<PAGE>
 
                      SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, DC  20549
                                   FORM 10-K
(Mark One)
[X]  Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 (Fee Required)

     For the Year Ended December 31, 1996

[ ]  Transition Report Pursuant to Section 13 of 15(d) of the Securities
Exchange Act of 1934 (No Fee Required)

     Commission File Number 0-14138
     REALTY BUSINESS PARTNERS LIQUIDATING TRUST, Formerly Known as
 REALTY BUSINESS PARTNERS, A CALIFORNIA LIMITED PARTNERSHIP (Former Registrant)
             (Exact Name of Registrant as Specified in Its Charter)
<TABLE>
<S>                                            <C>
California                                     95-6975742
(State or Other Jurisdiction of                (I.R.S. Employer
Incorporation or Organization)                 Identification Number)

9171 Wilshire Boulevard, Suite 627
Beverly Hills, California                      90210
(Address of Principal Executive Offices)       (Zip Code)
</TABLE>

      (310) 550-1111 (Registrant's Telephone Number, Including Area Code)

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

                                     None.

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

                                     None

     Indicate by check mark whether the registrant:  (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

                            Yes  [ X ]  NO  [   ]

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


          State the aggregate market value of the voting stock held 
                        by non-affiliates of the Trust.

$1,628,000 Beneficial interest in trust, not transferable  (See Item 5 Herein)

                      DOCUMENTS INCORPORATED BY REFERENCE.

     Portions of the Proxy Statement, dated July 7, 1994, and the report on Form
15 filed with the Securities and Exchange Commission on November 15, 1994 of
former registrant are incorporated by reference in Parts I, II, III and IV
hereof.

 Page 1 of 23 pages contained herein.  Exhibit Index located on page 9 herein.

                                  
<PAGE>
 
                                    PART I.


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

           Realty Business Partners, A California Limited Partnership (the
"Partnership"), the former registrant, ceased operations and dissolved on August
18, 1994 and subsequently terminated on November 10, 1994 upon filing Form  LP-
4.  Realty Business Partners Liquidating Trust (the "Trust") was formed in order
to wind up the Partnership's affairs.

           The Partnership sold its two properties on August 18, 1994 in a
simultaneous transaction in which properties owned by eight other affiliated
limited partnerships controlled by Herbert M. Gelfand or his affiliates were
sold or transferred, along with the sale of the De Anza Group, Inc., the
management company owned by Mr. Gelfand, to affiliates of Manufactured Home
Communities, Inc. ("MHC").

           The Trust was established pursuant to the terms of a trust agreement
dated August 10, 1994 with Mr. Herbert M. Gelfand (or his successor appointed in
accordance with the terms of the trust agreement), as sole trustee of the Trust
(the "Trustee"). The sole beneficiaries of the Trust are the former Limited
Partners of the Partnership (the "Beneficiaries"). The Trust will hold all of
the remaining assets of the Partnership, subject to any remaining liabilities of
the Partnership, whether known or unknown. The Trust assets are not commingled
with the assets of any other partnership or liquidating trust established for
any other partnership.

           The trust agreement contains customary terms and conditions and has
the following characteristics:
                (i) Each Limited Partner became a beneficiary of the Trust to
           the extent of their former pro rata class ownership interest in the
           Partnership.
                (ii) The Trust's activities will consist of: (a) satisfying any
           liabilities or obligations of the Partnership which were not paid or
           otherwise discharged by the Partnership; (b) making liquidating
           distributions to the beneficiaries as funds are released from the
           Reserves (as defined in Item 7(1) and (2) Liquidity and Capital
           Resources which is incorporated herein by reference); (c) investing
           its liquid assets in demand and short term time deposits in banks or
           savings institutions or temporary investments such as short-term
           certificates of deposit or Treasury bills (excluding derivative
           securities); and (d) taking such other action as is necessary to
           conserve and protect the assets of the Trust and provide for the
           orderly liquidation of the assets transferred to the Trust. Since the
           former Limited Partners are the sole beneficiaries of the Trust, they
           will bear the risk of the investment of the Trust assets.
                (iii) Beneficial interests in the Trust will not be transferable
           except by will, intestate succession, or operation of law and no
           certificates representing such beneficial interests have been issued.

