease) in cash and
cash equivalents...................... (538,972) 977,528 (866,967)

Cash and cash equivalents at
beginning of year..................... 1,062,361 84,833 951,800
------------- ------------- --------------

Cash and cash equivalents at end
of year............................... $ 523,389 $ 1,062,361 $ 84,833
============= ============= ==============
</TABLE>

See accompanying notes to financial statements.

<PAGE>

McNEIL PACIFIC INVESTORS FUND 1972

STATEMENTS OF CASH FLOWS

Reconciliation of Net Income (Loss) to Net Cash Provided by (Used in)
Operating Activities

For the Years Ended December 31,
----------------------------------------------------
1995 1994 1993
-------------- ------------- --------------
<S> <C> <C> <C>
Net income (loss).......................... $ (285,886) $ 433,544 $ (3,102,551)
------------ ------------ ------------

Adjustments to reconcile net income
(loss) to net cash provided by (used in)
operating activities:
Depreciation............................ 344,494 257,825 271,476
Amortization of deferred borrowing
costs................................. 10,387 10,387 10,387
Write-down for permanent
impairment of real estate............. - - 2,700,000
Gain on sale of real estate............. - (574,701) -
Changes in assets and liabilities:
Cash segregated for security
deposits............................ (7,576) 15,264 (18,676)
Accounts receivable................... (108) 4,408 22,015
Prepaid expenses and other
assets.............................. 1,374 29,469 (27,937)
Escrow deposits....................... 75,828 22,087 (98,215)
Accounts payable...................... (10,965) (92,800) 41,009
Accrued property taxes................ - (5,656) (5,655)
Accrued interest...................... (6,603) (15,865) (17,283)
Other accrued expenses................ (13,832) 12,227 (13,041)
Payable to affiliates................. (78,102) 75,169 2,910
Security deposits and deferred
rental revenue...................... (940) (8,995) 202
------------ ------------ ------------

Total adjustments................. 313,957 (271,181) 2,867,192
------------ ------------ ------------

Net cash provided by (used in)
operating activities.................... $ 28,071 $ 162,363 $ (235,359)
============ ============ ============

</TABLE>

See accompanying notes to financial statements.

<PAGE>

McNEIL PACIFIC INVESTORS FUND 1972

NOTES TO FINANCIAL STATEMENTS

December 31, 1995

NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- --------------------------------------------------------------------

Organization
- ------------

McNeil Pacific Investors Fund 1972 (the "Partnership") was organized September
30, 1971 as a limited partnership under provisions of the California Uniform
Limited Partnership Act. The general partner of the Partnership is McNeil
Partners, L.P. (the "General Partner"), a Delaware limited partnership, an
affiliate of Robert A. McNeil ("McNeil"). The General Partner was elected at a
meeting of limited partners on March 30, 1992, at which time the Partnership's
restated certificate and agreement of limited partnership (the "Partnership
Agreement") was amended. Prior to March 30, 1992, Pacific Investors Corporation,
an affiliate of Southmark Corporation, and McNeil were the general partners of
the Partnership. The principal place of business for the Partnership and the
General Partner is 13760 Noel Road, Suite 700, LB70, Dallas, Texas, 75240.

Basis of Presentation
- ---------------------

The accompanying financial statements have been prepared in conformity with
generally accepted accounting principles ("GAAP"). The preparation of financial
statements in conformity with GAAP requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

Real Estate Investment
- ----------------------

The real estate investment is generally stated at the lower of cost or net
realizable value. The real estate investment is monitored on an ongoing basis to
determine if the property has sustained a permanent impairment in value. At such
time, a write-down is recorded to reduce the basis of the property to its net
realizable value. A permanent impairment is determined to have occurred when a
decline in property value is considered to be other than temporary based upon
management's expectations with respect to projected cash flows and prevailing
economic conditions.

<PAGE>

Improvements and betterments are capitalized and expensed through depreciation
charges. Repairs and maintenance are charged to operations as incurred.

In March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of." This statement
requires that long-lived assets and certain identifiable intangibles to be held
and used by an entity be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. This statement is effective for financial statements for fiscal
years beginning after December 15, 1995. The Partnership has not adopted the
principles of this statement within the accompanying financial statements;
however, it is not anticipated that adoption will have a material effect on the
carrying value of the Partnership's long-lived assets.

Depreciation
- ------------

Buildings and improvements are depreciated using the straight-line method over
the estimated useful lives of the assets, ranging from 2 to 25 years.

