NYLIFE REALTY INCOME PARTNERS I L P, DEF 14A, 1996-05-28

NYLIFE REALTY INCOME PARTNERS I L P
DEF 14A, 1996-05-28
REAL ESTATE

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SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
(Amendment No. 2)

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Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
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______________________NYLIFE REALTY INCOME PARTNERS I, L.P._____________________
(Name of Registrant as Specified in its Charter)

________________________________________________________________________________
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

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Payment of Filing Fee (Check the appropriate box):
/ / $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or Item 22(a)(2) of
Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule 14a-6(i)(3).
/X/ Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies: Units of
Limited Partnership Interest
2) Aggregate number of securities to which transaction applies: 2,833,925.5
Units
3) Per unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is
calculated and state how it was determined):
$4.57 (aggregate amount of cash, estimated only for purposes of computing the
filing fee, to be distributed to security holders assuming sale of all of the
properties of the Registrant for the estimated fair market value,
$11,862,204)
4) Proposed maximum aggregate value of transaction:
$12,955,931 (aggregate amount of cash, estimated only for purposes of
computing the filing fee, to be distributed to security holders assuming sale
of all of the properties of the Registrant for the estimated fair market
value, $11,862,204)
5) Total fee paid:
$2,592.37
/ / Fee paid previously with preliminary materials.
/X/ Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2)
and identify the filing for which the offsetting fee was paid previously. Identify the
previous filing by registration statement number, or the Form or Schedule and the date
of its filing.
1) Amount Previously Paid:
$2,461.39
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2) Form, Schedule or Registration Statement No.:
Schedule 14A
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3) Filing Party:
NYLIFE Realty Income Partners I, L.P.
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4) Date Filed:
March 29, 1996
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NYLIFE REALTY INCOME PARTNERS I, L.P.,
51 Madison Avenue, Suite 1710
New York, NY 10010
Telephone Number: 1-800-278-4117

June 1, 1996

To the Limited Partners of
NYLIFE Realty Income Partners I, L.P.

Enclosed is a copy of the definitive consent solicitation statement (the
"Definitive Solicitation Statement") relating to the solicitation of written
consents of the limited partners (the "Limited Partners") of NYLIFE Realty
Income Partners I, L.P., a Delaware limited partnership (the "Partnership"), to
dissolve and terminate the Partnership.

Due to the importance of the action for which your consent is solicited, you
should carefully read the Definitive Solicitation Statement in its entirety. A
consent form is enclosed. Regardless of the size of your holdings, it is
important that your Units be voted. After you have received and read the
Definitive Solicitation Statement, we urge you to fill in, date, sign and mail
the enclosed consent form promptly.

Sincerely,
NYLIFE REALTY INC.,
GENERAL PARTNER

CNP REALTY INVESTMENTS INC.,
GENERAL PARTNER

YOUR VOTE IS IMPORTANT. PLEASE SIGN AND RETURN THE ENCLOSED
CONSENT FORM PROMPTLY IN THE ENCLOSED ENVELOPE.

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DEFINITIVE SOLICITATION STATEMENT

NYLIFE REALTY INCOME PARTNERS I, L.P.

51 Madison Avenue, Suite 1710
New York, NY 10010
Telephone Number: 1-800-278-4117

SOLICITATION OF CONSENTS TO DISSOLVE
AND TERMINATE THE PARTNERSHIP

To the Limited Partners of
NYLIFE Realty Income Partners I, L.P.:

NYLIFE Realty Income Partners I, L.P., a Delaware limited partnership (the
"Partnership"), is soliciting consents of the limited partners (the "Limited
Partners") of the Partnership to dissolve and terminate the Partnership (the
"Proposal"). If the Proposal is approved by the requisite consent of the Limited
Partners, the Partnership will be dissolved and terminated in accordance with
the terms of the Amended and Restated Agreement of Limited Partnership of the
Partnership (the "Partnership Agreement"). Under the Partnership Agreement,
adoption of the Proposal requires the consent of holders of more than 50% of the
units of limited partner interest ("Units") of the Partnership.

The approximate date on which this Definitive Solicitation Statement is
first being mailed to Limited Partners is June 1, 1996. The Definitive
Solicitation Statement modifies and supersedes the Preliminary Solicitation
Statement for the Partnership dated March 29, 1996. Each Limited Partner
received, with the Preliminary Solicitation Statement, a Statement of
Eligibility which contained a schedule showing total distributions received by
such Limited Partner through March 29, 1996 and an estimate of the payment to be
received by such Limited Partner under the Settlement. Upon request, the General
Partners will provide a copy of the Statement of Eligibility to a Limited
Partner at no charge. Only Limited Partners of record at the close of business
on May 14, 1996 (the "Record Date") will be entitled to submit consent forms
with respect to the Proposal. The consent solicitation for the Partnership will
expire at 5:00 p.m., New York time, on July 1, 1996, unless extended by the
General Partners (as extended from time to time, the "Expiration Date"). The
Proposal will be deemed adopted and effective on the Expiration Date if at such
time the Partnership has received executed consent forms consenting to the
Proposal from the holders of record of more than 50% of the Units outstanding on
the Record Date.

Limited Partners may revoke any previously submitted consent, disapproval or
abstention with respect to the Proposal by delivering written notice of such
revocation to the Partnership prior to the Expiration Date. Any duly executed
consent form on which a consent, disapproval or abstention is not indicated
(except broker non-votes expressly indicating a lack of discretionary authority
to consent) will be deemed a consent to the Proposal. An abstention from voting
on the Proposal will effectively count as a negative vote with respect to the
Proposal.

This Definitive Solicitation Statement is dated May 28, 1996.

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TABLE OF CONTENTS

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SUMMARY................................................................................................. 1
The Partnership....................................................................................... 1
The Proposal and Its Potential Effects................................................................ 1
The Proposal........................................................................................ 1
Effect of Approval of the Proposal and the Settlement............................................... 2
Required Consent.................................................................................... 3
Effect on Limited Partners and Partnership if Proposal Is Not Approved................................ 4
Summary of Potential Payments to Limited Partners..................................................... 4
No Dissenters' Rights................................................................................. 4
Reasons for the Proposal.............................................................................. 4
Material Advantages and Disadvantages of the Proposal to the Partners................................. 5
Determination of Liquidation Advance.................................................................. 5
Litigation and Proposed Settlement.................................................................... 6
The Lawsuit......................................................................................... 6
Denial of Claims.................................................................................... 6
Terms of Proposed Settlement Payments............................................................... 6
Release............................................................................................. 7
Conditions to Settlement............................................................................ 7
Class Notice and Final Order........................................................................ 7
Federal Income Tax Consequences....................................................................... 8
Interests of General Partners and Affiliates.......................................................... 9
Solicitation Costs.................................................................................... 9

THE PROPOSAL AND REASONS FOR THE PROPOSAL............................................................... 10
The Proposal.......................................................................................... 10
Liquidation Procedures.............................................................................. 10
Sale of the Partnership's Properties................................................................ 10
Provision for Liabilities........................................................................... 11
Liquidating Distributions........................................................................... 11
Sales Proceeds from Non-Terminating Sales........................................................... 11
Sales Proceeds from Terminating Sale................................................................ 11
Distributable Cash From Operations.................................................................. 12
Net Income and Net Loss............................................................................. 12
General Partners' Capital Account Deficiency........................................................ 13
Pro Forma Information............................................................................... 13
Effect of Approval of the Proposal and the Settlement................................................. 13
Cash Payments to Settling Limited Partners.......................................................... 13
Effect of the Settlement on Liquidating Distributions............................................... 15
Consent of Limited Partners to the Proposal........................................................... 15
Effect on Limited Partners and Partnership if the Proposal Is Not Approved............................ 16
Summary of Potential Payments to Limited Partners if the Settlement is Approved....................... 17
No Dissenters' Rights................................................................................. 17
Investment Committee and Board Determinations......................................................... 18
Reasons for the Proposal.............................................................................. 18
Material Advantages and Disadvantages of the Proposal to the Partners................................. 18
Advantages to Limited Partners...................................................................... 18
Disadvantages to Limited Partners................................................................... 19
Advantages to General Partners...................................................................... 19
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Estimated Financial Effects of Immediate Liquidation Versus Continued Operation of the Partnership.... 19

LITIGATION AND PROPOSED SETTLEMENT...................................................................... 20
The Lawsuit and the Class Members..................................................................... 20
Denial of Claims...................................................................................... 20
Payment Under the Settlement Agreement to the Limited Partners........................................ 21
The Hearing Order and the Settlement Hearing.......................................................... 21
Potential Termination of the Settlement Agreement..................................................... 21
Potential Termination of the Settlement Agreement with Respect to the Partnership..................... 22
Release............................................................................................... 22
Final Approval and Final Order and Judgment........................................................... 22

REGULATORY APPROVALS.................................................................................... 22

CERTAIN INFORMATION CONCERNING THE PARTNERSHIP.......................................................... 23
General............................................................................................... 23
General Partners and Management....................................................................... 23
Rights and Powers of Limited Partners................................................................. 24
Term and Dissolution of the Partnership............................................................... 25
Properties............................................................................................ 25
Competition........................................................................................... 28
Legal Proceedings..................................................................................... 28

APPRAISALS OF THE PROPERTIES............................................................................ 28

SELECTED FINANCIAL DATA................................................................................. 30

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS................... 31
Liquidity and Capital Resources....................................................................... 31
Results of Operations................................................................................. 31
Three months ended March 31, 1996 compared to three months ended March 31, 1995..................... 31
1995 compared to 1994............................................................................... 32
1994 compared to 1993............................................................................... 33
1993 compared to 1992............................................................................... 36

FEDERAL INCOME TAX CONSEQUENCES......................................................................... 38
Cash Payment.......................................................................................... 38
Refund.............................................................................................. 38
Liquidation Advance................................................................................. 38
Enhancement......................................................................................... 38
Special Rules for Tax-Exempt Limited Partners....................................................... 38
Winding Up and Liquidation of the Partnership......................................................... 39

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.......................................... 40

INTERESTS OF CERTAIN PERSONS IN TRANSACTION............................................................. 40

MARKET FOR UNITS AND RELATED MATTERS.................................................................... 41

VOTING PROCEDURES....................................................................................... 41

ADDITIONAL INFORMATION.................................................................................. 42

INCORPORATION BY REFERENCE.............................................................................. 42
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INDEX TO FINANCIAL STATEMENTS OF THE PARTNERSHIP........................................................ F-1

PRO FORMA BALANCE SHEETS ON A LIQUIDATION BASIS......................................................... PF-1
Pro Forma Balance Sheet on a Liquidation Basis for the Partnership (Unaudited)........................ PF-2
Pro Forma Balance Sheet on a Liquidation Basis for the Properties (Unaudited)......................... PF-3

CERTAIN FINANCIAL INFORMATION WITH RESPECT TO NYLIFE INC................................................ N-1
Report of Independent Accountants..................................................................... N-2
Consolidated Statement of Financial Position as of December 31, 1995 and 1994......................... N-3
Consolidated Statement of Changes in Stockholder's Equity............................................. N-4
Notes to Consolidated Statement of Financial Position................................................. N-5

EXHIBIT A -- EXECUTIVE SUMMARIES OF APPRAISALS.......................................................... A-1

EXHIBIT B -- CERTAIN DEFINED TERMS USED IN THE PARTNERSHIP
AGREEMENT.............................................................................................. B-1

EXHIBIT C -- NUMERICAL EXAMPLES OF PAYMENTS IF SETTLEMENT IS APPROVED................................... C-1
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SUMMARY

THE FOLLOWING SUMMARY IS INTENDED TO ASSIST LIMITED PARTNERS IN REVIEWING
THE MORE DETAILED INFORMATION CONTAINED ELSEWHERE IN THIS PRELIMINARY
SOLICITATION STATEMENT AND IS QUALIFIED IN ITS ENTIRETY BY SUCH DETAILED
INFORMATION.

THE PARTNERSHIP

The Partnership was formed on November 14, 1986 solely for the purpose of
investing in real estate, primarily through joint ventures (the "Joint
Ventures") that would invest in, hold, manage and sell existing commercial
properties. The Partnership presently has investments in three Joint Ventures
with New York Life Insurance Company (the "Co-Venturer"), an affiliate of the
Partnership. Through these Joint Ventures, the Partnership holds interests in
the following properties (the "Properties"): an office building in Blue Ash,
Ohio, a suburb of Cincinnati ("Cornell"); three commercial buildings in Eden
Prairie, Minnesota, a suburb of Minneapolis ("Eden Woods"); and a shopping
center in Columbus, Ohio ("NewMarket"). In December 1994, a fourth Joint Venture
in which the Partnership had been a co-venturer sold its property, an office
building in Brentwood, Tennessee, a suburb of Nashville ("Parklane"). On
February 15, 1995, the Partnership distributed its share of the Parklane cash
reserve and net sales proceeds aggregating $4,129,702 to the partners of the
Partnership.

The Joint Ventures for Cornell and Parklane were funded 60% by the
Partnership and 40% by the Co-Venturer. The Joint Venture for Eden Woods was
funded 47.06% by the Partnership and 52.94% by the Co-Venturer. The Joint
Venture for NewMarket was originally funded 47.09% by the Partnership and 52.91%
by the Co-Venturer; however, additional capital contributions to such Joint
Venture have resulted in ownership interests of 43.82% and 56.18% for the
Partnership and the Co-Venturer, respectively, at December 31, 1995. All Joint
Venture income, losses and distributions are generally apportioned pro-rata
between the Partnership and the Co-Venturer in proportion to their respective
contributions to the Joint Ventures.

Units of limited partnership interests in the Partnership were offered for
sale to the public (the "Public Offering") until June 30, 1989. As of such date
the Partnership had raised gross proceeds of $28,339,255 from the sale of
2,833,925.5 Units to 3,383 Limited Partners.

The general partners (the "General Partners") of the Partnership are NYLIFE
Realty Inc. ("NYLIFE Realty"), a Delaware corporation and an indirect,
wholly-owned subsidiary of the Co-Venturer, and CNP Realty Investments Inc.
("CNP"), a Delaware corporation and a wholly-owned subsidiary of NYLIFE Realty
(jointly, the "General Partners"). NYLIFE Inc., a wholly-owned subsidiary of the
Co-Venturer, is the sole stockholder of NYLIFE Realty. NYLIFE Realty is
primarily responsible for both property-related and Partnership administrative
matters. An agreement provides that a management committee (the "Investment
Committee") composed of six persons, three from each General Partner, must
approve all major decisions with respect to the Partnership's business.

The Partnership is the managing partner of each Joint Venture, responsible
for management of the day-to-day operations and implementing the joint decisions
of the Joint Venture's partners. Each Joint Venture agreement provides that a
management committee (the "Joint Venture Management Committee") composed of two
representatives from the Partnership and two representatives from the
Co-Venturer, must approve all major decisions with respect to each Joint
Venture's business. Such representatives are all employees of New York Life
Insurance Company ("New York Life").

THE PROPOSAL AND ITS POTENTIAL EFFECTS

THE PROPOSAL. The Partnership is soliciting the consent of its Limited
Partners to the Proposal. The consents are being sought in connection with a
proposed settlement (the "Settlement") of a class action lawsuit (the "Lawsuit")
pending in the United States District Court for the Southern District of Florida
(the "Court"). The Proposal is not conditioned upon the Settlement being
approved or completed. If the Limited Partners approve the Proposal, the
Partnership will be dissolved and terminated in accordance with the terms of the
Partnership Agreement. The assets of the Partnership
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will be sold for cash and the cash remaining after satisfaction of the
Partnership's liabilities will be distributed to the General Partners and the
Limited Partners in accordance with the terms of the Partnership Agreement. For
a discussion of the allocation and distribution of proceeds to partners upon
liquidation of the Partnership, see "The Proposal and Reasons for the Proposal
- -- The Proposal -- Liquidating Distributions."

EFFECT OF APPROVAL OF THE PROPOSAL AND THE SETTLEMENT. Under the
Settlement, "Cash Payments" will be made by NYLIFE Realty, as paying agent for
NYLIFE Inc., directly to Settling Limited Partners (as defined below) if the
Settlement is approved by the Court and becomes final. If no appeal is filed,
the Settlement will become final 30 days after the Court enters a Final Order
and Judgment approving the Settlement; otherwise, the Settlement becomes final
when all appellate proceedings have been concluded and those proceedings result
in the courts upholding the Final Order and Judgment (the "Final Settlement
Date"). The Cash Payments will be made within 30 days after the Final Settlement
Date, or as soon thereafter as practicable. The Court currently has scheduled
the hearing regarding approval of the Settlement for July 3, 1996.

If the Proposal is approved by the Limited Partners, a Limited Partner who
remains in the class (a "Settling Limited Partner") will receive under the
Settlement a Cash Payment that, when added to prior distributions received, will
at least equal the amount invested by that Settling Limited Partner in the
Partnership. Each Limited Partner received, with the Preliminary Solicitation
Statement, a Statement of Eligibility which contained a schedule showing total
distributions received by such Limited Partner through March 29, 1996 and an
estimate of the payment to be received by such Limited Partner under the
Settlement. Upon request, the General Partners will provide a copy of the
Statement of Eligibility to a Limited Partner at no charge. See "The Proposal
and Reasons for the Proposal -- Effect of Approval of the Proposal and the
Settlement -- Cash Payments to Settling Limited Partners."

The first part of the Cash Payment will be a "Liquidation Advance." The
Liquidation Advance will be a Settling Limited Partner's share in "Adjusted NAV"
(which, in general, is the estimated market value as of December 31, 1995, of
the Partnership's interests in the Joint Ventures) and in "Distributable Working
Capital." "Adjusted NAV" and "Distributable Working Capital" are more fully
described under "The Proposal and Reasons for Proposal -- Effect of Approval of
the Proposal and the Settlement."

The Liquidation Advance will be repaid to NYLIFE Realty solely out of any
"Liquidating Distribution" made by the Partnership to a Settling Limited
Partner. The Liquidating Distribution will consist of the Partnership's cash and
other assets that remain after the Partnership's assets are sold and its
liabilities are discharged. To ensure that repayment, each Settling Limited
Partner will grant NYLIFE Realty a security interest in such Settling Limited
Partner's Units and Liquidating Distribution up to the amount of the Liquidation
Advance. If the Liquidating Distribution is less than the Liquidation Advance, a
Settling Limited Partner has no obligation to repay the difference to NYLIFE
Realty. If a Settling Limited Partner's Liquidating Distribution exceeds the
Liquidation Advance, then that Settling Limited Partner will receive the excess
amount in up to two installments as the Partnership is liquidated and
liabilities are satisfied.

The second part of the Cash Payment to a Settling Limited Partner will be
either a "Refund" or an "Enhancement." A Refund will be paid if the Liquidation
Advance, plus all prior distributions, is less than the amount invested by a
Settling Limited Partner in the Partnership. The Refund portion of the Cash
Payment will be equal to that difference. An Enhancement will be paid if the
Liquidation Advance, plus all prior distributions, equals or exceeds the amount
invested by a Settling Limited Partner in the Partnership. The Enhancement will
be equal to $.40 multiplied by the number of Units of the Partnership owned by a
Settling Limited Partner. In no event will a Settling Limited Partner receive
less than $200 as a Refund or an Enhancement. For payments that may be made to a
Settling Limited Partner that is an employee benefit plan, see "The Proposal and
Reasons for the Proposal -- Effect of Approval of the Proposal and the
Settlement."

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The Refund or the Enhancement, together with the Liquidation Advance, form
the consideration provided to a Settling Limited Partner in exchange for the
release of claims that is provided under the Settlement. The Enhancement is
being offered to the Settling Limited Partners who have received a full return
on their investments as part of the consideration that such Settling Limited
Partners will receive for the Release (as defined below) they will grant the
Defendants (as defined below). See "Litigation and Proposed Settlement --
Release." Due to their different individual circumstances, Settling Limited
Partners who receive an Enhancement will be receiving, together with the
Liquidation Advance and prior distributions, an aggregate return on their
investment that is more than the return on investment obtained by those Settling
Limited Partners who receive a Refund. All Settling Limited Partners, however,
will receive at least a return of their investment, taking account of prior
distributions.

Cash Payments under the Settlement will not be made to a Limited Partner who
elects not to participate in the Settlement. A "Non-Settling Limited Partner"
will receive only a Liquidating Distribution after sale of the Partnership
properties, which will not include any Refund or Enhancement amount, and thus
will be less than the amount the Non-Settling Limited Partner would have
received if that Limited Partner had elected to participate in the Settlement.

There are numerous conditions to the Settlement, including approval by the
Court. There can be no assurance that if the Proposal is approved by the Limited
Partners and the Partnership is liquidated, such conditions will be satisfied.
If the Proposal is approved but the Settlement does not become final, Limited
Partners will receive only Liquidating Distributions. See "Litigation and
Proposed Settlement -- Potential Termination of the Settlement Agreement" and
"Litigation and Proposed Settlement -- Potential Termination of the Settlement
Agreement with respect to the Partnership." For an estimate of what a Settling
Limited Partner who purchased $10,000 worth of Units in June 1987 at the initial
closing of the public offering of the Units by the Partnership could expect to
receive if the Proposal is approved and the Settlement becomes final, see "The
Proposal and Considerations with Respect to the Proposal -- Effect of Approval
of the Proposal and the Settlement" and Exhibit C.

NYLIFE Inc., the sole stockholder of NYLIFE Realty, will deposit funds into
a trust account for the benefit of NYLIFE Realty to ensure the payment of the
Cash Payment to Settling Limited Partners under the Settlement Agreement. NYLIFE
Realty will act as paying agent for NYLIFE Inc. with respect to the Cash
Payments. The audited balance sheet of NYLIFE Inc. as of December 31, 1995 is
included under "Certain Financial Information with Respect to NYLIFE Inc."
NYLIFE Realty, although solvent, has only nominal assets and capital.
Accordingly, it is unable to contribute in any material manner to any payments
required under the Settlement and is also unable to satisfy any other
substantial liabilities of the Partnership or that may arise as a result of the
liquidation of the Partnership. Liabilities of NYLIFE Realty as to the
Settlement have been assumed by NYLIFE Inc. Therefore, the General Partners do
not believe that NYLIFE Realty's financial statements are relevant to the
decision of Limited Partners with respect to approving the Proposal or
participating in the Settlement, and, accordingly, such financial information is
not included with this Definitive Solicitation Statement. Any Liquidating
Distributions, however, will be made only from the net proceeds remaining after
the sale of the Partnership's assets and satisfaction, or provision for
satisfaction, of all the Partnerships liabilities (see "The Proposal and Reasons
for the Proposal -- The Proposal -- Liquidating Distributions."). See "The
Proposal and Reasons for the Proposal -- Effect of Approval of the Proposal and
the Settlement -- Cash Payments."

REQUIRED CONSENT. Under the Partnership Agreement, adoption of the Proposal
requires the approval of holders of more than 50% of the Units. NYLIFE Realty
owns 2,016.4 Units and will consent to the Proposal with respect to such Units.
For information on the number of Units outstanding and the total number of Units
with respect to which Unitholders must give their consent to the Proposal to
approve the Proposal, see "The Proposal and Reasons for the Proposal -- Consent
of Limited Partners to the Proposal." Only Limited Partners of record at the
close of business on the

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Record Date will be entitled to submit consent forms with respect to the
Proposal. The consent solicitation will expire at 5:00 p.m., New York time, on
July 1, 1996, unless extended by the General Partners. See "Voting Procedures."

EFFECT ON LIMITED PARTNERS AND PARTNERSHIP IF THE PROPOSAL IS NOT APPROVED

If the Proposal is not approved, the Partnership will continue to own and
operate the Properties and, depending on the Properties' performances, the
Partnership may continue to earn income and make distributions to the partners.
Consistent with the Partnership's investment objectives, the General Partners
may solicit offers for the sale of the Properties as opportunities arise. In any
such sale, the Partnership would benefit from any increase in the value of the
Properties and suffer further loss from any decrease in the value of the
Properties. Failure by the Limited Partners to approve the Proposal will not
affect the rights of the Limited Partners under the Partnership Agreement.

Under the terms of the Settlement Agreement (as defined below), if the
consents necessary to dissolve and terminate the Partnership have not been
obtained by the Final Settlement Date, the New York Life Defendants (as defined
below) will have the option of either (a) terminating the proposed Settlement as
it applies to the Partnership and the Settling Limited Partners or (b) paying to
each Settling Limited Partner the Refund or the Enhancement, as the case may be,
but not the Liquidation Advance, in exchange for a Release (as defined below)
from such Settling Limited Partner. In the latter event, the Refund or
Enhancement, as the case may be, will be calculated as if the Liquidation
Advance had been paid. Therefore, if the Limited Partners do not consent to the
dissolution of the Partnership by approving the Proposal, the Settling Limited
Partners will not be assured the full return of their investment in the
Partnership. There can be no assurance that the future performance of the
Partnership or the outcome of the Lawsuit or any possible future settlement
thereof would result in the Limited Partners receiving as much or more than they
would receive if the Proposal is approved and the Settlement is approved and
becomes final. See "The Proposal and Reasons for the Proposal -- Effect on
Limited Partners and Partnership if the Proposal Is Not Approved."

SUMMARY OF POTENTIAL PAYMENTS TO LIMITED PARTNERS

Under "The Proposal and Reasons for the Proposal -- Summary of Potential
Payments to Limited Partners If the Settlement is Approved" is a chart setting
forth the type of payments the Limited Partners may receive, assuming the
Settlement is approved and becomes final, depending upon (a) the approval or
rejection of the Proposal by the Limited Partners and (b) the election of the
individual Limited Partner to participate in the Settlement.

NO DISSENTERS' RIGHTS

The Limited Partners will not be entitled to any dissenters' rights or
appraisal rights under either the Partnership Agreement or Delaware law with
respect to the transactions described in this Solicitation Statement. See "The
Proposal and Reasons for the Proposal -- No Dissenters' Rights."

REASONS FOR THE PROPOSAL

The General Partners believe that it is in the best interests of the Limited
Partners to approve the Proposal for the following reasons:

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2. FAVORABLE MARKET CONDITIONS. The General Partners believe that this may
be an opportune time to sell the Properties. The Properties have achieved
improved operations during the past two years. Sale of the Properties and
liquidation of the Partnership at this time offers Limited Partners an
opportunity to liquidate their investment in the Partnership during a period of
favorable conditions in the real estate market.

3. COST OF MAINTAINING THE PARTNERSHIP. Continuing to operate the
Partnership as a public partnership requires ongoing expenditures for overhead
costs associated with investor relations and investor servicing, as well as
legal and accounting costs associated with required compliance reporting. The
Partnership is subject to federal and state securities laws and the terms of the
Partnership Agreement under which periodic reports and annual financial
statements are required to be generated by the Partnership. The cost of
completing these reports and financial statements is paid out of the revenues of
the Partnership. The Partnership sold its interests in Parklane in late 1994,
and if the Proposal is not approved, the Partnership may consider selling
additional Properties in the future. Each sale results in a reduction in the
number of Properties generating revenues to cover these overhead costs.

See "The Proposal and Reasons for the Proposal -- Reasons for the Proposal"
and "The Proposal and Reasons for the Proposal -- Material Advantages and
Disadvantages of the Proposal to the Partners."

MATERIAL ADVANTAGES AND DISADVANTAGES OF THE PROPOSAL TO THE PARTNERS

Potential advantages to the Limited Partners if the Proposal is approved:

- Limited Partners will be able to receive cash in liquidation of their
investments.

- Liquidation of the Partnership at this time offers Limited Partners an
opportunity to liquidate their investment during a period of favorable
conditions in the real estate market.

- If the Settlement is also approved, a Settling Limited Partner will
receive an amount that, together with prior distributions from the
Partnership, will be at least equal to the Settling Limited Partner's
total investment in the Partnership.

Potential disadvantages to the Limited Partners if the Proposal is approved:

- The Limited Partners will no longer have any rights in the Partnership's
properties and will not benefit from any potential increases in the value
of the properties or receive any semiannual distributions from the
Partnership.

- If a Limited Partner participates in the Settlement, he, she or it will
release and discharge the Defendants (as defined below), including the
General Partners, and various other persons from any and all past, present
and future causes of action in connection with the Proprietary
Partnerships (as defined below).

If the Proposal is approved, the General Partners will receive a
proportionate amount of the proceeds of liquidation of the Partnership pursuant
to their general partner interests and the Units they hold in the Partnership.
Estimates of these amounts for the General Partners, based on the pro forma
balance sheet on a liquidation basis, are set forth in Exhibit C. Furthermore,
if the Proposal is approved, the General Partners will receive the benefit of
the Release (as defined below). In addition, New York Life, an affiliate of the
General Partners and the Co-Venturer of each of the Joint Ventures, will
participate in the net proceeds from the sale of the Properties in proportion to
its interest in the Joint Ventures. See "The Proposal and Reasons for the
Proposal -- Material Advantages and Disadvantages of the Proposal to the
Partners," "Litigation and Proposed Settlement -- Release" and "Interests of
Certain Persons in Transaction."

DETERMINATION OF LIQUIDATION ADVANCE

The Cash Payment to a Settling Limited Partner will consist of both a
Liquidation Advance and either a Refund or Enhancement, as the case may be. The
Liquidation Advance will be equal to a Settling Limited Partner's proportionate
interest in the sum of (i) Adjusted NAV, which is the

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<PAGE>
estimated market value as of December 31, 1995 of the Partnership's interests in
the Joint Ventures as determined by the General Partners, as adjusted for any
sales of Properties from December 31, 1995 through the Final Settlement Date,
and (ii) Distributable Working Capital.

The General Partners have determined the estimated market value as of
December 31, 1995 of the Partnership's interests in the Joint Ventures to be
$11,862,204. In determining such estimated market value, the General Partners
relied in part on appraisals of the Properties prepared by the independent
appraisal firms of Property Counselors, Inc. (with respect to Eden Woods), U.S.
Realty Consultants, Inc. (with respect to NewMarket) and a third independent
appraisal firm (with respect to Cornell). Pursuant to their valuations dated
December 15, 1995 (with respect to Cornell and NewMarket) and December 31, 1995
(with respect to Eden Woods), such appraisal firms (the "Appraisers") determined
the market value of the Properties to be as follows:

<TABLE>
<CAPTION>
APPRAISED VALUE PARTNERSHIP SHARE
--------------- -----------------
<S> <C> <C>
Cornell................................................... $ 7,200,000 $ 4,320,000
Eden Woods................................................ $ 9,200,000 $ 4,329,520
NewMarket................................................. $ 8,000,000 $ 3,505,600
--------------- -----------------
Total................................................... $ 24,400,000 $ 12,155,120
--------------- -----------------
--------------- -----------------
</TABLE>

The appraisals are only estimates of current value and actual values
realizable upon sale may be significantly different. See "Appraisals of the
Properties."

LITIGATION AND PROPOSED SETTLEMENT

THE LAWSUIT. On March 18, 1996, Evelyn Shea and Ann Grimshawe
("Plaintiffs") filed the Lawsuit in the Court against New York Life, several of
its subsidiaries, including NYLIFE Realty and CNP (together with New York Life,
the "New York Life Defendants") and two companies unaffiliated with New York
Life (collectively with the New York Life Defendants, the "Defendants"). The
Lawsuit was preceded by two similar but separate lawsuits filed by the
Plaintiffs in Texas State court on January 11, 1996. The Plaintiffs purport to
represent a class (the "Class") of all persons (the "Class Members") who
purchased or otherwise assumed rights and title to interests ("Proprietary
Investment Units") in certain limited partnerships (the "Proprietary
Partnerships"), including the Partnership, created, sponsored, marketed, sold,
operated or managed by the Defendants from January 1, 1985 through March 18,
1996. In the Lawsuit, Plaintiffs allege generally that the Defendants engaged in
fraudulent activities in connection with the marketing and sale of interests in
the Proprietary Partnerships and the subsequent operation of such Partnerships,
breached implied covenants and fiduciary duties owed to investors in the
Proprietary Partnerships and violated various federal securities and state laws
and rules. See "Litigation and Proposed Settlement -- The Lawsuit and the Class
Members."

DENIAL OF CLAIMS. The Defendants have denied and continue to deny any
wrongdoing or liability alleged in the Lawsuit. The Defendants have,
nevertheless, agreed to the proposed Settlement of the Lawsuit for the reasons
described in more detail elsewhere in this Solicitation Statement. Prior to the
filing of the Lawsuit, the New York Life Defendants determined that it would be
in the best interest of the investors in certain Proprietary Partnerships,
including the Partnership, to terminate such partnerships and, in connection
therewith, to provide certain payments to the limited partners that would be in
addition to any amounts they would receive upon liquidation of the partnerships,
although the New York Life Defendants had no obligation to do so. See
"Litigation and Proposed Settlement -- Denial of Claims."

TERMS OF PROPOSED SETTLEMENT PAYMENTS. On March 19, 1996, the Plaintiffs
and Defendants filed with the Court a Stipulation of Settlement (the "Settlement
Agreement") that sets forth the terms of the proposed Settlement of the Lawsuit.
With respect to the Partnership, the proposed Settlement generally provides that
each Settling Limited Partner who is a Class Member and who has not excluded
himself, herself or itself from the Class by following the procedures outlined
by the Court will receive the Liquidation Advance and either the Refund or the
Enhancement, as the case may be, as

6
<PAGE>

described more fully elsewhere in this Solicitation Statement. See "Litigation
and Proposed Settlement -- Payment under the Settlement Agreement to Limited
Partners" and "The Proposal and Reasons for the Proposal -- Effect of Approval
of the Proposal and the Settlement -- Cash Payments to Settling Limited Partners
if Proposal and Settlement are Approved."

RELEASE. As part of the proposed Settlement, Plaintiffs and all Class
Members who did not exclude themselves from the Class, including the Settling
Limited Partners, will each grant a full release and discharge (the "Release")
of the Defendants, their affiliates, agents and various other persons and
entities from any and all causes of action in connection with the Proprietary
Partnerships, including the Partnership. See "Litigation and Proposed Settlement
- -- Release."

CONDITIONS TO SETTLEMENT. The Settlement Agreement is not yet final and may
be terminated in certain circumstances. The Settlement will become final only
after the Court enters a Final Order and Judgment approving the Settlement and
the period for appeal thereof has expired, or if the Final Order or Judgment is
appealed, on the date on which all appeals have been finally disposed of in a
manner that affirms the Final Order and Judgment. The Court currently has
scheduled the hearing regarding approval of the Settlement for July 3, 1996. See
"Litigation and Proposed Settlement -- Potential Termination of the Settlement
Agreement."

Plaintiffs have the right to terminate the Settlement Agreement under the
circumstances specified therein. In addition, Defendants may unilaterally
terminate the Settlement Agreement (a) with respect to all of the Proprietary
Partnerships taken together if those persons who elect to exclude themselves
from the Class (i) together number more than 3% of all Class Members, or (ii)
have ownership interests in the Proprietary Partnerships that together account
for more than 3% of all capital invested by limited partners in the Proprietary
Partnerships; (b) with respect to a particular Proprietary Partnership if those
persons who elect to exclude themselves from the Class with respect to such
Proprietary Partnership (i) together number more than 3% of all those who are
members of the Class with respect to such partnership, or (ii) have ownership
interests in such partnership that together account for more than 3% of all
capital invested by limited partners in such partnership; (c) if the votes,
consents or authorizations necessary to dissolve and liquidate four or more of
the Proprietary Partnerships are not obtained; (d) if any state or federal
regulator, self-regulatory organization or other administrative body or official
(i) objects either to any aspect or term of the Settlement Agreement or to the
transactions to be entered into to facilitate the proposed Settlement and takes
or threatens to take any regulatory or legal action that would impair the
ability of the parties to conclude the Settlement or (ii) requires as a
condition of not taking action any modification to the Settlement Agreement,
including, without limitation, any constriction or extension of the scope of the
contemplated relief, that the Defendants in their sole discretion believe would
impair their ability to consummate the Settlement or to provide the contemplated
relief; or (e) if a final order dismissing the Texas State court actions with
prejudice, which is no longer appealable, has not been entered by the Final
Settlement Date. See "Litigation and Proposed Settlement -- Potential
Termination of the Settlement Agreement." Furthermore, the Settlement Agreement
provides that if the Limited Partners of the Partnership do not approve the
Proposal, the New York Life Defendants may either (i) unilaterally terminate the
Settlement Agreement as it applies to the Partnership and the Settling Limited
Partners or (ii) pay each Settling Limited Partner the Refund or the
Enhancement, as the case may be, but not the Liquidation Advance, in exchange
for a Release from such Settling Limited Partner as described below. In the
latter event, the Refund or the Enhancement, as the case may be, will be
calculated as if the Liquidation Advance had been paid. See "Litigation and
Proposed Settlement -- Potential Termination of the Settlement Agreement with
Respect to The Partnership."

CLASS NOTICE AND FINAL ORDER. The Court has certified the Class for
settlement purposes only and directed the New York Life Defendants, or their
designee(s), to cause a notice (the "Class Notice") to be mailed to all
potential members of the Class at their last known address no later than 90 days
before the Settlement Hearing. The Class Notice has been sent to Limited
Partners included in the Class and should be referred to for further information
regarding the Lawsuit, the Settlement and the Settlement Hearing. See
"Litigation and Proposed Settlement -- The Hearing Order and the Settlement
Hearing."

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<PAGE>
FEDERAL INCOME TAX CONSEQUENCES

The following summary of what the General Partners believe, based on the
advice of tax counsel, are likely to be the principal federal income tax
consequences of the transaction for most Limited Partners, is for general
information purposes only. Each Limited Partner is strongly urged to consult
his, her or its own tax adviser with respect to the specific consequences of the
receipt of a Cash Payment pursuant to the Settlement and of the winding up and
liquidation of the Partnership in such Limited Partner's particular
circumstances. See "Federal Income Tax Consequences."

In general, with respect to the receipt of a Cash Payment pursuant to the
Settlement, the Refund and the Enhancement should be treated for federal income
tax purposes as a return of capital and should be applied against and reduce a
Settling Limited Partner's adjusted tax basis in his, her or its Units. To the
extent, if any, that the Refund or Enhancement received by a Settling Limited
Partner exceeds his, her or its adjusted tax basis in his, her or its Units,
such excess will constitute taxable income to such Settling Limited Partner,
which may be ordinary income. A Settling Limited Partner generally should not
recognize income on his, her or its receipt of the Liquidation Advance. If the
Liquidation Advance received by a Settling Limited Partner ultimately exceeds
the Liquidating Distribution allocable to such Settling Limited Partner, such
excess generally should be treated for federal income tax purposes in the same
manner as a Refund received at the time of the liquidation of the Partnership. A
Tax-Exempt Limited Partner (as defined herein) who participates in the
Settlement generally should not recognize unrelated business taxable income as a
result of its receipt of the Refund or Enhancement. However, if such a
Tax-Exempt Limited Partner has either (i) incurred "acquisition indebtedness"
within the meaning of the Internal Revenue Code of 1986, as amended (the
"Code"), with respect to its Units or (ii) utilized deductions (if any)
generated by the Partnership against unrelated business taxable income, then
such Limited Partner may recognize unrelated business taxable income to the
extent (if any) the Refund or Enhancement exceeds its adjusted tax basis in its
Units. Property acquired with the proceeds of the Liquidation Advance should not
be treated as "debt-financed property" within the meaning of the Code.

In general, upon the disposition of the Partnership's real properties, each
Limited Partner will recognize its allocable share of the gain or loss realized
by the Partnership from such disposition. It is anticipated that any gain or
loss from the disposition of such property should generally be treated as
"section 1231" gain or loss. Upon the disposition of the tangible personal
property of the Partnership, a Limited Partner will also recognize his, her or
its share of the gain or loss realized by the Partnership. Any gain from the
sale of such property will be treated as ordinary income (and in the case of a
Tax-Exempt Limited Partner, unrelated business taxable income if such Limited
Partner utilized deductions (if any) generated by the Partnership against
unrelated business taxable income) to the extent of the amount of depreciation
deductions previously allowed with respect to such property, and any excess gain
and the entire amount of any loss from the disposition of such property should
generally be treated as "section 1231" gain or loss. It is anticipated that the
amount characterized as ordinary income will generally be allocated to Limited
Partners other than Tax-Exempt Limited Partners.