                                            -2-
<PAGE>
 
                (iv) The Trustee will issue annual reports to the Beneficiaries
           showing the assets and liabilities of the Trust at the end of each
           calendar year and the receipts and disbursements of the Trustee for
           the period. The annual report will also describe changes to the
           assets of the Trust during the period and actions taken by the
           Trustee during the period. Such reports will be audited by the
           Trust's outside certified public accountants. The Trustee may also
           issue interim reports to the Beneficiaries. These interim reports
           will be issued whenever, in the opinion of the Trustee, a significant
           event relating to the assets of the Trust has occurred.
                (v) At the reasonable discretion of the Trustee, the Trust will
          disburse its net earnings annually.
                (vi) The Trust will terminate at the earlier of the distribution
          of all of the remaining assets, if any, to the Beneficiaries or three
          years from the date of formation of the Trust, but may be extended to
          a later date if liabilities remain unresolved at the end of the three-
          year term.

          The sole beneficiaries of the Trust are the former Limited Partners of
the Partnership. The Trust holds all of the remaining assets of the Partnership,
subject to any remaining liabilities of the Partnership, whether known or
unknown at the time of its termination. These assets initially consisted of the
MHC Reserve, the Partnership Expense Reserve, and the right to receive any funds
remaining in the Independent Committee Reserve trust and the General Reserve
trust. Each Reserve is defined in Item 7(1) and (2) Liquidity and Capital
Resources which is incorporated herein by reference. Upon termination of the
separate trust arrangements, any remaining assets will be distributed, in one or
more installments, to the Trust. The Trust will then distribute the remaining
assets from these reserves to the Beneficiaries (the former Limited Partners of
the Partnership, pro rata in accordance with their former class ownership
interest in the Partnership). Upon termination of the Trust, any remaining
assets will be distributed in one or more installments to the Beneficiaries.

ITEM 2.    PROPERTIES.
           -----------
           The Trust owns no physical properties.

ITEM 3.    LEGAL PROCEEDINGS.
           ------------------
           None.

ITEM 4.    SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS.
           ----------------------------------------------------
           No matter was submitted during the quarter ended December 31, 1996.

                                      -3-
<PAGE>
 
                                    PART II.


ITEM 5.  MARKET FOR THE TRUST'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
         ---------------------------------------------------------------------

     (a)  Market Information.
          -------------------
          Under the terms of the Trust, the Beneficial Interests are not
transferable, therefore, there is no public market for the Beneficiary Interests
in the Trust and it is not anticipated that a public market for them will
develop.  Accordingly, accurate information as to the market value of an
Interest at any given date is not available.  The estimated aggregate market
price shown on the cover page of this report is simply the original capital
contributed by the Partnership and should not be relied upon as indicative of
any bid or ask quotations or transactions in the Trust.

     (b)  Holders.
          --------
          As of December 31, 1996, the approximate number of Beneficiaries is
1,640.

     (c)  Dividends.
          ----------

          The Trust does not pay dividends, but will distribute Trust assets in
one or more installments as the resolution of contingencies allow as determined
by the Trustee. In 1996 the Trust distributed $123,119 to the Beneficiaries from
the Independent Committee Reserve.

                                      -4-
<PAGE>
 
ITEM 6.      SELECTED FINANCIAL DATA.
             ------------------------

          The following table sets forth in tabular form a summary of selected
financial data for the Trust for the years ended December 31, 1996 and 1995 and
for the period from August 10, 1994 (inception) through December 31, 1994:


<TABLE>
<CAPTION>
 
 
                                              1996         1995         1994
                                           ----------   ----------   -----------
<S>                                        <C>          <C>          <C>
Operating revenues:                        $   52,308   $   50,081   $   12,817
 
Gain on sale of property and equipment:       123,119      179,000          -0-
                                     
Net income (loss) from continuing
 operations:                                  140,919      143,194      (56,852)
 
 
Net income (loss) from continuing
 operations per 1% Beneficiary Interest      1,409.19     1,431.94      (568.52)
                                        
 
Total assets:                               1,002,288    1,124,480    1,624,785
 
Long-term obligations:                            -0-          -0-          -0-
 
Cash distributions per 1% Beneficiary
 Interest:                                   1,231.19     4,500.00          -0-
 
 
</TABLE>

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

                                      -5-
<PAGE>
 
ITEM 7.       MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
              ---------------------------------------------------------------
              RESULTS OF OPERATIONS.
              ----------------------