Cash and Cash Equivalents
- -------------------------

Cash and cash equivalents include cash on hand and cash on deposit with
financial institutions with original maturities of three months or less.
Carrying amounts for cash and cash equivalents approximate fair value.

Escrow Deposits
- ---------------

The Partnership is required to maintain an escrow account in accordance with
terms of the Palm Bay mortgage note. This escrow account is controlled by the
mortgagee and is used for payment of property taxes. Carrying amounts for escrow
deposits approximate fair value.

Deferred Borrowing Costs
- ------------------------

Loan fees and other related costs incurred to obtain or modify long-term
financing on real property are capitalized and amortized using a method that
approximates the effective interest method over the terms of the related
mortgage notes payable. Amortization of deferred borrowing costs is included in
interest expense on the Statements of Operations.

Rental Revenue
- --------------

The Partnership leases its property under short-term operating leases. Lease
terms generally are less than one year in duration. Rental revenue is recognized
as earned.

Income Taxes
- ------------

No provision for Federal income taxes is necessary in the financial statements
of the Partnership because, as a partnership, it is not subject to Federal
income tax and the tax effect of its activities accrues to the partners.

<PAGE>

Allocation of Net Income and Net Loss
- -------------------------------------

The Partnership Agreement provides that income will be allocated to the General
Partner to the extent of distributions to the General Partner of cash from
sales, refinancings, or from working capital reserves. All remaining net income
and all losses are allocated 100% to the limited partners.

An estimated gain on the ultimate disposition of Pacesetter Apartments was
allocated to the General Partner in 1982 based upon a 1982 sales contract for
Pacesetter Apartments. An adjustment was made in 1994 to adjust the amount
allocated to the General Partner based on the 1994 sale of Pacesetter
Apartments.

Federal income tax law provides that the allocation of loss to a partner will
not be recognized unless the allocation is in accordance with a partner's
interest in the partnership or the allocation has substantial economic effect.
Internal Revenue Code Section 704(b) and accompanying Treasury Regulations
establish criteria for allocations of Partnership deductions attributable to
debt. The Partnership's tax allocations for 1995, 1994 and 1993 have been made
in accordance with these provisions.

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

At the discretion of the General Partner, distributions to partners are paid
from operations of the Partnership's properties, from sales or refinancing of
properties, or from cash maintained as working capital reserves. Cash from
operations is distributed 100% to the limited partners.

Distributions of cash from sales and refinancings and cash from working capital
reserves are made in the following order:

(a) First to the limited partners in an amount, when added to all prior
distributions to the limited partners of disposition proceeds, that
equals 109.6% of the portion of net offering proceeds invested in
property sold; then,

(b) of the remaining balance, 90.5% to the limited partners and 9.5% to the
General Partner.

No distributions were paid to the partners during 1995, 1994 or 1993.

Net Income (Loss) Per Limited Partnership Unit
- ----------------------------------------------

Net income (loss) per limited partnership unit ("Units") is computed by dividing
net income (loss) allocated to the limited partners by the weighted average
number of Units outstanding. Per Unit information has been computed based on
13,752.5, 13,757.5 and 13,795 Units outstanding in 1995, 1994 and 1993,
respectively.

NOTE 2 - TRANSACTIONS WITH AFFILIATES
- -------------------------------------

The General Partner is entitled to receive a partnership management fee equal to
9.5% of distributions of cash from operations when distributable cash from
operations is distributed to the limited partners. No partnership management
fees were incurred during 1995, 1994 or 1993.

<PAGE>

The Partnership pays property management fees equal to 6% of the gross rental
receipts of the Partnership's properties to McNeil Real Estate Management, Inc.
("McREMI"), an affiliate of the General Partner, for providing property
management and leasing services for the Partnership's properties. Prior to
January 1, 1995, the Partnership paid property management fees equal to 5% of
gross rental receipts.

The Partnership reimburses McREMI for its costs, including overhead, of
administering the Partnership's affairs.

The General Partner is entitled to receive a sales commission as compensation
for selling Partnership property equal to the lesser of 4% of the sales price of
the property sold or the customary fee charged by independent real estate
brokers in the area where the property is located. The Partnership accrued an
$81,000 sales commission in connection with the 1994 sale of Pacesetter
Apartments. The sales commission was paid in 1995.