A Limited Partner could also recognize additional gain or loss upon the
liquidation of the Partnership and the distribution of the sales proceeds, to
the extent that the sum of the cash received (and in the case of a Settling
Limited Partner, any amounts treated as received and used to repay the
Liquidation Advance) and the reduction in his, her or its share of Partnership
non-recourse liabilities (if any) is greater or less than the adjusted tax basis
of his, her or its Units (taking into account any gain or loss recognized from
the sale of the Partnership assets and his, her or its receipt of a Refund or
Enhancement). Such gain or loss should be characterized as capital gain or loss.

A Tax-Exempt Limited Partner (as defined herein) may have unrelated business
taxable income as a result of the winding up and liquidation of the Partnership
if it has incurred "acquisition indebtedness" within the meaning of the Code
with respect to its Units.

See "Federal Income Tax Consequences."

8
<PAGE>
INTERESTS OF GENERAL PARTNERS AND AFFILIATES

The Proposal may give rise to interests of the General Partners in the
transaction and certain conflicts of interest arising out of the relationships
among the Partnership, the General Partners and affiliates of the General
Partners, including the following:

(i) If the Proposal is approved by the Limited Partners and the
Settlement is approved by the Court and becomes final, the General Partners
and certain of their affiliates will be released from certain liabilities as
discussed in "Litigation and Proposed Settlement -- Release."

(ii) New York Life, an affiliate of the General Partners, is the
Co-Venturer of each of the Joint Ventures and will participate in the net
proceeds from the sale of the Properties in proportion to its interest in
the Joint Ventures.

(iii) Each Joint Venture agreement provides that the consent of both the
Partnership and the Co-Venturer is required for the sale of the Property
owned by the Joint Venture. The Co-Venturer has informed the Partnership,
however, that if the Proposal is approved, the Co-Venturer will consent to
the terms of any sale of the Property for cash if the terms are acceptable
to the Partnership.

(iv) Pursuant to the Partnership Agreement, the General Partners would be
entitled to a Subordinated Disposition Fee (as defined therein) in
connection with the sale of a Property if the Limited Partners have received
a specified return on their capital contributions. The General Partners
believe that it is unlikely that the specified return will be achieved upon
sale of the Properties.

(v) As a condition to receipt of a Liquidation Advance from NYLIFE
Realty, as paying agent for NYLIFE Inc., each Settling Limited Partner will
grant a security interest in favor of NYLIFE Realty in his, her or its Units
and any Liquidating Distribution up to the amount of such Settling Limited
Partner's Liquidation Advance to secure the repayment of the Liquidation
Advance out of such Settling Limited Partner's Liquidating Distribution.

(vi) Each of the General Partners will receive Liquidating Distributions
as a result of its general partner interest in the Partnership. In addition,
NYLIFE Realty will receive a Liquidating Distribution as a result of its
ownership of Units. No Cash Payments will be made with respect to Units
owned by NYLIFE Realty.

See "Interests of Certain Persons in Transaction," "Security Ownership of
Certain Beneficial Owners and Management" and "The Proposal and Reasons for the
Proposal -- Material Advantages and Disadvantages of the Proposal to the
Partners -- Advantages to General Partners."

SOLICITATION COSTS

The Partnership Agreement allows certain costs and expenses incurred by the
General Partners, including those in connection with the preparation and mailing
of the Solicitation Statement and all papers which accompany or supplement the
Solicitation Statement, to be charged to the Partnership. NYLIFE Realty,
however, has elected to pay all costs and expenses, including legal fees,
incurred in connection with the preparation, filing and distribution of this
Solicitation Statement and all accompanying or supplementary papers.

The Proprietary Partnerships have retained the services of D. F. King & Co.,
Inc. ("King") to solicit the written consents of the Limited Partners.
Additionally, Boston Financial Data Services, Inc. ("BFDS") has been retained by
the General Partners, certain of their affiliates and the Plaintiffs as the
class action administrator in connection with the Lawsuit. As such, BFDS may
assist in the solicitation of written consents. Solicitation of written consents
also may be undertaken by the directors, officers, employees and agents of the
General Partners or New York Life. Solicitation may be made by mail, telephone,
telegraph, facsimile transmission or personal interview. The fees and expenses
of King and BFDS and the costs incurred by the General Partners in connection
with the solicitation of consents will be borne by NYLIFE Realty and certain of
its affiliates. See "Voting Procedures."

9
<PAGE>
THE PROPOSAL AND REASONS FOR THE PROPOSAL

THE PROPOSAL

The Partnership is requesting the consent of its Limited Partners to
dissolve and terminate the Partnership. If the Proposal is approved, the assets
of the Partnership will be sold, and, after satisfaction of all Partnership
liabilities, the net proceeds of such sale will be distributed to the partners
in accordance with the terms of the Partnership Agreement. The Proposal is not
conditioned upon the Court's approval of the Settlement or the Settlement
becoming final. There can be no assurance that the Settlement will be approved
and become final.

Summarized in this Solicitation Statement are certain provisions of the
Partnership Agreement. Such summaries are qualified in their entirety by
reference to the full text of the Partnership Agreement, which has been provided
previously to the Limited Partners and copies of which may be obtained without
charge upon request to the Partnership at the address set forth under
"Incorporation by Reference."

LIQUIDATION PROCEDURES. The Partnership Agreement provides that upon
dissolution and termination of the Partnership, the General Partners shall take
full account of the Partnership's assets and liabilities, liquidate the assets
as promptly as is consistent with obtaining the fair value thereof, and
distribute the proceeds first to the payment of creditors of the Partnership and
then to the partners. Once the affairs of the Partnership have been fully
concluded, if the proceeds from the sale of the Partnership's properties are
greater than the Partnership's liabilities, the General Partners will make cash
distributions to the Limited Partners as described below under "-- Liquidating
Distributions." (Liquidating Distributions of Settling Limited Partners will be
subject to a security interest, as described under "The Proposal and Reasons for
the Proposal -- Effect of Approval of the Proposal and the Settlement -- Cash
Payments to Settling Limited Partners.") The General Partners will determine the
amount, timing and method of making any Liquidating Distributions to the Limited
Partners in accordance with the terms of the Partnership Agreement. See "--
Liquidating Distributions." The Partnership will terminate upon the final
distribution of the net proceeds from the liquidation of the Partnership's
assets, and the General Partners will thereafter file a Certificate of
Cancellation with the Secretary of State of the State of Delaware for the
Partnership.

SALE OF THE PARTNERSHIP'S PROPERTIES. If the Proposal is approved, the
General Partners will undertake to cause the Joint Ventures to sell the
Properties for cash as promptly as is consistent with obtaining the fair value
thereof. Regardless of the manner of sale, the Properties may be sold with
limited representations and warranties or on an "as is, where is" basis, in
order to reduce the potential exposure of the Partnership to future claims by
purchasers of the Properties.

New York Life has engaged Morgan Stanley & Co. Incorporated ("Morgan
Stanley") and Greystone Realty Corporation ("Greystone") to assist in certain
aspects of the sale of Properties, should the Proposal be approved by the
Limited Partners. Morgan Stanley is an internationally recognized investment
banking and advisory firm. Morgan Stanley provides investment banking and
financial advisory services. Morgan Stanley, as part of its investment banking
business, is continually engaged in the valuation of businesses and securities
in connection with competitive biddings and valuations for corporate and other
purposes. Greystone is an affiliate of the Partnership and New York Life and has
provided property management services to the Joint Ventures since 1990. See
"Certain Information Concerning the Partnership -- General Partners and
Management." Any fees payable to Morgan Stanley and Greystone in connection with
the sale of the Properties will be paid by New York Life, and not the
Partnership.

No sale or agreement to sell the Properties has been made, and there can be
no assurance as to the price that will be received upon any such sale. The
General Partners and their affiliates will not purchase any of the Properties in
liquidation. Any such purchase would generally be prohibited by the Partnership
Agreement.

10
<PAGE>
PROVISION FOR LIABILITIES. Provision will be made for the payment of all
debts and liabilities of the Partnership, including all expenses incurred in the
liquidation, prior to distribution of the proceeds realized from liquidating the
Partnership's properties and assets. See the Partnership's Financial Statements
included elsewhere herein for the liabilities of the Partnership as shown on the
balance sheets of the Partnership as of December 31, 1995 and March 31, 1996.
The General Partners will set aside a specified amount to meet anticipated
liabilities of the Partnership.

Under applicable Delaware law, distributions to limited partners, including
liquidating distributions, are subject to payment of or the making of reasonable
provision for all obligations of the dissolving limited partnership including
contingent, conditional or unmatured claims and obligations. In general, a
limited partnership is prohibited from making a distribution to its partners to
the extent that, after giving effect to the distribution, the partnership's
liabilities exceed the fair value of its assets. In the event a liquidating
distribution is made to the Limited Partners without payment of all such
liabilities, the Limited Partners may be liable therefor to the extent they knew
at the time of the distribution that such distribution violated Delaware law. As
the Cash Payments are not being made by the Partnership and therefore do not
constitute distributions to the Settling Limited Partners, this provision of
Delaware law will not apply to the Cash Payments and the Settling Limited
Partners will not be liable to the Partnership therefor.

LIQUIDATING DISTRIBUTIONS. After discharging all debts and liabilities of
the Partnership or making provision therefor, all remaining cash will be
distributed in accordance with the terms of the Partnership Agreement as
summarized below. For the definitions of certain capitalized terms used herein
and not otherwise defined see Exhibit B attached hereto. The dissolution of the
Partnership is not conditioned upon the Settlement being approved by the Court
or the Settlement becoming final. Therefore, if the Proposal is approved, there
can be no assurance that a Limited Partner will receive any amounts other than a
Liquidating Distribution.

The Partnership Agreement provides that following the payment to creditors
of the Partnership from the proceeds of the liquidation of the Partnership's
assets, any remaining proceeds shall be distributed to the Partners pursuant to
Paragraph 11 of the Partnership Agreement. Paragraph 11 provides generally as
follows:

SALES PROCEEDS FROM NON-TERMINATING SALES. The Partnership Agreement
provides that Sales Proceeds from the sale of Properties (other than from a
Terminating Sale, as discussed below) will be distributed in the following order
of priority:

(i) first, 100% to the Limited Partners until each Limited Partner has
received aggregate Sales Proceeds equal to his, her or its Capital
Contribution;

(ii) second, 100% to the Limited Partners until each Limited Partner has
received cumulative Distributions from all sources (except (i) above) equal
to a 6% cumulative, noncompounded annual return on his, her or its Adjusted
Capital Contribution;

(iii) third, after payment of the Subordinated Disposition Fee to the
General Partners, 100% to the Limited Partners until each Limited Partner
has received cumulative Distributions from all sources (except (i) above)
equal to a 10% cumulative, noncompounded annual return on his, her or its
Adjusted Capital Contribution; and

(iv) the remainder, 85% to the Limited Partners and 15% to the General
Partners.

SALES PROCEEDS FROM TERMINATING SALE. Sales Proceeds from a Terminating
Sale (defined as any Sale or Disposition of a Property that causes the
Partnership's share of the aggregate acquisition cost of all Properties that
have been sold or disposed of to exceed 75% of the Partnership's share of the
aggregate original acquisition cost of all Properties) shall be distributed
among the Partners in proportion to, and to the extent of (and as a credit to),
their respective positive capital account balances, after allocation of Net
Income or Net Loss from any Sale or Disposition.

11
<PAGE>
DISTRIBUTABLE CASH FROM OPERATIONS. All Distributable Cash From Operations
will be distributed 99% to the Limited Partners and 1% to the General Partners.

NET INCOME AND NET LOSS. Net Income (other than Net Income arising from a
Sale or Disposition) and Net Loss of the Partnership (both computed without
regard to depreciation) shall be allocated 1% to the General Partners and 99% to
the Limited Partners. All Partnership depreciation will generally be allocated
1% to the General Partners and 99% to the Taxable Investors.

Subject to the requirement that the General Partners shall at all times have
a 1% interest in all Partnership income, gain, loss, deduction or credit
(disregarding any Units owned by the General Partners), all Net Income arising
from the occurrence of a Sale (other than in connection with a Terminating Sale)
will be allocated according to the following priority: first, to each Partner in
an amount equal to the depreciation previously allocated to such Partner's Unit
(including depreciation allocated to such Unit when held by prior owners) up to
an aggregate amount equal to the depreciation deductions attributable to the
Property which is the subject of the Sale; second, to the Partners in proportion
to and to the extent of the Sales Proceeds from such Sale distributed to each
Partner, other than in repayment of Partners' Capital Contributions; and third,
the remainder will be allocated in proportion to the amount of Sales Proceeds
from such Sale distributed in repayment of Capital Contributions.

Pursuant to the Partnership Agreement, in connection with a Terminating
Sale, Net Income generally will first be allocated to Partners having negative
capital account balances, to the extent of and in proportion to such negative
capital account balances. The remaining Net Income then shall be allocated to
bring the capital account balance of each Limited Partner to an amount equal to
his Capital Contribution less any Sales Proceeds distributed in repayment of
such Capital Contributions, provided, however, that if such Net Income is
insufficient to provide for such allocation, such Net Income will be allocated
so as to equalize, to the extent possible, the capital accounts of all Limited
Partners. Thereafter, such Net Income generally will be allocated to the
Partners until the capital account balance of each Partner equals the amount of
Sales Proceeds which would have been distributed to such Partner had such Sale
been a non-Terminating Sale.

Notwithstanding the foregoing allocations of Net Income, Net Loss or
depreciation, if (i) any allocation of Net Loss or depreciation to a Limited
Partner would reduce such Limited Partner's capital account balance below zero
or increase the negative balance in such Limited Partner's capital account at a
time when another Limited Partner has a positive capital account balance, and
(ii) such allocation causes the sum of the negative capital account balances of
all Partners having negative capital account balances to exceed the
Partnership's "minimum gain" (the sum of any and each gain that would be
realized by the Partnership if it disposed of each Property subject to a
non-recourse liability in a taxable transaction in full satisfaction thereof),
then such excess will instead be allocated (a) first, in the case of Net Loss,
pro rata to Limited Partners having positive capital account balances in
proportion to their respective positive capital account balances until such
capital account balances are reduced to zero and (b) second, in the case of
depreciation, pro rata to all Limited Partners having positive capital account
balances to the extent of and in proportion to their respective capital account
balances.

The Partnership Agreement also contains a "qualified income offset," which
provides that if at the close of any Partnership taxable year, the negative
capital account balance of any Partner having a negative capital account balance
(whether caused by allocations of Net Loss or depreciation or Distributions)
exceeds such Partner's share of the minimum gain (the "Capital Account
Deficiency"), then Net Income arising from a Sale or Disposition equal to such
Capital Account Deficiency shall first be allocated to each Partner having a
negative balance in the proportion to which such negative balance bears to all
negative balances of all Partners. If such allocation is not sufficient to
eliminate the Capital Account Deficiency, then an amount of gross income shall
be allocated to each Partner with

12
<PAGE>
a negative balance in such same proportion in an amount necessary to eliminate
the Capital Account Deficiency. The foregoing allocations shall be made, to the
extent possible, no later than when the Capital Account Deficiency arises.

GENERAL PARTNERS' CAPITAL ACCOUNT DEFICIENCY. In the event that,
immediately prior to the dissolution of the Partnership, the General Partners
shall have a deficiency in their capital accounts as determined in accordance
with tax accounting principles, then the General Partners shall contribute in
cash to the capital of the Partnership an amount equal to whichever is the
lesser of (i) the deficiency in the General Partners' capital accounts or (ii)
the excess of 1.01% of the Limited Partners' Capital Contributions over the
total Capital Contributions of the General Partners.

PRO FORMA INFORMATION. See "Pro Forma Balance Sheet on a Liquidation Basis"
for a pro forma balance sheet of the Partnership assuming liquidation. Pro forma
information as to the amount of the total consideration to be received for a
$10,000 investment in the Partnership based on such pro forma balance sheet and
certain other assumptions is set forth in Exhibit C.

EFFECT OF APPROVAL OF THE PROPOSAL AND THE SETTLEMENT

CASH PAYMENTS TO SETTLING LIMITED PARTNERS. Under the Settlement, Cash
Payments will be made by NYLIFE Realty, as paying agent for NYLIFE Inc.,
directly to Settling Limited Partners after the Final Settlement Date. If no
appeal is filed from the Final Order and Judgment approving the Settlement, the
Final Settlement Date will be 30 days after the Court enters a Final Order and
Judgment approving the Settlement. If an appeal is filed, the Final Settlement
Date will be the date on which all appellate proceedings have been concluded and
those proceedings result in the courts upholding the Final Order and Judgment.
The Cash Payments will be made within 30 days after the Final Settlement Date,
or as soon thereafter as practicable.

If the Limited Partners approve the Proposal, a Settling Limited Partner
will receive a Cash Payment that, when added to prior distributions received,
will at least equal the amount invested by that Settling Limited Partner in the
Partnership. Part of this Cash Payment will be a Liquidation Advance. The
Liquidation Advance will be the Settling Limited Partner's share of Adjusted NAV
and Distributable Working Capital. "Adjusted NAV" is the estimated market value
as of December 31, 1995, as determined by the General Partners, of the
Partnership's interests in the Joint Ventures, adjusted for the sale of any
Properties from December 31, 1995 to the Final Settlement Date.

"Distributable Working Capital" is the amount of "Working Capital" remaining
in the Partnership as of the Final Settlement Date that the General Partners
estimate will not be needed to meet outstanding liabilities, contingencies,
costs and expenses associated with winding up the Partnership. "Working Capital"
is the amount of cash, cash equivalents and accounts receivable (and, excluding
the value of those assets on which Adjusted NAV is based) less payables and
accrued liabilities of the Partnership, as determined by the General Partners as
of the end of the fiscal quarter immediately preceding the Final Settlement
Date.

The Liquidation Advance will be repaid to NYLIFE Realty out of any
"Liquidating Distribution" made by the Partnership to a Settling Limited
Partner. The Liquidating Distribution will consist of the Partnership's cash and
other assets that remain after the Partnership's assets are sold and its
liabilities are discharged. To ensure that repayment, each Settling Limited
Partner will grant NYLIFE Realty a security interest in such Settling Limited
Partner's Units and Liquidating Distribution up to the amount of the Liquidation
Advance. If the Liquidating Distribution is less than the Liquidation Advance, a
Settling Limited Partner has no obligation to repay the difference to NYLIFE
Realty. If a Settling Limited Partner's Liquidating Distribution exceeds the
Liquidation Advance, then that Settling Limited Partner will receive the excess
amount in up to two installments as the Partnership is liquidated and
liabilities are satisfied.

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<PAGE>

the Cash Payment will be equal to that difference. An Enhancement will be paid
if the Liquidation Advance, plus all prior distributions, equals or exceeds the
amount invested by a Settling Limited Partner in the Partnership. The
Enhancement will be equal to $.40 multiplied by the number of Units of the
Partnership owned by the Settling Limited Partner. In no event will a Settling
Limited Partner receive less than $200 as a Refund or an Enhancement.

The Refund or the Enhancement, together with the Liquidation Advance, form
the consideration provided to a Settling Limited Partner in exchange for the
Release that is provided under the Settlement. See "Litigation and Proposed
Settlement -- Release." The Enhancement is being offered to the Settling Limited
Partners who have received a full return on their investments as consideration
for the Release they will grant the Defendants. Due to their individual
circumstances, Settling Limited Partners who receive an Enhancement will be
receiving, together with the Liquidation Advance and prior distributions, an
aggregate return on their investment that is more than the return on investment
obtained by Settling Limited Partners who receive a Refund. All Settling Limited
Partners, however, will receive at least a return on their investment, taking
account of prior distributions.

If the Proposal is approved by the Limited Partners and the Settlement
becomes final, it is anticipated that Settling Limited Partners who are original
purchasers of Units will receive the Refund plus the Liquidation Advance. Based
on estimates as of March 31, 1996, a Settling Limited Partner who purchased
$10,000 worth of Units in June 1987 in the initial closing of the public
offering by the Partnership of the Units could expect to receive a Liquidation
Advance of $4,570 and a Refund of $1,362, as a Cash Payment. See "Exhibit C --
Numerical Examples of Alternative Payments if Settlement is Approved." Each
Limited Partner received, with the Preliminary Solicitation Statement, a
Statement of Eligibility which contained an estimate of the payment to be
received by such Limited Partner under the Settlement. Such estimated payment
was calculated based on the Partnership's financial statements as of December
31, 1995 and distributions to Limited Partners through March 29, 1996. Upon
request, the General Partners will provide a copy of the Statement of
Eligibility to a Limited Partner at no charge. These estimated payments would be
made only to a Limited Partner who participates in the Settlement and only if
the Proposal is approved by the Limited Partners and the Settlement becomes
final. For a summary of the types of payments a Limited Partner would receive in
other circumstances when the Proposal is not approved by the Limited Partners or
the Limited Partner does not participate in the Settlement, see "Summary of
Potential Payments to Limited Partners if the Settlement is Approved."

The estimates set forth in Exhibit C and the Statement of Eligibility are
based on assumptions that the General Partners believed, as of their respective
dates, to be reasonable, but which are inherently uncertain and unpredictable.
The estimates set forth in Exhibit C are based on the pro forma liquidation
balance sheet of the Partnership dated as of March 31, 1996 and the assumptions
stated therein, as well as the additional assumptions set forth in Exhibit C.
The actual Cash Payment received by a Settling Limited Partner will differ from
the estimates above as a result of distributions made by the Partnership after
March 31, 1996, and revenues earned and expenses incurred by the Partnership
after March 31, 1996, and may also be affected by other factors. The estimates
do not give effect to the semiannual distribution paid by the Partnership on May
15, 1996. The actual Cash Payment received by a Settling Limited Partner will
also depend upon the amount paid for the Units and prior distributions received
by the Settling Limited Partner as of the Final Settlement Date. See Exhibit C
and "Pro Forma Balance Sheets on a Liquidation Basis -- Pro Forma Balance Sheet
on a Liquidation Basis for the Partnership (Unaudited)" for further detail
regarding estimated payments to Limited Partners and the assumptions on which
such estimates are based.

Notwithstanding the foregoing, if a Settling Limited Partner is an employee
benefit plan under the Employee Retirement Income and Security Act of 1974, as
amended ("ERISA"), and the receipt of the Liquidation Advance or the granting of
a security interest in the Units or the Liquidating Distribution would be a
prohibited transaction under ERISA or the Code, then such Settling Limited
Partner will be entitled to receive the Refund or the Enhancement, as the case
may be, but not the

14
<PAGE>

Liquidation Advance. In such event, the Refund or Enhancement will be calculated
as if the Liquidation Advance had been paid. Such Settling Limited Partner will
also be entitled to its proportionate share of any Liquidating Distributions
made by the Partnership. A prohibited transaction will generally occur if NYLIFE
Realty is, or is affiliated with, a fiduciary or employer of, or a service
provider to, the plan that is the Settling Limited Partner. The prohibited
transfer rules might also apply to individual retirement accounts in certain
circumstances. Settling Limited Partners should consult with their personal
advisers regarding the application of the prohibited transfer rules.

Cash Payments under the Settlement will not be made to a Limited Partner who
elects not to participate in the Settlement. Such a "Non-Settling Limited
Partner" will receive only a Liquidating Distribution, which will not include
any Refund or Enhancement amount, and thus will be less than the amount the
Non-Settling Limited Partner would have received if that Limited Partner had
elected to participate in the Settlement.

NYLIFE Inc., the sole stockholder of NYLIFE Realty, will deposit funds into
a trust account for the benefit of NYLIFE Realty to ensure the payment of the
Cash Payment to Settling Limited Partners under the Settlement Agreement. NYLIFE
Realty will act as paying agent for NYLIFE Inc. with respect to the Cash
Payments. The audited balance sheet of NYLIFE Inc. as of December 31, 1995 is
included under "Certain Financial Information with Respect to NYLIFE Inc."
NYLIFE Realty, although solvent, has only nominal assets and capital.
Accordingly, it is unable to contribute in any material manner to any payments
required under the Settlement and is also unable to satisfy any other
substantial liabilities of the Partnership or that may arise as a result of the
liquidation of the Partnership. Liabilities of NYLIFE Realty as to the
Settlement have been assumed by NYLIFE Inc. Therefore, the General Partners do
not believe that NYLIFE Realty's financial statements are relevant to the
decision of Limited Partners with respect to approving the Proposal or
participating in the Settlement, and, accordingly, such financial information is
not included with this Definitive Solicitation Statement. Any Liquidating
Distributions, however, will be made only from the net proceeds remaining after
the sale of the Partnership's assets and satisfaction, or provision for
satisfaction, of all the Partnership's liabilities. See "The Proposal and
Reasons for the Proposal -- The Proposal -- Liquidating Distributions."

EFFECT OF THE SETTLEMENT ON LIQUIDATING DISTRIBUTIONS. If the Proposal is
approved by the Limited Partners and the Settlement is approved by the Court and
becomes final, the Partnership Agreement will govern the amount of proceeds
distributed to the partners as described above under "-- The Proposal --
Liquidating Distributions." However, under the terms of the Settlement
Agreement, the Liquidating Distributions would be paid in up to two
installments.

The first installment will be paid within 30 days, or as soon as practicable
thereafter, after the General Partners determine the reserve (the "Reserve")
necessary to meet anticipated liabilities of the Partnership. The second
installment will be paid within 30 days, or as soon as practicable thereafter,
after all liabilities, contingencies and other obligations of the Partnership
(including, without limitation, debts to the General Partners) have been
satisfied or otherwise provided for, to the extent that there is any remaining
Reserve. As each Settling Limited Partner will already have received an advance
from NYLIFE Realty of his, her or its share of liquidation proceeds up to the
amount of his, her or its Liquidation Advance, such Settling Limited Partner's
share of proceeds up to the amount of his, her or its Liquidation Advance will
instead be distributed to NYLIFE Realty in repayment of such Liquidation
Advance. If a Settling Limited Partner's Liquidating Distribution is less than
the amount such Settling Limited Partner received as a Liquidation Advance, such
Settling Limited Partner will not be obligated to repay the difference to NYLIFE
Realty.

CONSENT OF LIMITED PARTNERS TO THE PROPOSAL

The Partnership Agreement provides that the Partnership is to be dissolved
and terminated upon a Majority Vote in favor of such dissolution and
termination. A "Majority Vote" is defined in the Partnership Agreement as the
affirmative vote of Limited Partners who own more than 50% of the total
outstanding Units. As of the Record Date, there were 2,833,925.5 Units
outstanding. Therefore,

15
<PAGE>
Limited Partners holding at least 1,416,963 Units must consent for the
Partnership to be dissolved and terminated. NYLIFE Realty owns 2,016.4 Units and
will consent to the Proposal with respect to the Units owned by it.

If Limited Partners owning more than 50% of the total outstanding Units
consent to dissolve and terminate the Partnership, pursuant to the terms of the
Partnership Agreement, Limited Partners who did not join in such consent will
nevertheless be bound by the decision to dissolve. Failure to return a consent
form will have the effect of a vote against the Proposal. An abstention from
voting on the Proposal will effectively count as a negative vote with respect to
the Proposal. Broker non-votes expressly indicating a lack of discretionary
authority to consent also will effectively count as a negative vote with respect
to the Proposal. See "Voting Procedures."

EFFECT ON LIMITED PARTNERS AND PARTNERSHIP IF PROPOSAL IS NOT APPROVED

If the Proposal is not approved, the Partnership will continue to own and
operate the Properties and, depending on the Properties' performances, the
Partnership may continue to earn income and make distributions to the Partners.
Consistent with the Partnership's investment objectives, the General Partners
may solicit offers for the sale of the Properties as opportunities arise. In any
such sale, the Partnership would benefit from any increase in the value of the
Properties and suffer further loss from any decrease in the value of the
Properties. Failure by the Limited Partners to approve the Proposal will not
affect the rights of the Limited Partners under the Partnership Agreement.

Under the terms of the Settlement Agreement, if the consents necessary to
dissolve and terminate the Partnership have not been obtained by the Final
Settlement Date, the New York Life Defendants will have the option of either (a)
terminating the proposed Settlement as it applies to the Partnership and the
Settling Limited Partners or (b) paying to each Settling Limited Partner the
Refund or the Enhancement, as the case may be, but not the Liquidation Advance,
in exchange for a Release from such Settling Limited Partner. See "Litigation
and Proposed Settlement -- Potential Termination of the Settlement Agreement
with Respect to the Partnership." Whether the Settling Limited Partner would be
entitled to receive the Refund or the Enhancement depends upon the amount paid
for the subject Units by the Settling Limited Partner, the distributions
received as of the Final Settlement Date on such Units by the Settling Limited
Partner and the amount of the Liquidation Advance the Settling Limited Partner
would have received had the Proposal been approved and the Settlement become
final. Thus, if the Limited Partners do not consent to the dissolution of the
Partnership by approving the Proposal, Settling Limited Partners will not be
assured of receiving, in the aggregate, payments that are at least equal to
their investment in the Partnership. There can be no assurance that the future
performance of the Partnership or the outcome of the Lawsuit or any possible
future settlement thereof will result in a return on investment to Limited
Partners that equals or exceeds the return facilitated by the approval of the
Proposal and the Settlement becoming final.

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<PAGE>
SUMMARY OF POTENTIAL PAYMENTS TO LIMITED PARTNERS IF THE SETTLEMENT IS APPROVED

The following chart sets forth the type of payments the Limited Partners
will receive, assuming the Settlement is approved and becomes final, depending
upon (a) the approval or rejection of the Proposal by the Limited Partners and
(b) the election of the individual Limited Partner to participate in the
Settlement.

<TABLE>
<CAPTION>
ACTION TAKEN LIMITED PARTNER'S
REGARDING PROPOSAL CLASS ACTION STATUS PAYMENTS TO BE RECEIVED
- ----------------------------- ----------------------------- ---------------------------------------------------
<S> <C> <C>
Proposal Approved Settling Limited Partner (i) Liquidation Advance, (ii) Enhancement or Refund
and (iii) Liquidating Distributions in excess of
amount of Liquidation Advance, if any

Proposal Approved Non-Settling Limited Partner Liquidating Distributions, as provided in the
Partnership Agreement

Proposal Not Approved Settling Limited Partner (i) Payments as provided under the Partnership
Agreement, including (a) semiannual distributions
from the Partnership, to the extent there are funds
available for distributions, and (b) Liquidating
Distributions upon liquidation of the Partnership
at a later date pursuant to the terms of the
Partnership Agreement, and (ii) at the New York
Life Defendants' option, in exchange for the
Release, the Enhancement or the Refund to which
such Settling Limited Partner would have been
entitled had the Proposal been approved

Proposal Not Approved Non-Settling Limited Partner Payments as provided under the Partnership
Agreement, including (a) semiannual distributions
from the Partnership, to the extent there are funds
available for distributions, and (b) Liquidating
Distributions upon liquidation of the Partnership
at a later date pursuant to the terms of the
Partnership Agreement
</TABLE>

Exhibit C contains examples of the types and amounts of payments a Limited
Partner might expect to receive if the Settlement is approved, based on the
assumptions stated in such Exhibit under each of the scenarios set forth above.
If the Proposal is approved by the Limited Partners but the Settlement does not
become final, all Limited Partners will receive only Liquidatng Distributions,
as provided in the Partnership Agreement.

NO DISSENTERS' RIGHTS

The Limited Partners will not be entitled to any dissenters' or appraisal
rights under either the Limited Partnership Agreement or Delaware law with
respect to the transactions described in this Solicitation Statement.

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<PAGE>
INVESTMENT COMMITTEE AND BOARD DETERMINATIONS

Based on the reasons set forth under "-- Reasons for the Proposal" by action
of the Investment Committee and the respective boards of directors, the
Investment Committee and each of the General Partners have determined that it is
in the best interests of the Limited Partners that the Proposal be approved.

THE INVESTMENT COMMITTEE AND THE BOARDS OF DIRECTORS OF THE GENERAL PARTNERS
HAVE APPROVED THE PROPOSAL AND RECOMMEND APPROVAL OF THE PROPOSAL BY THE LIMITED
PARTNERS.

REASONS FOR THE PROPOSAL

The General Partners believe that it is in the best interests of the Limited
Partners to approve the Proposal for the following reasons:

1. LIQUIDITY. There is no established trading market for the Units.
Dissolution of the Partnership will provide Limited Partners the opportunity to
receive cash in liquidation of their investment in the Partnership and make
alternative investments. The prospectus for the Public Offering stated that the
Partnership's scheduled investment horizon was seven to ten years, subject to
market conditions, the performance of the Properties and the General Partner's
evaluation of the anticipated economic benefits of continued ownership of the
Properties. All of the Properties in which the Partnership currently has an
interest were acquired more than seven years ago, and thus dissolution of the
Partnership at this time will provide Limited Partners with investment liquidity
within their original expected timeframe. See "Selected Financial Data" for
information concerning cash distributions made by the Partnership. There can be
no assurance that any alternative investments would generate returns that are
equivalent to or greater than those being earned by an investment in the
Partnership. Pursuant to a preliminary injunction issued by the Court, Limited
Partners who have not excluded themselves from the Class have been enjoined from
transferring their Units except in certain specified circumstances. If the
Proposal is approved by the Limited Partners and the Settlement is approved by
the Court and becomes final, Settling Limited Partners will not be permitted to
transfer their Units. Settling Limited Partners will, however, receive the Cash
Payment. See "Litigation and Proposed Settlement -- The Hearing Order and the
Settlement Hearing."

2. FAVORABLE MARKET CONDITIONS. The General Partners believe that this may
be an opportune time to sell the Properties. The Properties have achieved
improved operations during the past two years. While the Partnership could
continue to hold the Properties for several more years in the hope that the
Properties may increase in value, sale of the Properties and liquidation of the
Partnership at this time offers Limited Partners an opportunity to liquidate
their investment in the Partnership during a period of favorable conditions in
the real estate market.

3. COST OF MAINTAINING THE PARTNERSHIP. Continuing to operate the
Partnership as a public partnership requires ongoing expenditures as overhead
costs associated with investor relations and investor servicing, as well as
legal and accounting costs associated with required compliance reporting. The
Partnership is subject to federal and state securities laws and the terms of the
Partnership Agreement under which periodic reports and annual financial
statements are required to be generated by the Partnership. The cost of
completing these reports and financial statements is paid out of the revenues of
the Partnership. In late 1994, the Partnership sold its interest in Parklane,
and if the proposals are not approved, the Partnership may consider selling
additional Properties in the future. Each sale results in a reduction in the
number of Properties generating revenues to cover these overhead costs.

MATERIAL ADVANTAGES AND DISADVANTAGES OF THE PROPOSAL TO THE PARTNERS

ADVANTAGES TO LIMITED PARTNERS. If the Proposal is approved, the
Partnership's assets will be sold as soon as practicable. The liquidation has
the potential of allowing the Limited Partners to

18
<PAGE>
realize a greater overall return on investment than continued operations because
of current favorable conditions in the real estate market. See "The Proposal and
Reasons for the Proposal -- Reasons for the Proposal -- Favorable Market
Conditions."

If the Proposal is approved, Limited Partners will receive cash in
liquidation of their investment. This would allow Limited Partners who desire
liquidity in their investment in the Partnership to dispose of their Units,
which might otherwise be difficult because there is no established trading
market for the Units. See "The Proposal and Reasons for the Proposal -- Reasons
for the Proposal -- Liquidity."

Futhermore, if the Settlement is approved and becomes final, and the
Proposal is approved with respect to the Partnership, a Settling Limited Partner
will receive an amount which, together with prior distributions from the
Partnership, will be at least equal to the Settling Limited Partner's total
investment in the Partnership. Additionally, a Settling Limited Partner will
receive any amounts by which the Liquidating Distribution exceeds the
Liquidation Advance to the Settling Limited Partner. See "-- Summary of
Potential Payments to Limited Partners If the Settlement is Approved" for a
summary of the types of payments a Limited Partner might receive under various
alternatives in connection with the proposed Settlement and the Proposal.

DISADVANTAGES TO LIMITED PARTNERS. If the Proposal is approved, the Limited
Partner will no longer have any rights in the Partnership's properties and will
not benefit from any potential increases in the value of the Properties or
receive any semiannual distributions from the Partnership.

If the Proposal is approved and the Partnership is not excluded from the
Settlement (see "Litigation and Proposed Settlement -- Potential Termination of
the Settlement Agreement " and "Litigation and Proposed Settlement -- Potential
Termination of the Settlement Agreement with Respect to the Partnership"), a
Settling Limited Partner will release and discharge the Defendants and certain
of their affiliates, agents and various other persons and entities from, among
other things, any and all causes of action that were, could have been, may be or
could be alleged in connection with the Proprietary Partnership, including the
Partnership, and any other limited partnership or other direct investment
program created, sponsored, marketed, sold, operated or managed by the
Defendants. See "Litigation and Proposed Settlement -- Release," and the Class
Notice that previously was sent to Limited Partners included in the Class.

ADVANTAGES TO GENERAL PARTNERS. If the Proposal is approved, the General
Partners will receive certain amounts from the proceeds of the liquidation in
connection with their ownership of general partner interests and Units of the
Partnership. The estimated amounts to be received by the General Partners in
connection with the liquidation of the Partnership, based on the pro forma
balance sheet on a liquidation basis and certain other assumptions, are set
forth in Exhibit C. In addition to any such monetary benefits, the General
Partners will receive the benefit of any Releases executed by Settling Limited
Partners. See "Litigation and Proposed Settlement -- Release" and "Interests of
Certain Persons in Transaction."

ESTIMATED FINANCIAL EFFECTS OF IMMEDIATE LIQUIDATION VERSUS CONTINUED OPERATION
OF THE PARTNERSHIP

As described more fully above under "-- Material Advantages and
Disadvantages of the Proposal to the Partners," the General Partners believe
that liquidation of the Partnership has the potential for providing a greater
aggregate return to the Limited Partners than continued operation of the
Partnership because current market conditions for sale of the Properties are
favorable while continuing to operate the Partnership as a public partnership
requires ongoing expenditures that reduce the revenues of the Partnership. If
the Partnership is not liquidated, however, the Partnership may continue to earn
income and make distributions to the partners, and the partners would benefit
from any increase in the value of the Properties and suffer further loss from
any decrease in the value of the Properties upon their ultimate sale.

19
<PAGE>
LITIGATION AND PROPOSED SETTLEMENT

THE LAWSUIT AND THE CLASS MEMBERS

On January 11, 1996, Evelyn Shea and Ann Grimshawe ("Plaintiffs") filed
separate class action complaints in the District Court of Harris County, Texas
("Texas State Court"), against NYLIFE Equity Inc., New York Life, NYLIFE Inc.
and NYLIFE Securities Inc. (collectively with all predecessors and successors of
these entities, and the affiliated entities identified below, the "New York Life
Defendants"), and American Exploration Production Company and American
Exploration Company (collectively, the "American Defendants"). The New York Life
Defendants and the American Defendants are sometimes collectively referred to as
the "Defendants." The Plaintiffs' allegations against the Defendants included
fraud, breach of fiduciary duties, violation of the National Association of
Securities Dealers, Inc. Rules of Fair Practice by NYLIFE Securities Inc.,
negligent misrepresentation, breach of implied covenants, and violation of Texas
state securities laws.

On March 18, 1996, Plaintiffs filed a complaint in the United States
District Court for the Southern District of Florida captioned SHEA, ET AL. V.
NEW YORK LIFE INSURANCE CO., ET AL. (the "Lawsuit"), amplifying claims alleged
in the complaints filed in Texas State Court, alleging violations of various
federal securities and state laws, naming NYLIFE Realty and CNP as additional
New York Life Defendants and including allegations concerning the Partnership.
Plaintiffs purport to represent a class of all persons who purchased or
otherwise assumed rights and title to interests in certain limited partnerships,
including the Partnership, and other programs created, sponsored, marketed,
sold, operated or managed by the Defendants from January 1, 1985 through March
18, 1996 (the "Proprietary Partnerships"). The Plaintiffs requested compensatory
damages for their lost original investment, plus, interest, costs (including
attorneys' fees), punitive damages, disgorgement of any earnings, compensation
and benefits received by the Defendants as a result of the alleged actions and
other unspecified relief to which Plantiffs may be entitled.