      (1) and (2)  Liquidity and Capital Resources.
                   --------------------------------
          Four separate reserves (the "Reserves") were established for the
benefit of the former Limited Partners of the Partnership in connection with the
formation of the Trust.
          The MHC Reserve consisted of cash in the amount of $179,000.  The MHC
Reserve was created on the date the properties owned by the Partnership were
sold, and was maintained by the Trust in a separate account, not to be
commingled with any other of the Trust funds.  Amounts in the MHC Reserve were
released in full in 1995 and distributed to the Beneficiaries.
          The General Reserve is maintained in a separate trust account,
pursuant to the terms of a trust agreement between the Trust, as the
beneficiary, and Mr. Gelfand, as trustee, with an initial all cash fund in the
amount of $546,892.  Pursuant to the terms of a contribution agreement entered
into among all of the partnerships and/or liquidating trusts involved in the
sale of assets which closed in August 1994, funds in the General Reserve may be
used to discharge or satisfy the Trust's pro rata portion of any contingent
liabilities of any of the liquidating trusts or the partnerships, and to
discharge or satisfy any liabilities of Mr. Gelfand and his affiliates.  Such
liabilities may include any legal expenses incurred by the liquidating trusts,
the partnerships, Mr. Gelfand and his affiliates personally in the defense or
resolution of any claim or action arising out of the MHC transaction, including
claims arising out of the indemnification obligations of the parties in
connection with the MHC transaction.  All amounts in the General Reserve are
invested in interest bearing accounts or other short term investments (excluding
derivatives) reportable for federal income tax purposes to the Trust's federal
tax identification number.  In August 1997, assuming no claims are threatened or
pending, all funds remaining in the General Reserve will be released to the
Trust, which will distribute these funds to the Beneficiaries.
          The amount of the Independent Committee Reserve trust of which the
Trust is the beneficiary was initially $246,238.  The funds held in the
Independent Committee Reserve are invested in an interest bearing account (but
not in derivative securities) pursuant to the terms of the Independent Committee
Trust Agreement, and reported for federal income tax purposes to the Trust's
federal tax identification number.  Pursuant to the terms of a contribution
agreement among all of the partnerships/liquidating trusts, each
partnership/liquidating trust (including the Trust) will contribute a pro rata
portion of any claim for indemnification made by the Independent Committee
regardless of which specific partnership or partnerships, if less than all, a
claim relates to. In August 1996, $123,119 of the Reserve was released, and
assuming no claims against the Independent Committee Reserve have been made or
threatened, the remaining $123,119, will be released in August 1997.  The
Independent Committee may elect to extend the term of the Independent Committee
Reserve for an additional year.  At the time of the release of funds from the
Independent Committee Reserve to the Trust, the Trustee will make distributions
to the Beneficiaries.

                                      -6-
<PAGE>
 
          The Partnership Expense Reserve was established and retained by the
Trust.  The initial amount of this Reserve was approximately $656,000 net of
liabilities and receivables.  During 1995, $271,000 was distributed to the
Beneficiaries.  Any funds remaining in this Reserve, after payment of
administrative expenses, contingent liabilities (known or unknown) and costs of
liquidating and dissolving, will be distributed by the Trustee to the
Beneficiaries.

     (3)  Results of Operations.
          ----------------------

          Since inception of the Trust on August 10, 1994 and its subsequent
receipt of Partnership assets, the Trust has received or has been allocated
interest and dividend income of $51,699, $50,081 and $12,339 in 1996, 1995 and
1994 respectively, and received released reserves of $123,119 and $179,000 in
1996 and 1995, respectively. Administrative expenses totaled $33,899, $34,006
and $32,885 in 1996, 1995 and 1994, respectively. Reprorations of rents, utility
,income and expenses including write-off of uncollectable rents subsequent to
the closing of the sale of properties owned by the Partnership resulted in a net
expense of $51,881 and $36,784 in 1995 and 1994, repsectively.
          Other than as described above, there are no known trends or
uncertainties which have had or can be reasonably expected to have a material
effect on continuing operations.


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

          See Index to Financial Statements set forth in Item 14 of this Annual
Report on Form 10-K.  The material contained in such Financial Statements and
Notes is incorporated herein by reference.


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

          None.

       
                                   PART III.