The General Partner has established a revolving credit facility not to exceed
$5,000,000 in the aggregate which is available on a "first-come, first-served"
basis to the Partnership and other partnerships affiliated with the General
Partner if certain conditions are met. Borrowings under the facility may be used
to fund deferred maintenance, refinancing obligations and working capital needs.
The Partnership had $50,000 of outstanding borrowings under the facility at
December 31, 1993. The $50,000 was repaid in 1994. Borrowings from the facility
are unsecured, due on demand and accrue interest at the prime lending rate of
Bank of America plus 1%. As of December 31, 1995, $2,662,819 remained available
for borrowing under the facility; however, additional funds could become
available as other partnerships repay borrowings. This commitment will terminate
on March 30, 1997.

Compensation and reimbursements paid or accrued for the benefit of the General
Partner or its affiliates are as follows:

For the Years Ended December 31,
-----------------------------------------------
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
Property management fees -
affiliates.............................. $ 79,474 $ 72,765 $ 92,490
Charged to general and
administrative - affiliates:
Partnership administration.............. 80,597 66,285 104,714
Charged to gain on disposition
of real estate:
Brokerage commission.................... - 81,000 -
-------- -------- --------

$ 160,071 $ 220,050 $ 197,204
======== ========= ========
</TABLE>

Payable to affiliates - General Partner at December 31, 1995 consists of
property management fees and reimbursable administrative costs. Payable to
affiliates - General Partner at December 31, 1994 consists of brokerage
commissions, property management fees and reimbursable administrative costs. All
amounts are due and payable from current operations.

<PAGE>

NOTE 3 - TAXABLE INCOME
- -----------------------

McNeil Pacific Investors Fund 1972 is a partnership and is not subject to
Federal and state income taxes. Accordingly, no recognition has been given to
income taxes in the accompanying financial statements of the Partnership since
the income or loss of the Partnership is to be included in the tax returns of
the individual partners. The tax returns of the Partnership are subject to
examination by Federal and state taxing authorities. If such examinations result
in adjustments to distributive shares of taxable income or loss, the tax
liability of the partners could be adjusted accordingly.

The Partnership's net assets and liabilities for financial reporting purposes
exceeded the net assets and liabilities for tax purposes by $1,948,374 in 1995,
$1,973,149 in 1994 and $1,490,685 in 1993.

NOTE 4 - REAL ESTATE INVESTMENTS
- --------------------------------

The Partnership recorded the Palm Bay (formerly Greentree) and Pacesetter
mortgage notes receivable as in-substance foreclosures on June 21, 1991 and
September 30, 1991, respectively. The Partnership began recording rental
revenues and expenses of the properties as of the dates of the in-substance
foreclosures. The Partnership began recording cash flows from operating
activities as of the dates the properties were foreclosed, May 28, 1992 for Palm
Bay Apartments and January 7, 1993 for Pacesetter Apartments.

The Partnership had limited financial resources to fund capital improvements and
refurbishments that the General Partner considered necessary to restore the
properties to their proper operating condition. The availability of additional
mortgage financing or loans from affiliates was also questionable. Without the
needed capital improvements and refurbishments, it was doubtful the properties
would have been able to generate operating income sufficient to support the
carrying value of the properties. Due to the uncertainty of how the Partnership
would fund needed capital improvements and refurbishments, the General Partner
concluded that the value of the properties had been permanently impaired.
Therefore, on June 30, 1993, the Partnership wrote down the carrying value of
Palm Bay Apartments by $800,000 and Pacesetter Apartments by $1,900,000 to state
the properties at their estimated realizable values.

During the fourth quarter of 1993, it became apparent that the Partnership's
cash resources would be exhausted before operations at Pacesetter Apartments
could be restored to a level that would be adequate to pay required debt service
payments on the Pacesetter mortgage note. The General Partner determined that it
would be in the best interest of the Partnership to sell Pacesetter Apartments.
On March 17, 1994, the property was sold (See Note 6 - "Disposition of Real
Estate Investment").

<PAGE>

The basis and accumulated depreciation of the Partnership's real estate
investment at December 31, 1995 and 1994, is set forth in the following table:

<TABLE>
<CAPTION>
Buildings and Accumulated Net Book
1995 Land Improvements Depreciation Value
---- ------------- ------------- ------------- -----------
<S> <C> <C> <C> <C>
Palm Bay
Orlando, FL $ 2,336,000 $ 5,010,483 $ (1,010,990) $ 6,335,493
============ ========== =========== ==========

Buildings and Accumulated Net Book
1994 Land Improvements Depreciation Value
---- ------------- -------------- ------------- -----------

Palm Bay $ 2,336,000 $ 4,569,577 $ (666,496) $ 6,239,081
============ ========== =========== ==========
</TABLE>

NOTE 5 - MORTGAGE NOTE PAYABLE
- ------------------------------

The following table sets forth the Partnership's mortgage note at December 31,
1995 and 1994. The mortgage note is secured by the Partnership's real estate
investment.