On March 19, 1996, the Plaintiffs and the Defendants filed with the Court a
Stipulation of Settlement (the "Settlement Agreement") that sets forth the terms
of the proposed Settlement of the claims underlying the Lawsuit. The Settlement
Agreement provides that the Plaintiffs will serve as the representatives of all
persons (the "Class" or "Class Members") who purchased an interest ("Proprietary
Investment Units") in any of the Proprietary Partnerships. Expressly excluded
from the Class are investors who signed a document that released the New York
Life Defendants from any claims concerning such investments. The Defendants have
agreed separately that they will not participate in the Settlement with respect
to any Proprietary Investment Units that they own. The Defendants will receive
any Liquidating Distributions with respect to the Units they own and their
general partner interests, as well as any other payments to which they are
entitiled under the various agreements relating to the Proprietary Partnerships.

On May 3, 1996, the Texas State Court entered an order dismissing the Texas
proceedings without prejudice, and provided the dismissal would be with
prejudice upon final disposition of the Lawsuit.

DENIAL OF CLAIMS

Prior to the institution of the Lawsuit, the New York Life Defendants
determined that it would be in the best interests of the investors in certain
Proprietary Partnerships, including the Partnership, to terminate such
partnerships and, in connection therewith, to provide certain payments to the
limited partners that would be in addition to any amounts they would receive
upon liquidation of the partnerships, although the New York Life Defendants had
no obligation to do so. The Defendants expressly deny any wrongdoing alleged in
the Lawsuit and do not concede any wrongdoing or liability in connection with
any of the facts or claims that have been alleged against them in the Lawsuit.
The Defendants consider it desirable, however, for the Settlement to be effected
because such Settlement will: (i) provide substantial benefits to the Class
Members, in a manner consistent with New York Life's prior determination to wind
up most of the Proprietary Partnerships through orderly liquidation because the
continuation of the business no longer served the intended objectives of either
the

20
<PAGE>
Defendants or the owners of interests in such partnerships; (ii) confer
substantial benefits on the Defendants and current limited partners of the
Proprietary Partnerships by providing an opportunity not only to wind up the
Proprietary Partnerships on a schedule favorable to the Class, but also to
resolve the issues presented by the Lawsuit with respect to the sale of
interests in and operation of the Proprietary Partnerships; and (iii) put
Plaintiffs' claims and the underlying matters to rest without undue expense to
the Class while reducing the burdens and uncertainties associated with
protracted litigation of the claims underlying the Lawsuit.

PAYMENT UNDER THE SETTLEMENT AGREEMENT TO THE LIMITED PARTNERS

The terms of the Settlement Agreement, with respect to the Partnership,
generally provide that each Settling Limited Partner who is a Class Member, and
who has not excluded himself, herself or itself from the Class by following the
procedures outlined by the Court, will receive the Liquidation Advance and
either the Refund or the Enhancement, as the case may be, as described more
fully under "The Proposal and Reasons for the Proposal."

THE HEARING ORDER AND THE SETTLEMENT HEARING

On March 19, 1996, the Court issued the Hearing Order, which, among other
things, certified the Class for settlement purposes only and directed
Defendants, or their designee(s), to cause the Class Notice to be mailed to all
potential Class Members at their last known address no later than 90 days before
the Settlement Hearing. The Class Notice previously was sent to the Limited
Partners, and each of the Limited Partners should refer to the Class Notice for
further information regarding the Lawsuit, the Settlement and the Settlement
Hearing, which the Court currently has scheduled for July 3, 1996.

Among other things, the Hearing Order preliminarily enjoins all Class
Members who have not excluded themselves from the Class from selling,
transferring, pledging, encumbering, hypothecating or assigning any Unit they
own or in which they have an interest, PROVIDED THAT (i) the Court may for good
cause shown by a Class Member allow a transfer notwithstanding the injunction
and (ii) any Class Member may transfer a Unit where such Class Member agrees in
writing to be bound by the Release described in the Class Notice and to waive
any right to receive benefits under the proposed Settlement, in which case the
person to whom the Unit(s) are transferred will be entitled to the benefits that
the Class Member would have received but for the transfer.

POTENTIAL TERMINATION OF THE SETTLEMENT AGREEMENT

The Settlement Agreement is not yet final and could be terminated for
various reasons. The Settlement will become final only after the Court enters a
Final Order and Judgment approving the Settlement and the period for appeal
thereof has expired or, if the Final Order and Judgment is appealed, on the date
on which all appeals have been finally disposed of in a manner that affirms the
Final Order and Judgment. There can be no assurance that such approval will be
obtained or that the Settlement will become final.

21
<PAGE>
threatens to take any regulatory or legal action that would impair the ability
of the parties to conclude the Settlement on the terms set forth in the
Settlement Agreement or (ii) requires as a condition of not taking action any
modification to the Settlement Agreement, including, without limitation, any
constriction or extension of the scope of the contemplated relief, that the
Defendants in their sole discretion reasonably believe would impair their
ability to consummate the Settlement or to provide the contemplated relief; or
(e) if a final order dismissing the Texas State Court actions with prejudice,
which is no longer appealable, has not been entered by the Final Settlement
Date.

POTENTIAL TERMINATION OF THE SETTLEMENT AGREEMENT WITH RESPECT TO THE
PARTNERSHIP

If the consents necessary to dissolve the Partnership have not been obtained
by the Final Settlement Date, the New York Life Defendants may either (i)
unilaterally terminate the Settlement Agreement as it applies to the Partnership
and Limited Partners, or (ii) pay each Settling Limited Partner the Refund or
the Enhancement, as the case may be, but not the Liquidation Advance, in
exchange for a Release from such Settling Limited Partner. If the Defendants
choose the latter option, a Settling Limited Partner will receive the Refund or
the Enhancement, as the case may be, in an amount equal to the amount of the
Refund or Enhancement he, she or it would have received had the Proposal been
approved and the Liquidation Advance been paid.

RELEASE

Effective as of the Final Settlement Date, Plaintiffs and all Class Members
who did not exclude themselves from the Class, including the Settling Limited
Partners, agree that they will release and discharge the Defendants and certain
of their affiliates, agents and various other persons and entities from, among
other things, any and all causes of action that were, could have been, may be or
could be alleged in connection with the Proprietary Partnerships, including the
Partnership, or any other limited partnership or other direct investment program
created, sponsored, marketed, sold, operated or managed by the Defendants. See
"The Proposal and Reasons for the Proposal -- Material Advantages and
Disadvantages of the Proposal to the Partners -- Advantages to General Partners"
and "Interests of Certain Persons in Transactions." The Class Notice previously
provided to each of the Limited Partners sets forth further information
regarding the scope of the Release.

FINAL APPROVAL AND FINAL ORDER AND JUDGMENT

Until the Settlement becomes final as described in the Class Notice, NYLIFE
Realty will not be obligated to pay any amounts to the Settling Limited Partners
in connection with the Settlement.

REGULATORY APPROVALS

Other than the filing of a Certificate of Cancellation with the Secretary of
State of the State of Delaware and a filing with the Commission to deregister
the Units, the General Partners are not aware of any federal or state regulatory
requirements that must be complied with or any approval of a state or federal
body that is necessary to proceed with the dissolution and termination of the
Partnership other than any such requirement or approval that may arise in
connection with the sale of the Partnership's assets due to (i) the identity of
the purchaser or purchasers of the Partnership's properties and assets or (ii)
the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, which may
require certain information to be filed with the Department of Justice and the
Federal Trade Commission and may require certain waiting periods to be satisfied
prior to such sale. Following final liquidation of the Partnership and the
deregistration of the Units under Section 12(g) of the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), the Partnership's obligations to file
reports under the Exchange Act will terminate. Additionally, in order to proceed
with the Settlement, the final approval of the Court must be obtained.

22
<PAGE>
CERTAIN INFORMATION CONCERNING THE PARTNERSHIP

GENERAL

The Partnership is a Delaware limited partnership that was formed on
November 14, 1986 solely for the purpose of investing in real estate, primarily
through Joint Ventures that would invest in, hold, manage and sell existing
commercial properties. The Partnership presently has investments in three Joint
Ventures with New York Life as the Co-Venturer. Through these Joint Ventures,
the Partnership holds interests in three Properties: an office building in Blue
Ash, Ohio, a suburb of Cincinnati ("Cornell"); three commercial buildings in
Eden Prairie, Minnesota, a suburb of Minneapolis ("Eden Woods"); and a shopping
center in Columbus, Ohio ("NewMarket"). In December 1994, a fourth Joint Venture
in which the Partnership had been a co-venturer sold its property, an office
building in Brentwood, Tennessee, a suburb of Nashville ("Parklane"). On
February 15, 1995, the Partnership distributed its share of the Parklane cash
reserve and net sales proceeds aggregating $4,129,702 to the partners of the
Partnership.

The Joint Ventures for Cornell and Parklane were funded 60% by the
Partnership and 40% by the Co-Venturer. The Joint Venture for Eden Woods was
funded 47.06% by the Partnership and 52.94% by the Co-Venturer. The Joint
Venture for NewMarket was originally funded 47.09% by the Partnership and 52.91%
by the Co-Venturer. However, additional capital contributions to such Joint
Venture have resulted in ownership interests of 43.82% and 56.18% for the
Partnership and the Co-Venturer, respectively, at December 31, 1995. All Joint
Venture income, losses and distributions are generally apportioned pro-rata
between the Partnership and the Co-Venturer in proportion to their respective
contributions to the Joint Ventures.

The Partnership's primary investment objectives are to (i) preserve and
protect the Partnership's assets, (ii) provide quarterly distributions to
partners and (iii) provide growth of capital through appreciation of the
Properties. The attainment of the Partnership's investment objectives depends on
many factors, including current and future economic conditions in the United
States as a whole and in the localities in which the Properties are located in
particular, and the quality of property management provided to the Joint
Ventures by local property managers. All of the Properties were acquired with a
view towards a seven to ten year holding period.

The Partnership concluded the Public Offering of Units of limited
partnership interests on June 30, 1989. As of such date, the Partnership had
raised gross proceeds of $28,339,255 from the sale of 2,833,925.5 Units to 3,383
Limited Partners. In addition, the General Partners contributed $2,000 to the
Partnership for their general partner interests. As of December 31, 1995, a
total of $9,586,037 in cash distributions had been made to the Limited Partners
and $66,470 in cash distributions had been made to the General Partners since
the formation of the Partnership. Limited Partners who purchased their Units in
the initial closing of the Public Offering in June 1987 have received total cash
distributions of $4.05 per Unit or 40.5% of their initial investment.

GENERAL PARTNERS AND MANAGEMENT

The General Partners of the Partnership are NYLIFE Realty, a Delaware
corporation and an indirect, wholly-owned subsidiary of the Co-Venturer, and
CNP, a Delaware corporation and a wholly-owned subsidiary of NYLIFE Realty.
NYLIFE Realty is primarily responsible for both property-related and Partnership
administrative matters. An agreement provides that a management committee (the
"Investment Committee") composed of six persons, three from each General
Partner, must approve all major decisions with respect to the Partnership's
business.

The Partnership is the managing partner of each Joint Venture, responsible
for management of the day-to-day operations and implementing the joint decisions
of the Joint Ventures' partners. Each Joint Venture agreement provides that a
management committee composed of two representatives from the Partnership and
two representatives from the Co-Venturer must approve all major decisions with
respect to each Joint Venture's business. Such representatives are all employees
of New York Life.

23
<PAGE>
Since January 1, 1990, property management services have been provided to
the Joint Ventures by Greystone Realty Corporation ("Greystone"), an affiliate
of the Partnership and New York Life. Prior to that date, Greystone had been
managing the Co-Venturer's interest in each of the Joint Ventures. Greystone has
contracted with local property and leasing agents to provide property management
services at each of the Properties. Local property and leasing agents are paid a
property management fee by the Joint Ventures equal to a percentage of gross
revenues received by them from the Properties. In addition, Greystone is paid a
management fee by the Joint Ventures for their management services in accordance
with the terms of the Partnership Agreement.

Neither the Partnership nor any of the Joint Ventures has any employees nor
do they expect to have any employees. During the years ended December 31, 1995
and 1994, certain employees of New York Life and its affiliates performed
accounting, secretarial and administrative services for the Partnership. A
portion of the costs of such services allocable to the Partnership were
reimbursed by the Partnership in accordance with the Partnership Agreement.

The principal executive offices of each of the General Partners are located
at 51 Madison Avenue, New York, New York 10010, and the telephone number for
each General Partner is (212) 576-7000.

RIGHTS AND POWERS OF LIMITED PARTNERS

Upon dissolution and termination of the Partnership, the Limited Partners
will no longer have an interest in the Partnership's assets and business and
will be giving up all of their rights under the Partnership Agreement. The
Limited Partners of the Partnership may not take part in the control of the
business or affairs of the Partnership and have no voice in the management or
operations of the Partnership. Their lack of a voice in management and control
is necessary to limit liability in excess of their investment in the Partnership
and their share of undistributed profits from the Partnership (subject to the
obligation of a Limited Partner to return distributions to him, her or it under
certain circumstances). The Limited Partners:

(i) share all profits, losses and distributions of the Partnership in
accordance with the Partnership Agreement;

(ii) have their liability for operations of the Partnership limited to
the amount of their capital contributions and to their shares of Partnership
capital and undistributed net revenues of the Partnership, if any; provided,
however, that under applicable partnership law the Limited Partners may
under certain circumstances be required to repay to the Partnership amounts
previously distributed to them by the Partnership (see "The Proposals and
Reasons for the Proposals -- The Proposal -- Provision for Liabilities");

(iii) have the right to inspect books and records relating to the
activities of the Partnership at all reasonable times;

(iv) receive financial statements, income tax information and certain
other reports referred to in the Partnership Agreement;

(v) have the right to assign their Units to the extent and as provided
in Paragraph 12 of the Partnership Agreement;

(vi) have the right to propose and vote on certain matters affecting the
Partnership as provided in Paragraph 16 of the Partnership Agreement;

(vii) have the right to dissolution and winding up of the Limited
Partnership by decree of court as provided for in the Delaware Revised
Uniform Limited Partnership Act; and

(viii) have the right to dissolve and terminate the Partnership or to
continue the Partnership as described below under "-- Term and Dissolution
of the Partnership."

24
<PAGE>
TERM AND DISSOLUTION OF THE PARTNERSHIP

The Partnership Agreement provides that the Partnership will continue for a
maximum period ending December 31, 2036, but may be dissolved at an earlier date
if certain contingencies occur. The contingencies whereupon the Partnership may
be dissolved at an earlier date are as follows:

(a) withdrawal, removal, adjudication of bankruptcy or insolvency of a
General Partner, dissolution or other cessation to exist as a legal entity
of a corporate General Partner or the death of an individual General
Partner, if any, unless (i) the remaining General Partner(s), within 60 days
of the date of such event, elect(s) to continue the business of the
Partnership, or (ii) if there is no remaining General Partner, the Limited
Partners by Majority Vote, within 90 days of the date of such event, elect
to continue the business of the Partnership, in a reconstituted form if
necessary, and elect a successor General Partner effective as of the date of
such event;

(b) a Majority Vote in favor of dissolution and termination of the
Partnership;

(c) the disposition of all interests in Properties and other assets of
the Partnership and the receipt of the final cash payment of the purchase
price for all such Properties and assets;

(d) the election by the General Partners to dissolve and terminate the
Partnership (after consulting with Partnership counsel), without the consent
of any Limited Partner, in the event that either (i) the Partnership's
assets constitute "plan assets," as such term is defined for purposes of
ERISA, or (ii) any of the transactions contemplated under the Partnership
Agreement constitutes a "prohibited transaction" under ERISA and no
exemption for such transaction is obtainable from the United States
Department of Labor or the General Partners determine not to seek such an
exemption; or

(e) the entry of a decree of judicial dissolution by a court of
competent jurisdiction.

See Paragraph 19 of the Partnership Agreement.

PROPERTIES

The Partnership currently has investments in three Joint Ventures, each of
which owns a Property. The Properties are described below.

CORNELL PLAZA OFFICE BUILDING. On March 30, 1988, the Partnership, through
a Joint Venture ("Joint Venture A") with the Co-Venturer, acquired an interest
in an office building known as Cornell Plaza Office Building ("Cornell") located
in Blue Ash, Ohio. Joint Venture A acquired the fee simple title for a purchase
price of $9,550,000, of which $5,730,000 represents the Partnership's 60% share
of the purchase price, $34,964 represents the Partnership's 60% share of the
Acquisition Expenses and $136,512 represents the Partnership's 100% share of
Acquisition Fees. No mortgage or other indebtedness has been incurred in
connection with the acquisition of Cornell.

Cornell is a five-story office building containing 97,790 gross sq. ft. and
85,625 net rentable sq. ft. The net rentable sq. ft. at Cornell decreased from
85,946 at December 31, 1994 as the building was remeasured to reflect slight
changes in common areas. The building was completed in 1985 and is situated on a
5.6 acre site which provides parking for 302 cars.

The Blue Ash submarket is one of the strongest markets in the Cincinnati
area. Cornell is a class "A" building of superior quality with a stable
occupancy rate and income stream.

Overall, 15% of suburban Cincinnati office space was vacant at the end of
1995. The Blue Ash submarket reported a vacancy rate of 14% as compared to
Cornell's vacancy rate of 3% at December 31, 1995. Cincinnati's overall office
market was adversely impacted during the past four years by significant
downsizing by several locally-based firms, including Procter & Gamble, General
Electric Aircraft Engines, Marion Merrell Dow and U.S. Shoe. Fortunately, few of
these cutbacks directly affected the Blue Ash submarket as affected companies
were concentrated in the Tri-County, Warren County and Central Business District
areas.

25
<PAGE>
Build to suit properties constructed in 1993 also impacted the market.
Buildings for Lenscrafters and Honey Baked Hams created large blocks of space.
Additionally, Procter & Gamble completed its $280 million Health Care and
Research Center in Warren County during 1995. This resulted in an additional
100,000 sq. ft. of leasable space for the Blue Ash submarket.

A two-story 40,000 sq. ft. office building directly adjacent to Cornell
Plaza was fully vacated when its tenant, Heekin Can, was acquired by Ball
Manufacturing and employees were consolidated into other locations. However,
this building is not considered a Class "A" property and does not compete
directly with Cornell Plaza.

Despite the space being vacated by tenants moving to build to suit
properties, only two blocks of space greater than 15,000 sq. ft. exist in the
market. The majority of the available space is in the 3,000 to 8,000 sq. ft.
range and landlords are aggressive in competing for smaller tenants.

Employment growth is expected over the next several years due to the new
Delta Airlines $375 million hub expansion project which opened in 1994. This
expansion project, combined with the continued expansion of local firms in the
technology, health care, distribution and retail sectors, support such
expectations.

The following table highlights pertinent data relating to Cornell for the
years 1995, 1994 and 1993:

<TABLE>
<CAPTION>
1995 1994 1993
--------------- --------------- ---------------
<S> <C> <C> <C>
Occupancy rate at year end.......................... 97% 98% 92%
# of tenants at year end............................ 18 22 20
Range of initial minimum lease terms................ 3-10 years 3-10 years 2-10 years
Range of annual base rents (per sq. ft.)............ $6.44-$12.91 $6.78-$15.45 $6.75-$15.04
Annual real estate taxes............................ $119,020 $130,355 $127,890
</TABLE>

Generally, leases contain provisions requiring tenants to pay their pro-rata
share of real estate taxes and operating expenses in addition to their annual
base rent.

EDEN WOODS BUSINESS CENTER. On August 23, 1988, the Partnership, through a
Joint Venture ("Joint Venture C") with the Co-Venturer, acquired three buildings
known as Eden Woods Business Center ("Eden Woods") located in Eden Prairie,
Minnesota, a suburb located eight miles southwest of Minneapolis' Central
Business District. Joint Venture C acquired the fee title to Eden Woods for a
purchase price of $10,900,000 and paid Acquisition Fees of $46,213 and
Acquisition Expenses of $53,570, resulting in a total cash investment of
$10,999,783. As of December 31, 1995, the Partnership and the Co-Venturer had
interests in Joint Venture C of 47.06% and 52.94%, respectively. No mortgage or
other indebtedness was incurred by Joint Venture C in connection with the
purchase of Eden Woods.

Eden Woods is a complex of flex buildings, which are defined as a
combination of office and industrial (warehouse, showroom, assembly, and light
manufacturing) space, with a two-tiered rent structure based on the percentage
of space used for each purpose. Eden Woods is comprised of three one-story
buildings containing a total of 165,866 net rentable sq. ft., of which 54% is
office space and 46% is industrial space. The buildings are constructed of steel
and masonry frame with an exterior of brick and block facial structure. The
12.65 acre site is heavily wooded and provides surface parking for 509 cars.

Management believes that the southwest suburban market is one of the most
desirable locations in the Minneapolis market for office/showroom and
office/warehouse markets. The office/showroom market is the tightest industrial
product type in the southwest market, reporting a 2.6% vacancy rate.
Additionally, despite the low vacancy rates, there are no new office/showroom
projects planned for 1996. New construction has been mostly build-to-suit
projects with some office/warehouse construction.

26
<PAGE>
Lease rates in the southwest region market range from $3.50 to $4.75 per sq.
ft. for industrial space, and $7.75 to $9.00 per sq. ft. for office space. Lease
rates before rental concessions at Eden Woods approximate market levels at $8.75
per sq. ft. for office space and $4.50 per sq. ft. for warehouse space. Tenant
improvement allowances are $10 to $15 per sq. ft. for office space for new
tenants.

Approximately 62,500 sq. ft, or 38%, of Eden Woods' leases expire during
1996. This amount includes 42,500 sq. ft. occupied by one tenant, Lawrence
Jewelry. The Lawrence Jewelry lease expired on December 31, 1995, but the tenant
extended its lease for one month and vacated on January 31, 1996. The balance of
the expiring space of approximately 20,000 sq. ft. has been leased by Netstar to
1999. One existing tenant, Edentec, currently occupying approximately 15,000 sq.
ft. will relocate within the Property and expand into approximately 22,000 sq.
ft. formerly occupied by Lawrence Jewelry. The space to be vacated by Edentec
will also be leased by Netstar. Additionally, Netstar will also lease another
3,000 sq. ft. currently occupied by another Eden Woods tenant. Once these
expansions and moves are complete, there will be approximately 21,000 sq. ft.
remaining to be leased at the Property. Management is currently in negotiations
with prospective tenants and expects to have the space leased within 90 days
although there can be no assurance that it will be able to do so.

The following table highlights pertinent data relating to Eden Woods for the
years 1995, 1994 and 1993:

<TABLE>
<CAPTION>
1995 1994 1993
--------------- --------------- ---------------
<S> <C> <C> <C>
Occupancy rate at year end.......................... 100% 98% 92%
# of tenants at year end............................ 16 15 12
Range of initial minimum lease terms................ 1-10 years 3-8 years 3-8 years
Range of annual base rents (per sq. ft.)............ $4.86-$7.27 $4.28-$7.05 $4.28-$7.81
Annual real estate taxes............................ $417,728 $419,217 $504,163
</TABLE>

Generally, leases contain provisions requiring tenants to pay their pro-rata
share of real estate taxes and operating expenses in addition to their annual
base rent.

NEWMARKET SHOPPING CENTER. On December 22, 1988, the Partnership, through a
Joint Venture ("Joint Venture D") with the Co-Venturer, acquired a one-story
retail shopping center known as NewMarket Shopping Center ("NewMarket") located
in northwestern Columbus, Franklin County, Ohio. Joint Venture D acquired the
fee title to NewMarket for a purchase price of $15,500,000 and paid Acquisition
Expenses of $75,888 in connection with the purchase, resulting in a total cash
investment of $15,575,888. During 1993, substantial structural improvements were
made at NewMarket to accommodate leases with CompUSA to anchor the south end of
the center and Media Play to anchor the north end. Such improvements were funded
by cash flow from operations as well as capital contributions by the Partnership
and the Co-Venturer during 1993 and 1994. Since the Partnership was unable to
fund a portion of its required contribution, the Co-Venturer increased its
contribution by the amount of the Partnership's shortfall in exchange for an
increased ownership interest in the Joint Venture. During 1994, the Co-Venturer
contributed $155,059 of additional capital and during 1993, the Partnership and
Co-Venturer contributed $459,375 and $1,600,163 of additional capital,
respectively.

NewMarket is adjacent to the interchange of Sawmill Road and Interstate 270.
Sawmill Road is a heavily traveled retail corridor serving a relatively affluent
area. NewMarket contains 172,833 net rentable sq. ft. It is an enclosed
community shopping center, constructed of steel and masonry with decorative
split concrete block and metal banding around the exterior walls.

Columbus's total retail market reported a 9% vacancy rate. Almost all the
vacancy is in small shop space. NewMarket's vacancy rate was approximately 7% at
December 31, 1995. Rental rates in NewMarket's northwest submarket are
$8.50-$14.00 per sq. ft. before concessions. NewMarket's rates before
concessions are $7.50-$13.00 per sq. ft.

The Columbus retail market is currently experiencing a boom of activity
which is a direct result of the city's continued population growth and resulting
economic expansion. With this continued growth

27
<PAGE>
the city has attracted numerous new retailers to the market. Since 1990 five
retail centers totaling approximately 515,000 sq. ft. have been added. This does
not include free standing retail buildings known as "big box" or "power center"
stores which account for over 800,000 sq. ft. Expansion of the power centers has
continued in the Columbus area as well as nationwide. Fifteen new big box stores
have been added in Columbus within the past two years and another dozen are
expected to open by the end of 1996. Along with the predominance of the power
center stores, typical shopping centers with anchor stores and large amounts of
satellite space are becoming less prevalent in the current market. Accordingly,
there is much competition for smaller retail tenants and this competition should
continue going forward.

The following table highlights pertinent data relating to NewMarket for the
years 1995, 1994 and 1993:

<TABLE>
<CAPTION>
1995 1994 1993
------------------ ------------------ ------------------
<S> <C> <C> <C>
Occupancy rate at year end................ 93% 96% 96%
# of tenants at year end.................. 23 25 24
Range of initial minimum lease terms...... month to month-14 month to month-14 month to month-14
years years years
Range of annual base rents (per sq. ft.):
less than 3,000 sq. ft. (1)............. $6.23-$75.00 $6.12-$63.83 $4.97-$60.64
more than 3,000 sq. ft.................. $5.88-$13.00 $4.81-$13.00 $4.81-$13.00
Annual real estate taxes.................. $179,582 $201,957 $169,400
</TABLE>

- ------------------------
(1) The annual base rental rates per sq. ft. for tenants occupying less than
3,000 sq. ft include amounts for "kiosk" tenants whose monthly rents range
from $750-$1,000.

Generally, lease provisions require tenants to pay their pro-rata share of
common area maintenance, real estate taxes and insurance in addition to their
annual base rent.

COMPETITION

The real estate business is highly competitive, and the Properties acquired
by the Joint Ventures have active competition from similar properties in their
respective vicinities. Additionally, the Partnership may also experience
competition for potential buyers at such time as it seeks to sell any of the
Properties.

LEGAL PROCEEDINGS

For a discussion of the Lawsuit, see "Litigation and Proposed Settlement."

APPRAISALS OF THE PROPERTIES

The Partnership has received appraisals of the Properties from the
Appraisers. Property Counselors, Inc. ("Counselors") rendered an appraisal of
Eden Woods as of December 31, 1995; U.S. Realty Consultants, Inc. ("U.S.
Realty") rendered an appraisal of NewMarket as of December 15, 1995; and a third
appraiser has rendered an appraisal of Cornell as of December 15, 1995.
Executive summaries of the appraisal reports are attached hereto as Exhibit A.
The full appraisal reports are available for inspection and copying at the
principal offices of the Partnership during regular business hours by any
interested Limited Partner or his, her or its representative who has been so
designated in writing.

Each of the Appraisers is a recognized, independent real estate firm with
extensive valuation experience. The Partnership decided to retain each of the
Appraisers because of the Appraiser's valuation experience in the given market.
In addition, during the past two years, Counselors and U.S. Realty have rendered
appraisals to Greystone with respect to various properties. The General Partners
and their affiliates have no contract, agreement or understanding with any of
the Appraisers regarding any future engagement.

28
<PAGE>

Each appraisal addressed the market value of the fee simple interest in the
subject Property as a going concern. The Appraisers did not appraise the value
of other assets or liabilities of the Joint Ventures or the Partnership. After
considering numerous factors, each of the Appraisers rendered a valuation of the
subject Property as of the date specified above. The following table sets forth
the Appraisers' valuations and the Partnership's Joint Venture share of such
valuations.

<TABLE>
<CAPTION>
APPRAISED VALUE PARTNERSHIP SHARE
--------------- -----------------
<S> <C> <C>
Cornell................................................... $ 7,200,000 $ 4,320,000
Eden Woods................................................ 9,200,000 4,329,520
NewMarket................................................. 8,000,000 3,505,600
--------------- -----------------
$ 24,400,000 $ 12,155,120
--------------- -----------------
--------------- -----------------
</TABLE>

An appraisal is an estimate or opinion of value and cannot be relied upon as
a precise measure of value or worth. The amount that may be realized upon sale
of a Property may be more or less than its appraised value. None of the
Appraisers solicited any offers or inquiries with respect to the Properties from
potential purchasers, and therefore, the appraisals should not be construed to
suggest that a buyer was, in fact, available or if one were available, that it
would be willing to pay the appraised value. Accordingly, no assurance can be
given as to the value that may be obtained upon sale of the Properties.

29
<PAGE>
SELECTED FINANCIAL DATA

The following financial data as of and for each of the years ended December
31, 1991 through 1995 and for the three month periods ended March 31, 1996 and
March 31, 1995 should be read in conjunction with the Partnership's Financial
Statements and related notes thereto included elsewhere herein.

<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
YEAR ENDED DECEMBER 31,
---------------------------- ----------------------------------------------------------
1996 1995 1995 1994 1993 1992
------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Equity in income (loss) from Joint
Ventures (3)......................... $ 67,116 $ 63,314 $ 248,687 $ 765,893 $ 311,734 $ (4,686,456)
------------- ------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- ------------- -------------
Net income (loss) -- GAAP basis (2)... $ 23,440 $ 54,104 $ 157,197 $ 615,369 $ 158,466 $ (4,856,242)
------------- ------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- ------------- -------------
Net income (loss) -- Tax basis (2).... $ 23,440 $ 54,104 $ 486,336 $ (1,155,825) $ 420,471 $ 412,579
------------- ------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- ------------- -------------
Net income (loss) allocated to
partners:
Limited Partners.................... $ 23,206 $ 53,563 $ 155,625 $ 609,215 $ 156,881 $ (4,807,680)
------------- ------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- ------------- -------------
General Partners.................... $ 234 $ 541 $ 1,572 $ 6,154 $ 1,585 $ (48,562)
------------- ------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- ------------- -------------
Net income (loss) per Unit............ $ .01 $ .02 $ .05 $ .21 $ .06 $ (1.70)
------------- ------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- ------------- -------------
OTHER OPERATING DATA:
Cash generated from (used in)
operations........................... $ 45,916 $ (23,221) $ 71,646 $ 700,795 $ 58,242 $ (78,052)
Cash distributions to Limited
Partners (5)......................... -- 4,120,585 4,581,098 141,697 -- --
Cash distributions to General
Partners............................. -- 9,117 13,769 1,431 -- --
------------- ------------- ------------- ------------- ------------- -------------
Total cash distributions (1).......... -- 4,129,702 4,594,867 143,128 -- --
------------- ------------- ------------- ------------- ------------- -------------
Cash generated from (used in)
operations after distributions to
Limited Partners (4)................. $ 45,916 $ (4,152,923) $ (4,523,221) $ 557,667 $ 58,242 $ (78,052)
------------- ------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- ------------- -------------
Limited Partner cash distributions per
Unit................................. $ .00 $ 1.45 $ 1.62 $ .05 $ .00 $ .00
------------- ------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- ------------- -------------
Number of Units outstanding at period
end.................................. 2,833,925.5 2,833,925.5 2,833,925.5 2,833,925.5 2,833,925.5 2,833,925.5
------------- ------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- ------------- -------------
BALANCE SHEET DATA:
Total assets.......................... $ 14,611,394 $ 14,936,501 $ 14,565,801 $ 19,114,353 $ 18,529,965 $ 18,480,937
------------- ------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- ------------- -------------
Total liabilities..................... $ 110,211 $ 102,686 $ 94,058 $ 204,940 $ 92,793 $ 202,231
------------- ------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- ------------- -------------
Partners capital:
General Partners.................... $ (73,279) $ (69,952) $ (73,573) $ (61,376) $ (66,099) $ (67,684)
Limited Partners.................... 14,574,462 14,903,767 14,545,316 18,970,789 18,503,271 18,346,390
------------- ------------- ------------- ------------- ------------- -------------
Total Partners capital.............. $ 14,501,183 $ 14,833,815 $ 14,471,743 $ 18,909,413 $ 18,437,172 $ 18,278,706
------------- ------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- ------------- -------------
Book value per Unit................... $ 5.14 $ 5.26 $ 5.13 $ 6.69 $ 6.53 $ 6.47
------------- ------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- ------------- -------------

1991
-------------
<S> <C>
STATEMENT OF OPERATIONS DATA:
Equity in income (loss) from Joint
Ventures (3)......................... $ 626,000
-------------
-------------
Net income (loss) -- GAAP basis (2)... $ 470,825
-------------
-------------
Net income (loss) -- Tax basis (2).... $ 477,655
-------------
-------------
Net income (loss) allocated to
partners:
Limited Partners.................... $ 466,117
-------------
-------------
General Partners.................... $ 4,708
-------------
-------------
Net income (loss) per Unit............ $ .16
-------------
-------------
OTHER OPERATING DATA:
Cash generated from (used in)
operations........................... $ 533,578
Cash distributions to Limited
Partners (5)......................... 779,333
Cash distributions to General
Partners............................. 7,872
-------------
Total cash distributions (1).......... 787,205
-------------
Cash generated from (used in)
operations after distributions to
Limited Partners (4)................. $ (253,627)
-------------
-------------
Limited Partner cash distributions per
Unit................................. $ .28
-------------
-------------
Number of Units outstanding at period
end.................................. 2,833,925.5
-------------
-------------
BALANCE SHEET DATA:
Total assets.......................... $ 23,235,833
-------------
-------------
Total liabilities..................... $ 100,885
-------------
-------------
Partners capital:
General Partners.................... $ (19,122)
Limited Partners.................... 23,154,070
-------------
Total Partners capital.............. $ 23,134,948
-------------
-------------
Book value per Unit................... $ 8.17
-------------
-------------
</TABLE>

- ----------------------------------
(1) In 1991 the General Partners decided to suspend distributions throughout
1992 and 1993 as part of a long-term strategy to preserve the assets and
maximize performance of the portfolio.
(2) The differences between GAAP and Tax basis net income (loss) are primarily
the result of different methods of depreciation and rental income
recognition for financial reporting and tax reporting purposes.
(3) The 1992 Equity in loss from Joint Ventures resulted from a write-down of
the carrying values of Parklane and NewMarket to their then current
appraised values.
(4) Cash generated from (used in) operations after distributions to Limited
Partners does not include cash distributions from Joint Ventures in excess
of earnings (return of capital) of $3,849,522, $802,507, $12,779, $373,732
and $302,816, for each of the five years in the period ended December 31,
1995 and $93,873 and $3,358,700 for the three month periods ended March 31,
1996 and March 31, 1995, respectively.

(5) Cash distributions to Limited Partners representing a return of capital
were $1.62, $.05, $.00, $.00 and $.11, on a per Unit basis, for each of the
five years in the period ended December 31, 1995 and $.00 and $1.45 per
Unit for the three months ended March 31, 1996 and March 31, 1995,
respectively.

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<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

LIQUIDITY AND CAPITAL RESOURCES

The Partnership's cash balance of $828,769 at March 31, 1996 includes
$110,211 to pay accrued liabilities, and cash generated from operations of the
Joint Ventures and distributed to the Partnership.

The Partnership derives its revenues primarily from its equity interests in
the Joint Ventures. Accordingly, the Partnership's share of cash flow from the
Joint Ventures depends on the performance of the Properties. Cash flow generated
by the Properties is first to be used to fund tenant improvements, leasing
commissions and capital improvements, if any. Any remaining cash flow is then
distributed to the Co-Venturers. The Partnership also received interest income
on the balance in its restricted cash account and short-term investments.

The Partnership's only operating costs were general and administrative
expenses which primarily include audit and tax return preparation fees, printing
and postage costs for quarterly and annual reports, and reimbursements to the
General Partners for reimbursable expenses incurred in accordance with the
Partnership Agreement. Such general and administrative expenses, which are not
expected to fluctuate materially, totaled $50,600 for the three months ended
March 31, 1996.

As of February 3, 1996 the space previously leased to Lawrence Jewelry
consisting of an entire building has become available. Portions of this space
have already been leased to new tenants and the Co-Venturers have determined
that an estimated $250,000 in tenant improvements will be necessary.
Accordingly, Eden Woods' cash flow from operations has been utilized to fund
such improvements. In addition, cash flow in excess of charges for tenant
improvements has been held in escrow to pay the first half of the year's
property taxes totaling $221,124 which are due on May 15, 1996. There are no
other material capital commitments.

Cornell and NewMarket are expected to generate adequate cash flow to fund
their own operations. During the quarter ended March 31, 1996, Cornell and
NewMarket distributed $116,734 and $44,258 to the Partnership, respectively. As
discussed above, cash flow for the first quarter at Eden Woods was used to fund
the new tenant improvements, as well as property taxes.

The Partnership expects sufficient cash flow to be generated from its Joint
Venture investments to meet its current and future operating requirements.
However, if the Partnership does not have sufficient funds to meet its future
operating requirements, the General Partners, at their sole discretion, may
borrow money on behalf of the Partnership from unaffiliated third parties
subject to the terms of the Partnership Agreement. The Partnership may also
utilize its restricted cash to meet such future operating requirements. If such
a circumstance were to occur, the Partnership would thereafter seek to replenish
its restricted cash.

RESULTS OF OPERATIONS

THREE MONTHS ENDED MARCH 31, 1996 COMPARED TO THREE MONTHS ENDED MARCH 31, 1995

The decrease in the Partnership's net income for the quarter ended March 31,
1996 as compared to the corresponding period in 1995 is the result of a decrease
in interest income and a slight increase in general and administrative expenses.

Cornell's net income increased by $11,000 for the three months ended March
31, 1996 compared to the corresponding 1995 period primarily due to an increase
in tenant reimbursements for improvements. Eden Woods' net income increased by
approximately $4,000 for the three months ended March 31, 1996 primarily due to
a decrease in amortization and depreciation expense on prepaid leasing
commissions and tenant improvements, respectively. NewMarket's net income
decreased by approximately $16,000 for the three months ended March 31, 1996 as
compared to the corresponding period in 1995 due primarily to a decline in
rental rates as well as a 5% decrease in occupancy. The retail market in which
NewMarket is located continues to experience rapid development including the

31
<PAGE>
addition of new superstores. This development has led to increased price
competition among the retail segment. Recognizing that high occupancy is vital
to the success of a mall, management has responded to this increased price
competition by lowering rental rates so existing tenants do not vacate.

Occupancy at Cornell, Eden Woods, and NewMarket was 95%, 87%, and 91%,
respectively, as of March 31, 1996, as compared to 95%, 98%, and 96%,
respectively, as of March 31, 1995.

1995 COMPARED TO 1994

The Partnership's net income for the year ended December 31, 1995 decreased
by approximately $460,000 as compared to the prior year primarily as a result of
a decrease in equity in income from Joint Venture operations. Included in equity
in income from Joint Venture operations for the year ended December 31, 1994 was
approximately $361,000 of equity in income from Parklane, including
approximately $177,000 representing the Partnership's share of the gain on the
sale of Parklane on December 6, 1994. For a more detailed discussion of the
operations of each Property, see "Investments in Joint Ventures -- 1995" below.

Partially offsetting such decrease in equity in income from Joint Venture
operations was an increase in interest income of approximately $48,000 for the
year ended December 31, 1995 as compared to the prior year primarily due to
interest earned on the Partnership's share of the Parklane cash reserve account
and net sales proceeds from January 1, 1995 to February 15, 1995, when such cash
was distributed to investors.

In management's opinion, except for the proposed dissolution of the
Partnership as more fully discussed in Note 10 of the Notes to Financial
Statements, when adopted on January 1, 1996, Statement of Financial Accounting
Standards No. 121 "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed of" will not have a material adverse effect on
the Partnership's financial position or results of operations. In the event of
dispositon, the Partnership would record an adjustment to state its investments
in real estate and Joint Ventures at their then fair market value. Subsequent
increases and decreases in fair market value would be recorded currently in
earnings under the liquidation method of accounting.