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE TRUST.
          ----------------------------------------------

          The Trust has no executive officers or directors. The Trustee is Mr.
Herbert M. Gelfand.   Herbert M. Gelfand currently serves as a Trustee of 16
affiliated trusts and is the Operating General Partner of four affiliated
partnerships, the first of which was formed in 1969.  Mr. Gelfand was also the
founder, and together with his wife, Beverly J. Gelfand, were the principal
shareholders of De Anza Group, Inc., the 

                                      -7-
<PAGE>
 
former Operating General Partner of the Partnership. Mr. Gelfand had served as
its Chairman of the Board of Directors until its sale. From 1986 to 1990, Mr.
Gelfand was also its Chief Executive Officer. In addition, Mr. Gelfand is the
sole shareholder and Chairman of the Board of Directors of De Anza Corporation
which currently serves as the Operating General Partner of two real estate
partnerships and is the liquidating agent of three other partnerships. He is a
member of the Bar of the State of California and was engaged in the private
practice of law from 1956 through 1977. From 1970 until 1975, Mr. Gelfand was a
partner in the predecessor to the firm of Benjamin and Susman, a Law Corporation
(and thereafter was counsel to that firm until 1977), which predecessor law firm
performed legal services for all but one of the affiliated partnerships. Mr.
Gelfand is married to Beverly J. Gelfand, who served as a director of De Anza
Group, Inc. until its sale, and is the father of Michael D. Gelfand, the former
Director, President and Chief Financial Officer of De Anza Group, Inc., the
Director, President and Chief Financial Officer of De Anza Corporation and the
sole shareholder, Chairman of the Board, President and Chief Financial Officer
of Terra Vista Management, Inc.
          Based upon a review of Forms 3, 4 and 5 and amendments thereto
furnished to the Trust, no person failed to timely file a report required by
Section 16(a) of the Securities Exchange Act of 1934.

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

          The Trust does not have directors, a chief executive officer or any
other executive officers.  In 1996 the Trustee received approximately $91 in
distributions for his direct pro rat share as a Beneficiary of the Trust and
indirectly through his spouse's Beneficiary Interest. No compensation was paid
by the Trust to the Trustee.
          Information contained in Item 13 of this Annual Report on Form 10-K is
incorporated herein by reference.

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

      (a) Security Ownership of Certain Beneficial Owners.
          ------------------------------------------------
          The Trust has no knowledge of any individual who has beneficial
ownership of more than five percent of any class of the Trust's voting interest.
 
ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
          -----------------------------------------------

          For the year ended December 31, 1996, one or more affiliated or
related parties of the Trustee were reimbursed $15,208 for the cost of goods and
services provided that were necessary for the 

                                      -8-
<PAGE>
 
administration of the Trust and wind up of the Partnership's affairs. See Item
8, Note 3 to the Financial Statements for discussion of the affiliations with
the Trust is incorporated herein by reference.

                                   PART IV.
 
ITEM 14.       EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
               ------------------------------------------------------
               FORM 8-K.
               --------

     (a)       1. Index to Financial Statements for the years ended December 31,
1996 and 1995 that are filed as part of this report:

<TABLE>
<CAPTION>

                                                                            PAGE
                                                                            ----
          <S>                                                               <C>
          Independent Auditor's Report.....................................  14

          Balance Sheets, December 31, 1996 and 1995.......................  15
          Statements of Operations for the years ended
          December 31, 1996 and 1995 and for the period
          August 10, 1994 through December 31, 1994........................  16

          Statements of Changes in Beneficiaries' Capital
          for the years ended December 31, 1996 and 1995
          and for the period August 10, 1994 through
          December 31, 1994................................................  17

          Statements of Cash Flows for the years ended
          December 31, 1996 and 1995 and for the period
          August 10, 1994 through December 31, 1994........................  18

          Notes to Financial Statements....................................  20
</TABLE>
               2. All Schedules have been omitted since they are not required,
not applicable or the information is included in the Financial Statements or
notes thereto.
               3. The following index sets forth the exhibits required to be
filed by Item 601 of Regulation S-K:

<TABLE>
<CAPTION>

EXHIBIT NO.                                                           PAGE
-----------                                                           ----
<S>                                                                   <C>
2.1      Realty Business Partners Liquidating Trust Agreement 
         dated August 10,1994 between the Partnership and Herbert 
         M. Gelfand, trustee. (See Exhibit 2.1 in the Trust's 
         Annual Report on Form 10-K for the year ended December 31, 
         1994, incorporated herein by reference.)
</TABLE>

                                      -9-
<PAGE>
 
<TABLE>
<CAPTION>

EXHIBIT NO.                                                              PAGE
-----------                                                              ----
<S>                                                                      <C>
2.2       Assignment and Assumption Agreement dated August 18, 
          1994 between the Partnership and the Trust. (See 
          Exhibit 2.2 in the Trust's Annual Report on Form 10-K 
          for the year ended December 31, 1994 incorporated 
          herein by reference

2.3       General Reserve Trust Agreement dated August 1, 1994 
          between the Partnership, the Herbert M. and Beverly J. 
          Gelfand Family Trust, and Herbert M. Gelfand as 
          trustee. (See Exhibit 2.3 in the Trust's Annual 
          Report on Form 10-K for the year ended December 31, 
          1994 incorporated herein by reference.)