<TABLE>
<CAPTION>
Mortgage Annual Monthly
Lien Interest Payments/ December 31,
Property Position (a) Rates % Maturity Date (c) 1995 1994
- -------- --------------- ------- ----------------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Palm Bay First 8.750 $26,775 06/97(b) $ 2,161,204 $ 2,287,341
============ ===========
</TABLE>

(a) The debt is non-recourse to the Partnership.

(b) The Palm Bay mortgage note matures in June 1997. At that time, a balloon
payment of approximately $1,975,000 will be due.

<S> <C>
1996.................................... $ 137,627
1997.................................... 2,023,577
----------

$ 2,161,204
==========
</TABLE>

<PAGE>

Based on borrowing rates currently available to the Partnership for a mortgage
loan with similar terms and average maturities, the fair value of the mortgage
note payable was approximately $2,101,900 at December 31, 1995.

As indicated above, the mortgage note is secured by the Partnership's only
property and is due and payable on June 1, 1997. Management's current
projections indicate that there will not be sufficient cash flow from operations
to fund that obligation. Management is currently analyzing the Partnership's
options, including refinancing the mortgage note or marketing the property for
sale.

NOTE 6 - DISPOSITION OF REAL ESTATE INVESTMENT
- ----------------------------------------------

On March 17, 1994, the Partnership sold its investment in Pacesetter Apartments
to an unaffiliated buyer for a cash sales price of $4,050,000. Cash proceeds
from this transaction, as well as the gain on sale are detailed below.

<TABLE>
<CAPTION>
Gain on Sale Cash Proceeds
----------------- -----------------

<S> <C> <C>
Sales price........................................ $ 4,050,000 $ 4,050,000
Selling costs...................................... (300,692) (300,692)
Basis of real estate sold.......................... (3,174,607)
---------------

Gain on sale....................................... $ 574,701
===============
---------------
Proceeds from sale of real estate.................. 3,749,308
Retirement of mortgage note........................ (2,094,135)
---------------

Net cash proceeds.................................. $ 1,655,173
===============
</TABLE>

NOTE 7 - LEGAL PROCEEDINGS
- --------------------------

<PAGE>

This action was dismissed without prejudice in November 1995.

On November 7, 1995, High River filed a second complaint with the
District Court which alleges, inter alia, that McNeil Partners, L.P.'s
(the "General Partner") Schedule 14D-9 filed in connection with the
High River tender offers was materially false and misleading, in
violation of Sections 14(d) and 14(e) of the Securities Exchange Act
of 1934, 15 U.S.C. Section 78n(d) and (e), and the SEC Regulations
promulgated thereunder; and that High River further alleges that the
General Partner has wrongfully refused to admit High River as a
limited partner to the ten partnerships referenced above.
Additionally, High River purports to assert claims derivatively on
behalf of McNeil Real Estate Fund IX, Ltd., McNeil Real Estate Fund
XI, Ltd., McNeil Real Estate Fund XV, Ltd., McNeil Real Estate Fund
XXIV, L.P. and McNeil Real Estate Fund XXV, L.P., for breach of
contract and breach of fiduciary duty, asserting that the General
Partner has charged these partnerships excessive fees. High River's
complaint seeks, inter alia, preliminary injunctive relief requiring
the General Partner to admit High River as a limited partner in each
of the ten partnerships referenced above and to transfer the tendered
units of interest in the partnerships to High River; an unspecified
award of damages payable to High River and an additional unspecified
award of damages payable to certain of the partnerships; an order that
defendants must discharge their fiduciary duties and must account for
all fees they have received from certain of the partnerships; and
attorneys' fees. On January 31, 1996, this action was dismissed
without prejudice.

<PAGE>

3) Robert Lewis v. McNeil Partners, L.P., McNeil Investors, Inc., Robert
A. McNeil et al - In the District Court of Dallas County, Texas,
A-14th Judicial District, Cause No. 95-08535 (Class Action) -
Plaintiff, Robert Lewis, is a limited partner with McNeil Pacific
Investors Fund 1972, Ltd., McNeil Real Estate Fund X, Ltd. and McNeil
Real Estate Fund XV, Ltd.