The effects of inflation on the Partnership are immaterial.

INVESTMENTS IN JOINT VENTURES -- 1995

CORNELL PLAZA OFFICE BUILDING. Net operating income at Cornell decreased by
approximately $13,000, or 2%, for the year ended December 31, 1995 as compared
to the prior year. Occupancy was 97% as of December 31, 1995. Occupancy as of
December 31, 1994 was 98%. Interest income at Cornell increased by approximately
$5,000 for the year ended December 31, 1995 as compared to the prior year
primarily due to interest earned on the funds set aside for the new HVAC system
described below. Depreciation and amortization increased by approximately
$96,000 for the year ended December 31, 1995 as compared to the prior year
primarily due to depreciation charges related to such HVAC system.

During 1995 one tenant, USA Mobile Communications, expanded its space by
3,119 sq. ft. This tenant executed a five year lease at $10.75 per sq. ft. for
the first three years and $11.50 thereafter.

Three tenants vacated the premises during 1995, however, the USA Mobile
expansion absorbed most of such vacated space. Galbreath, Cornell's managing and
leasing agent, and Orion International vacated the space which USA Mobile
leased. Additionally, Talent Tree did not renew its lease of 1,325 sq. ft.
Computer Associates will also be vacating its 9,000 sq. ft. before its lease
expires in March 1997. This tenant has informed management that it will continue
to make all payments in accordance with its lease. Additionally, Chrysler, a
current Cornell tenant, has expressed interest in expanding into the Computer
Associates space.

A new HVAC system was installed at Cornell due to the insufficient capacity
and outdated technology of the old system. Cornell's cash flow from operations
had been set aside to fund such improvement and distributions to Co-Venturers
were suspended at Cornell as of October 1994. The

32
<PAGE>
new system was installed and operational as of April 1995. The total cost of the
new system was approximately $323,000, all of which was funded entirely from
Cornell's cash flow from operations. Accordingly, Cornell has since resumed
distributions to Co-Venturers.

EDEN WOODS BUSINESS CENTER. Net operating income at Eden Woods decreased by
approximately $138,000 for the year ended December 31, 1995 as compared to the
prior year. Such decrease is primarily due to revenues recognized by the
Property in 1994 representing the Sanborn early lease termination settlement.
Eden Woods' occupancy increased from 98% at December 31, 1994 to 100% at
December 31, 1995.

Approximately 35,000 additional sq. ft. was leased at Eden Woods during
1995. Three new tenants were added during the year. Trisen Systems Inc. executed
a 5 year lease for 10,132 sq. ft. vacated by Micro-Net in January, 1995 with a
base rent of $4.18 per sq. ft. the first year and $5.66, $6.31, $6.94, and $8.45
per sq. ft. the second through fifth years, respectively. Office Products of
Minnesota Inc. executed a 5 year lease for 20,086 sq. ft. formerly occupied by
Sanborn, with a base rent of $7.06 the first three years and $7.42 thereafter.
Wilson Learning Corp. signed a three year lease for 5,186 sq. ft. vacated by
Trimar in January, 1995, with a base rent of $7.05.

In addition to the new leases discussed above, one tenant, Netstar, expanded
its space by 3,043 sq. ft.

Lawrence Jewelry did not renew its lease for 42,500 sq. ft., which expired
on December 31, 1995, but instead extended its lease for one month and vacated
on January 31, 1996. One current tenant has agreed to expand into approximately
half of the Lawrence Jewelry space.

NEWMARKET SHOPPING CENTER. Net operating income at NewMarket increased by
approximately $86,000 for the year ended December 31, 1995 as compared to the
prior year partially as a result of a property tax refund of approximately
$52,000 received during 1995 resulting from a successful certiorari of 1994's
tax assessment. Also contributing to the increase in net operating income for
1995 is a decrease in repairs and maintenance expense of approximately $35,000
as compared to 1994. Minor parking lot and electrical repairs performed during
1994 comprise most of such difference. The occupancy rate decreased from 96% at
December 31, 1994 to 93% at December 31, 1995.

During 1995 two tenants did not renew their leases. Elbee Shoes vacated its
4,813 sq. ft. space. Additionally, Southwest Designs informed management of its
intention to vacate the mall by January 31, 1996. The adjacent tenant, S & K
Famous Brands, which currently leases 4,030 sq. ft., intends to expand into such
vacated space.

As previously reported, in 1994 Famous Footwear expanded its space and
extended its lease. Their renovated space opened for business in June 1995.

Leases aggregating approximately 23,000 sq. ft., or 13% of NewMarket's net
rentable area, are due to expire during 1996. Included in such amount are three
month-to-month tenants: We're For Kids, Family Theatre Playhouse, and Shoe
Sensation, currently occupying 6,998 sq. ft., 8,000 sq. ft and 6,100 sq. ft.,
respectively.

Management plans for 1996 include retention of tenants whose leases expire
in 1996, including the month-to-month tenants discussed above, and attracting
one or two new shops that may act as "mini-anchors," although there can be no
assurances that management will be able to accomplish its plans.

1994 COMPARED TO 1993

The increase in the Partnership's net income for the year ended December 31,
1994 from the year ended December 31, 1993 is primarily a result of an increase
in equity in income from Joint Venture operations. Net operating income for each
of the Joint Ventures increased by an aggregate 34% for the year ended December
31, 1994 over the corresponding period in 1993. See "Investments in Joint
Ventures -- 1994" below for a more detailed discussion of the operations of each
Property. In addition,

33
<PAGE>
general and administrative expenses decreased approximately $7,000 for the year
ended December 31, 1994 as compared to the corresponding period in 1993,
resulting from a reduction in printing and postage costs for the year ended
December 31, 1994 as well as an over accrual of professional fees of
approximately $18,000 for the year ended December 31, 1993. The Partnership had
accrued for certain professional fees in 1993 that were subsequently paid for by
the Joint Ventures. Accordingly, the Partnership reversed the accrual for those
expenses in 1994.

The effects of inflation on the Partnership were immaterial.

INVESTMENTS IN JOINT VENTURES -- 1994

CORNELL PLAZA OFFICE BUILDING. Net operating income at Cornell increased by
approximately $170,000 for the year ended December 31, 1994 as compared to the
year ended December 31, 1993. Occupancy increased from 92% at December 31, 1993
to 98% at December 31, 1994. Additionally, the Partnership received a real
estate tax refund of approximately $84,000 resulting from a successful appeal of
the 1991 and 1992 tax assessments.

During 1994, an additional 5,458 sq. ft. of space was leased at Cornell. Two
new tenants were added, while seven existing tenants expanded. JBA International
and the Galbreath Company executed new leases aggregating 2,614 sq. ft. JBA
International leased 1,614 sq. ft. for three years at $10.00 per sq. ft.
Galbreath executed a month-to-month lease for 1,000 sq. ft. at $5.00 per sq. ft.
Expansions took place during 1994 for Cincinnati Asset Management, Spencer and
Spencer, Citizens Mortgage, USA Mobile Communications, Inacomp, Zaring Homes and
Eaton ranging from 389 sq. ft. to 1,603 sq. ft. with average rental rates
ranging from $9.00 per sq. ft. to $12.95 per sq. ft. In addition, Hitachi
renewed its lease for 5,891 sq. ft. for four years at an average rental rate of
$9.75 per sq. ft.

As expected, Phoenix Mutual Insurance ("Phoenix Mutual") vacated 3,261 sq.
ft. during 1994 as a result of the merger between Phoenix Mutual and Home Life
Insurance.

Besides the Galbreath month-to-month tenancy, the only lease expiring during
1995 was Talent Tree's for 1,325 sq. ft.

As of December 31, 1994, the property was 98% occupied, and management was
carefully evaluating any expansion requests in order to achieve maximum rents.

As discussed above, a new HVAC system was installed at Cornell during 1995
due to the insufficient capacity and outdated technology of the old system. As
of December 31, 1994, cash in the amount of $149,956 had been set aside for such
expenditure.

PARKLANE OFFICE BUILDING. On December 6, 1994, pursuant to a Purchase and
Sale Agreement dated October 7, 1994, Joint Venture B sold Parklane, along with
the underlying land and related improvements to Principal Mutual Life Insurance
Company for $5,600,000 which represents approximately 127% of its appraised
value of $4,400,000 as of November 30, 1993. It was determined that under
current market conditions and considering the departure of South Central Bell,
whose 69,302 sq. ft. occupancy comprises approximately 64% of Parklane's net
rentable space, the sale of Parklane would provide more value than utilizing the
cash reserve to re-tenant the building. At the time of the sale the cash reserve
balance was $1,519,570. The Partnership distributed to investors its share of
the net proceeds from the sale, along with its share of the cash reserve, on
February 15, 1995.

For the year ended December 31, 1994, Parklane had a decrease in net
operating income of approximately $48,000 over the corresponding period in 1993
due to the reduction in rental income as a result of the sale of Parklane on
December 6, 1994. The Joint Venture recognized a gain on the sale of Parklane of
$294,687, based on the carrying value of the land, the building and the related
improvements.

34
<PAGE>
In addition, Parklane had an increase in interest income of approximately
$20,000 for the year ended December 31, 1994 as compared to the corresponding
period in 1993, due to the growth of the cash reserve account throughout 1994.
The cash reserve balance was $1,143,225 at December 31, 1993 and $1,519,570 at
December 6, 1994, the date of the sale of Parklane described above.

EDEN WOODS BUSINESS CENTER. Net operating income at Eden Woods increased by
approximately $249,000 for the year ended December 31, 1994 as compared to the
year ended December 31, 1993. Eden Woods' occupancy increased from 92% at
December 31, 1993 to 98% at December 31, 1994. Additionally, a tax reassessment
of Eden Woods resulted in a reduction of real estate taxes of approximately
$85,000 for the year ended December 31, 1994 as compared to the year ended
December 31, 1993.

Approximately 11,000 additional sq. ft. was leased at Eden Woods during
1994. Five new tenants were added during the year. Proline Audio executed a five
year lease for 4,103 sq. ft. at an average rental rate of $5.90 per sq. ft. A
five year lease was executed with Heidelberg USA for 5,441 sq. ft. at an average
rental rate of $6.55 per sq. ft. Original Marketing executed a five year lease
for 2,519 sq. ft. at an average rental rate of $7.00 per sq. ft. Business
Machine Sales executed a seven year lease for 7,162 sq. ft. at an average rental
rate of $7.19 per sq. ft. Woodroast Systems Inc. executed a five year lease for
5,035 sq. ft. at an average rental rate of $6.24 per sq. ft.

In addition, Datatrak (formerly Jobtrak) renewed the lease on its 8,123 sq.
ft. for five years at an average rental rate of $6.47 per sq. ft. Edentec also
elected to renew its lease for 15,388 sq. ft. for five years at an average
rental rate of $7.17 per sq. ft.

Fargo-Datamax and Datatrend vacated 12,197 sq. ft. and 4,103 sq. ft.,
respectively, during 1994. Trimar, which occupied 5,186 sq. ft., vacated in
January 1995. This space was subsequently leased to Wilson Learning Corporation
for three years at $7.05 per sq. ft.

NEWMARKET SHOPPING CENTER. Net operating income at NewMarket increased by
approximately $384,000 for the year ended December 31, 1994 as compared to the
year ended December 31, 1993, as a result of the addition of CompUSA and Media
Play in November 1993. Media Play and CompUSA comprised approximately 47% of
total occupancy of NewMarket at December 31, 1994. During 1994, a full year of
rental revenue was recognized from these tenants. The occupancy rate at December
31, 1994 and 1993 remained stable at 96%.

Depreciation and amortization expense for the year ended December 31, 1994
increased by approximately $133,000 as compared to the year ended December 31,
1993 as a result of depreciation expense related to the improvements for the two
anchor tenants.

Approximately 5,000 additional sq. ft. was leased at NewMarket during 1994.
Southwest Design executed a five year lease for 3,202 sq. ft. at an average
rental rate of $8.50 per sq. ft. Candlesticks executed a five year lease for
1,843 sq. ft. at an average rental rate of $8.56 per sq. ft.

Two tenants, Linens N Things and Mr. Bulky's, vacated NewMarket during 1994.
Linens N Things had occupied 7,200 sq. ft. Mr. Bulky's exercised a termination
option in its lease and vacated its 1,843 sq. ft. In accordance with such
termination option agreement, NewMarket received approximately $10,000 for
reimbursement of certain improvements and leasing commissions paid with regard
to the Mr. Bulky's lease.

Hit or Miss renewed its lease for 3,686 sq. ft. for five years at $11.00 per
sq. ft. Dress Barn also renewed its lease for 7,427 sq. ft. for five years at
$12.50 per sq. ft.

Famous Footware expanded by 3,982 sq. ft. from 5,418 sq. ft. to 9,400 sq.
ft. and extended its lease on the combined space for five years at $8.50 per sq.
ft.

As of December 31, 1994, leases aggregating approximately 40,275 sq. ft., or
23% of NewMarket's net rentable area, were due to expire during 1995. Included
in the aforementioned are two month-to-month tenants: We're For Kids and Family
Theatre Playhouse, who occupy 6,998 sq. ft. and 8,000 sq.

35
<PAGE>
ft., respectively. El-Bee Shoe Outlet and Shoe Sensation, occupying 4,813 sq.
ft. and 6,100 sq. ft., respectively, which had leases expiring during the first
quarter of 1995, renewed on a month-to-month basis.

As of December 31, 1994, management was also negotiating lease renewals with
three other tenants with large spaces expiring during 1995. These tenants: S&K
Famous Brands, The Casual Male and Dress Barn occupied 4,030 sq. ft., 2,719 sq.
ft. and 7,427 sq. ft. respectively, at December 31, 1994.

1993 COMPARED TO 1992

The Partnership had net income of $158,466 for the year ended December 31,
1993 as compared to its net loss of $4,856,242 for the year ended December 31,
1992. The 1992 net loss resulted from the write-down of the carrying values of
Parklane and NewMarket of $9,945,784 in the aggregate. The Partnership's share
of such write-downs totaled $5,085,409. The Partnership's 1992 net income,
exclusive of the write-downs, was $416,467, representing $398,953 of operating
income from Joint Ventures and $17,514 of interest income.

The Partnership's 1993 equity in income from Joint Ventures (prior to the
effect of the write-downs) declined by approximately 22% from 1992. Net
operating income at Cornell and Parklane increased while Eden Woods and
NewMarket experienced a decline. See Investments in Joint Ventures -- 1993 below
for a more detailed discussion of the operations of each Property. In addition,
the Partnership's general and administrative expenses decreased by approximately
7% as a result of a reduction in professional fees and printing and postage
costs.

The effects of inflation on the Partnership were immaterial.

INVESTMENTS IN JOINT VENTURES -- 1993

CORNELL PLAZA OFFICE BUILDING. Net operating income at Cornell increased
during 1993 primarily as a result of an increase in occupancy at the Property
and a decrease in real estate tax expense, the latter resulting from a
reassessment of the Property value. Occupancy at Cornell increased to 92% from
82% in 1992.

During 1993, an additional 9,821 sq. ft. of space was leased. Two new
tenants were added, while three existing tenants expanded. Keane, Inc. signed a
five year lease for 2,500 sq. ft. at $8.78 per sq. ft. Orion International
Consulting signed a four year lease for 1,587 sq. ft. at an average $8.06 per
sq. ft. RJR/Nabisco's Planters division renewed its lease and expanded by 608
sq. ft. Planters' new lease is for a three year term at $9.80 per sq. ft.
Heublein expanded its office by 2,053 sq. ft. and executed a new five year lease
at $8.94 per sq. ft. with annual increases equal to 50% of the change in the
Consumers Price Index. Zaring Homes Inc. expanded by 2,985 sq. ft., agreeing to
pay an average of $7.63 per sq. ft. for a 4.25 year term. Zaring Homes recently
went public and is now Cornell's second-largest tenant, with 11,351 sq. ft. In
addition, a renewal was effected with Southwestern Ohio Water Co. for 762 sq.
ft.

During 1993, Cornell offset some of the soft market conditions in the
Cincinnati market primarily with internal growth from existing tenants and
relatively few lease expirations. Although Cornell enjoyed a 92% occupancy rate
at the end of 1993, management anticipated rental rates might need to be reduced
in order to continue to compete effectively and thereby retain tenants and lease
the remaining 6,717 vacant sq. ft.

Cornell had increased depreciation/amortization expense for 1993 relating to
the tenant improvement and leasing commissions incurred as a result of the
aforementioned leasing activity.

PARKLANE OFFICE BUILDING. Net operating income at Parklane increased for
the year ended December 31, 1993, as a result of an increase in occupancy at the
Property. Occupancy at Parklane increased from 87% to 96% during 1993.

36
<PAGE>
During 1993, two new leases were signed at Park Lane and one existing tenant
expanded its space. Centex Real Estate Corp. signed a five year lease for 6,097
sq. ft. at an average rental rate of $11.59 per sq. ft. Wright & Company signed
a three year lease for 1,230 sq. ft. at $12.76 per sq. ft. Tanya Tucker Inc.
expanded by 1,178 sq. ft. and signed a new one year lease at $11.00 per sq. ft.

During 1992, the carrying value of Parklane was written down to reflect its
appraised value at that time. As a result, depreciation expense on the building
decreased during 1993.

EDEN WOODS BUSINESS CENTER. Net operating income at Eden Woods decreased
during 1993. Although occupancy increased, rental rates were slightly lower and
concessions were being offered. Occupancy at Eden Woods increased from 89% to
92% in 1993 as a result of a successful leasing program. In addition, Eden Woods
experienced an increase in its 1993 real estate tax assessment.

In January of 1993, a five year lease was executed with Seaberg Medical for
2,478 sq. ft. at $6.88 per sq. ft. for the first three years and $7.38 per sq.
ft. for the remainder of the term. Costs associated with this lease include rent
abatements of $7,814, leasing commissions of $5,774 and tenant improvements of
$18,972.

During June of 1993, a three year lease was executed with Netstar for 16,810
sq. ft. at $5.10 per sq. ft. for the first year, $5.70 per sq. ft. for the
second year and $6.29 per sq. ft. for the third year. Costs associated with this
lease include leasing commissions of $25,564 and tenant improvements of $30,875.

EdenTec renewed its lease for a term of three years, to commence in February
1994, at $6.96 per sq. ft. for the first year and $7.27 per sq. ft. for the
remainder of the term. Costs associated with this renewal include rent
abatements of $17,850, leasing commissions of $18,559 and tenant improvements of
$12,000.

NEWMARKET SHOPPING CENTER. Net operating income at NewMarket decreased
during 1993. Prior to the addition of two new anchor tenants in November 1993,
occupancy at NewMarket had declined as several tenants vacated the Property.
Upon the addition of the two anchor tenants, occupancy at NewMarket increased
from 77% to 96% during 1993. Additionally, NewMarket received a real estate tax
refund during 1993 of $97,439 resulting from a successful certiorari of 1991's
tax assessment.

As previously discussed, NewMarket added two anchor tenants during 1993.
Both tenants opened for business in November 1993 and their presence increased
traffic at the center.

The total costs associated with the admission of the two new anchor tenants
and the related reconfiguration of NewMarket totaled $2,610,758. As of December
31, 1993, $2,455,699 had been expended, of which, $396,161 was funded from
property operations and $459,375 and $1,600,163 were contributed by the
Partnership and the Co-Venturer, respectively. The Partnership and the Co-
Venturer are required to make capital contributions in accordance with their
respective ownership interests. As of December 31, 1993, the Partnership's
required contribution was $969,836. Since the Partnership was unable to fund a
portion of its required contribution, the Co-Venturer increased its contribution
by the amount of the Partnership's shortfall in exchange for an increased
ownership interest in the Joint Venture. In addition, the remaining contribution
of $155,059 was funded by the Co-Venturer in January 1994.

In addition to the new anchor tenants, two new small shops were added during
1993. Galleria Leather and Luggage signed a five year lease for 3,000 sq. ft. at
an average rental rate of $5.80 per sq. ft. and Tuxedo Classics signed a five
year lease for 1,500 sq. ft. at an average rental rate of $8.40 per sq. ft.

Several tenants renewed and/or expanded in conjunction with the
reconfiguration, including The Kitchen Place, BK Sports, The Cookie Store, The
Raisin Rack, Backstage Studio, Fiesta Hair Salon, E.B. Brown Opticians and Art
on the Block.

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<PAGE>
During 1992, the carrying value of NewMarket was written down to reflect its
appraised value at that time. As a result, depreciation expense on the building
decreased during 1993.

FEDERAL INCOME TAX CONSEQUENCES

The following discussion briefly addresses what the General Partners
believe, based on the advice of tax counsel, Akin, Gump, Strauss, Hauer & Feld,
L.L.P., are likely to be the principal federal income tax consequences under
current law of a Limited Partner's receipt of a Cash Payment pursuant to the
Settlement and of the winding-up and liquidation of the Partnership. The federal
income tax discussion set forth below is a summary included for general
information purposes only and does not address all of the potential tax
consequences that might be relevant to a particular Limited Partner.

The United States federal income tax consequences to each Limited Partner,
including a Limited Partner that is a tax-exempt entity (such as a charitable or
other tax-exempt organization, a pension, profit sharing or stock bonus plan, or
a Keogh plan, IRA or other employee benefit plan) (a "Tax-Exempt Limited
Partner"), of the receipt of a Cash Payment pursuant to the Settlement and of
the winding up and liquidation of the Partnership will vary depending on the
Limited Partner's particular circumstances. In addition, the views of the
General Partners and tax counsel described below are not binding on the Internal
Revenue Service (the "IRS") or the courts. It is possible that the IRS could
take a different position regarding the federal income tax consequences
described below and that a court would sustain the IRS's position, in which case
a Limited Partner may realize different tax consequences. Accordingly, each
Limited Partner is strongly urged to consult his, her or its own tax adviser
with respect to the specific tax consequences of its receipt of a Cash Payment
pursuant to the Settlement and of the winding-up and liquidation of the
Partnership, including the effect and applicability of federal, state, local and
foreign tax laws.

CASH PAYMENT

REFUND. The Refund should be treated for federal income tax purposes as a
return of capital and should be applied against and reduce a Settling Limited
Partner's adjusted tax basis in his, her or its Units. To the extent, if any,
that the Refund received by a Settling Limited Partner exceeds his, her or its
adjusted tax basis in his, her or its Units, such excess will constitute taxable
income to such Settling Limited Partner, which may be ordinary income.

LIQUIDATION ADVANCE. A Settling Limited Partner generally should not
recognize income on his, her or its receipt of the Liquidation Advance. If the
Liquidation Advance received by a Settling Limited Partner ultimately exceeds
the Liquidating Distribution allocable to such Settling Limited Partner (see
"Winding Up and Liquidation of the Partnership", below), such excess generally
should be treated for federal income tax purposes in the same manner as a Refund
received at the time of the liquidation of the Partnership.

ENHANCEMENT. The Enhancement should be treated in the same manner as the
Refund.

SPECIAL RULES FOR TAX-EXEMPT LIMITED PARTNERS. A Tax-Exempt Limited Partner
who participates in the Settlement generally should not recognize unrelated
business taxable income as a result of its receipt of the Refund or Enhancement.
However, if such a Tax-Exempt Limited Partner has either (i) incurred
"acquisition indebtedness" within the meaning of the Code with respect to its
Units or (ii) utilized deductions (if any) generated by the Partnership against
unrelated business taxable income, then such Limited Partner may recognize
unrelated business taxable income to the extent (if any) the Refund or
Enhancement exceeds its adjusted tax basis in its Units.

The General Partners and tax counsel believe that property acquired with the
proceeds of the Liquidation Advance should not be treated as "debt-financed
property" within the meaning of the Code even though it is expected that NYLIFE
Realty will recoup all or part of the Liquidation Advance from Liquidating
Distributions that would otherwise be paid to the Settling Limited Partner.
However, there is no clear legal authority on the treatment of payments like the
Liquidation Advance for such purposes and it is possible that the IRS could take
a different view.

38
<PAGE>
EACH TAX-EXEMPT LIMITED PARTNER IS PARTICULARLY URGED TO CONSULT ITS OWN TAX
ADVISER WITH RESPECT TO THE TAX CONSEQUENCES OF THE RECEIPT OF THE CASH PAYMENT.

WINDING UP AND LIQUIDATION OF THE PARTNERSHIP

In general, in computing his, her or its federal income tax liability for
his, her or its tax year in which the assets of the Partnership are sold, each
Limited Partner will be required to take into account his, her or its allocable
share of any gain or loss from the sale of the Partnership's real property. Any
gain and the entire amount of any loss reportable by a Limited Partner from the
disposition by the Partnership of real property should generally be treated as
"section 1231" gain or loss.

A Limited Partner also will be required to report gain or loss from the
Partnership's sale of tangible personal property used its trade or business in
an amount equal to his, her or its allocable share of the gain or loss realized
by the Partnership. Any gain from the sale of tangible personal property will be
treated as ordinary income (and in the case of a Tax-Exempt Limited Partner,
unrelated business taxable income if such Limited Partner utilized deductions
(if any) generated by the Partnership against unrelated business taxable income)
to the extent of depreciation deductions previously allowed with respect to such
property, and any excess gain and the entire amount of any loss will be treated
as "section 1231" gain or loss. It is anticipated that the gain treated as
ordinary income should generally be allocated solely to the Limited Partners
other than Tax-Exempt Limited Partners.

Generally, section 1231 gains or losses from all sources are required to be
netted on the Limited Partner's tax return. Any net section 1231 gain is treated
as long-term capital gain, and any net section 1231 loss is treated as an
ordinary loss.

A Limited Partner may deduct losses allocated by the Partnership only to the
extent of his, her or its adjusted tax basis in his, her or its Units. Because
the Refund paid to a Limited Partner will reduce his, her or its adjusted tax
basis in his, her or its Units, a Limited Partner who receives a Refund may not
be entitled to deduct the full amount of his, her or its share of any losses
realized by the Partnership.

Upon the liquidation of the Partnership and the distribution of sale
proceeds, a Limited Partner could, depending on his, her or its personal tax
situation, recognize additional gain or loss, to the extent that the sum of the
cash received (and in the case of a Settling Limited Partner any amounts treated
as received and used to repay the Liquidation Advance) and the reduction in his,
her or its share of Partnership non-recourse liabilities (if any) is greater or
less than such Limited Partner's adjusted tax basis of his, her or its Units.
For this purpose, the Limited Partner's adjusted tax basis in his, her or its
Units is increased by his, her or its share of any gain and reduced by such
Limited Partner's share of any loss recognized from the sale of Partnership
assets (as well as such Limited Partner's receipt of a Refund or Enhancement, as
described above).

As described more fully under the heading "The Proposal and the Reasons for
the Proposal -- Effect of Approval of the Proposal and the Settlement," all or
part of the Liquidating Distribution otherwise payable to any Limited Partner
who has received a Liquidation Advance will be paid to NYLIFE Realty as a
repayment of the Liquidation Advance. Although the issue is not free from doubt,
the General Partners believe that any Limited Partner who has received a
Liquidation Advance will be treated for federal income tax purposes as having
received from the Partnership his, her or its full allocable share of the
Liquidating Distribution, and, to the extent such amount is paid to NYLIFE
Realty, to have applied such proceeds to repay the Liquidation Advance. The
General Partners intend that the Partnership's annual information return will be
prepared in a manner consistent with such treatment.

Any additional gain or loss recognized by a Limited Partner on the
liquidation of the Partnership generally will be treated as capital gain or
loss.

39
<PAGE>
Any loss reportable by a Limited Partner as a result of the transactions
contemplated herein, and any suspended passive activity losses from prior years
that are attributable to the Partnership, should generally be deductible in the
year of sale without regard to the passive activity loss limitations. Any net
income or gain reportable by a Limited Partner as a result of the transactions
contemplated herein should generally be considered "passive activity" income
that can be offset against passive activity losses from other sources.

A Tax-Exempt Limited Partner may have unrelated business taxable income as a
result of the winding up and liquidation of the Partnership if it has incurred
"acquisition indebtedness" within the meaning of the Code with respect to its
Units.

EACH LIMITED PARTNER IS STRONGLY URGED TO CONSULT ITS TAX ADVISER WITH
RESPECT TO THE TAX CONSEQUENCES OF THE RECEIPT OF THE CASH PAYMENT AND OF THE
WINDING UP AND LIQUIDATION OF THE PARTNERSHIP ON THE LIMITED PARTNER'S
PARTICULAR TAX SITUATION.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT

There is no individual known by the General Partners to be the beneficial
owner of more than five percent of the outstanding Units. The Partnership's
records indicate that no director or officer of NYLIFE Realty or CNP is a
beneficial owner of any of the outstanding Units. Each of the General Partners
owns a 0.5% general partner interest in the Limited Partnership. In addition,
NYLIFE Realty owns 2,016.4 Units.

INTERESTS OF CERTAIN PERSONS IN TRANSACTION

If the Proposal is approved by the Limited Partners, the Partnership will
proceed with the dissolution and termination of the Partnership pursuant to the
Partnership Agreement regardless of whether the Settlement is approved by the
Court and becomes final, and any Partnership assets remaining after the sale of
the Partnership's properties and the discharge of all of its liabilities,
including debts to partners, will be distributed to the Limited Partners and
General Partners in accordance with the Partnership Agreement. See "The Proposal
and Reasons for the Proposal -- The Proposal -- Liquidating Distributions." In
addition to any Liquidating Distribution NYLIFE Realty will receive as a result
of its general partner interest, NYLIFE Realty will receive a percentage of the
Liquidating Distributions to Limited Partners corresponding to the number of
Units owned by it.

If the Limited Partners approve the Proposal and the Court approves the
Settlement and the Settlement becomes final, NYLIFE Realty will pay a
Liquidation Advance to each Settling Limited Partner. The Liquidation Advance
will be non-interest bearing and repayable solely out of any Liquidating
Distribution payable by the Partnership to the Settling Limited Partner. Each
Settling Limited Partner will grant a security interest in favor of NYLIFE
Realty in his, her or its Units and Liquidating Distribution up to the amount of
such Settling Limited Partner's Liquidation Advance to secure the repayment of
such Liquidation Advance out of his, her or its Liquidating Distribution. No
Cash Payment will be made with respect to the Units owned by NYLIFE Realty.

The Proposal may give rise to certain conflicts of interest arising out of
the relationships among the Partnership, the General Partners and affiliates of
the General Partners. If the Proposal is approved by the Limited Partners and
the Settlement is approved by the Court and becomes final, the General Partners
and certain of their affiliates will be released from certain liabilities as
discussed in "Litigation and Proposed Settlement -- Release." New York Life, an
affiliate of the General Partners, is the Co-Venturer of each of the Joint
Ventures and will participate in the net proceeds from the sale of the
Properties in proportion to its interest in the Joint Ventures. Each Joint
Venture agreement provides that the consent of both the Partnership and the
Co-Venturer is required for the sale of the Property owned by the Joint Venture.
The Co-Venturer has informed the Partnership, however, that if the Proposal is
approved, the Co-Venturer will consent to the terms of any sale of the Property
for cash

40
<PAGE>

if the terms are acceptable to the Partnership. Pursuant to the Partnership
Agreement, the General Partners would be entitled to a Subordinated Disposition
Fee in connection with the sale of a Property if the Limited Partners have
received a specified return on their capital contributions. The General
Partnerships believe it is unlikely that the specified return will be achieved
upon sale of the Properties. As a condition to receipt of a Liquidation Advance
from NYLIFE Realty, as paying agent for NYLIFE Inc., each Settling Limited
Partner will grant a security interest in favor of NYLIFE Realty in his, her or
its Units and Liquidating Distribution up to the amount of such Settling Limited
Partner's Liquidation Advance to secure the repayment of the Liquidation Advance
out of such Settling Limited Partner's Liquidating Distribution. See "The
Proposal and Reasons for the Proposal -- Material Advantages and Disadvantages
of the Proposal to the Partners -- Advantages to General Partners."

MARKET FOR UNITS AND RELATED MATTERS

There is no organized trading market for the Units. Units may be assigned
upon compliance with applicable laws and the terms of the Partnership Agreement.
As of the Record Date, the Partnership had 3,065 Limited Partners. Pursuant to a
preliminary injunction issued by the Court, Limited Partners who have not
excluded themselves from the Class have been enjoined from transferring their
Units except in certain specified circumstances. If the Proposal is approved by
the Limited Partners and the Settlement is approved by the Court and becomes
final, Settling Limited Partners will not be permitted to transfer their Units.
Settling Limited Partners will, however, receive the Cash Payment. See "The
Proposal and Reasons for the Proposal -- Reasons for the Proposal -- Liquidity"
and "Litigation and Proposed Settlement -- The Hearing Order and the Settlement
Hearing."

Information regarding cash distributions to the Limited Partners is included
under "Selected Financial Data."

VOTING PROCEDURES

Each Limited Partner shall be entitled to one vote or portion thereof for
each Unit or portion thereof owned of record by such Limited Partner on the
Record Date. Approval of the Proposal requires the affirmative consents of
Limited Partners holding a majority of the Units (a minimum of 1,416,963 Units)
outstanding on the Record Date. A duly executed consent form on which a consent,
disapproval or abstention is not indicated will be deemed a consent to the
Proposal, except that broker non-votes (Units held by a broker or nominee for
which a consent form is submitted but with respect to which such broker or
nominee expressly indicates that it does not have discretionary authority to
consent to the proposals) will be treated as negative votes. Abstentions also
will be treated effectively as negative votes.

This Definitive Solicitation Statement is accompanied by a separate consent
form. Consent forms should be completed, signed and returned promptly if by
United States mail to New York Life Limited Partnership Class Action
Administrator, P.O. Box 9224, Boston, MA 02205-8622, or if by hand delivery or
delivery service, to New York Life Limited Partnership Class Action
Administrator, c/o Boston Financial Data Services, 1250 Hancock Street, Quincy,
MA 02169. A self-addressed, prepaid envelope for return of the consent forms has
been included with this Definitive Solicitation Statement.

Only Limited Partners of record on the Record Date (May 14, 1996) will be
entitled to submit consent forms with respect to the Proposal. The consent
solicitation for the Partnership will expire at 5:00 p.m., New York time, on
July 1, 1996, unless extended by the General Partners (as extended from time to
time, the "Expiration Date"). The General Partners may extend the Expiration
Date in their sole discretion. The General Partners intend to extend the
Expiration Date until the earlier of the date on which a majority of the Limited
Partners have approved or disapproved the Proposal or the Final Settlement Date.

Any Limited Partner delivering a consent form pursuant to the Definitive
Solicitation Statement may revoke his, her or its consent, disapproval, or
abstention with respect to the Proposal at any time prior to the Expiration Date
by delivering written notice of such revocation to New York Life Limited

41
<PAGE>
Partnership Class Action Administrator, P.O. Box 9224, Boston, MA 02205-8622, or
if by hand delivery or delivery service, to New York Life Limited Partnership
Class Action Administrator, c/o Boston Financial Data Services, 1250 Hancock
Street, Quincy, MA 02169. Such written notice must be received by NYLIFE Realty
prior to the Expiration Date.

The Proprietary Partnerships have retained the services of King to solicit
the written consents of limited partners to the dissolution of such
partnerships. Additionally, BFDS has been retained by the General Partners,
certain of their affiliates and the Plaintiffs to act as the class action
administrator in connection with the Lawsuit. As such, BFDS may assist in the
solicitation of written consents. Solicitation of consents also may be
undertaken by the directors, officers, employees and agents of the General
Partners and New York Life. Solicitation may be made by mail, telephone,
telegraph, facsimile transmission or personal interview. The fees and expenses
of King and BFDS and the costs incurred by the General Partners in connection
with the solicitation of consents will be borne by NYLIFE Realty and certain of
its affiliates. The fees of King for the solicitation of consents on behalf of
all Proprietary Partnerships (including the Partnership) is estimated to be
$100,000, plus reimbursement for out-of-pocket costs and expenses. The fees of
BFDS for its services as class action administrator in connection with the
Lawsuit are estimated to be $2,500,000.

ADDITIONAL INFORMATION

The Partnership is subject to the informational requirements of the Exchange
Act and in accordance therewith, files reports, proxy statements and other
information with the Commission. Such reports, proxy statements and other
information filed by the Partnership may be inspected at, and, upon payment of
the Commission's customary charges, copies may be obtained from, the public
reference facilities maintained by the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549. Such reports, proxy statements and other information are
also available for inspection and copying at prescribed rates at the
Commission's regional offices located at Seven World Trade Center, 13th Floor,
New York, New York 10048 and Citicorp Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661.

INCORPORATION BY REFERENCE

The Partnership's Annual Report on Form 10-K for the year ended December 31,
1995, as amended by Form 10-K/A-1 dated May 15, 1996 and Form 10-K/A-2 dated May
28, 1996, and its Quarterly Report on Form 10-Q for the three months ended March
31, 1996, as amended by Form 10-Q/A-1 dated May 28, 1996, are incorporated by
reference into this Solicitation Statement.

The Partnership will provide without charge to each person to whom a copy of
this Preliminary Solicitation Statement is delivered, upon written or oral
request of such person and by first class mail or other equally prompt means, a
copy of any or all of the documents incorporated by reference herein, other than
exhibits to such documents (unless such exhibits are specifically incorporated
by reference in such documents). Requests should be directed to NYLIFE Realty
Income Partners I, L.P., 51 Madison Avenue, Suite 1710, New York, New York
10010.

By Order of the General Partners

NYLIFE REALTY INC.
CNP REALTY INVESTMENTS INC.

42
<PAGE>
NYLIFE REALTY INCOME PARTNERS I, L.P.
INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE NO.
-----------
<S> <C>
ANNUAL FINANCIAL STATEMENTS:

Report of Independent Public Accountants.............................................................. F-2

Balance Sheets as of December 31, 1995 and 1994....................................................... F-3

Statements of Operations for the Years Ended December 31, 1995, 1994 and 1993......................... F-4

Statements of Partners' Capital for the Years Ended December 31, 1995, 1994 and 1993.................. F-5

Statements of Cash Flows for the Years Ended December 31, 1995, 1994 and 1993......................... F-6

Notes to Financial Statements......................................................................... F-7

QUARTERLY FINANCIAL STATEMENTS (UNAUDITED):

Balance Sheets as of March 31, 1996 and December 31, 1995............................................. F-15

Statements of Operations for the Three Months Ended March 31, 1996 and 1995........................... F-16

Statements of Partners' Capital (Deficit) for the Three Months Ended March 31, 1996 and for the Year
Ended December 31, 1995.............................................................................. F-17

Statements of Cash Flows for the Three Months Ended March 31, 1996 and 1995........................... F-18

Notes to Financial Statements......................................................................... F-19
</TABLE>

F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Partners of NYLIFE Realty Income Partners I, L.P.:

We have audited the accompanying balance sheets of NYLIFE Realty Income Partners
I, L.P. (a Delaware limited partnership) (the "Partnership") as of December 31,
1995 and 1994 and the related statements of operations, changes in partners'
capital and cash flows for each of the three years in the period ended December
31, 1995. These financial statements are the responsibility of the general
partner. Our responsibility is to express an opinion on these financial
statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by the
general partner, 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 11, in connection with the proposed settlement of
litigation involving NYLIFE Realty Inc., a co-general partner of the
Partnership, the general partners will solicit consents of the limited partners
for the dissolution of the Partnership. The financial statements do not include
any adjustments that might result should the limited partners consent to
liquidate the Partnership.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the Partnership 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.