Plaintiff alleges that McNeil Partners, L.P., McNeil Investors, Inc.,
Robert A. McNeil and other senior officers (as defined in this Section 3,
collectively, the "Defendants") breached their fiduciary duties by, among
other things, (1) failing to attempt to sell the properties owned by the
Partnerships (as defined in this Section 3, the "Properties") and extending
the lives of the Partnerships indefinitely, contrary to the Partnerships'
business plans, (2) paying distributions to themselves and generating fees
for their affiliates, (3) refusing to make significant distributions to the
class members, despite the fact that the Partnerships have positive cash
flows and substantial cash balances, and (4) failing to take steps to
create an auction market for equity interests of the Partnerships, despite
the fact that a third party bidder filed tender offers for approximately
forty-five percent (45%) of the outstanding units of each of the
Partnerships. Plaintiff also claims that Defendants have breached the
partnership agreements of the Partnerships by failing to take steps to
liquidate the Properties and by their alteration of the Partnerships'
primary purposes, their acts in contravention of these agreements, and
their use of the assets of the Partnerships for their own benefit instead
of for the benefit of the Partnerships.

The Defendants deny that there is any merit to Plaintiff's allegations and
intend to vigorously defend this action.

<PAGE>

The Defendants deny that there is any merit to Plaintiff's allegations and
intend to vigorously defend this action.

Plaintiff brings this class action on behalf of a class of all persons and
entities who are current owners of units and/or are limited partners in one
or more of the partnerships referenced above (as defined in this Section 5,
the "Partnerships"). Plaintiff alleges that McNeil Partners, L.P., McNeil
Investors, Inc., Robert A. McNeil and other senior officers (as defined in
this Section 5, collectively, the "Defendants") have breached their
fiduciary duties to the class members by, among other things, (1) taking
steps to prevent the consummation of the High River tender offers, (2)
failing to take steps to maximize unitholders' or limited partners' values,
including failure to liquidate the properties owned by the Partnerships,
(3) managing the Partnerships so as to extend indefinitely the present fee
arrangements, and (4) paying itself and entities owned and controlled by
the general partner excessive fees and reimbursements of general and
administrative expenses.

The Defendants deny that there is any merit to Plaintiff's allegations and
intend to vigorously defend this action.

NOTE 8 - PRO FORMA DISCLOSURE (UNAUDITED)
- -----------------------------------------

The following pro forma information for the years ended December 31, 1994 and
1993 reflects the results of operations of the Partnership as if the sale of
Pacesetter Apartments had occurred as of January 1, 1993. The pro forma
information is not necessarily indicative of the results of operations that
actually would have occurred or those which might be expected to occur in the
future.

<TABLE>
<CAPTION>
For the Years Ended December 31,
-------------------------------------
1994 1993
---------------- --------------
<S> <C> <C>
Total revenues..................................... $ 1,287,125 $ 1,209,697
Net loss........................................... (77,885) (1,027,901)
Net loss per limited partnership unit.............. (5.66) (74.51)
</TABLE>

<PAGE>

McNEIL PACIFIC INVESTORS FUND 1972
SCHEDULE III
REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION
December 31, 1995

<TABLE>
<CAPTION>
Cumulative Costs
Initial Cost (b) Write-down Capitalized
Related (b) Buildings and and Permanent Subsequent
Description Encumbrances Land Improvements Impairment To Acquisition
- ----------- ------------ ---- ------------- ------------- --------------

Apartments:
<S> <C> <C> <C> <C> <C>
Palm Bay Apartments
Orlando, FL $ 2,161,204 $ 2,336,000 $ 4,214,000 $ (800,000) $ 1,596,483
============= ============= ============= =========== ============
</TABLE>

(b) The initial cost and encumbrances reflect the present value of future loan
payments discounted, if appropriate, at a rate estimated to be the
prevailing interest rate at the date of acquisition or refinancing.

See accompanying notes to Schedule III.

<PAGE>

McNEIL PACIFIC INVESTORS FUND 1972
SCHEDULE III
REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION
December 31, 1995

<TABLE>
<CAPTION>
Gross Amount at
Which Carried at Close of Period Accumulated
Buildings and Depreciation
Description Land Improvements Total (a) and Amortization
- ----------- ---- ------------- --------- ----------------

Apartments:
<S> <C> <C> <C> <C>
Palm Bay Apartments
Orlando, FL $ 2,336,000 $ 5,010,483 $ 7,346,483 $ (1,010,990)
============= ============= =============== =============
</TABLE>

(a) For Federal income tax purposes, the properties are depreciated over lives
ranging from 15-25 years using ACRS or MACRS methods. The aggregate cost of
real estate investments for Federal income tax purposes was approximately
$10,653,153 and accumulated depreciation was $940,317 December 31,
1995.