/s/ Arthur Andersen LLP
ARTHUR ANDERSEN LLP
New York, New York
March 22, 1996

F-2
<PAGE>
NYLIFE REALTY INCOME PARTNERS I, L.P.
(A LIMITED PARTNERSHIP)
BALANCE SHEETS
AS OF DECEMBER 31, 1995 AND 1994

<TABLE>
<CAPTION>
ASSETS 1995 1994
----------- -----------
<S> <C> <C>
Cash and cash equivalents........................................ $ 688,977 $ 1,362,676
Restricted cash.................................................. 283,392 283,392
Investments in real estate Joint Ventures........................ 13,590,960 17,440,482
Other assets -- net.............................................. 2,472 27,803
----------- -----------
Total assets............................................... $14,565,801 $19,114,353
----------- -----------
----------- -----------

LIABILITIES AND PARTNERS' CAPITAL
Due to affiliates................................................ $ -- $ 100,000
Accrued liabilities.............................................. 94,058 104,940
----------- -----------
Total liabilities.......................................... 94,058 204,940
----------- -----------
Partners' capital
General Partners:
Capital contributions........................................ 2,000 2,000
Accumulated deficit.......................................... (9,103) (10,675)
Cumulative distributions..................................... (66,470) (52,701)
----------- -----------
(73,573) (61,376)
----------- -----------
Limited Partners:
Capital contributions net of public offering expenses........ 25,032,724 25,032,724
Accumulated deficit.......................................... (901,371) (1,056,996)
Cumulative distributions..................................... (9,586,037) (5,004,939)
----------- -----------
14,545,316 18,970,789
----------- -----------
Total partners' capital.................................... 14,471,743 18,909,413
----------- -----------
Total liabilities and partners' capital.................... $14,565,801 $19,114,353
----------- -----------
----------- -----------
</TABLE>

The accompanying Notes to Financial Statements are
an integral part of these statements.

F-3
<PAGE>
NYLIFE REALTY INCOME PARTNERS I, L.P.
(A LIMITED PARTNERSHIP)
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993

<TABLE>
<CAPTION>
1995 1994 1993
------------- ------------- -------------
<S> <C> <C> <C>
INCOME
Equity in income from Joint Venture operations..................... $ 248,687 $ 765,893 $ 311,734
Interest........................................................... 64,280 16,444 20,332
------------- ------------- -------------
Total income................................................... 312,967 782,337 332,066
------------- ------------- -------------
EXPENSES
General and administrative......................................... 55,770 66,968 73,600
General and administrative -- related party........................ 100,000 100,000 100,000
------------- ------------- -------------
Total expenses................................................. 155,770 166,968 173,600
------------- ------------- -------------
Net income................................................... $ 157,197 $ 615,369 $ 158,466
------------- ------------- -------------
------------- ------------- -------------
NET INCOME ALLOCATED
General Partners................................................... $ 1,572 $ 6,154 $ 1,585
Limited Partners................................................... 155,625 609,215 156,881
------------- ------------- -------------
$ 157,197 $ 615,369 $ 158,466
------------- ------------- -------------
------------- ------------- -------------
Net income per Unit................................................ $ .05 $ .21 $ .06
------------- ------------- -------------
------------- ------------- -------------
Number of Units.................................................... 2,833,925.5 2,833,925.5 2,833,925.5
------------- ------------- -------------
------------- ------------- -------------
</TABLE>

The accompanying Notes to Financial Statements are
an integral part of these statements.

F-4
<PAGE>
NYLIFE REALTY INCOME PARTNERS I, L.P.
(A LIMITED PARTNERSHIP)
STATEMENTS OF PARTNERS' CAPITAL
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994, AND 1993

<TABLE>
<CAPTION>
TOTAL
LIMITED GENERAL PARTNERS'
PARTNERS PARTNERS CAPITAL
-------------- ---------- --------------
<S> <C> <C> <C>
Capital (deficit) at January 1, 1993................................ $ 18,346,390 $ (67,684) $ 18,278,706
Net income.......................................................... 156,881 1,585 158,466
-------------- ---------- --------------
Capital (deficit) at December 31, 1993.............................. 18,503,271 (66,099) 18,437,172
Net income.......................................................... 609,215 6,154 615,369
Distributions to partners........................................... (141,697) (1,431) (143,128)
-------------- ---------- --------------
Capital (deficit) at December 31, 1994.............................. 18,970,789 (61,376) 18,909,413
Net income.......................................................... 155,625 1,572 157,197
Distributions to partners........................................... (4,581,098) (13,769) (4,594,867)
-------------- ---------- --------------
Capital (deficit) at December 31, 1995.............................. $ 14,545,316 $ (73,573) $ 14,471,743
-------------- ---------- --------------
-------------- ---------- --------------
</TABLE>

The accompanying Notes to Financial Statements are
an integral part of these statements.

F-5
<PAGE>
NYLIFE REALTY INCOME PARTNERS I, L.P.
(A LIMITED PARTNERSHIP)
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994, AND 1993

<TABLE>
<CAPTION>
1995 1994 1993
-------------- ------------- ------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income........................................................... $ 157,197 $ 615,369 $ 158,466
-------------- ------------- ------------
Adjustments to reconcile net income to net cash provided by operating
activities:
Equity in income from joint venture operations..................... (248,687) (765,893) (311,734)
Cash distributions from joint venture operations................... 248,687 765,893 311,734
Changes in assets and liabilities:
(Increase) decrease in restricted cash............................. -- (250,000) 250,000
Decrease (increase) in other assets................................ 25,331 (26,721) 9,214
(Decrease) increase in due to affiliates........................... (100,000) 100,000 --
(Decrease) increase in accrued liabilities......................... (10,882) 12,147 (109,438)
-------------- ------------- ------------
Total adjustments................................................ (85,551) (164,574) 149,770
-------------- ------------- ------------
Net cash provided by operating activities........................ 71,646 450,795 308,242
-------------- ------------- ------------
Cash flows from investing activities:
Cash distributions from Joint Venturers in excess of earnings
(return of capital)............................................... 3,849,522 802,507 12,779
Investments in real estate Joint Ventures.......................... -- -- (459,375)
-------------- ------------- ------------
Net cash provided by (used in) investing activities.............. 3,849,522 802,507 (446,596)
-------------- ------------- ------------
Cash flows from financing activities:
Distributions to partners.......................................... (4,594,867) (143,128) --
-------------- ------------- ------------
Net (decrease) increase in cash and cash equivalents................. (673,699) 1,110,174 (138,354)
Cash and cash equivalents at beginning of year....................... 1,362,676 252,507 390,856
-------------- ------------- ------------
Cash and cash equivalents at end of year............................. $ 688,977 $ 1,362,676 $ 252,507
-------------- ------------- ------------
-------------- ------------- ------------
</TABLE>

The accompanying Notes to Financial Statements are
an integral part of these statements.

F-6
<PAGE>
NYLIFE REALTY INCOME PARTNERS I, L.P.
(A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994

NOTE 1 -- ORGANIZATION
NYLIFE Realty Income Partners I, L.P. (the "Partnership") is a Delaware
limited partnership formed on November 14, 1986. Its co-general partners are
NYLIFE Realty Inc. ("Realty") and CNP Realty Investments, Inc. ("CNP"),
(collectively, the "General Partners"). The Partnership was formed to enter into
a series of joint ventures (individually, a "Joint Venture", collectively, the
"Joint Ventures") with New York Life Insurance Company (the "Co-Venturer"), an
affiliate of Realty. Each Joint Venture acquired (on an unleveraged basis),
operates, holds for investment, and will ultimately sell, existing, income
producing, commercial properties (individually, a "Property", collectively, the
"Properties").

The Partnership is the managing partner of each Joint Venture, responsible
for management of the day-to-day operations and implementing the joint decisions
of the Joint Venture's partners.

The Partnership will continue until December 31, 2036, unless terminated
sooner in accordance with the terms of the partnership agreement (the
"Partnership Agreement") (see Note 11). The Partnership did not commence active
operations until March 1987. The offering of units was terminated by the General
Partners on June 30, 1989.

Capitalized terms used in these Notes to Financial Statements, unless
otherwise defined herein, shall have the meanings set forth in Section 2 of the
Partnership Agreement.

NOTE 2 -- BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF REPORTING

The accompanying financial statements are prepared under generally accepted
accounting principles using the accrual basis of accounting. Accordingly,
revenues are recognized as earned and expenses are recognized as incurred.

The preparation of financial statements in conformity with generally
accepted accounting principles 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.

CASH AND CASH EQUIVALENTS

Highly liquid debt instruments (primarily consisting of commercial paper)
purchased with a maturity of three months or less are considered cash
equivalents.

RESTRICTED CASH

Restricted cash represents amounts required to be retained in the
Partnership which may be used to fund future operating requirements pursuant to
the Partnership Agreement.

INVESTMENTS IN REAL ESTATE JOINT VENTURES

The Partnership accounts for its investments in real estate joint ventures
using the equity method of accounting. Equity in income (loss) from Joint
Venture operations is recognized as earned and cash distributions received are
accounted for as a reduction of the related investment (see Note 4).

The Partnership's investments in real estate joint ventures are carried at
the lower of equity method carrying amount or estimated net realizable value.
The Partnership periodically reviews its investments for declines in net
realizable values, to amounts below recorded balances based upon its

F-7
<PAGE>
NYLIFE REALTY INCOME PARTNERS I, L.P.
(A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1995 AND 1994

NOTE 2 -- BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (CONTINUED)
present investment strategies. Future changes in such investment strategies and
other circumstances may effect estimates of net realizable values and therefore
the carrying amount of investments (see Note 10).

INCOME TAXES

No provision for income taxes has been made in the financial statements
since these taxes are the responsibility of the individual partners rather than
the Partnership.

RECLASSIFICATIONS

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

NOTE 3 -- THE PARTNERSHIP AGREEMENT
The Partnership Agreement, dated June 10, 1987, provides that net cash from
operations, as defined, for each fiscal year will be distributed on a quarterly
basis, 99% to the Limited Partners and 1% to the General Partners until each
Limited Partner has received a 6% annual return. Any remaining net cash from
operations will first be distributed to the General Partners until the General
Partners have received an additional 9% of the aggregate net cash from
operations distributed to all partners. Thereafter, net cash from operations
will be distributed 99% to the Limited Partners and 1% to the General Partners.

Net proceeds from sales of Properties shall be distributed first, 100% to
the Limited Partners until each Limited Partner has received an amount equal to
his capital contribution; second, 100% to the Limited Partners until each
Limited Partner has received aggregate distributions from all sources (other
than the proceeds previously referred to) equal to a 6% cumulative return;
third, after payment of the subordinated disposition fee to the General
Partners, if any, 100% to the Limited Partners until each Limited Partner has
received aggregate distributions from all sources (other than the proceeds first
mentioned) equal to a 10% cumulative return; and fourth, any remaining proceeds
will be distributed 85% to the Limited Partners and 15% to the General Partners.

NOTE 4 -- INVESTMENT IN REAL ESTATE JOINT VENTURES
Since inception, the Partnership and Co-Venturer have acquired four
commercial properties, Cornell Plaza Office Building ("Cornell"), Parklane
Office Building ("Parklane"), Eden Woods Business Center ("Eden Woods") and
NewMarket Shopping Center ("NewMarket") through investments in Joint Ventures
("Joint Ventures A, B, C and D" respectively) as follows:

<TABLE>
<CAPTION>
PARTNERSHIP INTEREST
DATE AT
JOINT RENTABLE ACQUIRED BY --------------------
VENTURE PROPERTY NAME LOCATION SQ. FT. PARTNERSHIP PURCHASE PRICE 12/31/95 12/31/94
- --------- --------------- --------------------- --------- ----------- -------------- --------- ---------
<C> <S> <C> <C> <C> <C> <C> <C>
A Cornell Blue Ash, OH 85,625 3/30/88 $ 9,550,000 60% 60%

(1)B Parklane Brentwood, TN 107,523 6/29/88 $ 9,600,000 60% 60%

C Eden Woods Eden Prairie, MN 165,866 8/23/88 $ 10,900,000 47.06% 47.06%

D NewMarket Columbus, OH 172,833 12/22/88 $ 15,500,000 43.82% 43.82%
</TABLE>

- ------------------------
(1) As discussed below, Parklane was sold on December 6, 1994.

F-8
<PAGE>
NYLIFE REALTY INCOME PARTNERS I, L.P.
(A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1995 AND 1994

NOTE 4 -- INVESTMENT IN REAL ESTATE JOINT VENTURES (CONTINUED)
MINIMUM RENT PAYMENTS

Future minimum rental income to be received from non-cancelable operating
leases as of December 31, 1995 for the Joint Ventures are as follows:

<TABLE>
<S> <C>
1996.......................................... $ 2,594,600
1997.......................................... 2,380,277
1998.......................................... 2,082,463
1999.......................................... 1,721,142
2000.......................................... 1,159,530
Thereafter.................................... 3,001,737
-----------
$12,939,749
-----------
-----------
</TABLE>

Base rent in 1995, 1994 and 1993 was $2,703,146, $3,875,542 and $3,492,005
excluding escalations, respectively.

Generally, lease terms are for 3 to 5 years and allow for increases in
certain property operating expenses to be passed through to the tenants.

JOINT VENTURE A -- CORNELL

During the years ended December 31, 1995 and 1994, various leasing and
capital improvement costs were incurred as follows:

<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
Tenant improvements................................................. $ 21,663 $ 274,378
----------- -----------
----------- -----------
Building improvements............................................... $ 314,554 $ 21,024
----------- -----------
----------- -----------
Leasing commissions................................................. $ 16,882 $ 69,172
----------- -----------
----------- -----------
Rent concessions.................................................... $ 12,655 $ 1,400
----------- -----------
----------- -----------
</TABLE>

During 1995 and 1994, the Partnership received distributions from Cornell of
$280,761 and $179,043, respectively.

JOINT VENTURE B -- PARKLANE

On December 6, 1994 pursuant to a Purchase and Sale Agreement dated October
7, 1994, Joint Venture B sold Parklane, along with the underlying land and
related improvements, to Principal Mutual Life Insurance Company for $5,600,000
which represents approximately 127% of its appraised value of $4,400,000 at
November 30, 1993. It was determined that under current market conditions and
considering the departure of South Central Bell, whose 69,302 sq. ft. occupancy
comprises approximately 64% of Parklane's net rentable space, the sale of
Parklane would provide more value than utilizing the cash reserve to re-tenant
the building. At the time of the sale the cash reserve balance was $1,519,570.
During 1995 and 1994, the Partnership received distributions from Parklane of
$3,301,334 and $915,124, respectively. The Partnership distributed to investors
its share of the net proceeds from the sale, along with its share of the cash
reserve, in accordance with the provisions of the Partnership Agreement on
February 15, 1995.

F-9
<PAGE>
NYLIFE REALTY INCOME PARTNERS I, L.P.
(A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1995 AND 1994

NOTE 4 -- INVESTMENT IN REAL ESTATE JOINT VENTURES (CONTINUED)
JOINT VENTURE C -- EDEN WOODS

During the years ended December 31, 1995 and 1994, various leasing costs
were incurred as follows:

<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
Tenant improvements................................................. $ 213,655 $ 273,914
----------- -----------
----------- -----------
Leasing commissions................................................. $ 122,270 $ 76,809
----------- -----------
----------- -----------
Rent concessions.................................................... $ 59,060 $ 51,951
----------- -----------
----------- -----------
</TABLE>

During 1995 and 1994, the Partnership received distributions from Eden Woods
of $163,970 and $211,193, respectively.

JOINT VENTURE D -- NEWMARKET

During 1993, substantial structural improvements were made at NewMarket to
accommodate leases with CompUSA to anchor the south end of the center and Media
Play to anchor the north end. Such improvements were funded by cash flow from
operations as well as capital contributions by the Partnership and Co-Venturer
during 1993 and 1994. Since the Partnership was unable to fund a portion of its
required contribution in 1994, the Co-Venturer increased its contribution by the
amount of the Partnership's shortfall in exchange for an increased ownership
interest in the Joint Venture. During 1994, the Co-Venturer contributed $155,059
of additional capital and during 1993, the Partnership and the Co-Venturer
contributed $459,375 and $1,600,163, of additional capital, respectively.

During the years ended December 31, 1995 and 1994 various leasing and
capital improvement costs were incurred as follows:

<TABLE>
<CAPTION>
1995 1994
--------- -----------
<S> <C> <C>
Tenant improvements.................................................... $ 4,500 $ 115,448
--------- -----------
--------- -----------
Building improvements.................................................. $ 2,521 $ 85,632
--------- -----------
--------- -----------
Leasing commissions.................................................... $ -- $ 36,178
--------- -----------
--------- -----------
Rent concessions....................................................... $ 2,454 $ 10,487
--------- -----------
--------- -----------
</TABLE>

During 1995 and 1994, the Partnership received distributions from NewMarket
of $352,144 and $263,040, respectively.

The terms of the Partnership Agreement, dated June 10, 1987, provide that
all Joint Venture income, losses and distributions, generally, will be
apportioned pro-rata among the Partnership and the Co-Venturer in proportion to
their respective contributions (exclusive of the Partnership's contribution for
Acquisition Fees).

F-10
<PAGE>
NYLIFE REALTY INCOME PARTNERS I, L.P.
(A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1995 AND 1994

NOTE 4 -- INVESTMENT IN REAL ESTATE JOINT VENTURES (CONTINUED)
A summary of the condensed combined financial information of the Joint
Ventures and the appraised values of the Properties as of December 31, 1995 and
1994 is presented below:

<TABLE>
<CAPTION>
1995 1994
---------------------------------------------------------------- ------------
COMBINED COMBINED
CORNELL PARKLANE EDEN WOODS NEWMARKET TOTAL TOTAL
----------- ----------- ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
APPRAISED VALUES OF
PROPERTIES.................... $ 7,200,000 -- $ 9,200,000 $ 8,000,000 $ 24,400,000 $ 21,800,000
----------- ----------- ----------- ----------- ------------ ------------
----------- ----------- ----------- ----------- ------------ ------------
BALANCE SHEETS
Land........................... $ 1,128,832 -- $ 1,765,928 $ 1,773,046 $ 4,667,806 $ 4,667,806
Building and improvements...... 9,840,813 -- 10,382,181 9,667,612 29,890,606 29,333,712
Accumulated depreciation....... (3,202,942) -- (2,802,780) (2,903,364) (8,909,086) (7,440,878)
Other assets................... 500,368 -- 750,316 651,961 1,902,645 7,596,351
Accrued liabilities............ (176,651) -- (125,209) (251,255) (553,115) (690,317)
Co-Venturer's equity........... (3,185,096) -- (5,312,239) (5,505,369) (14,002,704) (16,646,395)
----------- ----------- ----------- ----------- ------------ ------------
Partnership's equity in Joint
Ventures...................... $ 4,905,324 -- $ 4,658,197 $ 3,432,631 $ 12,996,152 $ 16,820,279
----------- ----------- ----------- ----------- ------------ ------------
----------- ----------- ----------- ----------- ------------ ------------
Represented by:
Partnership's equity in Joint
Ventures at January 1......... $ 5,106,600 $ 3,300,349 $ 4,920,342 $ 4,113,191 $ 17,440,482 $ 18,242,989
Joint Venture income......... 79,485 985 47,860 145,754 274,084 765,893
Cash distributions........... (280,761) (3,301,334) (163,970) (352,144) (4,098,209) (1,568,400)
----------- ----------- ----------- ----------- ------------ ------------
Net equity investment.......... 4,905,324 -- 4,804,232 3,906,801 13,616,357 17,440,482
Interest....................... -- -- (72,377) (300,910) (373,287) (373,287)
Acquisition fees............... -- -- (73,656) (173,260) (246,916) (246,916)
Amortization of interest and
acquisition fees.............. -- -- 6,043 19,354 25,397 --
----------- ----------- ----------- ----------- ------------ ------------
Partnership's equity in Joint
Ventures at December 31....... $ 4,905,324 -- $ 4,664,242 $ 3,451,985 $ 13,021,551 $ 16,820,279
----------- ----------- ----------- ----------- ------------ ------------
----------- ----------- ----------- ----------- ------------ ------------
</TABLE>

The following is a summary of the condensed combined operations of the Joint
Ventures for the years ended December 31, 1995, 1994 and 1993:

<TABLE>
<CAPTION>
1995 1994 1993
----------------------------------------------------------- ----------- -----------
EDEN COMBINED COMBINED COMBINED
OPERATIONS CORNELL PARKLANE WOODS NEWMARKET TOTAL TOTAL TOTAL
- -------------------------- --------- ----------- --------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Net operating income...... $ 121,882 $ (673) $ 93,754 $ 323,504 $ 538,467 $ 1,051,960 $ 499,690
Interest income........... 10,593 2,314 7,945 9,115 29,967 67,190 39,011
Gain on sale of Property
(1)...................... -- -- -- -- -- 294,687 --
--------- ----------- --------- ----------- ----------- ----------- -----------
Net income................ $ 132,475 $ 1,641 $ 101,699 $ 332,619 $ 568,434 $ 1,413,837 $ 538,701
--------- ----------- --------- ----------- ----------- ----------- -----------
--------- ----------- --------- ----------- ----------- ----------- -----------
Net income allocated:
To Co-Venturer............ $ 52,990 $ 656 $ 53,839 $ 186,865 $ 294,350 $ 647,944 $ 226,967
To Partnership............ 79,485 985 47,860 145,754 274,084 765,893 311,734
--------- ----------- --------- ----------- ----------- ----------- -----------
$ 132,475 $ 1,641 $ 101,699 $ 332,619 $ 568,434 $ 1,413,837 $ 538,701
--------- ----------- --------- ----------- ----------- ----------- -----------
--------- ----------- --------- ----------- ----------- ----------- -----------
</TABLE>

- ------------------------------
(1) As discussed above, Parklane was sold on December 6, 1994.

NOTE 5 -- MANAGEMENT OF REAL ESTATE JOINT VENTURES
In order to provide quality asset management consistent with the goals and
objectives of the Partnership, the three remaining Joint Ventures contracted
with Greystone Realty Corporation

F-11
<PAGE>
NYLIFE REALTY INCOME PARTNERS I, L.P.
(A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1995 AND 1994

NOTE 5 -- MANAGEMENT OF REAL ESTATE JOINT VENTURES (CONTINUED)
("Greystone"), an affiliate of the Co-Venturer and the General Partners, to
provide property management services for the Joint Ventures. Greystone has been
managing the Joint Ventures since July 1, 1989. Greystone has contracted with
local property managers and leasing agents separately in accordance with the
terms and conditions approved by the management of each Joint Venture.

NOTE 6 -- TRANSACTIONS WITH THE GENERAL PARTNERS AND AFFILIATES
The following is a summary of the amounts earned by the General Partners and
their affiliates for the years ended December 31, 1995, 1994 and 1993, as
defined in the Partnership Agreement:

<TABLE>
<CAPTION>
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
Property management fees (1)........................... $ 138,660 $ 171,972 $ 175,000
Reimbursement of general and administrative expenses
paid by the General Partner........................... 100,000 100,000 100,000
----------- ----------- -----------
$ 238,660 $ 271,972 $ 275,000
----------- ----------- -----------
----------- ----------- -----------
</TABLE>

The above amounts are allocable to the General Partners and their affiliates
as follows:

<TABLE>
<CAPTION>
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
NYLIFE Realty Inc...................................... $ 100,000 $ 100,000 $ 100,000
Greystone Realty Corporation........................... 138,660 171,972 175,000
----------- ----------- -----------
$ 238,660 $ 271,972 $ 275,000
----------- ----------- -----------
----------- ----------- -----------
</TABLE>

- ------------------------
(1) Costs associated with property management fees are borne by the Joint
Ventures.

NOTE 7 -- CAPITAL CONTRIBUTIONS AND ALLOCATION OF NET INCOME TO LIMITED PARTNERS
As of December 31, 1995 and 1994, the Partnership had issued 2,833,925.5
Units in exchange for an aggregate of $28,339,255 in Limited Partner capital
contributions. Net income or loss and cash distributions from operations for any
fiscal year shall be allocated 99% to the Limited Partners and 1% to the General
Partners.

NOTE 8 -- RECONCILIATION OF NET INCOME TO TAXABLE INCOME
The following table reconciles net income for financial reporting purposes
to taxable income (loss) for Federal income tax reporting purposes for the years
ended 1995, 1994 and 1993. The differences are due primarily to i) differences
between the tax and financial statement basis of buildings and improvements,
(creating a loss on the sale of Parklane for tax reporting purposes and a gain
for financial reporting purposes in 1994), ii) depreciating real estate on a
straight-line basis for financial

F-12
<PAGE>
NYLIFE REALTY INCOME PARTNERS I, L.P.
(A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1995 AND 1994

NOTE 8 -- RECONCILIATION OF NET INCOME TO TAXABLE INCOME (CONTINUED)
reporting purposes while using accelerated methods for tax reporting purposes
and iii) recognition of rental income on a straight-line basis for financial
reporting purposes and based upon the contractual minimum rental payments for
tax reporting purposes.

<TABLE>
<CAPTION>
1995 1994 1993
----------- -------------- -----------
<S> <C> <C> <C>
Net income for financial reporting purposes.............. $ 157,197 $ 615,369 $ 158,466
Difference between tax and financial statement
depreciation............................................ 264,490 189,828 180,537
Adjustment for straight-line rent........................ 39,252 14,382 79,292
Adjustment for bad debt reserve.......................... -- (18,150) 2,176
Difference between tax loss and financial statement gain
on the sale of Parklane................................. -- (1,957,254) --
Difference between tax and financial statement
amortization............................................ 25,397 -- --
----------- -------------- -----------
Net income (loss) for income tax reporting purposes...... $ 486,336 $ (1,155,825) $ 420,471
----------- -------------- -----------
----------- -------------- -----------
</TABLE>

NOTE 9 -- FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107, "Disclosures about Fair
Value of Financial Instruments," requires disclosure of fair value information
of financial instruments, whether or not recognized on the accompanying balance
sheets, for which it is practical to estimate that value. Management believes
that, due to the short term nature of cash equivalents, the carrying amounts
reported on the balance sheets approximate their fair value.

NOTE 10 -- ADOPTION OF NEWLY ISSUED PRONOUNCEMENTS
In March 1995, the Financial Accounting Standards Board issued Statement 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 to be
held and used by an entity be recognized as impaired whenever events or changes
in circumstances indicate that the carrying amount of an asset may not be
recoverable, and when impaired to record an impairment loss to state the asset
at its fair value. In addition, the statement requires that long-lived assets to
be disposed of be reported at the lower of carrying amount or fair value less
cost to sell. This pronouncement is effective for fiscal years beginning after
December 15, 1995. In management's opinion, except for the proposed dissolution
of the Partnership as more fully discussed in Note 11, when adopted on January
1, 1996, Statement No. 121 will not have a material adverse effect on the
Partnership's financial position or results of operations.

In the event of dissolution, the Partnership would record an adjustment to
state its investments in real estate Joint Ventures at their then fair market
value. Subsequent increases and decreases in fair market value would be recorded
currently in earnings under the liquidation method of accounting.

NOTE 11 -- SUBSEQUENT EVENT
Two class action lawsuits were filed against the Co-Venturer and certain
other affiliates of the General Partners in the District Court of Harris County,
Texas on January 11, 1996, styled GRIMSHAWE V. NEW YORK LIFE INSURANCE CO., ET
AL. (No. 96-001188) and SHEA V. NEW YORK LIFE INSURANCE CO., ET AL. (No.
96-001189) alleging misconduct in connection with the original sale of
investment units in

F-13
<PAGE>
NYLIFE REALTY INCOME PARTNERS I, L.P.
(A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1995 AND 1994

NOTE 11 -- SUBSEQUENT EVENT (CONTINUED)

various partnerships (the "Proprietary Partnerships"), including violation of
various laws and regulations and claims of continuing fraudulent conduct. The
plaintiffs have asked for compensatory damages for their lost original
investment, plus interest, costs (including attorneys fees), punitive damages,
disgorgement of any earnings, compensation and benefits received by the
defendants as a result of the alleged actions and other unspecified relief to
which plaintiffs may be entitled. These suits were amended and refiled in a
consolidated action in the United States District Court for the Southern
District of Florida (the "Court") on March 18, 1996. In the federal action, the
plaintiffs added Realty and CNP as defendants and included allegations
concerning the Partnership. The Partnership is not a defendant in the
litigation.

The defendants expressly deny any wrongdoing alleged in the complaint and
concede no liability or wrongdoing in connection with the sale of the Units or
the structure of the Proprietary Partnerships. Nevertheless, to reduce the
burden of protracted litigation, the defendants have entered into a Stipulation
of Settlement ("Settlement Agreement") with the plaintiffs because in their
opinion such Settlement would (i) provide substantial benefits to the limited
partners in a manner consistent with New York Life's position that it had
previously determined to wind up most of the Proprietary Partnerships, including
the Partnership, through orderly liquidation as the continuation of the business
no longer serves the intended objectives of either the limited partners or the
defendants and to offer the limited partners an enhancement to the liquidating
distribution they would otherwise receive and (ii) provide an opportunity to
wind up such partnerships on a schedule favorable to the limited partners and
resolve the issues raised by the lawsuit.

In coordination with the proposed settlement (the "Settlement"), the General
Partners will solicit consents of the Limited Partners for the dissolution of
the Partnership.

Under the terms of the Settlement Agreement, any settling Limited Partners
will receive at least a complete return of their original investment, less
distributions received prior to the final settlement date, in exchange for a
release of any and all claims a Limited Partner may have against the defendants
in connection with the Proprietary Partnership, including the Partnership, and
all activities related to the dissolution and liquidation of such partnerships.
Payments under the Settlement Agreement will be made by NYLIFE Realty, as paying
agent for NYLIFE Inc., directly to each Settling Limited Partner, who will grant
NYLIFE Realty a security interest in such Settling Limited Partner's Units and
liquidating distributions received from the Partnership to secure repayment of a
portion of such settlement payments.

Preliminary approval of the Settlement Agreement was given by the Court on
March 19, 1996. The Settlement Agreement is further conditioned upon final
approval by the Court as well as certain other conditions and is subject to
certain rights of termination detailed in the consent solicitation material
being mailed to the Limited Partners.

If the necessary consents of Limited Partners for dissolution are obtained,
the Partnership will be dissolved even if all necessary approvals for the
Settlement Agreement are not obtained or the Settlement Agreement is otherwise
terminated. In general, upon the dissolution of the Partnership, negative tax
consequences may accrue to the partners. Recent appraisals (Note 4) indicate
that the fair market value of the Properties is less than their carrying
amounts. If the Properties are sold, proceeds from such sales may be less than
these carrying amounts or the recent appraisal amounts.

The financial statements do not include any adjustments that might result
should the Limited Partners vote to liquidate the Partnership.

F-14
<PAGE>
NYLIFE REALTY INCOME PARTNERS I, L.P.
(A LIMITED PARTNERSHIP)
BALANCE SHEETS
AS OF MARCH 31, 1996 (UNAUDITED) AND DECEMBER 31, 1995

<TABLE>
<CAPTION>
1996 1995
-------------- --------------
<S> <C> <C>
ASSETS
Cash and cash equivalents........................................................ $ 828,769 $ 688,977
Restricted cash.................................................................. 283,392 283,392
Investments in real estate joint ventures........................................ 13,491,084 13,590,960
Other assets -- net.............................................................. 2,149 2,472
-------------- --------------
Total assets............................................................... $ 14,605,394 $ 14,565,801
-------------- --------------
-------------- --------------

LIABILITIES AND PARTNERS' CAPITAL
Due to affiliates................................................................ $ 25,000 $ --
Accrued liabilities.............................................................. 85,211 94,058
-------------- --------------
Total liabilities............................................................ 110,211 94,058
-------------- --------------
Partners' capital
General Partners:
Capital contributions........................................................ 2,000 2,000
Accumulated deficit.......................................................... (8,869) (9,103)
Cumulative distributions..................................................... (66,470) (66,470)
-------------- --------------
(73,339) (73,573)
-------------- --------------
Limited Partners:
Capital contributions net of public offering expenses........................ 25,032,724 25,032,724
Accumulated deficit.......................................................... (878,165) (901,371)
Cumulative distributions..................................................... (9,586,037) (9,586,037)
-------------- --------------
14,568,522 14,545,316
-------------- --------------
Total partners' capital........................................................ 14,495,183 14,471,743
-------------- --------------
Total liabilities and partners' capital........................................ $ 14,605,394 $ 14,565,801
-------------- --------------
-------------- --------------
</TABLE>

The accompanying Notes to Financial Statements are
an integral part of these statements.

F-15
<PAGE>
NYLIFE REALTY INCOME PARTNERS I, L.P.
(A LIMITED PARTNERSHIP)
STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1995
(UNAUDITED)

<TABLE>
<CAPTION>
1996 1995
--------- ---------
<S> <C> <C>
INCOME
Equity in income from Joint Venture operations......................... $ 61,116 $ 63,314
Interest............................................................... 12,924 33,355
--------- ---------
Total income......................................................... 74,040 96,669
--------- ---------
EXPENSES
General and administrative............................................. 25,600 17,565
General and administrative -- related party............................ 25,000 25,000
--------- ---------
Total expenses....................................................... 50,600 42,565
--------- ---------
Net income......................................................... $ 23,440 $ 54,104
--------- ---------
--------- ---------
NET INCOME ALLOCATED
General Partners....................................................... $ 234 $ 541
Limited Partners....................................................... 23,206 53,563
--------- ---------
$ 23,440 $ 54,104
--------- ---------
--------- ---------
Net income per Unit.................................................... $ .01 $ .02
--------- ---------
--------- ---------
</TABLE>

The accompanying Notes to Financial Statements are
an integral part of these statements.

F-16
<PAGE>
NYLIFE REALTY INCOME PARTNERS I, L.P.
(A LIMITED PARTNERSHIP)
STATEMENTS OF PARTNERS' CAPITAL (DEFICIT)
FOR THE THREE MONTHS ENDED MARCH 31, 1996 (UNAUDITED)
AND FOR THE YEAR ENDED DECEMBER 31, 1995

<TABLE>
<CAPTION>
TOTAL
LIMITED GENERAL PARTNERS'
PARTNERS PARTNERS CAPITAL
-------------- ----------- --------------
<S> <C> <C> <C>
Capital (deficit) at January 1, 1995................................ $ 18,970,789 $ (61,376) $ 18,909,413
Net income.......................................................... 155,625 1,572 157,197
Distributions to partners........................................... (4,581,098) (13,769) (4,594,867)
-------------- ----------- --------------
Capital (deficit) at December 31, 1995.............................. 14,545,316 (73,573) 14,471,743
Net income.......................................................... 23,206 234 23,440
-------------- ----------- --------------
Capital (deficit) at March 31, 1996................................. $ 14,568,522 $ (73,339) $ 14,495,183
-------------- ----------- --------------
-------------- ----------- --------------
</TABLE>

The accompanying Notes to Financial Statements are
an integral part of these statements.

F-17
<PAGE>
NYLIFE REALTY INCOME PARTNERS I, L.P.
(A LIMITED PARTNERSHIP)
STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1995
(UNAUDITED)

<TABLE>
<CAPTION>
1996 1995
----------- --------------
<S> <C> <C>
Cash flows from operating activities:
Net income........................................................................... $ 23,440 $ 54,104
----------- --------------
Adjustments to reconcile net income to net cash provided by (used in) operating
activities:
Equity in income from joint venture operations..................................... (61,116) (63,314)
Cash distributions from joint venture operations................................... 61,116 63,314
Changes in assets and liabilities:
Decrease in other assets........................................................... 323 24,929
Increase (decrease) in due to affiliates........................................... 25,000 (75,000)
Decrease in accrued liabilities.................................................... (8,847) (27,254)
----------- --------------
Total adjustments................................................................ 16,476 (77,325)
----------- --------------
Net cash provided by (used in) operating activities.............................. 45,916 (23,221)
----------- --------------
Cash flows from investing activities:
Cash distributions from joint venture operations in excess of earnings (return of
capital).......................................................................... 93,876 3,358,700
----------- --------------
Cash flows from financing activities:
Distributions to partners.......................................................... -- (4,129,702)
----------- --------------
Net increase (decrease) in cash and cash equivalents................................. 139,792 (794,223)
Cash and cash equivalents at beginning of period..................................... 688,977 1,362,676
----------- --------------
Cash and cash equivalents at end of period........................................... $ 828,769 $ 568,453
----------- --------------
----------- --------------
</TABLE>

The accompanying Notes to Financial Statements are
an integral part of these statements.

F-18
<PAGE>
NYLIFE REALTY INCOME PARTNERS I, L.P.
(A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1996
(UNAUDITED)

NOTE 1 -- ORGANIZATION
The accompanying financial statements and related notes should be read in
conjunction with the Partnership's 1995 Annual Report on Form 10-K. The
accompanying financial statements include the accounts of the Partnership
including its investments in NYLIFE Realty Partners I -- General Partnership A
(Cornell), General Partnership C (Eden Woods), and General Partnership D
(NewMarket) (collectively, the "Joint Ventures") to which the equity method of
accounting has been applied. The Partnership will continue until December 31,
2036, unless terminated sooner in accordance with the terms of the Partnership
Agreement. A preliminary solicitation statement for dissolution of the
partnership was issued on March 29, 1996 (Note 4).

The summarized financial information contained herein is unaudited, however,
in the opinion of management, all adjustments (which include normal recurring
adjustments) necessary for a fair presentation of financial information have
been included.

Capitalized terms used in these Notes to Financial Statements, unless
otherwise defined herein, shall have the meanings set forth in the Partnership
Agreement.

NOTE 2 -- INVESTMENT IN REAL ESTATE JOINT VENTURES
A summary of the financial information for the Joint Ventures as of March
31, 1996 is presented below:

<TABLE>
<CAPTION>
EDEN
BALANCE SHEETS CORNELL WOODS NEWMARKET TOTAL
- ------------------------------------------------ -------------- -------------- -------------- ---------------
<S> <C> <C> <C> <C>
Land............................................ $ 1,128,832 $ 1,765,928 $ 1,773,046 $ 4,967,806
Building and improvements....................... 9,840,813 10,457,194 9,667,612 29,965,619
Accumulated depreciation........................ (3,331,943) (2,898,452) (3,013,217) (9,243,612)
Other assets.................................... 429,671 1,023,404 665,892 2,118,967
Accrued liabilities............................. (142,519) (350,494) (181,021) (674,034)
Co-Venturer's equity............................ (3,118,869) (5,326,608) (5,486,989) (13,932,466)
-------------- -------------- -------------- ---------------
Partnership's equity in Joint Ventures.......... $ 4,805,985 $ 4,670,972 $ 3,425,323 $ 12,902,280
-------------- -------------- -------------- ---------------
-------------- -------------- -------------- ---------------
Represented by:
Partnership's equity investment in Joint
Ventures at January 1, 1996.................... $ 4,905,325 $ 4,804,232 $ 3,906,801 $ 13,616,357
Joint Venture income............................ 17,395 12,772 36,948 67,116
Cash distributions.............................. (116,734) -- (44,258) (160,992)
-------------- -------------- -------------- ---------------
Net equity investment........................... 4,805,986 4,817,004 3,899,491 13,522,481
Interest........................................ -- (72,377) (300,910) (373,287)
Acquisition fees................................ -- (73,656) (173,260) (246,916)
Amortization of interest and acquisition fees... -- 7,483 23,914 31,397
-------------- -------------- -------------- ---------------
Partnership's equity in Joint Ventures at March
31, 1996....................................... $ 4,805,986 $ 4,678,454 $ 3,449,235 $ 12,933,675
-------------- -------------- -------------- ---------------
-------------- -------------- -------------- ---------------
</TABLE>

F-19
<PAGE>
NYLIFE REALTY INCOME PARTNERS I, L.P.
(A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1996
(UNAUDITED)

NOTE 2 -- INVESTMENT IN REAL ESTATE JOINT VENTURES (CONTINUED)
The following is a summary of the operations of Cornell Plaza, Eden Woods
and NewMarket for the three months ended March 31, 1996:

<TABLE>
<CAPTION>
EDEN
OPERATIONS CORNELL WOODS NEWMARKET TOTAL
- ---------------------------------------------------------------- --------- --------- ----------- -----------
<S> <C> <C> <C> <C>
Net operating income............................................ $ 27,484 $ 23,230 $ 82,649 $ 133,363
Interest income................................................. 1,508 3,910 1,669 7,088
--------- --------- ----------- -----------
Net income...................................................... $ 28,992 $ 27,140 $ 84,318 $ 140,451
--------- --------- ----------- -----------
--------- --------- ----------- -----------
Net income allocated
To Co-Venturer.................................................. $ 11,597 $ 14,368 $ 47,370 $ 73,335
To Partnership.................................................. 17,395 12,772 36,948 67,116
--------- --------- ----------- -----------
$ 28,992 $ 27,140 $ 84,318 $ 140,451
--------- --------- ----------- -----------
--------- --------- ----------- -----------
</TABLE>

NOTE 3 -- TRANSACTIONS WITH THE GENERAL PARTNERS AND AFFILIATES
The following is a summary of the amounts earned by the General Partners and
their Affiliates for the three months ended March 31, 1996 and 1995 as defined
in the Partnership Agreement:

<TABLE>
<CAPTION>
EARNED FOR THE EARNED FOR THE
UNPAID AT THREE MONTHS ENDED THREE MONTHS ENDED
MARCH 31, 1996 MARCH 31, 1996 MARCH 31, 1995
-------------- ------------------ ------------------
<S> <C> <C> <C>
Property management fees (1)............................. $ 14,830 $ 34,665 $ 34,665
Reimbursement of general and administrative expenses paid
by the General Partners................................. 25,000 25,000 25,000
-------------- -------- --------
$ 39,830 $ 59,665 $ 59,665
-------------- -------- --------
-------------- -------- --------
</TABLE>

- ------------------------
(1) Costs associated with property management fees are borne by the Joint
Ventures.