See accompanying notes to Schedule III.

<PAGE>

McNEIL PACIFIC INVESTORS FUND 1972
SCHEDULE III
REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION
December 31, 1995

Date of Date Depreciable
Description Construction Acquired lives (years)
- ----------- ------------ -------- -------------
Apartments:

<S> <C> <C> <C>
Palm Bay Apartments
Orlando, FL 1974 06/91 2-25

</TABLE>

See accompanying notes to Schedule III.

<PAGE>

McNEIL PACIFIC INVESTORS FUND 1972

NOTES TO SCHEDULE III

REAL ESTATE INVESTMENT AND ACCUMULATED DEPRECIATION

A summary of activity for the Partnership's real estate investments and
accumulated depreciation for the years ended December 31, 1995, 1994 and 1993 is
as follows:

For the Years Ended December 31,
----------------------------------------------------
1995 1994 1993
-------------- -------------- ---------------
Real estate investments:

<S> <C> <C> <C>
Balance at beginning of year............... $ 6,905,577 $ 6,257,807 $ 11,952,287

Write-down for permanent
impairment of real estate............... - - (2,700,000)

Improvements............................... 440,906 647,770 466,547

Reclassification to asset held
for sale................................ - - (3,461,027)
------------- ------------- --------------

Balance at end of year..................... $ 7,346,483 $ 6,905,577 $ 6,257,807
============= ============== ==============

Accumulated depreciation:

Balance at beginning of year............... $ 666,496 $ 443,333 $ 423,615

Depreciation............................... 344,494 223,163* 271,476

Reclassification to asset held
for sale................................ - - (251,758)
------------- -------------- --------------

Balance at end of year..................... $ 1,010,990 $ 666,496 $ 443,333
============= ============== ===============

</TABLE>

* Amount excludes depreciation on Pacesetter Apartments which was classified
as an asset held for sale throughout the year.

<PAGE>

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
- ------- -----------------------------------------------------------
AND FINANCIAL DISCLOSURE
------------------------

None.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Neither the Partnership nor the General Partner has any directors or executive
officers. The names and ages of, as well as the positions held by, the officers
and directors of McNeil Investors, Inc., the general partner of the General
Partner, are as follows:

Other Principal Occupations and Other
Name and Position Age Directorships During the Past 5 Years
- ----------------- --- -------------------------------------
<S> <C> <C>
Robert A. McNeil, 75 Mr. McNeil is also Chairman of the Board and Director of McNeil Real
Chairman of the Estate Management, Inc. ("McREMI") which is an affiliate of the General
Board and Director Partner. He has held the foregoing positions since the formation of such
entity in 1990. Mr. McNeil received his B.A. degree from Stanford
University in 1942 and his L.L.B. degree from Stanford Law School in
1948. He is a member of the State Bar of California and has been involved
in real estate financing since the late 1940's and in real estate
acquisitions, syndications and dispositions since 1960. From 1986 until
active operations of McREMI and McNeil Partners, L.P. began in February
1991, Mr. McNeil was a private investor. Mr. McNeil is a member of the
International Board of Directors of the Salk Institute, which promotes
research in improvements in health care.

Carole J. McNeil 52 Mrs. McNeil is Co-Chairman, with husband Robert A. McNeil, of McNeil
Co-Chairman of the Investors, Inc. Mrs. McNeil has twenty years of real estate experience,
Board most recently as a private investor from 1986 to 1993. In 1982, she
founded Ivory & Associates, a commercialreal estate brokerage firm in
San Francisco, CA. Prior to that, she was a commercial real estate
associate with the Madison Company and, earlier, a commercial sales
associate and analyst with Marcus and Millichap in San Francisco.
In 1978, Mrs. McNeil established Escrow Training Centers,
California's first accredited commercial training program for title
company escrow officers and real estate agents needing college
credits to qualify for brokerage licenses. She began in real estate
as Manager and Marketing Director of Title Insurance and Trust
in Marin County, CA. Mrs. McNeil serves on the International
Board of Directors of the Salk Institute.