The above amounts are allocable to the General Partners and their Affiliates as
follows:

<TABLE>
<CAPTION>
EARNED FOR THE EARNED FOR THE
UNPAID AT THREE MONTHS ENDED THREE MONTHS ENDED
MARCH 31, 1996 MARCH 31, 1996 MARCH 31, 1995
-------------- ------------------ ------------------
<S> <C> <C> <C>
NYLIFE Realty Inc. and Affiliates........................ $ 25,000 $ 25,000 $ 25,000
Greystone Realty Corporation (2)......................... 14,830 34,665 34,665
-------------- -------- --------
$ 39,830 $ 59,665 $ 59,665
-------------- -------- --------
-------------- -------- --------
</TABLE>

- ------------------------
(2) Under no circumstances will the amount charged to the Partnership in respect
of Greystone Realty Corporation ("Greystone"), an affiliate of New York Life
Insurance Company, exceed the limitations on payments to affiliates set
forth in the Partnership Agreement.

NOTE 4 -- LEGAL PROCEEDINGS

Two class action lawsuits were filed against the Co-Venturer and certain
other affiliates of the General Partners in the District Court of Harris County,
Texas on January 11, 1996, styled GRIMSHAWE V. NEW YORK LIFE INSURANCE CO., ET
AL. (No. 96-001188) and SHEA V. NEW YORK LIFE INSURANCE CO., EL AL. (No.
96-001189) alleging misconduct in connection with the original sale of
investment units in various partnerships, including violation of various laws
and regulations and claims of continuing

F-20
<PAGE>
NYLIFE REALTY INCOME PARTNERS I, L.P.
(A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1996
(UNAUDITED)

NOTE 4 -- LEGAL PROCEEDINGS (CONTINUED)
fraudulent conduct. The plaintiffs have asked for compensatory damages for their
lost original investment, plus interest, costs (including attorneys fees),
punitive damages, disgorgement of any earnings, compensation and benefits
received by the defendants as a result of the alleged actions and other
unspecified relief to which plaintiffs may be entitled. These suits were amended
and refiled in a consolidated action in the United States District Court for the
Southern District of Florida (the "Court") on March 18, 1996. In the federal
action, the plaintiffs added Realty and CNP as defendants and included
allegations concerning the Partnership. The plaintiffs purport to represent a
class of all persons (the "Class") who purchased or otherwise assumed rights and
title to interests in certain limited partnerships, including the Partnership,
and other programs created, sponsored, marketed, sold, operated or managed by
the defendants (the "Proprietary Partnerships"). The Partnership is not a
defendant in the litigation.

The defendants expressly deny any wrongdoing alleged in the complaint and
concede no liability or wrongdoing in connection with the sale of the Units or
the structure of the Proprietary Partnerships. Nevertheless, to reduce the
burden of protracted litigation, the defendants have entered into a Stipulation
of Settlement ("Settlement Agreement") with the plaintiffs because in their
opinion such Settlement would (i) provide substantial benefits to the Class in a
manner consistent with New York Life's position that it had previously
determined to wind up most of the Proprietary Partnerships, including the
Partnership, through orderly liquidation as the continuation of the business no
longer serves the intended objectives of either the owners of interests in such
Proprietary Partnerships or the defendants and to offer the investors an
enhancement to the liquidating distribution they would otherwise receive and
(ii) provide an opportunity to wind up such partnerships on a schedule favorable
to the Class and resolve the issues raised by the lawsuit.

In coordination with the proposed settlement (the "Settlement"), the General
Partners will solicit consents of the Limited Partners for the dissolution of
the Partnership.

Under the terms of the Settlement Agreement, any settling Limited Partners
will receive at least a complete return of their original investment, less
distributions received prior to the final settlement date, in exchange for a
release of any and all claims a Limited Partner may have against the defendants
in connection with the Proprietary Partnerships, including the Partnership, and
all activities related to the dissolution and liquidation of such partnerships.
Payments under the Settlement Agreement will be made by NYLIFE Realty, as paying
agent for NYLIFE Inc., directly to each Settling Limited Partner, who will grant
NYLIFE Realty a security interest in such Settling Limited Partner's Units and
liquidating distributions received from the Partnership to secure repayment of a
portion of such settlement payments.

If the necessary consents of Limited Partners for dissolution are obtained,
the Partnership will be dissolved even if all necessary approvals for the
Settlement Agreement are not obtained or the Settlement Agreement is otherwise
terminated. In general, upon the dissolution of the Partnership, negative tax
consequences may accrue to the partners. Recent appraisals indicate that the
fair market value of the Properties is less than their carrying amounts. If the
Properties are sold, proceeds from such sales may be less than these carrying
amounts or the recent appraisal amounts.

F-21
<PAGE>
NYLIFE REALTY INCOME PARTNERS I, L.P.
(A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1996
(UNAUDITED)

NOTE 4 -- LEGAL PROCEEDINGS (CONTINUED)
The financial statements do not include any adjustments that might result
should the Limited Partners vote to liquidate the Partnership.

F-22
<PAGE>
PRO FORMA BALANCE SHEETS
ON A LIQUIDATION BASIS

PF-1
<PAGE>
PRO FORMA BALANCE SHEET ON A LIQUIDATION BASIS
FOR NYLIFE REALTY INCOME PARTNERS I, L.P.
AS OF MARCH 31, 1996
(UNAUDITED)

The following unaudited pro forma balance sheet as of March 31, 1996 has
been prepared on a liquidation basis of accounting, is based on the assumptions
noted below and is not necessarily indicative of the value which will be
received upon liquidation. In general, under the liquidation basis of
accounting, assets are stated at estimated amounts to be realized and
liabilities are stated at estimated amounts to be paid upon settlement. While
the General Partners believe that liquidation of the Partnership is possible,
the General Partners do not believe that liquidation is imminent because a
number of conditions must be satisfied, including approval of the Proposal by
holders of a majority of Units.

Although the proposed liquidation of the Partnership has not occurred, the
pro forma balance sheet is based on the following assumptions:

(1) The General Partners believe the amounts set forth below for all
assets and liabilities, other than investments in real estate Joint
Ventures, approximate fair market value.

(2) Fair value of investments in real estate Joint Ventures is based on
appraisals performed on the Joint Venture Properties, less estimated costs
to sell, as of December 15, 1995 for Cornell and NewMarket and December 31,
1995 for Eden Woods. Management believes that no material changes to the
fair market value of the Joint Venture Properties have occurred between the
appraisal dates and March 31, 1996.

<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
-------------- --------------
<S> <C> <C>
ASSETS
Cash and cash equivalents...................................................... $ 828,769 $ 828,769
Restricted cash................................................................ 283,392 283,392
Investments in real estate Joint Ventures...................................... 13,491,084 11,862,204
Other assets -- net............................................................ 2,149 2,149
-------------- --------------
Total assets................................................................. $ 14,605,394 $ 12,976,514
-------------- --------------
-------------- --------------
LIABILITIES AND PARTNERS' CAPITAL
Due to affiliates.............................................................. $ 25,000 $ 25,000
Accrued liabilities............................................................ 85,211 85,211
-------------- --------------
Total liabilities............................................................ 110,211 110,211
-------------- --------------
Partners' capital
Limited Partners, 2,833,925.5 units outstanding................................ 14,568,522 12,955,931
General Partners............................................................... (73,339) (89,528)
-------------- --------------
Total partners' capital........................................................ 14,495,183 12,866,303
-------------- --------------
Total liabilities and partners' capital........................................ $ 14,605,394 $ 12,976,514
-------------- --------------
-------------- --------------
Amount per Unit................................................................ $ 5.14 $ 4.57
-------------- --------------
-------------- --------------
-------------- --------------
-------------- --------------
</TABLE>

PF-2
<PAGE>
PRO FORMA COMBINED BALANCE SHEET ON A LIQUIDATION BASIS
FOR CORNELL PLAZA OFFICE BUILDING, EDEN WOODS BUSINESS CENTER
AND NEWMARKET SHOPPING CENTER

AS OF MARCH 31, 1996
(UNAUDITED)

The following unaudited pro forma combined balance sheet as of March 31,
1996 is based on the following assumptions and is not necessarily indicative of
the value which may be received upon liquidation. In general, under the
liquidation basis of accounting, assets are stated at estimated amounts to be
realized and liabilities are stated at estimated amounts to be paid upon
settlement. While the General Partners believe that liquidation of the Joint
Ventures is possible, the General Partners do not believe that liquidation is
imminent because a number of conditions must be satisfied, including approval of
the Proposal by holders of a majority of Units. Although the proposed
liquidation of the Joint Ventures has not occurred, the following pro forma
combined balance sheet is based on the following assumptions:

(1) The General Partners believe the amounts set forth below for all assets
and liabilities, other than land, building, improvements and deferred
leasing costs, approximate fair market value.

(2) Fair value of land, buildings and improvements is based on appraisals
performed as of December 15, 1995 for Cornell and NewMarket and December
31, 1995 for Eden Woods, less estimated costs to sell of $1,220,000.
Management believes that no material changes have occurred between the
appraisal dates and March 31, 1996.

(3) The fair market value of deferred leasing costs is zero. These costs
have been incurred in conjunction with leasing of the Properties and have
no separate market value.

<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
-------------- --------------
<S> <C> <C>
ASSETS
Investment property:
Land, buildings and improvements, net............................................ $ 25,389,813 $ 23,180,000
Cash and cash equivalents........................................................ 1,037,524 1,037,524
Deferred leasing costs........................................................... 1,043,040 --
Other assets..................................................................... 38,402 38,402
-------------- --------------
Total assets................................................................. $ 27,508,779 $ 24,255,926
-------------- --------------
-------------- --------------
LIABILITIES AND PARTNERS' CAPITAL
Accrued liabilities.............................................................. $ 674,035 $ 674,035
Partners' capital................................................................ 26,834,744 23,581,891
-------------- --------------
Total liabilities and partners' capital...................................... $ 27,508,779 $ 24,255,926
-------------- --------------
-------------- --------------
</TABLE>

PF-3
<PAGE>

CERTAIN FINANCIAL INFORMATION
WITH RESPECT TO NYLIFE INC.

N-1
<PAGE>

April 15, 1996

To the Board of Directors and
Stockholder of NYLIFE Inc.

REPORT OF INDEPENDENT ACCOUNTANTS

We have audited the accompanying statutory basis consolidated statement of
financial position of NYLIFE Inc. and its subsidiaries (affiliates of New York
Life Insurance Company) as of December 31, 1995 and 1994, and the related
statutory basis consolidated statements of changes in stockholder's equity for
the years then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

We conducted our audits 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, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

As described in Note 1, these financial statements were prepared in conformity
with accounting practices prescribed or permitted by the New York State
Insurance Department for valuing companies owned by an insurer, which is a
comprehensive basis of accounting other than generally accepted accounting
principles. The effects on the financial statements of the variances between
such practices and generally accepted accounting principles are described in
Note 1.

In our opinion, except for the effects of the matters described in the preceding
paragraph, the financial statements referred to above present fairly, in all
material respects, the financial position of NYLIFE Inc. and its subsidiaries at
December 31, 1995 and 1994, in conformity with generally accepted accounting
principles.

Also, in our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of NYLIFE Inc. and its
subsidiaries at December 31, 1995 and 1994, on the basis of the accounting
described in Note 1.

As described in Note 12, certain transactions occurred in early 1996 which
increased the Company's capital and broadened its healthcare business.

/s/ Price Waterhouse LLP
Price Waterhouse LLP
New York, New York

N-2
<PAGE>

NYLIFE INC. AND SUBSIDIARIES
(AFFILIATES OF NEW YORK LIFE INSURANCE COMPANY)
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
(STATUTORY BASIS)

ASSETS

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1995 1994
------------ ------------
(IN THOUSANDS)
<S> <C> <C>
Cash and cash equivalents........................................................... $ 252,640 $ 240,799
Short-term investments.............................................................. 9,925 17,801
Accounts receivable less allowance for doubtful accounts of $5,642 and $3,638,
respectively....................................................................... 245,942 152,452
Interest and other receivables...................................................... 67,205 24,996
Deferred distribution costs (net of accumulated amortization of $172,254 and
$126,013 respectively)............................................................. 174,055 151,758
Investments:
Common stocks..................................................................... 3,664 2,385
Available for sale-bonds.......................................................... 163,648 150,689
Held to maturity-bonds............................................................ -- 28,000
Insurance operations-bonds........................................................ 29,201 57,533
Mortgage loans.................................................................... 18,197 116,960
Real estate....................................................................... 94,193 130,663
MainStay funds at fair value...................................................... 33,762 46,709
Security alarm monitoring contracts (net of accumulated amortization of $23,017
and $12,674 respectively)........................................................ 48,425 59,620
Other investments and advances to affiliates...................................... 114,386 87,718
Statutory valuation of subsidiary in excess of GAAP net equity...................... 406,834 289,713
Fixed assets (net of accumulated depreciation of $59,044 and $48,981,
respectively)...................................................................... 72,925 63,856
Income taxes receivable............................................................. 2,412 1,422
Other assets........................................................................ 209,001 150,903
------------ ------------
Total assets.................................................................... $ 1,946,415 $ 1,773,977
------------ ------------
------------ ------------
LIABILITIES AND STOCKHOLDER'S EQUITY
Claims and capitation costs payable................................................. $ 183,888 $ 167,599
Participating policyholder liability................................................ 1,130 939
Payable to New York Life Insurance Company.......................................... 49,828 80,573
Accrued expenses and other payables................................................. 158,633 152,763
Interest payable.................................................................... 1,347 6,330
Medical group risk sharing and unearned premiums.................................... 53,626 46,082
Notes payable....................................................................... 141,081 484,144
Insurance reserves.................................................................. 39,328 30,167
Deferred taxes and other liabilities................................................ 126,828 70,108
Accrued costs for liquidation of Limited Partnerships............................... 137,000 --
------------ ------------
Total liabilities............................................................... 892,689 1,038,705
------------ ------------
Minority interest................................................................... 26,252 21,603

Stockholder's equity:
Common stock, par value $.10 per share (20,000 shares authorized, 3,850 shares
issued and outstanding) and additional paid-in capital........................... 946,546 599,073
Accumulated deficit............................................................... (328,753) (176,124)
Investment valuation account...................................................... 406,834 289,713
Net unrealized gains (losses) on available for sale investments (net of taxes of
$882 and $(591), respectively)................................................... 1,724 (956)
Cumulative translation adjustment................................................. 1,123 1,963
------------ ------------
Total stockholder's equity...................................................... 1,027,474 713,669
------------ ------------
Total liabilities and stockholder's equity...................................... $ 1,946,415 $ 1,773,977
------------ ------------
------------ ------------
</TABLE>

The accompanying notes are an integral part of these financial statements.

N-3
<PAGE>

NYLIFE INC. AND SUBSIDIARIES
(AFFILIATES OF NEW YORK LIFE INSURANCE COMPANY)

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDER'S EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
(STATUTORY BASIS)

<TABLE>
<CAPTION>
COMMON NET UNREALIZED
STOCK & GAINS (LOSSES)
ADDITIONAL INVESTMENT ON AVAILABLE CUMULATIVE TOTAL
PAID-IN ACCUMULATED VALUATION FOR SALE TRANSLATION STOCKHOLDER'S
CAPITAL DEFICIT ACCOUNT INVESTMENTS ADJUSTMENT EQUITY
----------- ------------- ----------- -------------- ----------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1993.......... $ 482,390 $ (122,303) $ 180,818 $ -- $ 3,880 $ 544,785

Capital contributions................. 127,913 -- -- -- -- 127,913
Return of capital..................... (11,230) -- -- -- -- (11,230)
Dividends............................. -- (72,946) -- -- -- (72,946)
Cumulative translation adjustment..... -- -- -- -- (1,917) (1,917)
Statutory valuation of subsidiary in
excess of GAAP net equity............ -- -- 108,895 -- -- 108,895
Other equity adjustments.............. -- (10,768) -- -- -- (10,768)
Net unrealized losses on available for
sale investments..................... -- -- -- (956) -- (956)
Net income............................ -- 29,893 -- -- -- 29,893
----------- ------------- ----------- ------- ----------- -------------
Balance at December 31, 1994.......... 599,073 (176,124) 289,713 (956) 1,963 713,669

Capital contributions................. 347,473 -- -- -- -- 347,473
Dividends............................. -- (41,900) -- -- -- (41,900)
Cumulative translation adjustment..... -- -- -- -- (840) (840)
Statutory valuation of subsidiary in
excess of GAAP net equity............ -- -- 117,121 -- -- 117,121
Other equity adjustments.............. -- (621) -- -- -- (621)
Net unrealized gains on available for
sale investments..................... -- -- -- 2,680 -- 2,680
Net (loss) income..................... -- (110,108) -- -- -- (110,108)
----------- ------------- ----------- ------- ----------- -------------
Balance at December 31, 1995.......... $ 946,546 $ (328,753) $ 406,834 $ 1,724 $ 1,123 $ 1,027,474
----------- ------------- ----------- ------- ----------- -------------
----------- ------------- ----------- ------- ----------- -------------
</TABLE>

The accompanying notes are an integral part of these financial statements.

N-4
<PAGE>

NYLIFE INC. AND SUBSIDIARIES
(AFFILIATES OF NEW YORK LIFE INSURANCE COMPANY)
NOTES TO CONSOLIDATED STATEMENT OF FINANCIAL POSITION
DECEMBER 31, 1995, 1994 AND 1993

NOTE 1 -- ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

The accompanying financial statements reflect the consolidation of NYLIFE
Inc. ("NYLIFE" or the "Company"), a wholly-owned subsidiary of New York Life
Insurance Company ("New York Life"), and its subsidiaries, each of which is
wholly-owned, except as noted:

Aegis Technologies, Inc.("Aegis"), 94% owned, formerly Personal Financial
Assistant, Inc.
Eagle Strategies Corp. ("Eagle")
Greystone Realty Corporation ("Greystone")
MacKay-Shields Financial Corporation ("MacKay-Shields")
MSC Holding, Inc. ("MSC"), 85% owned, formerly Magnus Software Corp.
Monitor Capital Advisors, Inc.
New York Life Capital Corporation ("Capital Corp.")
New York Life International Investment Inc. ("NYL International")
Quorum Capital Management Limited ("Quorum")
Monetary Research Limited ("MRL")
New York Life Settlement Corporation ("NYL Settlement")
New York Life Worldwide Holding, Inc. ("Worldwide")
NAFCO, Inc. ("NAFCO")
NAFCO Auto Funding, LP
NYLIFE Administration Corp. ("NYLACOR")
NYLCO, Inc.
NYLICO Inc. ("NYLICO"), formerly New York Life Capital Corp.
NYL Benefit Services Company, Inc. ("Benefit Services"), formerly ADQ,
Inc.
NYL Trust Company ("NYL Trust")
NYLIFE Depositary Corporation
NYLIFE Distributors Inc. ("NYLIFE Distributors")
NYLIFE Equity Inc. ("NYLIFE Equity")
NYLIFE Funding Inc. ("NYLIFE Funding")
NYLIFE HealthCare Management Inc. ("NYLIFE HealthCare"), 99% owned
Sanus Corp. Health Systems ("Sanus")
Express Scripts Inc. ("ESI"), 69% owned
NYLIFE Realty Inc. ("NYLIFE Realty")
NYLIFE Refinery Inc. ("NYLIFE Refinery")
NYLIFE Resources Inc. ("NYLIFE Resources")
NYLIFE Securities Inc. ("NYLIFE Securities")
NYLTemps Inc.

NYLIFE Inc., though its subsidiaries, primarily develops and manages health
maintenance organizations, markets mail order prescriptions and provides
pharmacy claims processing services; offers life insurance products and services
in the United Kingdom, Hong Kong, Korea, Indonesia, Mexico, Argentina and
Bermuda; provides investment management services; and distributes and
administers mutual funds.

Intercompany accounts and transactions have been eliminated.

The accompanying statutory basis consolidated financial statements have been
prepared on the basis of accounting practices prescribed or permitted by the New
York State Insurance Department for valuing common stocks of subsidiaries, which
is a comprehensive basis of accounting other than

N-5
<PAGE>

NYLIFE INC. AND SUBSIDIARIES
(AFFILIATES OF NEW YORK LIFE INSURANCE COMPANY)
NOTES TO CONSOLIDATED STATEMENT OF FINANCIAL POSITION (CONTINUED)
DECEMBER 31, 1995, 1994 AND 1993

NOTE 1 -- ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

generally accepted accounting principles ("GAAP"). Under such practices,
goodwill arising from the purchase of non-insurance subsidiaries is amortized
over a period not to exceed ten years. Under GAAP, this goodwill would be
amortized over a period of 15 to 25 years. In 1993, New York Life received
authorization from the New York State Insurance Department to adopt approximate
market value as the carrying value for its investment in Express Scripts Inc., a
publicly traded 69% owned subsidiary of NYLIFE HealthCare. This practice is not
recognized under GAAP.

The approximate effects on the financial statements of the variances between
the practices described in the preceding paragraph and generally accepted
accounting principles are as follows: a decrease in net income of $3,000,000,
$2,000,000 and $3,000,000 for the years ending December 31, 1995, 1994 and 1993,
respectively, and a decrease in total assets of $322,000,000 and $222,000,000
and a decrease in stockholder's equity of $339,000,000 and $224,000,000 as of
December 31, 1995 and 1994, respectively.

Accounting principles prescribed or permitted by the New York State
Insurance Department are considered GAAP for the insurance operations as they
are wholly-owned stock life subsidiaries of a mutual life insurer. The Financial
Accounting Standards Board has issued an Interpretation which establishes a
different definition of GAAP for mutual life insurance companies and their
subsidiaries. Under that interpretation, financial statements for mutual life
insurance companies and their subsidiaries for periods beginning after December
15, 1995 which are prepared on the basis of statutory accounting principles
(practices prescribed or permitted by insurance regulatory authorities) will no
longer be characterized as in conformity with GAAP.

Management of the Company has not yet determined the effect on its December
31, 1995 financial statements of applying the new Interpretation nor whether the
Company will continue to present its general purpose financial statements in
conformity with the statutory basis of accounting or adopt the accounting
changes required. The effect of the changes would be reported retroactively
through restatement of all previously issued financial statements presented for
comparative purposes. The cumulative effect of adopting these changes would be
included in the earliest year restated.

INSURANCE SUBSIDIARY POLICIES:

Specific policies pertaining to life insurance subsidiaries are as follows:
(1) premiums are recognized when due and are taken into income over the
premium-paying period of the policies; (2) commissions and other costs incurred
in connection with acquiring new business are charged to current operations as
incurred; (3) reserves for life insurance policies are based on mortality tables
and interest assumptions which are consistent with the local statutory
requirements of each respective subsidiary and are considered to be sufficient
to provide for contractual benefits and to meet the minimum requirements of the
New York State Insurance Regulations; (4) the participating policyholder
liability consists principally of the amount of surplus attributable to
participating policyholders after the provision for policy reserves; (5) the
excess of purchase price over statutory net assets acquired is charged to
stockholder's equity in the year of acquisition; (6) in the year that the
insurance subsidiaries are wholly or partially sold, the excess of purchase
price over statutory net assets acquired is then wholly or partially charged to
realized gains; (7) bonds associated with insurance operations are generally
stated at amortized cost; and (8) joint ventures and minority stock investments
are included in other investments and advances to affiliates and are stated at
the value of their underlying statutory net assets.

N-6
<PAGE>

NYLIFE INC. AND SUBSIDIARIES
(AFFILIATES OF NEW YORK LIFE INSURANCE COMPANY)
NOTES TO CONSOLIDATED STATEMENT OF FINANCIAL POSITION (CONTINUED)
DECEMBER 31, 1995, 1994 AND 1993

NOTE 1 -- ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

FEE INCOME:

The Company through its subsidiaries receives fees for services provided
under agreements with its clients. The Company accrues fee income when earned.
Additionally, the Company derives monitoring revenues from customer payments for
alarm monitoring services. The Company recognizes revenue as the monitoring
services are provided.

FOREIGN CURRENCY TRANSLATION:

Assets and liabilities denominated in foreign currency have been translated
into U.S. dollars at the respective year end exchange rates. Operating results
are translated at the average exchange rates for the year. Foreign currency
translation gains and losses are credited or charged directly to the Cumulative
Translation Adjustment account in stockholder's equity. The change in the
Cumulative Translation Adjustment account is due to the current year effect of
the translation adjustment. Foreign currency transaction gains and losses are
included in net income.

CASH AND CASH EQUIVALENTS:

Cash equivalents are short-term, highly liquid investments that are readily
convertible to known amounts of cash and have original maturities of three
months or less. The carrying value of cash and cash equivalents approximates
fair value.

ACCOUNTS RECEIVABLE:

The carrying value of accounts receivable at December 31, 1995 and 1994
approximates fair value.

DEFERRED DISTRIBUTION COSTS:

Deferred distribution costs relate to commission expenses and certain other
costs related to the distribution of MainStay Funds which have a contingent
deferred sales charge, and are deferred and amortized over a six year period on
a straight-line basis, adjusted for related contingent deferred sales charge
income earned.

INVESTMENTS:

Short-term investments are carried at cost which approximates fair value.
Common stocks are stated at market value. At December 31, 1995 and 1994, bonds,
other than those associated with insurance operations, are either classified as
held to maturity and are reported at amortized cost or classified as available
for sale and are reported at estimated fair value, with unrealized gains and
losses, net of tax, being reported as a separate component of stockholder's
equity. The investment in the MainStay Funds is primarily held by NYLIFE
Securities and NYLIFE Distributors, broker-dealers, and accordingly is recorded
at fair value, with unrealized gains and losses included in income.

Mortgage loans are generally stated at the aggregate principal balance due,
except when in management's opinion collection of the loan is doubtful, in which
case the loan is written down to the appraised value of the underlying property.
Real estate acquired through foreclosure is valued at the lower of the mortgage
loan carrying value or the appraised value of the property at the time of
foreclosure. Any excess of the carrying value of the loan over the appraised
value is recorded as a realized loss. Alarm monitoring contracts are recorded at
cost net of accumulated amortization. Auto loans in the warehouse period are
carried at cost and reduced for impairment. Investments in limited partnerships
are generally accounted for under the equity method of accounting. Under this
method, net earnings or losses are included in income currently.

N-7
<PAGE>

NYLIFE INC. AND SUBSIDIARIES
(AFFILIATES OF NEW YORK LIFE INSURANCE COMPANY)
NOTES TO CONSOLIDATED STATEMENT OF FINANCIAL POSITION (CONTINUED)
DECEMBER 31, 1995, 1994 AND 1993

NOTE 1 -- ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

FAIR VALUES OF FINANCIAL INSTRUMENTS:

Fair values of various assets and liabilities are included throughout the
notes to financial statements. Specifically, fair value disclosure of bonds,
mortgage loans, real estate and the investment in the MainStay Funds is reported
in Note 4, and fair value disclosure of notes payable is reported in Note 6.
Fair values of bonds and the investment in the MainStay Funds are based on
published or quoted market values, respectively. Fair value of mortgage loans is
estimated based on discounted cash flow analyses prepared for each loan using
interest rates approximating the current rates for new mortgages with similar
remaining maturities. Fair value of notes payable is estimated based on quoted
market prices and borrowing rates currently available to NYLIFE and its
subsidiaries for bank loans with similar terms and average maturities.

FIXED ASSETS:

Fixed assets are recorded at cost and are depreciated over the estimated
useful lives of the assets, generally 3 to 10 years, using the double-declining
balance and straight-line methods of depreciation.

PREMIUM REVENUE RECOGNITION AND COST OF PRESCRIPTION SALES:

Premium revenue for prepaid health care is recognized as income in the month
in which the enrollees are entitled to health care services. Consulting and
management fees are recognized in income as services are rendered. Revenue on
premiums collected in advance is deferred.

Revenues from dispensing prescription and non-prescription medical products
from ESI's mail service pharmacies are recorded upon shipment. Revenue from
sales of prescription drugs by pharmacies in ESI's nationwide network and
pharmacy claims processing revenues are recognized when the claims are
adjudicated. When ESI has an independent contractual obligation to pay its
network pharmacy providers for benefits provided to members of its clients'
pharmacy benefit plans, ESI includes payments from plan sponsors for these
benefits as prescription sales and fees and payments to these pharmacy providers
in cost of prescription sales. If ESI is only administering the plan sponsors'
network pharmacy contracts, ESI records fees derived from ESI's contracts with
plan sponsors as net revenue.

Cost of prescription sales include product costs, pharmacy claims payments
and other direct costs associated with dispensing prescription and
non-prescription medical products and claims processing operations, offset by
fees received from pharmaceutical manufacturers in connection with ESI's drug
purchasing and formulary management programs.

ACCOUNTS PAYABLE AND ACCRUED EXPENSES:

The carrying value of accounts payable and accrued expenses at December 31,
1995 and 1994 approximates fair value.

MEDICAL GROUPS' RISK SHARING:

Primary care physicians are compensated on a capitation basis and
participating specialists on a fee-for-service basis. In 1995, Sanus instituted
an incentive compensation program whereby primary care physicians are eligible
to receive a bonus based on quality and cost utilization criteria. As part of
this program, Sanus retains a portion of the amounts due to the participating
specialists. These amounts are payable to the specialists based upon cost
utilization criteria. Prior to 1995, Sanus retained a portion of the amounts due
to both primary care physicians and participating specialists and amounts paid
were based upon cost utilization criteria. An accrual is made for the estimate
of the amount of incentive withheld and bonus which will be paid to medical care
providers based upon actual medical costs incurred during the year.

N-8
<PAGE>

NYLIFE INC. AND SUBSIDIARIES
(AFFILIATES OF NEW YORK LIFE INSURANCE COMPANY)
NOTES TO CONSOLIDATED STATEMENT OF FINANCIAL POSITION (CONTINUED)
DECEMBER 31, 1995, 1994 AND 1993

NOTE 1 -- ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

BUSINESS RISKS AND UNCERTAINTIES:

The preparation of financial statements in conformity with generally
accepted accounting principals 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 revenue and expenses during the reporting
period. Actual results could differ from those estimates.

At December 31, 1995, the Company's investments were comprised of common
stock, bonds, real estate properties and mortgage loans. Significant changes in
prevailing interest rates and geographic conditions may adversely affect the
timing and amount of cash flows on such investments, as well as their related
values. In addition, the value of these investments is often derived from an
appraisal, an estimate or opinion of value. A significant decline in the market
value of these investments could have an adverse affect on the Company's balance
sheet.

The Company through its limited partnership investments in the oil and gas
industry is subject to extensive and rapidly changing federal and state
environmental regulations governing air emissions, waste discharges, and solid
and hazardous waste management activities. When it is both probable that a
liability has been incurred and the amount can be reasonably estimated, the
Company accrues environmental and clean up related costs. Such estimates may be
subject to revision in the future as regulations and other conditions change.

The Company's revenues from the oil and gas industry are derived principally
from uncollateralized sales to customers in the oil and gas industry. Market
prices for oil and gas may fluctuate; accordingly, a significant decline in
market prices could adversely affect the Company's net operating revenues and
cash flow from operating activities. Additionally, the concentration of credit
risk in a single industry affects the Company's overall exposure to credit risk
because customers may be similarly affected by changes in economic and other
conditions. As described in Note 10, the Company has recorded a loss of
$137,000,000 related to an announced plan of liquidating its limited partnership
programs.

During 1993, New York Life received authorization from the New York State
Insurance Department to adopt approximate market value as the carrying value for
its investment in ESI. Accordingly, the Company recorded adjustments of
$406,834,000 and $289,713,000 for the statutory valuation of ESI in excess of
its GAAP net equity at December 31, 1995 and 1994, respectively. These
adjustments are included as a component of stockholder's equity. Based upon the
market value of ESI's common stock at April 11, 1996, the amount of the
statutory valuation of subsidiary in excess of GAAP net equity was approximately
$389,021,000. A significant decline in the value of this stock could have an
adverse effect on the Company's stockholders' equity.

As providers of life insurance products, the operating results of certain
subsidiaries in any given period depend upon estimates of policy reserves
required to provide for future policyholder benefits. The development of policy
reserves for the products of these companies requires management to make
estimates and assumptions regarding mortality, morbidity, lapse, expense and
investment experience. Such estimates are primarily based on historical
experience and the specific requirements of local insurance regulators. Actual
results could differ materially from these estimates. Management monitors actual
experience, and where circumstances warrant, revises its assumptions and the
related estimates of policy reserves.

N-9
<PAGE>

NYLIFE INC. AND SUBSIDIARIES
(AFFILIATES OF NEW YORK LIFE INSURANCE COMPANY)
NOTES TO CONSOLIDATED STATEMENT OF FINANCIAL POSITION (CONTINUED)
DECEMBER 31, 1995, 1994 AND 1993

NOTE 1 -- ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Medical claims include estimates of payments to be made on individual claims
for medical specialists, drugs and hospital costs for which services have been
performed. The cost of claims incurred but not reported is estimated based on
current membership statistics, current utilization and historical data. The
estimates for claims incurred but not reported are continually reviewed and
revised as changes in these factors occur and revisions are reflected in the
current year's statement of income. Capitation costs represent monthly charges
paid to participating physicians as compensation for providing continuing
medical care.

Intangible assets primarily consist of goodwill arising from acquisitions.
Goodwill, which represents the cost in excess of the value assigned to net
assets acquired in connection with acquisitions, is being amortized over 10
years. The Company's investment in alarm monitoring contracts is amortized over
the estimated lives of the contracts of approximately 12 years as adjusted for
terminated contracts. Actual amortization of the intangible assets may vary from
the amortization schedule.

CONTRACTUAL AGREEMENTS:

ESI enters into corporate alliances with certain of its clients whereby
shares of ESI's Class A Common Stock are awarded as advance discounts to the
client. The stock is valued utilizing the quoted market value at the date the
agreement is consummated if the number of shares to be issued is known. If the
number of shares to be issued is contingent upon the occurrence of future
events, the stock is valued utilizing the quoted market value at the date the
contingency is satisfied and the number of shares is determinable. The value of
the shares of stock awarded as advance discounts is recorded as a deferred cost
and included in other assets. The deferred cost is recognized in selling
expenses over the period of the contract.

RECLASSIFICATIONS:

Certain reclassifications have been made to 1994 and 1993 amounts to conform
with the 1995 presentation.

NOTE 2 -- CHANGES IN ACCOUNTING PRINCIPLES

During 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard No. 121 ("SFAS 121"), "Accounting for the
Impairment of Long-lived Assets to be Disposed Of," which is effective for the
fiscal years beginning after December 15, 1995. SFAS 121 establishes accounting
standards for the impairment of long-lived assets, certain identifiable
intangibles and goodwill related to those assets to be held and used and for
long-lived assets and certain identifiable intangibles to be disposed of. If the
Company adopts GAAP in 1996 (See Note 1) it will be required to adopt SFAS 121
in 1996. The Company does not expect that adoption of SFAS 121 would have a
significant effect on the consolidated financial position of the Company.

NOTE 3 -- ACQUISITIONS AND DISPOSITIONS

NYLIFE HEALTHCARE

During 1995 and 1994, Sanus completed four acquisitions for cash, as
described below. Each transaction was accounted for as a purchase and
accordingly, the purchase price was allocated to the fair values of assets
acquired and liabilities assumed. The remaining excess of the purchase price
over such fair values was allocated to goodwill. The operating results of each
acquisition have been included in consolidated net income of the Company from
the date of acquisition.

N-10
<PAGE>

NYLIFE INC. AND SUBSIDIARIES
(AFFILIATES OF NEW YORK LIFE INSURANCE COMPANY)
NOTES TO CONSOLIDATED STATEMENT OF FINANCIAL POSITION (CONTINUED)
DECEMBER 31, 1995, 1994 AND 1993

NOTE 3 -- ACQUISITIONS AND DISPOSITIONS (CONTINUED)

In July 1995, Sanus acquired the minority shareholder's interest in
Lonestar Holding Company for approximately $4,100,000 in cash. As a result
of the transaction, the Houston HMO became a wholly owned subsidiary of
Sanus. Goodwill related to the purchase of approximately $2,700,000 is being
amortized over an estimated useful life of 10 years.

In November 1994, Sanus purchased 100% of the outstanding stock of The
Ethix Corporation, which included the 13% owned by NYLIFE, for a purchase
price of approximately $32,900,000. The fair values of assets acquired and
liabilities assumed were $25,800,000 and $16,200,000, respectively. Goodwill
of approximately $23,300,000 related to the purchase is being amortized over
an estimated useful life of 10 years. The acquisition agreement provides for
additional consideration to be paid based on membership increases over the
five year period ending November 1999. No such amounts were due in 1995.

In June 1994, Sanus acquired certain assets and assumed certain
liabilities of two partnerships which performed administrative services for
a physician group in the New York City metropolitan area. Cash paid totaled
$10,000,000 plus the assumption of an excess of the fair value of
liabilities over assets acquired of $17,200,000. Goodwill associated with
the acquisition of $27,200,000 is being amortized over an estimated useful
life of 10 years.

In May 1994, Sanus purchased the remaining 12% minority interest in
Avanti Health Systems. The entire purchase price of $10,000,000 was
allocated to goodwill, which is being amortized over an estimated useful
life of 10 years.

During 1995, NYLIFE Inc. paid $10,800,000 to two of the three original
Founders of NYLIFE HealthCare to purchase their remaining HealthCare shares in
accordance with their Termination, Severance and Stock Buyback Agreements.
Subsequent to the purchase of these shares, NYLIFE's ownership of NYLIFE
HealthCare increased to 98.78%.

On June 9, 1992, ESI, previously an indirectly 96% owned subsidiary of
NYLIFE, completed an initial public offering of 4,000,000 shares of its Class A
common stock at $6.50 per share, thereby decreasing NYLIFE's percentage
ownership to 69%. NYLIFE recognized a pre-tax gain of approximately $15,800,000
from this transaction, representing the difference between the value of NYLIFE's
interest in ESI immediately after the public offering and the historical book
value of its interest in ESI. NYLIFE's percentage of ownership at December 31,
1995 is 69%. The common stock owned by the Company controlled approximately 96%
and 93% of the voting stock of ESI as of December 31, 1995 and 1994,
respectively. The portion of ESI's equity relating to the shares not owned by
NYLIFE and the earnings relating thereto are included in "Minority Interest" in
the accompanying financial statements.

WORLDWIDE HOLDING
UNITED KINGDOM:

On December 22, 1994, NYLUK sold 68.75% of the common stock of Windsor Life
to outside investors for consideration amounting to $77,596,000. NYLUK's gain
arising from this transaction amounted to $27,788,000 and was credited to
realized gains on investments. This gain is net of excess of purchase price over
statutory net assets acquired of $47,311,000 and Section 49 gains of $25,055,000
previously charged or credited directly to stockholder's equity, respectively.
Also on December 22, 1994, NYLUK and the new stockholders of Windsor Life
exchanged all of their common

N-11
<PAGE>

NYLIFE INC. AND SUBSIDIARIES
(AFFILIATES OF NEW YORK LIFE INSURANCE COMPANY)
NOTES TO CONSOLIDATED STATEMENT OF FINANCIAL POSITION (CONTINUED)
DECEMBER 31, 1995, 1994 AND 1993

NOTE 3 -- ACQUISITIONS AND DISPOSITIONS (CONTINUED)

stock for common stock of Life Assurance Holding Corporation Limited ("LAHC"), a
new holding company. As of December 22, 1994, NYLUK adopted the equity method of
accounting for its 31.25% interest in LAHC.