</TABLE>

<PAGE>

Other Principal Occupations and Other
Name and Position Age Directorships During the Past 5 Years
- ----------------- --- -------------------------------------
<S> <C>
Donald K. Reed, 50 Mr. Reed is President, Chief Executive Officer and Director of McREMI
Director, President, which is an affiliate of the General Partner. Prior to joining McREMI in
and Chief Executive March 1993, Mr. Reed was President, Chief Operating Officer and Director
Officer of Duddlesten Management Corporation and Duddlesten Realty Advisors, Inc.,
with responsibility for a management portfolio of office, retail,
multi-family and mixed-use land projects representing $2 billion in asset
value. He was also Chief Operating Officer, Director and member of
the Executive Committee of all Duddlesten affiliates. Mr. Reed started
with the Duddlesten companies in 1976 and served as Senior Vice President
and Chief Financial Officer and as Executive Vice President and Chief
Operating Officer of Duddlesten Management Corporation before his
promotion to President in 1982. He was President and Chief Operating
Officer of Duddlesten Realty Advisors, Inc., which has been engaged in
real estate acquisitions, marketing and dispositions, since its
formation in 1989.

Ron K. Taylor 38 Mr. Taylor is a Senior Vice President of McREMI and has been in this
capacity since McREMI commenced active operations in 1991. He also serves
as Acting Chief Financial Officer of McREMI since the resignation of
Robert C. Irvine on January 31, 1996. Mr. Taylor is primarily responsible
for Asset Management functions at McREMI, including property dispositions,
commercial leasing, real estate finance and portfolio management. Prior
to joining McREMI, Mr. Taylor served as an Executive Vice President for a
national syndication/property management company. Mr. Taylor has been
involved in the real estate industry since 1983.
</TABLE>

Each director shall serve until his successor shall have been duly elected and
qualified.

ITEM 11. EXECUTIVE COMPENSATION
- -------- ----------------------

No direct compensation was paid or payable by the Partnership to directors or
officers (since it does not have any directors or officers) for the year ended
December 31, 1995, nor was any direct compensation paid or payable by the
Partnership to directors or officers of the general partner of the General
Partner for the year ended December 31, 1995. The Partnership has no plans to
pay any such remuneration to any directors or officers of the general partner of
the General Partner in the future.

See Item 13 - Certain Relationships and Related Transactions for amounts of
compensation and reimbursements paid by the Partnership to the General Partner
and its affiliates.

<PAGE>

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
- -------- --------------------------------------------------------------

(A) Security ownership of certain beneficial owners.

No individual or group, as defined by Section 13(d)(3) of the
Securities Exchange Act of 1934, known to the Partnership is the
beneficial owner of more than 5% of the Partnership's securities with
the exception of the following:

1. The General Conference Corporation of Seventh Day Adventists,
12501 Old Columbia Pike, Silver Spring, Maryland, 20904, owns
950 (6.9%) of the Partnership's Units as of February 29, 1996.

2. A group of ten limited partnerships affiliated with Liquidity
Financial Corporation, all of whose outstanding stock is owned
by Richard G. Wollack and Brent R. Donaldson, 2200 Powell
Street, Suite 700, Emeryville, California, 94608, collectively
own 840 (6.1%) of the Partnership's Units as of February 29,
1996.

(B) Security ownership of management.

The General Partner and the officers and directors of its general
partner collectively own 50 Units, which is less than 1% of Units
outstanding.

None.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- -------- ----------------------------------------------

The Partnership pays property management fees equal to 6% of gross rental
receipts of the Partnership's property to McREMI for providing property
management and leasing services for the Partnership's property. The Partnership
reimburses McREMI for its costs, including overhead, of administering the
Partnership's affairs. For the year ended December 31, 1995, the Partnership
paid or accrued $160,071 in property management fees and reimbursements.

The General Partner is entitled to receive a sales commission as compensation
for selling Partnership property equal to the lesser of 4% of the sales price of
the property sold or the customary fee charged by independent brokers in the
area where the property is located. During 1995, the Partnership paid an $81,000
commission to the General Partner in connection with the 1994 sale of Pacesetter
Apartments.

The General Partner has established a revolving credit facility not to exceed
$5,000,000 in the aggregate which is available on a "first-come, first-served"
basis to the Partnership and other partnerships affiliated with the General
Partner if certain conditions are met. Borrowings under the facility may be used
to fund deferred maintenance, refinancing obligations and working capital needs.
The Partnership had $50,000 of outstanding borrowings under the facility at
December 31, 1993. The $50,000 was repaid during 1994. Borrowings from the
facility are unsecured, due on demand and accrue interest at the prime lending
rate of Bank of America plus 1%. As of December 31, 1995, $2,662,819 remained
available for borrowing under the facility; however, additional funds could
become available as other partnerships repay borrowings. This commitment will
terminate on March 30, 1997.