The total income, total benefits and expenses and realized gains on
investments of Windsor Life presented in the Consolidated Statement of
Operations during 1994 amounted to $212,326,000, $259,151,000 and $58,617,000,
respectively.

NYLUK is party to the Warranty Indemnity Deed (guaranteed by Worldwide)
relating to the sale of the common stock of Windsor Life. Under the terms of
this deed, NYLUK has undertaken to indemnify the outside investors against
liabilities, costs and expenses incurred with regard to specified matters. Any
claims under the deed require NYLUK to subscribe for deferred shares in LAHC at
par value. Management believes that adequate provision has been made for
potential claims that may arise.

ARGENTINA:

On June 3, 1994, Worldwide acquired 17% of the common stock of Maxima S.A.
AFJP from Roberts S.A. de Inversiones and 26% of the common stock of La Buenos
Aires Seguros de Vida S.A. and La Buenos Aires Seguros de Retiro S.A. from La
Buenos Aires Compania Argentina de Seguros S.A.

Maxima S.A. AFJP is licensed to conduct pension fund management business in
Argentina. La Buenos Aires Seguros de Vida S.A. and La Buenos Aires Seguros de
Retiro S.A. are licensed to conduct personal and annuity insurance business in
Argentina, respectively. La Buenos Aires Seguros de Vida S.A. and La Buenos
Aires Seguros de Retiro S.A. were renamed La Buenos Aires-New York Life Seguros
de Vida S.A. and La Buenos Aires-New York Life Seguros de Retiro S.A.,
respectively.

Capital contributions to fund operating activities were made by all of the
stockholders into each of these companies in their respective ownership
percentages. Worldwide's share to Maxima S.A. AFJP, La Buenos Aires-New York
Life Seguros de Vida S.A. and La Buenos Aires-New York Life Seguros de Retiro
S.A. was $972,000, $1,320,000 and $0 respectively, for the year ended December
31, 1995, and was $6,528,000, $3,270,000 and $329,000, respectively, for the
year ended December 31, 1994.

NYL BENEFIT SERVICES COMPANY, INC.

Effective June 6, 1994, NYLIFE's acquired Benefit Services, a provider of
consulting, administrative, actuarial, communications and investment advisory
services for employee benefit plan sponsors, with an up-front cash payment of
$8,000,000, plus a series of future cash payments, exercisable from the fifth to
tenth year. The future cash payments are based on the joint assets of New York
Life and its affiliates related to the 401(k) Complete product. Approximately
$6,640,000 of the purchase price was allocated to goodwill, which is being
amortized over an estimated useful life of 10 years. The comparative statement
of operations and statement of cash flows for the prior year included in these
financial statements cover the period from June 6, 1994 (date of acquisition)
through December 31, 1994.

MSC HOLDING, INC.

During 1995, the assets of the Health and Investment Divisions were sold to
Meritech, a subsidiary of Summit Technologies and Melson Technologies, an
indirect subsidiary of Aegon Insurance, respectively. Meritech purchased the
Health Division assets for approximately $750,000 which included contracts,
licenses, equipment and various receivables. Melson Technologies purchased the
Investment Division assets for a contingent purchase price of $3,500,000. One
million dollars of the purchase price is guaranteed and is expected to be
received by MSC within three years. The remaining

N-12
<PAGE>

NYLIFE INC. AND SUBSIDIARIES
(AFFILIATES OF NEW YORK LIFE INSURANCE COMPANY)
NOTES TO CONSOLIDATED STATEMENT OF FINANCIAL POSITION (CONTINUED)
DECEMBER 31, 1995, 1994 AND 1993

NOTE 3 -- ACQUISITIONS AND DISPOSITIONS (CONTINUED)

$2,500,000 is contingent upon the amount of licensing fees the buyers receive
over the next 10 years relating to the SMS Investment System, which is currently
under development. A total gain of approximately $1,695,000 was recognized on
these transactions.

NEW YORK LIFE CAPITAL CORP.

New York Life Capital Corp. was incorporated in Delaware in June 1995.
Capital Corp's activities will primarily consist of issuing commercial paper and
borrowing from other sources for the purpose of making loans to New York Life
and its affiliates. Capital Corp. did not commence operations during 1995.

NYL TRUST COMPANY

NYL Trust was incorporated in New York on February 2, 1995 as a limited
purpose trust company chartered by the New York State Banking Department to act
as a fiduciary for pension, profit sharing and other employee benefit plans. NYL
Trust's responsibilities include acting as a passive trustee or custodian for
401(k) plans and Individual Retirement Accounts.

NOTE 4 -- INVESTMENTS

COMMON STOCK:

The common stock portfolio, which is stated at market value, primarily
consists of securities issued in the United Kingdom which are denominated in
British Pounds Sterling at December 31, 1995 and 1994.

BONDS:

At December 31, 1995 the maturity distribution of bonds was as follows (in
thousands):

<TABLE>
<CAPTION>
DECEMBER 31, 1995
<S> <C> <C> <C> <C>
AVAILABLE FOR SALE LIFE INSURANCE
-------------------- OPERATIONS
ESTIMATED ----------------------
AMORTIZED FAIR STATEMENT ESTIMATED
COST VALUE VALUE FAIR VALUE
--------- --------- --------- -----------
Due in one year or less.................... $ 75,551 $ 75,857 $ 2,101 $ 2,101
Due in years two through five.............. 79,566 81,449 6,714 6,955
Due in years six through ten............... 5,704 5,868 13,637 14,845
Due after ten years........................ 466 474 6,749 7,355
--------- --------- --------- -----------
Total...................................... $ 161,287 $ 163,648 $ 29,201 $ 31,256
--------- --------- --------- -----------
--------- --------- --------- -----------
</TABLE>

N-13
<PAGE>

NYLIFE INC. AND SUBSIDIARIES
(AFFILIATES OF NEW YORK LIFE INSURANCE COMPANY)
NOTES TO CONSOLIDATED STATEMENT OF FINANCIAL POSITION (CONTINUED)
DECEMBER 31, 1995, 1994 AND 1993

NOTE 4 -- INVESTMENTS (CONTINUED)

At December 31, 1995 and 1994, the distribution of unrealized gains and
losses on bonds was as follows (in thousands):

<TABLE>
<CAPTION>
DECEMBER 31, 1995
<S> <C> <C> <C> <C>
ESTIMATED
AMORTIZED UNREALIZED UNREALIZED FAIR
AVAILABLE FOR SALE COST GAINS LOSSES VALUE
- ----------------------------------------- --------- ----------- ----------- ---------
U.S. Treasury and other U.S.
Governmental Agencies................. $ 71,868 $ 584 $ 33 $ 72,419
Commercial paper and Corporate notes... 89,228 1,861 51 91,038
Certificates of deposit................ 191 -- -- 191
--------- ----------- ----------- ---------
Total.................................. $ 161,287 $ 2,445 $ 84 $ 163,648
--------- ----------- ----------- ---------
--------- ----------- ----------- ---------

ESTIMATED
STATEMENT UNREALIZED UNREALIZED FAIR
INSURANCE OPERATIONS: VALUE GAINS LOSSES VALUE
- ----------------------------------------- --------- ----------- ----------- ---------
<S> <C> <C> <C> <C>
Foreign Governments.................... $ 12,240 $ 869 $ 4 $ 13,105
Corporate.............................. 16,961 1,548 358 18,151
--------- ----------- ----------- ---------
Total.................................. $ 29,201 $ 2,417 $ 362 $ 31,256
--------- ----------- ----------- ---------
--------- ----------- ----------- ---------
<CAPTION>

DECEMBER 31, 1994
ESTIMATED
AMORTIZED UNREALIZED UNREALIZED FAIR
HELD TO MATURITY COST GAINS LOSSES VALUE
- ----------------------------------------- --------- ----------- ----------- ---------
<S> <C> <C> <C> <C>
Corporate.............................. $ 28,000 $ -- $ 221 $ 27,779
--------- ----------- ----------- ---------
Total.................................. $ 28,000 $ -- $ 221 $ 27,779
--------- ----------- ----------- ---------
--------- ----------- ----------- ---------
<CAPTION>

ESTIMATED
AMORTIZED UNREALIZED UNREALIZED FAIR
AVAILABLE FOR SALE COST GAINS LOSSES VALUE
- ----------------------------------------- --------- ----------- ----------- ---------
<S> <C> <C> <C> <C>
U.S. Treasury and other U.S.
Governmental Agencies................. $ 98,404 $ 20 $ 1,130 $ 97,294
Commercial paper and Corporate notes... 53,647 -- 437 53,210
Certificates of deposit................ 185 -- -- 185
--------- ----------- ----------- ---------
Total.................................. $ 152,236 $ 20 $ 1,567 $ 150,689
--------- ----------- ----------- ---------
--------- ----------- ----------- ---------
<CAPTION>

ESTIMATED
STATEMENT UNREALIZED UNREALIZED FAIR
INSURANCE OPERATIONS: VALUE GAINS LOSSES VALUE
- ----------------------------------------- --------- ----------- ----------- ---------
<S> <C> <C> <C> <C>
Foreign Governments.................... $ 45,659 $ 318 $ 60 $ 45,917
Corporate.............................. 11,874 -- 318 11,556
--------- ----------- ----------- ---------
Total.................................. $ 57,533 $ 318 $ 378 $ 57,473
--------- ----------- ----------- ---------
--------- ----------- ----------- ---------
</TABLE>

Proceeds from investments in bonds sold, matured, or repaid were
$282,649,000, $402,126,000, and $133,095,000 for 1995, 1994 and 1993,
respectively. Realized gains from investments in bonds sold, matured, or repaid
were $898,000, $6,551,000 and $2,230,000 for 1995, 1994 and 1993, respectively,
and realized losses were $744,000, $912,000 and $182,000 for 1995, 1994 and 1993
respectively.

Investment in bonds include $58,585,000 and $51,229,000 of restricted
securities on deposit to meet statutory solvency requirements, for 1995 and
1994, respectively.

N-14
<PAGE>

NYLIFE INC. AND SUBSIDIARIES
(AFFILIATES OF NEW YORK LIFE INSURANCE COMPANY)
NOTES TO CONSOLIDATED STATEMENT OF FINANCIAL POSITION (CONTINUED)
DECEMBER 31, 1995, 1994 AND 1993

NOTE 4 -- INVESTMENTS (CONTINUED)

MORTGAGE LOANS:

Mortgage loans, which are generally stated at the aggregate principal due,
are secured by first liens on real estate properties. The loans carry interest
rates ranging from 8.75% to 9.75% and maturity dates which range from 1995 to
1999. At December 31, 1995 and 1994 the geographic diversification of the
mortgage loan portfolio was as follows (in millions):

<TABLE>
<CAPTION>
1995 1994
--------- ---------
<S> <C> <C>
United States:
Pacific............................................................... $ 12.6 $ 48.2
Middle Atlantic....................................................... 2.0 14.5
South Atlantic........................................................ 3.6 32.8
East North Central.................................................... -- 12.4
West South Central.................................................... -- 9.0
United Kingdom........................................................ -- .1
--------- ---------
$ 18.2 $ 117.0
--------- ---------
--------- ---------
</TABLE>

At December 31, 1995, mortgage loans are comprised of office buildings
($7,700,000) and shopping centers ($10,500,000). During 1995, several loans were
sold to New York Life, see Note 7.

The fair value of the mortgage loan portfolio was $17,633,000 and
$115,241,000 at December 31, 1995 and 1994, respectively, estimated based on
discounted cash flow analyses prepared for each loan using interest rates
approximating the current rates for new mortgages with similar remaining
maturities. Fair values do not necessarily represent the values for which these
loans could have been sold at December 31, 1995 or 1994; therefore, care should
be exercised in drawing any conclusions from these fair values.

Write downs related to declines in the appraised value of properties
underlying mortgage loans totaled $9,335,000 and $2,984,000 in 1995 and 1994,
respectively.

REAL ESTATE:

At December 31, 1995 and 1994, real estate included the following properties
which were acquired through foreclosure (in millions):

<TABLE>
<CAPTION>
CARRYING VALUE
YEAR --------------------
PROPERTY TYPE STATE ACQUIRED 1995 1994
- --------------------------------------------- ----- ----------- --------- ---------
<S> <C> <C> <C> <C>
Apartment.................................... VA 1991 $ -- $ 35.0
Office....................................... MD 1991 74.5 70.5
Shopping Center.............................. FL 1991 -- 5.2
Office....................................... NY 1992 17.6 17.6
--------- ---------
$ 92.1 $ 128.3
--------- ---------
--------- ---------
</TABLE>

At December 31, 1995 and 1994, real estate also included $2,100,000 and
$2,300,000 associated with Worldwide operations.

In January 1995, the apartment property was sold to New York Life for cash,
see Note 7.

In April 1995, the shopping center property was sold. NYLIFE Funding
recorded a realized gain of $867,000 as a result of this transaction.

N-15
<PAGE>

NYLIFE INC. AND SUBSIDIARIES
(AFFILIATES OF NEW YORK LIFE INSURANCE COMPANY)
NOTES TO CONSOLIDATED STATEMENT OF FINANCIAL POSITION (CONTINUED)
DECEMBER 31, 1995, 1994 AND 1993

NOTE 4 -- INVESTMENTS (CONTINUED)

MAINSTAY FUNDS:

At December 31, 1995 the total investment in the MainStay Funds includes
investments in individual funds as follows (in thousands):

<TABLE>
<CAPTION>
FUND COST FAIR VALUE
----------------------------------------- --------- -----------
<S> <C> <C>
California Tax Free.................................................... $ 4,646 $ 4,582
Capital Appreciation................................................... 55 115
Convertible............................................................ 71 103
Equity Index........................................................... 109 186
International Equity................................................... 10,000 10,051
International Bond..................................................... 10,129 10,560
High Yield Corporate Bond.............................................. 79 96
Tax Free............................................................... 503 494
New York Tax Free...................................................... 7,007 6,945
Total Return........................................................... 51 79
Value.................................................................. 434 551
--------- -----------
Total 1995......................................................... $ 33,084 $ 33,762
--------- -----------
--------- -----------
Total 1994......................................................... $ 47,466 $ 46,709
--------- -----------
--------- -----------
</TABLE>

TIME DEPOSITS:

Time deposits, included in cash and cash equivalents, at December 31, 1995
and 1994 amounted to $8,155,000 and $28,541,000, respectively.

OTHER INVESTMENTS:

Other investments include interests in limited partnerships which consist
primarily of an oil refinery and oil and gas producing properties valued at
$38,966,000 and $44,423,000 at December 31, 1995 and 1994, respectively.

NOTE 5 -- FIXED ASSETS

At December 31, 1995 and 1994 fixed assets, at cost, are comprised of the
following (in thousands):

<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
Furniture........................................................... $ 22,021 $ 13,127
Equipment........................................................... 41,737 35,530
Computer hardware................................................... 30,315 21,847
Computer software................................................... 7,646 14,720
Leasehold improvements.............................................. 19,084 16,564
Other............................................................... 11,166 11,049
----------- -----------
131,969 112,837
Less accumulated depreciation and amortization...................... 59,044 48,981
----------- -----------
Total............................................................... $ 72,925 $ 63,856
----------- -----------
----------- -----------
</TABLE>

N-16
<PAGE>

NYLIFE INC. AND SUBSIDIARIES
(AFFILIATES OF NEW YORK LIFE INSURANCE COMPANY)
NOTES TO CONSOLIDATED STATEMENT OF FINANCIAL POSITION (CONTINUED)
DECEMBER 31, 1995, 1994 AND 1993

NOTE 6 -- NOTES PAYABLE

Notes payable, generally carried at the unpaid principal balance, consisted
of the following at December 31, 1995 and 1994 (in thousands):

<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
9.25% Guaranteed Notes due May 15, 1995................................................. $ -- $ 300,000
Worldwide-Loan from Windsor Life........................................................ 6,434 9,573
Series A and B, Floating Rate Secured Five Year Notes................................... 20,628 23,874
Series C 9% Fixed Rate Secured Five Year Notes.......................................... 32,218 38,503
Loans payable to New York Life.......................................................... 59,842 93,788
Bank borrowings and revolving line of credit with financial institutions................ 15,732 4,149
Other (including current portion)....................................................... 6,227 14,257
----------- -----------
$ 141,081 $ 484,144
----------- -----------
----------- -----------
</TABLE>

The fair value of notes payable was approximately $141,081,000 and
$485,698,000 at December 31, 1995 and 1994, respectively.

On May 15, 1995, NYLIFE Funding repaid the principal and remaining interest
on the 9.25% Guaranteed Notes which totaled $300,000,000 and $9,250,000,
respectively. At December 31, 1994 the fair value of the Notes was $302,531,000
estimated based on the quoted market price. The notes were unconditionally
guaranteed by New York Life as to the payment of principal and interest.

New York Life Capital Corp. is party to a credit agreement with a group of
relationship banks consisting of a $150,000,000 364 day committed revolving
credit facility ("Facility A"), and a $350,000,000 5 year committed revolving
credit facility ("Facility B"). Annual facility fees are .04% and .06%, for
Facility A and B respectively, and borrowing rates are capped at spreads of .16%
and .14% over LIBOR, respectively. In addition, the credit agreement contains
various covenants pertaining to allowable activities of Capital Corp. No amounts
were drawn down or outstanding on these agreements at December 31, 1995.

The $20,628,000 of Series A and B Floating Rate Secured Five Year Notes are
collateralized by security alarm monitoring contracts, and pay interest
quarterly at a per annum floating rate based on the minimum denomination
five-year certificate of deposit average rate as reported by Bank Rate Monitor.
Principal is paid down on a quarterly basis. At December 31, 1995, the rate on
these Notes was 9%. In addition, $1,721,000 of these notes are payable during
1996.

The $32,218,000 of Series C 9% Fixed Rate Secured Five Year Notes are
collateralized by security alarm monitoring contracts, and pay interest
quarterly at the fixed rate. Principal is paid down on a quarterly basis. In
addition, $2,250,000 of these notes are payable during 1996.

In January 1995, NYLIFE entered into a credit agreement, expiring January 1,
1996, with New York Life whereby NYLIFE can borrow up to an aggregate principal
amount of $200,000,000 at any one time. This agreement and any loans made shall
be automatically extended and renewed for additional one year periods, unless
either NYLIFE or New York Life notifies the other of its desire to terminate the
agreement. At December 31, 1995 the total principal borrowed under this
agreement was $27,358,000. Interest expense amounted to $94,000.

On December 11, 1992, NAFCO entered into a revolving credit agreement (the
"Credit Agreement") with Barclays Bank PLC ("Barclays"). The Credit Agreement
allows NAFCO to borrow an aggregate principal amount not to exceed $15,000,000
at any one time. Interest on any borrowing accrues at a rate equal to either (i)
the rate of interest per annum declared by Barclays as its prime

N-17
<PAGE>

NYLIFE INC. AND SUBSIDIARIES
(AFFILIATES OF NEW YORK LIFE INSURANCE COMPANY)
NOTES TO CONSOLIDATED STATEMENT OF FINANCIAL POSITION (CONTINUED)
DECEMBER 31, 1995, 1994 AND 1993

NOTE 6 -- NOTES PAYABLE (CONTINUED)

rate in effect at its branch in New York City or (ii) LIBOR plus 1%. During
1995, NAFCO recorded interest expense of approximately $204,000 to Barclays
pursuant to the Credit Agreement. At December 31, 1995, borrowings under the
credit agreement are $15,000,000. There were no borrowings at December 31, 1994.

On November 1, 1993, NAFCO entered into a loan agreement with New York Life.
The agreement allows NAFCO to borrow money pursuant to one or more master notes
(individually, a "Master Note", collectively, "Master Notes") each of which will
not exceed one year in maturity and for amounts, in aggregate, not to exceed
$35,000,000 at any one time. Interest on any Master Note borrowings accrues at
the rate which is the annual simple interest equivalent (computed on the actual
daily principal balance based on a 360 day year of 12 30-day months) of 225
basis points above the one month LIBOR published in the Wall Street Journal on
the 15th day of the proceeding calendar month (or if such day is not a day on
which such newspaper is published, the next succeeding day of such publication).
In 1995, the loan agreement between NAFCO and New York Life was amended to
accommodate the acquisition of prime auto loans. The amendment provides for the
following: (i) an increase in the maximum borrowings to $70,000,000, (ii) an
interest rate of 200 basis points above the one month LIBOR for borrowings
related to prime auto loan acquisitions, and (iii) a change in the monthly
interest payment date to the 20th of each month. During 1995 and 1994, NAFCO
made interest payments totaling $2,636,600 and $379,651, respectively, to New
York Life pursuant to the Master Notes. At December 31, 1995 and 1994, the
amounts outstanding under the Master Note are $32,484,000 and $11,922,000,
respectively. Accrued interest at December 31, 1995 and 1994 is $278,000 and
$67,000, respectively.

Sanus had a loan agreement with New York Life under which Sanus borrowed
amounts as mutually agreed. Under the provisions of this agreement, interest was
payable at the end of each calendar quarter at a rate of 1% over the prime rate
as announced by a specified New York money center bank. The applicable interest
rates during 1995 ranged from 9.5% to 10.0% and 1994 ranged from 7.00% to 9.50%.
Sanus borrowed an additional $4,000,000 during 1995 and $57,889,000 during 1994,
primarily to finance acquisitions. Effective December 31, 1995 the loan balance,
along with accrued interest, in the total amount of $82,898,000 was contributed
to Sanus as additional paid-in-capital and the loan agreement, which was to
mature on October 1, 1997, was terminated. Interest expense on such borrowings
during 1995 and 1994 were $7,854,000 and $3,051,000, respectively.

NOTE 7 -- RELATED PARTY TRANSACTIONS

NYLIFE and several of its subsidiaries are party to a service agreement with
New York Life, whereby New York Life provides services to NYLIFE and such
subsidiaries, including office space, legal, accounting, administrative,
personnel and other services for which NYLIFE and its subsidiaries are billed.
NYLIFE and its subsidiaries are charged for these services based upon (a) actual
costs incurred, where they are separately identifiable and (b) allocation of
costs incurred by New York Life developed through analyses of time spent on
matters relating to NYLIFE and its subsidiaries.

Investment management fees of $35,089,000, $32,684,000, and $25,970,000 were
received from New York Life and certain of its affiliates during the years ended
December 31, 1995, 1994 and 1993, respectively.

Sanus and New York Life offer a product (Sanus Plus) to members which
combines HMO coverage from Sanus and indemnity insurance coverage from New York
Life. The member pays a single premium for this coverage and elects either HMO
or major medical coverage at the time of service. Sanus collects the full
premium and allocates a portion to New York Life. Under the terms of

N-18
<PAGE>

NYLIFE INC. AND SUBSIDIARIES
(AFFILIATES OF NEW YORK LIFE INSURANCE COMPANY)
NOTES TO CONSOLIDATED STATEMENT OF FINANCIAL POSITION (CONTINUED)
DECEMBER 31, 1995, 1994 AND 1993

NOTE 7 -- RELATED PARTY TRANSACTIONS (CONTINUED)

the agreement between the parties, a final allocation of premiums is made one
year after the close of the coverage period, whereby a transfer is completed
between Sanus and New York Life which will cause each to have an identical ratio
of medical expenses to premium for coverage provided under this product. Sanus
classifies New York Life's estimated share of premiums during the period as a
reduction of its premium income. New York Life's estimated share of premiums was
$45,092,000 and $43,089,000 at December 31, 1995 and 1994, respectively.
Additionally, at December 31, 1995, Sanus has accrued approximately $331,000 due
from New York Life ($7,395,000 due to New York Life at December 31, 1994)
related to Sanus Plus.

Certain subsidiaries earned premiums and fees related to health care
services provided to New York Life of $54,489,000, $48,016,000 and $28,953,000
in 1995, 1994 and 1993, respectively. At December 31, 1995 and 1994, New York
Life owed $5,455,000 and $4,496,000, respectively, for such services.

During 1995 and 1994, one of Sanus' HMO subsidiaries paid hospital service
claims of approximately $7,000,000 and $12,000,000, respectively, to its
minority shareholders.

NYLACOR has eight "dedicated offices" to market the New York Life long-term
care product. Beginning in 1995, all the expenses incurred by the dedicated
offices are paid by NYLACOR and reimbursed by New York Life. These expenses and
the associated reimbursements totaled $3,200,000 in 1995.

At December 31, 1995 and 1994, New York Life owned approximately 8.7% and
8.6%, respectively, of the outstanding common stock of American Exploration
Company ("American"), the parent of NYLIFE Equity's co-general partner (American
Exploration Production Company) and had invested approximately $18,954,400 and
$54,747,000, respectively, in partnerships it managed. In addition, New York
Life provided a $40,000,000 bridge facility for American through February 1995
to finance the consolidation of its institutional oil and gas limited
partnerships.

On January 3, 1994, NYLIFE Distributors assumed the mutual fund underwriting
and certain administrative functions previously performed by NYLIFE Securities,
an affiliate, on behalf of the MainStay Funds and the MainStay Institutional
Funds Inc. In connection with this transfer, NYLIFE received a distribution of
certain assets and liabilities valued at book value from NYLIFE Securities in
the net amount of $96,966,000, as well as $250,000 cash. The distribution
resulted in a return of capital to NYLIFE and reduced NYLIFE Securities'
stockholder's equity by $97,216,000. NYLIFE then contributed these assets,
liabilities and cash, as capital, to NYLIFE Distributors.

As distributor, NYLIFE Distributors has entered into agreements with the
MainStay Funds, pursuant to Rule 12b-1 under the Investment Act of 1940, to
compensate it for the distribution expenses it incurs. At December 31, 1995 and
1994 receivables from the MainStay Funds approximated $6,493,000 and $5,365,000,
respectively for distribution, services and administration fees.

NYLIFE Securities earned commission revenue of approximately $29,910,000 and
$16,855,000 on transactions with affiliates during 1995 and 1994, respectively.

In June 1994, New York Life and Greystone, as co-defendants, settled
litigation brought in connection with the alleged formation of a joint venture
to acquire an office building located in Miami, Florida. Greystone, in its
capacity as Portfolio investment advisor, had represented New York Life in
evaluating this proposed transaction at various times during 1989 and 1990.
While denying plaintiff's allegations, New York Life and Greystone determined to
limit potential financial exposure and further

N-19
<PAGE>

NYLIFE INC. AND SUBSIDIARIES
(AFFILIATES OF NEW YORK LIFE INSURANCE COMPANY)
NOTES TO CONSOLIDATED STATEMENT OF FINANCIAL POSITION (CONTINUED)
DECEMBER 31, 1995, 1994 AND 1993

NOTE 7 -- RELATED PARTY TRANSACTIONS (CONTINUED)

costs of protracted legal proceedings by settling this suit. The full and final
settlement amount of $5,000,000 and legal expenses of $369,000 were paid by New
York Life and subsequently charged to Greystone. At December 31, 1995, Greystone
and New York Life have adopted a plan of liquidation of the intercompany account
related to this charge. In December, Greystone paid an installment of
$1,279,000; installments of $250,000 will be made in subsequent years until the
balance of the account is liquidated. Such liability is non-interest bearing.

During 1995, NYLIFE Funding sold fourteen mortgage loans and one foreclosed
property with a total statement value of $119,314,000 to New York Life and
received a capital infusion of $115,000,000 from New York Life through NYLIFE.
The cash received in these two transactions was used to repay the principal and
interest obligations on the 9.25% Guaranteed Notes. In December 1994, NYLIFE
Funding transferred a $6,660,000 mortgage loan to New York Life in exchange for
a participating interest in a loan with the same statement value. No gain or
loss was recorded on this transfer.

In August 1994, NYLIFE Funding refinanced a $19,690,000 third party mortgage
loan by replacing it with a NYLIFE Funding loan for $4,930,000 and a New York
Life loan for $14,760,000.

NOTE 8 -- FOREIGN OPERATIONS

NYLIFE subsidiaries conduct insurance and investment management operations
in the United Kingdom, Argentina, Bermuda, Hong Kong, Japan, Korea, Indonesia
and Mexico. The assets and liabilities of these foreign operations at December
31, 1995 and 1994 are as follows (in thousands):

<TABLE>
<CAPTION>
CONSOLIDATED SUBSIDIARIES: 1995 1994
- --------------------------------------------------------------------- --------- -----------
<S> <C> <C>
Assets............................................................... $ 90,614 $ 127,782
Liabilities.......................................................... $ 70,326 $ 115,332
</TABLE>

NON-CONSOLIDATED SUBSIDIARIES

<TABLE>
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
Assets...................................... $3,261,163 $1,567,569
Liabilities................................. $3,178,398 $1,517,562
</TABLE>

The sale of the majority of UK operations in 1994 (Note 3) primarily
contributed to the change in the consolidated subsidiary figures.

The cumulative translation adjustment for 1995 is $1,123,000.

NOTE 9 -- INCOME TAXES

NYLIFE and its subsidiaries are members of an affiliated group which joins
in the filing of a consolidated federal income tax return with New York Life.
The consolidated income tax provision or benefit is allocated among the members
of the group in accordance with a tax allocation agreement. The tax allocation
agreement provides that each member of the group is allocated its share of the
consolidated tax provision or benefit determined generally on a separate return
basis, but may, where applicable, recognize the tax benefits of net operating
losses or capital losses utilizable in the consolidated group. Estimated
payments for taxes are made between the members of the consolidated group during
the year. State, local, and foreign tax returns are filed separately.

The income tax receivable included $5,141,000 and $7,586,000 due from New
York Life as of December 31, 1995 and 1994, respectively pursuant to the tax
allocation agreement.

N-20
<PAGE>

NYLIFE INC. AND SUBSIDIARIES
(AFFILIATES OF NEW YORK LIFE INSURANCE COMPANY)
NOTES TO CONSOLIDATED STATEMENT OF FINANCIAL POSITION (CONTINUED)
DECEMBER 31, 1995, 1994 AND 1993

NOTE 9 -- INCOME TAXES (CONTINUED)

The net deferred tax asset (liability) as of December 31, 1995 and 1994,
respectively is attributable to the following temporary differences (in
thousands):

<TABLE>
<CAPTION>
1995 1994
----------- ----------
<S> <C> <C>
DEFERRED TAX ASSET:
Non-deductible reserves............................................ $ 71,022 $ 25,431
Net operating losses............................................... 6,244 3,935
Deferred compensation.............................................. 13,483 11,598
Impairments........................................................ 5,787 3,734
Investments in affiliates and partnerships......................... 410 632
Leasehold improvements............................................. 1,935 1,350
Deferred rent...................................................... 2,943 2,257
Depreciation....................................................... 1,046 1,354
Unrealized investment losses....................................... -- 591
Other.............................................................. 1,519 803
----------- ----------
Gross deferred tax asset......................................... $ 104,389 $ 51,685
----------- ----------
----------- ----------
DEFERRED TAX LIABILITY:
Deferred distribution costs........................................ $ (60,919) $ (53,115)
Unrealized appreciation of subsidiary.............................. (1,713) --
Investments in affiliates and partnerships......................... (6,736) (5,339)
Depreciation....................................................... (1,363) (1,804)
Unrealized net appreciation........................................ (7,780) (7,380)
Software development costs......................................... (322) (1,336)
Unrealized investment gains........................................ (882) --
Other.............................................................. (615) (1,114)
----------- ----------
Gross deferred tax (liability)................................... (80,330) (70,088)
Valuation allowance................................................ (6,236) (3,935)
----------- ----------
Net deferred tax asset (liability)............................... $ 17,823 $ (22,338)
----------- ----------
----------- ----------
</TABLE>

The December 31, 1995 and 1994 valuation allowance principally relates to
foreign net operating losses, the utilization of which is subject to limitations
in the United Kingdom, and net operating loss limitations.

NOTE 10 -- COMMITMENTS AND CONTINGENCIES

LEASES:

The subsidiaries lease office space, a telephone system, and certain
computer and office equipment under agreements with various expiration dates.
The leases contain provisions for payment of real estate taxes, building
maintenance, electricity, and other escalations. Effective January 1, 1990, a
subsidiary of Worldwide entered into a $10,282,000 capital lease expiring in
2002 on its head office development in the United Kingdom.

N-21
<PAGE>

NYLIFE INC. AND SUBSIDIARIES
(AFFILIATES OF NEW YORK LIFE INSURANCE COMPANY)
NOTES TO CONSOLIDATED STATEMENT OF FINANCIAL POSITION (CONTINUED)
DECEMBER 31, 1995, 1994 AND 1993

NOTE 10 -- COMMITMENTS AND CONTINGENCIES (CONTINUED)

Future minimum lease payments under capital and noncancelable operating
leases with original or remaining lease terms in excess of one year at December
31, 1995, are as follows (in thousands):

<TABLE>
<CAPTION>
CAPITAL
LEASES OPERATING LEASES
------------- ----------------
<S> <C> <C>
1996........................................................ $ 757 $ 24,347
1997........................................................ 680 25,233
1998........................................................ 1,077 24,768
1999........................................................ 1,077 24,272
2000........................................................ 1,077 22,111
2001 & thereafter........................................... 2,549 93,149
------------- ----------------
Total....................................................... 7,217 213,880
------------- ----------------
Less amount representing interest........................... 3 --
future sublease rental receipts........................... -- 3,785
------------- ----------------
Present value of future minimum lease payments.............. 7,214 --
------------- ----------------
Less amount due in one year................................. 757 --
------------- ----------------
Total....................................................... $ 6,457 $ 210,095
------------- ----------------
------------- ----------------
</TABLE>

Assets recorded under capital leases and the related accumulated
depreciation are listed below. Amortization of these assets is included in
depreciation and amortization expense (in thousands):

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1995 1994
--------- ---------
<S> <C> <C>
Assets recorded under leases..................................... $ 12,871 $ 13,261
Accumulated depreciation......................................... (2,794) (3,218)
--------- ---------
Total............................................................ $ 10,077 $ 10,043
--------- ---------
--------- ---------
</TABLE>

Rent expense for the years ended December 31, 1995, 1994 and 1993 was
approximately $32,848,000, $28,315,000 and $16,405,000, respectively.

Windsor Construction Company Limited, a wholly owned subsidiary of NYLUK,
entered into two contracts with Balfour Beatty Limited on January 11, 1994, for
the construction of phases II and III of NYLUK's head office development in the
United Kingdom amounting to $3,945,000 for Phase II and $4,190,000 for Phase
III. The contract for Phase II must begin by January 8, 1997, and the contract
for Phase III must begin by December 31, 1999.

LIQUIDATION OF LIMITED PARTNERSHIP:

In December of 1995, NYLIFE Inc. announced a plan to evaluate the economics
of continuing the operation of its New York Life Oil and Gas Producing
Partnership Programs, its NYLIFE Realty Income Partnership Programs, and its
NYLIFE Government Mortgage Plus Limited Partnership Programs. In early 1996,
class action lawsuits were filed against New York Life, NYLIFE, Inc. and several
of its subsidiaries by various investors in the partnership programs seeking
damages for alleged fraudulent activities in connection with the marketing and
sale of interests in the partnership programs and in the subsequent operation
thereof.

On March 19, 1996, New York Life, NYLIFE Inc., and certain other affiliated
and unaffiliated entities, entered into a Stipulation of Settlement of the class
action lawsuit. The settlement is subject

N-22
<PAGE>

NYLIFE INC. AND SUBSIDIARIES
(AFFILIATES OF NEW YORK LIFE INSURANCE COMPANY)
NOTES TO CONSOLIDATED STATEMENT OF FINANCIAL POSITION (CONTINUED)
DECEMBER 31, 1995, 1994 AND 1993

NOTE 10 -- COMMITMENTS AND CONTINGENCIES (CONTINUED)

to final court approval and certain other conditions. In 1995, NYLIFE Inc.
recorded a provision of $137,000,000 to reflect the estimated costs of
discontinuing the proprietary partnership operations and settling certain claims
in connection therewith, including settlement of the class action lawsuit.

NYLIFE Inc. has agreed to indemnify its subsidiaries and certain other
unaffiliated entities named in the class action lawsuit. Accordingly NYLIFE Inc.
will fund any settlement payments to the partnership program investors.

OFFICE OF PERSONNEL MANAGEMENT:

Sanus, through its subsidiaries, contracts with the Office of Personnel
Management ("OPM") to provide or arrange health services under the Federal
Employees Health Benefits Program ("FEHBP") for federal employees, annuitants
and their dependents. These contracts with OPM and applicable government
regulations establish premium rating requirements for the FEHBP. OPM conducts
periodic audits of its contractors to, among other things, verify that the
premiums charged under the OPM contracts were established in compliance with the
community rating and other requirements under the FEHBP. OPM auditors concluded
periodic audits in 1995 and 1994 of two of Sanus' subsidiaries and released
final audit reports alleging certain defects in that subsidiary's rating
practices under applicable regulatory and contractual requirements. The OPM
Audit Resolution Division is responsible for resolving the audit findings. As
part of the resolution process, the Audit Resolution Division may reconsider the
findings of the auditors and the information provided by the subsidiaries.

At this time, management and legal counsel are unable to determine the
amounts that may be required to be refunded to OPM to resolve the audit
findings. Management currently believes, however, that after application of
established reserves, amounts ultimately required to be refunded to OPM will not
have a material adverse effect on the financial condition of Sanus. In addition,
management does not believe that the audit will have a material effect on future
relations with OPM.

CREDIT AGREEMENTS:

Effective May 31, 1995, ESI negotiated an amendment to extend its existing
unsecured line of credit of $25,000,000 for another year. This amendment expires
May 29, 1996. On November 1, 1995, ESI negotiated a second $25,000,000 revolving
loan agreement with another bank, expiring on October 31, 1996. Terms of both
lines are as follows: interest is charged on the principal amount outstanding at
a rate equal to any of the following options which ESI, at its option shall
select: (1) the bank's "prime rate", (ii) a floating rate equal to the bank's
cost of funds rate plus 50 basis points, or (iii) a fixed rate for periods of
30, 60, 90 or 180 days equal to the LIBOR rate plus 50 basis points. Fees under
these agreements on any unused portion are charged at ten hundredths of one
percent per year. At December 31, 1995, ESI had no outstanding borrowings under
these agreements.

REINSURANCE:

Certain subsidiaries enter into reinsurance agreements in the normal course
of their insurance business. Reinsurance on certain individual lives is ceded to
reduce the risk on any one life. Additionally, Sanus maintains reinsurance under
which it is insured for eligible hospital expenses incurred for each member
which exceed a specified dollar amount during a year. These subsidiaries remain
liable for the reinsurance ceded, if the reinsurer fails to meet its
obligations. Premiums ceded by these subsidiaries for the years ended December
31, 1995, 1994 and 1993 in connection with reinsurance agreements totaled
$3,201,000, $75,971,000 and $34,244,000, respectively. Benefit reserves have
been reduced for reinsurance at December 31, 1995 and 1994 by $649,000 and
$499,000, respectively.

N-23
<PAGE>

NYLIFE INC. AND SUBSIDIARIES
(AFFILIATES OF NEW YORK LIFE INSURANCE COMPANY)
NOTES TO CONSOLIDATED STATEMENT OF FINANCIAL POSITION (CONTINUED)
DECEMBER 31, 1995, 1994 AND 1993

NOTE 10 -- COMMITMENTS AND CONTINGENCIES (CONTINUED)

NYLUK assumed credit life and mortgage life risk business from third
parties. Premiums assumed and the commissions incurred in connection with these
reinsurance agreements for the year ended December 31, 1994 amounted to
$58,758,000 and $48,419,000, respectively, and for the year ended December 31,
1993 amounted to $29,017,000 and $26,971,000, respectively.

INTEGRATION COSTS:

During 1995, Sanus recorded a pretax charge of $10,000,000 relating to
expenses incurred for the integration of Sanus' operations and certain of New
York Life's group operations. Such costs related primarily to consulting, public
relations and relocation charges. A remaining liability of $5,000,000 is
included in accounts payable and accrued expenses as of December 31, 1995 and
the related charge was included in selling, administrative and other costs for
1995.

OTHER:

During 1990, NYLIFE entered into an agreement to provide a guarantee for the
benefit of the shareholders of the MainStay Equity Index Fund. The guarantee
provides that if, in ten years from the date of purchase, the net asset value is
less than the original offering price, then NYLIFE will reimburse the
shareholders for their loss of principal and restore the net asset value to the
original offering price.