See Item 1 - Business, Item 7 - Management's Discussion and Analysis of
Financial Condition and Results of Operations, and Item 8 - Note 2 -
"Transactions with Affiliates."

<PAGE>
PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-K
- -------- -----------------------------------------------------------------

See accompanying Index to Financial Statements at Item 8.

<TABLE>
<CAPTION>
(A) Exhibits
--------

The following exhibits are incorporated by reference and are an
integral part of this Form 10-K.

Exhibit
Number Description
------- -----------

<S> <C>
3.1 Restated Certificate and Agreement of
Limited Partnership dated as of March
8, 1972. (1)

3.2 Amendment to Restated Certificate and
Agreement of Limited Partnership
dated as of March 30, 1992. (3)

10.1 Mortgage Note, dated March 9, 1975,
between McNeil Pacific Investors Fund
1972 and John Hancock Life Insurance
Company. (2)

10.2 Property Management Agreement, dated as
of October 1, 1993, between McNeil
Pacific Investors Fund 1972 and McNeil
Real Estate Management, Inc. (3)

10.3 Revolving Credit Agreement, dated
August 6, 1991 between McNeil Partners,
L.P. and McNeil Pacific Investors Fund
1972. (3)

10.4 Amendment of Property Management
Agreement, dated January 1, 1995, between
McNeil Pacific Investors Fund 1972 and
McNeil Real Estate Management, Inc. (4)

10.5 Modification Agreement, dated effective
June 1, 1992, between M R Partners, Inc.
and John Hancock Mutual Life Insurance
Company (4)
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------

<S> <C>
11. Statement regarding computation of Net
Income per Limited Partnership Unit (see
Note 1 to Financial Statements).

(1) Incorporated by reference to the Annual
Report of McNeil Pacific Investors Fund
1972 on Form 10-K for the period ended
December 31, 1990, as filed with the
Securities and Exchange Commission on
March 29, 1991.

(2) Incorporated by reference to the Annual
Report of McNeil Pacific Investors Fund
1972 (Commission file number 0-7162), on
Form 10-K for the period ended December
31, 1991, as filed with the Securities and
Exchange Commission on March 30, 1992.

(3) Incorporated by reference to the Annual
Report of McNeil Pacific Investors Fund
1972 (Commission file number 0-7162), on
Form 10-K for the period ended December
31, 1993, as filed with the Securities and
Exchange Commission on March 30, 1994.

(4) Incorporated by reference to the Annual
Report of McNeil Pacific Investors Fund
1972 (Commission file number 0-7162), on
Form 10-K for the period ended December
31, 1994, as filed with the Securities and
Exchange Commission on March 30, 1995.

27. Financial Data Schedule for the year ended
December 31, 1995.
</TABLE>

(B) Reports on Form 8-K. There were no reports on Form 8-K filed during the
quarter ended December 31, 1995.

<PAGE>

McNEIL PACIFIC INVESTORS FUND 1972
A Limited Partnership

SIGNATURE PAGE

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.

McNEIL PACIFIC INVESTORS FUND 1972

By: McNeil Partners, L.P., General Partner

By: McNeil Investors, Inc., General Partner

<S> <C>
March 29, 1996 By: /s/ Robert A. McNeil
- -------------- -------------------------------------------------
Date Robert A. McNeil
Chairman of the Board and Director
(Principal Executive Officer)

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 and
in the capacities and on the dates indicated.

March 29, 1996 By: /s/ Donald K. Reed
- -------------- -------------------------------------------------
Date Donald K. Reed
President and Director of McNeil Investors, Inc.

March 29, 1996 By: /s/ Ron K. Taylor
- -------------- -------------------------------------------------
Date Ron K. Taylor
Acting Chief Financial Officer
of McNeil Investors, Inc.

March 29, 1996 By: /s/ Brandon K. Flaming
- -------------- -------------------------------------------------
Date Brandon K. Flaming
Chief Accounting Officer of McNeil Real Estate
Management, Inc.

</TABLE>

<ARTICLE> 5

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 523,389
<SECURITIES> 0
<RECEIVABLES> 3,849
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 7,346,483
<DEPRECIATION> (1,010,990)
<TOTAL-ASSETS> 6,993,903
<CURRENT-LIABILITIES> 0
<BONDS> 2,161,204
<COMMON> 0
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 6,993,903
<SALES> 1,376,148
<TOTAL-REVENUES> 1,439,428
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,526,366
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 198,948
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> (285,886)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (285,886)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0

</TABLE>