The Company is also a defendant in other individual and alleged class
actions arising from its operations. Most of these actions also seek substantial
or unspecified compensatory and punitive damages. The Company is also from time
to time involved as a party in various governmental, administrative and
investigative proceedings and inquiries. Given the uncertain nature of
litigation and regulatory inquiries, the outcome of the above and other actions
pending against the Company cannot be predicted. The Company nevertheless
believes that the ultimate outcome of all pending litigation should not have a
material adverse effect on the Company's financial position; however, it is
possible that settlements or adverse determinations in one or more actions or
other proceedings in the future could have a material adverse effect on the
Company's operating results for a given year.

Additionally, certain subsidiaries are subject to minimum net worth
restrictions pursuant to regulatory requirements and the terms of limited
partnership and debt agreements. At December 31, 1995 and 1994, the net worth of
these subsidiaries exceeded the related requirements.

From January 1, 1995 through November 30, 1995, approximately 70% of ESI's
pharmaceutical purchases were through one wholesaler. As of December 1, 1995,
ESI has entered into a new primary wholesale relationship with another supplier.
ESI anticipates that it will purchase a similar percentage of its
pharmaceuticals from the new supplier. ESI believes that other alternative
sources of pharmaceuticals are readily available.

NOTE 11 -- EMPLOYEE BENEFIT PLANS

LONG TERM PERFORMANCE PLAN:

MacKay-Shields adopted a Long-Term Performance Plan ("the Plan") in 1988
pursuant to which key professionals earn an annual performance award or, at such
time MacKay-Shields attains specified goals set forth in the Plan, the
participants may elect to receive 20% of the market value of MacKay-Shields. At
December 31,1994, MacKay-Shields achieved the specified goals set forth in the
Plan and pursuant to Plan provisions, the participants elected to receive an
amount equal to 20% of the fair market value of MacKay-Shields. Based on an
independent valuation, such amount was determined to be $21,000,000 which was
recorded as a liability at December 31, 1994. In accordance with the provisions
of the plan, participants are also entitled to income on the unpaid amount of
their

N-24
<PAGE>

NYLIFE INC. AND SUBSIDIARIES
(AFFILIATES OF NEW YORK LIFE INSURANCE COMPANY)
NOTES TO CONSOLIDATED STATEMENT OF FINANCIAL POSITION (CONTINUED)
DECEMBER 31, 1995, 1994 AND 1993

NOTE 11 -- EMPLOYEE BENEFIT PLANS (CONTINUED)

award. Interest expense and the related amount payable to participants have been
accrued as of December 31, 1995. Approximately $16,600,000 of the obligation
plus income related to this amount will be paid to the participants in three
annual installments commencing in 1996. The remaining amount of the obligation
will be paid in the years 1998 through 2000. For certain individuals, a portion
of this amount may be adjusted based upon the investment performance of certain
registered investment companies managed by MacKay-Shields.

OTHER:

Certain subsidiaries sponsor defined contribution retirement, 401(k) and
profit sharing plans for employees. Contributions to these plans during 1995,
1994 and 1993 totalled $1,794,000, $548,000 and $459,000, respectively.

NOTE 12 -- SUBSEQUENT EVENTS

On January 1, 1996 New York Life combined the majority of its Group
Department operations with those of Sanus and contributed its wholly-owned
subsidiary, New York Life and Health Insurance Company ("NYLHIC"), to Sanus.
NYLHIC, as of that date, had a tangible net worth of approximately $69,000,000.
Effective on that date, the combined company began operations under the name
NYLCare Health Plans, Inc., which continues to be a wholly-owned subsidiary of
the company.

Effective January 1, 1996, ESI and its wholly owned subsidiary ESI Canada,
acquired certain assets, software licenses and the claims processing business of
Eclipse Claims Services, Inc. ("Eclipse") for $1,015,000. Eclipse was a
processor of Canadian pharmacy claims and was owned by The Manufacturers Life
Insurance Company, the Prudential Insurance Company of America Canadian
Operations ("Prudential"), Aetna Life Insurance Company of Canada ("Aetna"), and
Metropolitan Life Insurance Company. The acquisition has been accounted for
under the purchase method of accounting. The purchase price has been allocated
to the assets acquired, based on their estimated fair values at the date of
acquisition. Effective January 1, 1996, and in connection with the acquisition
of certain assets and software licenses of Eclipse described above, ESI Canada
signed an agreement with each of Aetna and Prudential pursuant to which ESI
Canada will provide electronic drug claim processing and other pharmacy benefit
management services in Canada for a period of five years. In addition, ESI,
Canada is providing services to Crown Life Insurance Company, and is negotiating
a formal contract.

On January 2, 1996, NYLIFE paid $7,076,000 to purchase the shares owned by a
remaining Founder of the Company, in accordance with his Termination, Severance
and Stock Buyback agreement. Subsequent to this purchase, NYLIFE owned 100% of
HealthCare.

On February 13, 1996, The New York Life Irrevocable Trust of 1996, (the
"Trust") was created to hold the stock of New York Life Settlement Corporation
("NYLSET"). NYLIFE, as Grantor of the Trust, transferred its 100% ownership of
NYLSET to the Trust, making NYLIFE the beneficiary. The Trust has three
trustees, two of whom are independent parties. The trustees are prohibited from
voting in favor of any amendment to the certificate of incorporation of NYLSET
or permitting NYLSET to incur any debt other than Structured Settlement
obligations created by qualified assignments, sell, transfer, or otherwise
dispose of any assets, merge or consolidate with any other entity or change its
corporate purpose.

N-25
<PAGE>

NYLIFE INC. AND SUBSIDIARIES
(AFFILIATES OF NEW YORK LIFE INSURANCE COMPANY)
NOTES TO CONSOLIDATED STATEMENT OF FINANCIAL POSITION (CONTINUED)
DECEMBER 31, 1995, 1994 AND 1993

NOTE 12 -- SUBSEQUENT EVENTS (CONTINUED)

In December 1995, the Aegis' Board of Directors approved a plan to close the
business and dissolve Aegis in the event a suitable buyer could not be found. On
March 5, 1996, the decision to dissolve Aegis and its subsidiary, Personal
Financial Assistant Financial Centers was announced. Dissolution costs of
approximately $4,437,000 have been accrued in 1995.

In March 1996, Express Scripts filed a Form S-3 registration statement for
an offering of 1,000,000 (1,150,000 if the underwriters' over allotment option
is exercised) shares of its Class A Common Stock. The proceeds from this
offering will be used for general corporate purposes. NYLIFE HealthCare will
offer for sale 2,600,000 (2,990,000 if the underwriters' over allotment option
is exercised) shares of Class A Common Stock upon conversion from Class B Common
Stock owned by NYLIFE HealthCare.

On February 15, 1996, SAMCO distributed $4,033,000 to the series A, B, and C
holders, which included interest, quarterly principal repayment and additional
principal repayment.

NAFCO continues to borrow under the credit agreement with Barclays Bank PLC.
As of April 11, 1996, $15,000,000 is outstanding pursuant to the Credit
Agreement.

NAFCO continues to borrow under the Master Note agreement with New York
Life. As of April 11, 1996, $50,474,000 is outstanding pursuant to the Master
Note Agreement.

As of April 11, 1996, NYLIFE has received $30,076,000 of cash contributions
from New York Life.

NOTE 13 -- SUBSEQUENT EVENTS (UNAUDITED)

Pursuant to the S-3 registration statement filed in March 1996, Express
Scripts sold 1,000,000 and 150,000 shares of its Class A Common Stock on April
16, 1996 and April 23, 1996, respectively for a total of $53,268,000 (net of
underwriting and commission costs). NYLIFE HealthCare recognized a gain before
taxes of approximately $16,000,000. In addition, NYLIFE HealthCare sold
2,600,000 and 390,000 shares of Class A Common Stock of its previously owned
Express Scripts stock on April 16, 1996 and April 23, 1996, respectively for a
total of $138,497,000 (net of underwriting and commission costs). As a result of
the sale of its shares, NYLIFE HealthCare Management decreased its ownership of
Express Scripts from 70% to 46% and its voting stock from 96% to 90%. The sale
of shares by NYLIFE HealthCare resulted in a realized gain before taxes of
approximately $131,000,000 and a reduction in the statutory valuation account,
reflected in Stockholder's Equity, approximately $110,000,000.

N-26
<PAGE>
EXHIBIT A
EXECUTIVE SUMMARIES OF APPRAISALS

A-1
<PAGE>
EXECUTIVE SUMMARY OF APPRAISAL OF EDEN WOODS

A-2
<PAGE>
PROPERTY COUNSELORS, INC.

December 31, 1995

Mr. Steven F. Bowers
Vice President
Greystone Realty Corporation
1111 West 22nd Street
Suite 240
Oak Brook, Illinois 60521

Re: Market Value Appraisal
Eden Woods Business
Center
Eden Prairie, Minnesota

Dear Mr. Bowers:

At your request we have completed a market value appraisal of the leased fee
interest in the office/ showroom building situated at the above captioned
location. We have thoroughly analyzed the market and the property in arriving at
our value estimate. The purpose of the following report is to outline the
reasoning and the important factors considered in arriving at our value
estimate. It contains a summary of the data gathered in our investigation and
describes in detail the analysis that resulted in our conclusions.

The subject property is comprised of three multi-tenant, office/showroom
facilities. The Eden Woods Business Center has three single-story
office/showroom buildings that have a combined total of 165,866 net rentable
square feet, which consists of 92,764 square feet of office space (56%) and
73,102 square feet of warehouse space (44%).

Our appraisal report conforms to the Uniform Standards of Professional
Appraisal Practice (USPAP). This report should only be used by sophisticated
users that have the opportunity to obtain a full understanding of the
assumptions underlying the analysis.

All factors considered, it is our opinion that the market value of the
property BASED ON THE ASSUMPTIONS AND LIMITING CONDITIONS SET FORTH IN THIS
REPORT as of December 31, 1995 is:

NINE MILLION TWO HUNDRED THOUSAND DOLLARS
$9,200,000

If you have any questions regarding our value estimate or analysis or
require any additional information please contact the undersigned. We appreciate
having the opportunity to be of service to you in this matter.

Respectfully submitted.

PROPERTY COUNSELORS, INC.

/s/ BRIAN D. FLANAGAN
- ---------------------------------------------
Brian D. Flanagan, MAI,
EXECUTIVE VICE PRESIDENT
State Certification No. 153-000103

A-3
<PAGE>
SUMMARY OF SALIENT FACTS

<TABLE>
<S> <C>
NAME AND ADDRESS: Eden Woods Business Center
10200-10300 Valley View Road
Eden Prairie, Minnesota
LOCATION: The subject property is located on the north
side of Valley View Road, west of Golden
Triangle Drive and east of Flying Cloud
Drive.
PROPERTY DESCRIPTION: The subject property is comprised of three
multi-tenant, office/showroom facilities. The
Eden Woods Business Center has three
single-story office/showroom buildings that
have a combined total of 165,866 net rentable
square feet, which consists of 92,764 square
feet of office space (56%) and 73,102 square
feet of warehouse space (44%). The site is
irregular in shape, contains 12.65 acres
(551,034 square feet), and has 901 feet of
frontage on Valley View Road. The site has
on-site parking for 512 cars.
MARKET ANALYSIS: The Twin Cities real estate market has
experienced a significant comeback over the
past 24 months, particularly in the
industrial segment, after a period of decline
in the early 1990's. In June of 1993 the
vacancy rates for the industrial market as a
whole, the Southwest market overall,
including bulk warehouse, office/ showroom
and office/warehouse were 18.44 percent,
15.90 percent, and 14.01 percent,
respectively. As of June 1995, these rates
had dramatically decreased to 8.14, 5.74 and
5.24 percent, respectively. Accompanying this
tightening of the market has come increased
net effective rental rates, decreased leasing
concessions and some new construction,
primarily in the southern suburbs. Asking
lease rates at the subject property are
currently $8.50 per square foot for finished
office space, and $4.00 per square foot for
warehouse space, with TI allowances in the
range of $10 to $15 per square foot of office
area. Based on our analysis of the subject
property and its submarket, we have concluded
that these asking rates are at market levels,
and that rental rates throughout this
submarket are on the upswing.
HIGHEST AND BEST USE: It is our opinion that the highest and best
use for the Eden Woods Business Center is for
its present use as an office/showroom
facility.
INCOME CAPITALIZATION METHODOLOGY: A Discounted Cash Flow (DCF) Analysis has
been prepared for the subject property based
on the leases, rent roll, and other data that
was provided to us. We used this information
as well as that
</TABLE>

A-4
<PAGE>
<TABLE>
<S> <C>
obtained from our market analysis to arrive
at a projected cash flow. Property income and
expenses have been projected over the next
ten years, a residual sale assumed at the end
of this period based on capitalizing year
eleven N.O.I., and all net income streams
were discounted and totaled to arrive at a
market valuation. In arriving at discount and
capitalization rates we considered the
comparable sales which are detailed in our
report, as well as published surveys. We also
analysed the subject property using a direct
capitalization approach. The following rates
were important to our analysis.
GOING IN CAPITALIZATION RATE 9.35%
DISCOUNT RATE: 12.00%
TERMINAL CAPITALIZATION RATE: 9.75%
GROWTH RATE RENTAL: 3.00%
GROWTH RATE EXPENSES: 3.00%
GROWTH RATE TAX EXPENSE: 3.00%
VALUE INDICATIONS:
LAND VALUE: $1,500,000
COST APPROACH: $9,800,000
SALES COMPARISON APPROACH: $9,100,000
INCOME CAPITALIZATION APPROACH: $9,200,000
FINAL VALUE ESTIMATE: $9,200,000
VALUE PER SQUARE FOOT: $55.47
DATE OF VALUE: December 31, 1995
INSPECTION DATE: December 4, 1995
MARKETABILITY CONSIDERATIONS: The market for suburban industrial and
office/ showroom in the Minneapolis/St. Paul
metropolitan market has improved dramatically
over the past two years. A sign of this is
that in 1994 alone, two REIT's purchased 54
industrial buildings totaling over 5.0
million square feet of leasable area. The
subject is situated in the Southwest
industrial market, which is generally
regarded as the most desirable in the
Minneapolis/St. Paul market. It is fully
occupied with some tenant turnover expected
in the near future. Given the quality of the
subject property, and the current market
overall, we would expect that if the property
were aggressively marketed that it could
reasonably be expected to sell within a six
to 12 month time frame.
</TABLE>

CERTIFICATION OF VALUE

The undersigned do hereby certify that, except as otherwise noted in this
appraisal report:

-The statements of fact contained in this report are true and correct;

A-5
<PAGE>
-The reported analyses, opinions, and conclusions are limited only by the
reported assumptions and limiting conditions, and are our personal, and
unbiased professional analyses opinions, and conclusions;

-We have no present or prospective interest in the property that is the
subject of this report, and we have no personal interest or bias with
respect to the parties involved;

-Our compensation is not contingent upon the reporting of a predetermined
value or direction in value that favors the cause of the client, the amount
of the estimate, the attainment of a stipulated result, or the occurrence
of a subsequent event;

-Our analyses, opinions, and conclusions were developed, and this report has
been prepared, in conformity with the Uniform Standards of Professional
Appraisal Practice;

-Brian D. Flanagan, has made a personal inspection of the property that is
the subject of this report;

-No one provided significant professional assistance to the person signing
this report;

-The reported analyses, opinions, and conclusions were developed, and this
report has been prepared, in conformity with the requirements of the Code
of Professional Ethics and the Standard of Professional Appraisal Practice
of the Appraisal Institute;

-The use of this report is subject to the requirements of the Appraisal
Institute relating to review by its duly authorized representatives.

As of the date of this report, Brian D. Flanagan has completed the
requirements of the continuing education program of the Appraisal Institute.

ASSUMPTIONS AND LIMITING CONDITIONS

This appraisal report has been based on, and is subject to, the following
general assumptions and limiting conditions:

-The value reported is only applicable to the purpose, function, and terms
stated in this report and shall not be used for any other purpose.

-The appraisers have assumed that the reader(s) of this report is well
versed in real estate and is a sophisticated and knowledgeable business
person(s).

-No responsibility is assumed for the legal description provided or for
matters pertaining to legal or title considerations. Title to the property
is assumed to be good and marketable unless otherwise stated. The property
is appraised free and clear of any and all liens or encumbrances unless
otherwise stated. It is assumed that the use of the land and improvements
is confined within the boundaries or property lines of the property
described and that there is no encroachment or trespass unless noted in the
report.

-Responsible ownership and competent property management are assumed.

-The information furnished by others is believed to be reliable, but no
warranty is given for its accuracy.

-All engineering studies are assumed to be correct. The plot plans and
illustrative material in this report are included only to help the reader
visualize the property.

-It is assumed that there are no hidden or unapparent conditions of the
property, subsoil, or structures that render it more or less valuable. No
responsibility is assumed for such conditions or for obtaining the
engineering studies that may be required to discover them.

-It is assumed that the property is in full compliance with all applicable
federal, state, and local environmental regulations and laws unless the
lack of compliance is stated, described and

A-6
<PAGE>
considered in the appraisal report. It is assumed that all required
licenses, certificates of occupancy, consents, and other legislative or
administrative authority from any local, state, or national government or
private entity or organization have been or can be obtained or renewed for
any use on which the value estimate contained in this report is based.

-It is assumed that the property conforms to all applicable zoning and use
regulations and restrictions unless a nonconformity has been identified,
described and considered in the appraisal report.

-The appraisers shall not be required to give testimony as a witness or to
appear in any capacity in any legal or administrative hearing or procedure,
or to have any continued service responsibility unless compensated, by the
engager of this report, in advance, according to their fee schedule then in
effect.

-Unless otherwise stated in this report, the existence of hazardous
materials, which may or may not be present on the property, was not
observed by the appraiser. The appraiser has no knowledge of the existence
of such material on or in the property. The appraiser, however is not
qualified to detect such substances. The presence of substances such as
asbestos, urea-formaldehyde foam insulation, and other potentially
hazardous materials may affect the value of the property. The value
estimated is predicated on the assumption that there are no such material
on or in the property that would cause a loss in value. No responsibility
is assumed for such conditions or for any expertise or engineering
knowledge required to discover them. The client is urged to retain an
expert in this field, if desired.

-The Appraisers are not engineers, no warranties are made by references to
physical property characteristics in terms of quality, condition, cost,
suitability, soil conditions, flood risk, obsolescence, etc., and no
liability is assumed for any engineering-related issues.

-Possession of this report or a copy thereof does not imply right of
publication, nor use for any purpose by any other than the person to whom
it is addressed, without the written consent of Property Counselors, Inc.

-The liability of Property Counselors, Inc., and its employees is limited to
the client. This appraisal was prepared specifically for our client, to
whom this appraisal was addressed.

-Cash flow projections are forecasts of estimated future operating
characteristics and are predicated on the information and assumptions
contained within the appraisal report. The achievement of the financial
projections will be affected by fluctuating economic conditions and is
dependent upon other future occurrences that cannot be assured. Actual
results may well vary from the projections contained herein. The appraisers
do not warrant that these forecasts will occur. Projections may be affected
by circumstances beyond the current realm of knowledge or control of the
appraisers. The appraisers are not trying to forecast the future but rather
are attempting to replicate techniques utilized by market participants for
properties similar to the subject.

The Americans with Disabilities Act ("ADA") became effective January 26,
1992. We have not made a specific compliance survey and analysis of this
property to determine whether or not it is in conformity with the various
detailed requirements of the ADA. It is possible that a compliance survey of the
property, together with a detailed analysis of the requirements for the ADA,
could reveal that the property is not in compliance with one or more of the
requirements of the Act. If so, this fact could have a negative effect upon the
value of the property. Since we have no direct evidence relating to this issue,
we did not consider possible non-compliance with the requirements of the ADA in
estimating the value of the property.

A-7
<PAGE>
EXECUTIVE SUMMARY OF APPRAISAL OF NEW MARKET

A-8
<PAGE>
USRC
U S R E A L T Y
CONSULTANTS, INC.

January 24, 1996
Mr. Gregory F. Cami
Greystone Realty Corporation
6201 Powers Ferry Road, Suite 300
Atlanta, GA 30339

RE: NEW MARKET MALL
COLUMBUS, FRANKLIN COUNTY, OHIO

Dear Mr. Camia:

In accordance with the engagement letter dated November 28, 1995, we have
appraised the property captioned above. The purpose of this appraisal is to
estimate the market value of the leased fee interest in the subject. This report
is to be used for internal decision-making purposes. The date as of which the
market value estimate applies is December 15, 1995, which was also the date of
our property inspection.

The subject is located at the northeast quadrant of Interstate 270 and
Sawmill Road in the city of Columbus, Franklin County, Ohio. It consists of a
one-story, enclosed shopping center containing 172,461 square feet of rentable
area situated on 15.856 acres. A complete description of the property, together
with the sources of information and the bases of the estimates, are stated in
the accompanying sections of this report. This appraisal has been completed in
compliance with the Standards of Professional Practice of the Appraisal
Institute. Your attention is called to the Standard Conditions and the
Certification which follow.

Subject to all conditions and explanations contained in the accompanying
report, our estimate of the market value of the leased fee interest in the
subject, expressed in terms of financial arrangements equivalent to cash, as of
December 15, 1995, is:

EIGHT MILLION DOLLARS
$8,000,000

The accompanying prospective financial analyses are based on estimates and
assumptions developed in connection with the appraisal. Some assumptions,
however, may not materialize, and unanticipated events and circumstances may
occur; therefore, actual results achieved during the period covered by our
prospective financial analyses may vary from our estimates and the variations
may be material. Further, we have not been engaged to evaluate the effectiveness
of management, and we are not responsible for future marketing efforts and other
management actions upon which actual results will depend.

This report, the final estimate of value, and the prospective financial
analyses are intended solely for your information and assistance for the
function stated and should not be relied upon for any other purpose. Neither our
report nor any of its contents nor any reference to the appraisers or U S Realty
Consultants, Inc. may be included or quoted in any document, offering circular
or registration statement, prospectus, sales brochure, other appraisal, or other
agreement without U S Realty Consultants, Inc.'s prior written approval of the
form and context in which it appears.

Respectfully submitted,

U S REALTY CONSULTANTS, INC.

/s/ ROBERT J. FEELEY
Robert J. Feeley, MAI
VICE-PRESIDENT

A-9
<PAGE>
I-4 INTRODUCTION

<TABLE>
<S> <C>
EXECUTIVE SUMMARY
Property Identification New Market Mall
Property Location Northeast Quadrant of Interstate 270 and
Sawmill Road
Columbus, Franklin County, Ohio
Pertinent Dates:
Date of Inspection December 15, 1995
Date of Valuation December 15, 1995
Legal Interest Appraised Leased fee
Land Area 15.856 acres
Rentable Area 172,461 square feet
Highest and Best Use:
As Though Vacant Retail development
As Improved Continued shopping center use
Indications of Value:
Income Capitalization Approach:
Discounted Cash Flow $8,000,000
Terminal Capitalization Rate 10%
Discount Rate 12.5%
$/Square Foot $46.39
Sales Comparison Approach: $7,800,000
$/Square Foot $45.23
Land Valuation: $3,600,000
$/Acre +$225,000
Insurable Value: $8,700,000
$/Square Foot $50.45
Final Estimate of Market Value: $8,000,000
$//Square Foot $46.39
</TABLE>

A-10
<PAGE>
EXHIBIT B
CERTAIN DEFINED TERMS USED IN THE PARTNERSHIP AGREEMENT

"Adjusted Capital Contribution" of a Limited Partner shall mean the Capital
Contribution paid for or attributable to his Units reduced by the total of cash
distributed to him and prior holders of his Units from Sales Proceeds and from
the property reserve account (to the extent such reserves came from Net Proceeds
rather than from operations).

"Adjusted Cash From Operations" shall mean the cash funds of the Partnership
provided from operations, including interest income from escrow investments and
Temporary Investments, and cash revenues from the operation of Properties,
without deduction for depreciation, but after deducting cash funds used to pay
all other expenses.

"Capital Contribution" shall mean $10 per Unit, which amount shall be
attributed to each Unit in the hands of a subsequent holder.

"Distributable Cash From Operations" shall mean Adjusted Cash From
Operations, less the Partnership Management Fee, plus any amounts released from
working capital reserves pursuant to Paragraph 3.2(i) of the Partnership
Agreement, less any amounts set aside for additional working capital reserves.

"Distributions" shall mean any cash or other property distributed to
Partners arising from their interests in the Partnership, but shall not include
any payments to the General Partners under the provisions of Paragraph 9 or
Paragraph 10 of the Partnership Agreement.

"Net Income" or "Net Loss" shall mean the taxable income or losses of the
Partnership, as determined for federal income tax purposes.

"Sales Proceeds" shall mean the Partnership's share of (i) the net cash
received by a Joint Venture from the Sale or Disposition of any Property after
retirement of applicable mortgage debt, if any, and all expenses related to the
transaction, together with the principal amount of, and interest received on,
any notes taken back by the Joint Venture upon the sale of a Property, or (ii)
the net proceeds of a financing of a Property, provided that the Partnership may
first use such proceeds to repay a mortgage on another Property or to increase
the amount of working capital reserves.

"Sale or Disposition" shall mean any transaction (other than the receipt of
subscriptions for Units) not in the ordinary course of business, including,
without limitation, sales (including foreclosure sales), exchanges or other
dispositions of real or personal property, condemnations, recoveries of damage
awards and insurance proceeds (other than damage awards or insurance proceeds
used to repair or rebuild a Property or business or rental interruption
insurance proceeds).

"Subordinated Disposition Fee" shall mean the fee payable to the General
Partners or their Affiliates, as described in Paragraph 9.8 of the Partnership
Agreement. Section 9.8 of the Partnership Agreement provides that for real
estate disposition services in connection with analyzing potential sales of
Properties, recommending selling prices, terms and structure, identifying
potential purchasers, analyzing offers, negotiating purchase contracts and
managing the closing process, the Partnership shall pay the General Partners the
Subordinated Disposition Fee. Such fee shall be paid only if the General
Partners provide a substantial amount of services in the sales effort and shall
not exceed the Partnership's percentage interest in each Joint Venture,
multiplied by the lesser of (i) a percentage of the gross sales price of a
Property equal to one-half of the Competitive Commission (I.E., an amount equal
to the real estate brokerage fees customarily charged by independent real estate
brokers which are reasonable, customary and competitive, taking into
consideration the size, type and location of the Property), or (ii) up to 3% of
the gross sales price of a Property.

"Terminating Sale" shall mean any Sale or Disposition of a Property where
the Partnership's share of the aggregate purchase price of all Properties which
have been sold or disposed of exceeds 75% of the Partnership's share of the
aggregate original purchase price of all Properties.

B-1
<PAGE>
EXHIBIT C
NUMERICAL EXAMPLES OF ALTERNATIVE PAYMENTS IF SETTLEMENT IS APPROVED
(AS OF MARCH 31, 1996)

The following schedule estimates, based on information available to the
General Partners, the payments that a Limited Partner who purchased $10,000
worth of Units in June 1987 in the initial closing of the Public Offering could
expect to receive under each of the four alternatives listed under "The Proposal
and Reasons for the Proposal -- Summary of Potential Payments to Limited
Partners If the Settlement Is Approved" as of March 31, 1996, before giving
effect to the semi-annual distribution which occurred on May 15, 1996. This
Limited Partner is referred to in this Exhibit as "LP." Limited Partners should
refer to that section for a more detailed description of each of the
alternatives.

The estimates are based on the pro forma liquidation balance sheet of the
Partnership dated as of March 31, 1996 and the assumptions stated therein, as
well as the additional assumptions set forth below. While the General Partners
believe that these assumptions are reasonable, the assumptions are inherently
uncertain and unpredictable. In addition, the actual Cash Payment received by a
Settling Limited Partner will differ from these estimates as a result of
distributions made by the Partnership after March 31, 1996 (including the May
15, 1996 semiannual distribution), and revenues earned and expenses incurred by
the Partnership after March 31, 1996, and may also be affected by the facts and
circumstances of court approval, and other factors. The actual Cash Payment
received by a Settling Limited Partner will also depend upon the amount paid for
the Units and prior distributions received by the Settling Limited Partner as of
the Final Settlement Date.

As discussed under "The Proposal and Reasons for the Proposal -- Effect of
Approval of the Proposal and the Settlement," the Liquidation Advance to a
Settling Limited Partner will be equal to such Settling Limited Partner's share
of Adjusted NAV and Distributable Working Capital. "Adjusted NAV" is the
estimated market value as of December 31, 1995, as determined by the General
Partners, of the Partnership's interests in the Joint Ventures, adjusted for any
sales of Properties from December 31, 1995 to the Final Settlement Date.

The General Partners have determined the estimated market value as of
December 31, 1995 of the Limited Partners' aggregate share of the Partnership's
interests in the Joint Ventures to be $11,862,204. In determining such estimated
market value, the General Partners relied in part on the appraisals of the
Properties prepared by the Appraisers. An appraisal is an estimate or opinion of
value and cannot be relied upon as a precise measure of value or worth. The
amount that may be realized upon sale of a Property may be more or less than its
appraised value. None of the Appraisers solicited any offers or inquiries with
respect to the Properties from potential purchasers, and therefore, the
appraisals should not be construed to suggest that a buyer was, in fact,
available or if one were available, that it would be willing to pay the
appraised value. Accordingly, no assurance can be given as to the value that may
be obtained upon sale of the Properties.

C-1
<PAGE>
ASSUMPTIONS:

1) LP is assumed to be an original purchaser of 1,000 Units in June 1987
which he, she or it purchased for $10 per Unit, or a total of $10,000,
and has continuously held such Units since their purchase.

2) Partnership activity after March 31, 1996 is not reflected in this
schedule. The Partnership paid a semiannual distribution of $283,393 on
May 15, 1996.

3) The Limited Partners' aggregate share of the Adjusted NAV is $11,862,204,
which is based in part on the appraisals of the Properties prepared by
the Appraisers.

4) The Liquidating Distribution is calculated based on the pro forma
liquidation balance sheet as of March 31, 1996 and the assumptions set
forth therein, and has not been adjusted to reflect the semi-annual
distribution of $283,393 paid on May 15, 1996. The amounts which Settling
Limited Partners could anticipate receiving pursuant to the Settlement,
as indicated on the Eligibility Statement previously distributed to
Limited Partners with the Preliminary Consent Solicitation Statement,
were calculated based upon the Partnership's financial statements as of
December 31, 1995 and distributions to Limited Partners through March 29,
1996. Nevertheless, the General Partners' estimate of the aggregate
amount which each Settling Limited Partner will receive pursuant to the
terms of the Settlement has not been reduced.

5) Although the estimated Liquidation Advances include LP's share of the
Partnership's Distributable Working Capital as of March 31, 1996, the
actual Liquidation Advance will differ because Distributable Working
Capital will be (a) adjusted by revenues earned and expenses incurred
after March 31, 1996 and (b) reduced by distributions made to Limited
Partners after March 31, 1996, including the semi-annual distribution
paid on May 15, 1996.

<TABLE>
<CAPTION>
ACTION TAKEN LIMITED PARTNER'S
REGARDING PROPOSAL CLASS ACTION STATUS PAYMENTS TO BE RECEIVED
- --------------------------- ----------------------------------- -----------------------------------------------
<S> <C> <C>
Proposal Approved Settling Limited Partner (i) Liquidation Advance of $4,570 plus (ii)
Refund of $1,362 plus (iii) Excess of
Liquidating Distribution over Liquidation
Advance of $0. Total: $5,952
Proposal Approved Non-Settling Limited Partner Liquidating Distribution of $4,570

Proposal Not Approved Settling Limited Partner Distributions as provided under the Partnership
Agreement plus at the New York Life
Defendants' option, the Refund of $1,362

Proposal Not Approved Non-Settling Limited Partner Distributions as provided under the Partnership
Agreement
</TABLE>

A Limited Partner who purchased $10,000 worth of Units in June 1987 in the
initial closing of the Public Offering has received through May 15, 1996 total
cash distributions from the Partnership of $4,048. Therefore, if the Proposal is
approved, LP would receive (a) as a Settling Limited Partner, a Cash Payment of
$5,952 that, when added to the prior distributions, would result in a return of
$10,000, or (b) as a Non-Settling Limited Partner, a Liquidating Distribution of
$4,570 that, when added to the prior distributions, would result in a return of
$8,618.

Based on the assumptions set forth above, if the Proposal is approved, the
General Partners will not receive any Liquidating Distributions in respect of
their general partner interests, but NYLIFE Realty will receive a Liquidating
Distribution of $4.57 per Unit with respect to the 2,016.4 Units that it owns.

C-2
<PAGE>

[APPENDIX]

NYLIFE REALTY INCOME PARTNERS I, L.P.
CONSENT FORM

(Side 1)

THIS CONSENT IS SOLICITED ON BEHALF OF NYLIFE REALTY INCOME PARTNERS I, L.P.
BY ITS GENERAL PARTNERS, NYLIFE REALTY INC. AND CNP REALTY INVESTMENTS INC. THIS
SOLICITATION OF CONSENTS EXPIRES ON JULY 1, 1996 UNLESS EXTENDED OR TERMINATED
EARLIER.

The Units represented by this Consent, when properly executed, will be
recorded as directed by the Limited Partner. IF NO DIRECTION IS GIVEN, UNITS
WILL BE COUNTED AS GIVING CONSENT TO THE PROPOSAL (AS DEFINED BELOW). However, a
Consent returned by a broker or nominee on which such person expressly indicates
lack of discretionary authority to CONSENT to the Proposal will be treated as
being AGAINST the Proposal. Please note that an abstention will be counted as
being AGAINST the Proposal.

The undersigned, acting with regard to all Units of limited partner
interests held in NYLIFE Realty Income Partners I, L.P. (the "Partnership") with
respect to which the undersigned is entitled to give his, her or its consent on
the Record Date, hereby consents, denies consent or abstains from consenting,
all as indicated on the reverse side hereof, to approve the proposal (the
"Proposal") to dissolve and terminate the Partnership as described in the
Definitive Solicitation Statement dated May , 1996, receipt of which, together
with all amendments and supplements thereto, if any, is hereby acknowledged.
Delivery of this Consent, when properly executed, will revoke any consent,
failure to consent or abstention heretofore given with respect to such Units.

(Please Date and Sign on Reverse Side)

<PAGE>

CONSENT FORM

(Side 2)

<TABLE>
<S> <C>
/X/ PLEASE MARK VOTES
AS IN THIS EXAMPLE
</TABLE>

<TABLE>
<S> <C>
THE BOARD OF DIRECTORS OF EACH OF THE GENERAL PARTNERS
RECOMMENDS CONSENT TO THE PROPOSAL
</TABLE>

<TABLE>
<S> <C> <C> <C> <C>
CONSENT AGAINST ABSTAIN
1. TO APPROVE THE DISSOLUTION AND
TERMINATION OF THE PARTNERSHIP (check one box). / / / / / /
</TABLE>

<TABLE>
<S> <C>
PLEASE MARK, SIGN, DATE AND RETURN THIS CONSENT PROMPTLY USING
THE ENCLOSED PRE-PAID ENVELOPE OR DELIVER TO: NYLIFE Realty
Inc. c/o New York Life Limited Partnership Class Action
Administrator, P.O. Box 9224, Boston, Massachusetts 02205-8622
if sent by United States mail, or New York Life Limited
Partnership Class Action Administrator, c/o Boston Financial
Data Services, Inc., 1250 Hancock Street, Quincy, Massachusetts
02169 if sent by hand delivery or delivery service. If you have
any questions, please call 1-800-278-4117. Facsimile copies of
the Consent Form, properly completed and duly executed, will be
accepted at 1-617-774-5623.

YOU MAY REVOKE THIS CONSENT AT ANY TIME PRIOR TO THE EXPIRATION
DATE (AS DEFINED IN THE DEFINITIVE SOLICITATION STATEMENT).
</TABLE>

<TABLE>
<S> <C> <C>
Please be sure to sign and
date this Consent. Date
Please sign exactly as your name appears hereon. Joint owners
should each sign. When signing as attorney, executor,
administrator, trustee or guardian, please give full title as
such. If a corporation, please sign in corporate name by
President or other authorized officer. If a partnership, please
sign in partnership name by authorized person.
Limited Partner sign here Co-owner sign here
</TABLE>

DETACH FORM

<PAGE>

INDEX TO EXHIBITS

<TABLE>
<S> <C> <C>
EXHIBIT
- --------------------
1. -- Letter from President
2. -- Consent of Property Counselors, Inc.
3. -- Consent of US Realty Consultants, Inc.
</TABLE>

<PAGE>

EXHIBIT 1

[COVER LETTER TO ACCOMPANY DEFINITIVE PROXY OR
CONSENT SOLICITATION STATEMENT FOR INVESTORS]

Dear Investor:

Enclosed please find a copy of the Definitive Consent or Proxy Solicitation
Statements (the "Statements") for each of the proprietary limited partnerships
(NYLOG I, II and III, NYLIFE Energy Investors, NYLIFE Realty Income Partners,
NYLIFE Government Mortgage Plus) in which you are the owner as of the Record
Date (May 14, 1996). IT IS IMPORTANT THAT YOU READ CAREFULLY EACH OF THE
ENCLOSED STATEMENTS IN ITS ENTIRETY AND PROMPTLY RETURN THE ENCLOSED CONSENT OR
PROXY FORMS. The enclosed Statements supersede the Preliminary Consent or Proxy
Solicitation Statements sent to you at the end of March. Those Statements were
accompanied by a Notice of a Proposed Settlement of a Class Action in relation
to these Partnerships.

Each of these limited partnerships is soliciting your consent or vote to
dissolve, wind up, liquidate and terminate the respective partnerships, and with
respect to NYLOG I partnerships to approve certain amendments to the partnership
agreements in connection with such liquidation. The proposals are set forth in
greater detail in the Statements. In order for the class members to receive the
full monetary benefits of the class action settlement, approval of the proposals
is necessary.

Also enclosed is a consent or proxy form for each partnership in which you own
units. Liquidation of each partnership requires the approval by the requisite
vote of limited partners of record on the Record Date, as more fully described
in the Statements. REGARDLESS OF THE NUMBER OF UNITS HELD, IT IS IMPORTANT THAT
YOU VOTE YOUR UNITS BY SIGNING, DATING AND MAILING THE ENCLOSED CONSENT OR PROXY
FORM(S) PROMPTLY IN THE ENCLOSED ENVELOPES. TO ENSURE THAT YOUR VOTE IS COUNTED,
YOUR CONSENT OR PROXY FORM(S) MUST BE RECEIVED NO LATER THAN JULY 1, 1996. IN
ADDITION, IF YOU OWN UNITS IN MORE THAN ONE PARTNERSHIP, YOU WILL NEED TO SIGN,
DATE AND MAIL A WRITTEN CONSENT OR PROXY FOR EACH LIMITED PARTNERSHIP IN WHICH
YOU HOLD UNITS.

If you have questions, please call the toll-free number at 1-800-278-4117.

Sincerely,

/s/ KEVIN M. MICUCCI

- -------------------------------------------

Kevin M. Micucci
President

<PAGE>

CONSENT OF PROPERTY COUNSELORS, INC.

We hereby consent to all references to (i) our Firm and (ii) our appraisal
dated December 15, 1995 (the "Appraisal") in this Definitive Consent
Solicitation Statement for NYLIFE Realty Income Partners I. L.P. (the
"Partnership") and to the inclusion of a summary of the Appraisal in this
Definitive Consent Solicitation Statement for the Partnership.

PROPERTY COUNSELORS, INC.

/s/ BRIAN D. FLANAGAN

--------------------------------------

Print Name: Brian D. Flanagan

Print Title: Executive Vice President

May 21, 1996

<PAGE>

CONSENT OF US REALTY CONSULTANTS, INC.

We hereby consent to all references to (i) our Firm and (ii) our appraisal
dated December 15, 1995 (the "Appraisal") in this Definitive Consent
Solicitation Statement for NYLIFE Realty Income Partners I, L.P. (the
"Partnership") and to the inclusion of a summary of the Appraisal in this
Definitive Consent Solicitation Statement for the Partnership.

U S REALTY CONSULTANTS, INC.

/s/ Robert J. Feeley
- --------------------------------------------------------------------------------
Print Name: Robert J. Feeley
Print Title: Its Vice President

May 21, 1996