2.4       Independent Committee Trust Agreement dated August 1,
          1994 between the Partnership and Citicorp Trust N.A. 
          as trustee. (See Exhibit 2.4 in the Trust's Annual 
          Report on Form 10-K for the year ended December 31, 
          1994 incorporated herein by reference.)

2.5       General Reserve Contribution Agreement dated August 1, 
          1994 between the Partnership, affiliated partnerships, 
          the Herbert M. and Beverly J. Gelfand Family Trust, 
          and Herbert M. Gelfand as trustee. (See Exhibit 2.5 in 
          the Trust's Annual Report on Form 10-K for the year 
          ended December 31, 1994 incorporated herein by 
          reference.)

2.6       Independent Committee Reserve Contribution Agreement 
          dated August 1, 1994 between the Partnership, 
          affiliated partnerships, and Citicorp Trust N.A. as 
          trustee. (See Exhibit 2.6 in the Trust's Annual Report 
          on Form 10-K for the year ended December 31, 1994 
          incorporated herein by reference.) 
</TABLE>

        (b)  Reports on Form 8-K.
             None.
 
        (c) The information set forth in Item 14(a) (3) of this Annual Report on
Form 10-K is incorporated herein by reference.

        (d) All information required by Regulation S-X will be furnished by the
Trust to its Beneficiaries in its annual report.  Therefore, this Item is not
applicable.

                                      -10-
<PAGE>
 
                                  SIGNATURES
                                  ----------

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


REALTY BUSINESS PARTNERS LIQUIDATING TRUST



By      /s/Herbert M. Gelfand
        ----------------------
           Herbert M. Gelfand
           Trustee

Date:   March 26, 1997

                                      -11-
<PAGE>
 
                           REALTY BUSINESS PARTNERS
                               LIQUIDATING TRUST

                         AUDITED FINANCIAL STATEMENTS

                          December 31, 1996 and 1995

<PAGE>
 
                  Realty Business Partners Liquidating Trust


                          December 31, 1996 and 1995



                                   CONTENTS
<TABLE>
<CAPTION>
 
<S>                                                 <C>
Report of Independent Auditors...................   1
 
Audited Financial Statements
 
Balance Sheets...................................   2
Statements of Operations.........................   3
Statement of Changes in Beneficiaries' Capital...   4
Statements of Cash Flows.........................   5
Notes to Financial Statements....................   7
</TABLE>

<PAGE>
 
                        Report of Independent Auditors


To the Beneficiaries
Realty Business Partners Liquidating Trust
Beverly Hills, California


We have audited the accompanying balance sheets of Realty Business Partners
Liquidating Trust (the Trust) as of December 31, 1996 and 1995, and the related
statements of income, changes in beneficiaries' capital and cash flows for the
years ended December 31, 1996 and 1995 and for the period August 10, 1994 (date
of inception) through December 31, 1994. These financial statements are the
responsibility of Herbert M. Gelfand, the trustee. Our responsibility is to
express an opinion on these financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the Trust as of December 31,
1996 and 1995, and the related results of operations and its cash flows for the
years ended December 31, 1996 and 1995, and for the period August 10, 1994 (date
of inception) through December 31, 1994, in conformity with generally accepted
accounting principles.


ERNST & YOUNG, LLP
Los Angeles, California
January 21, 1997


                                                                               1

<PAGE>
 
                  Realty Business Partners Liquidating Trust

                                Balance Sheets
<TABLE>
<CAPTION>
 
 
                                                 DECEMBER 31,
                                              1996          1995
                                          ---------------------------
                               ASSETS
<S>                                        <C>           <C>
 
CASH (Note 1)                               $  329,470    $  324,832
 
RESTRICTED CASH (Notes 1 and 2)                670,011       793,130
 
INTEREST RECEIVABLE                              2,807         6,518
                                          ---------------------------
 
                                            $1,002,288    $1,124,480
                                          =========================== 

 LIABILITIES AND BENEFICIARIES' CAPITAL
 
ACCOUNTS PAYABLE AND ACCRUED
 EXPENSES, including $2,177 and $2,609
 due to related parties at December
 31, 1996 and 1995, respectively (Note 3)   $   21,596    $   38,469
 
 
UNRECOGNIZED GAIN (Note 2)                     670,011       793,130
                                          ---------------------------
                                               691,607       831,599
 
BENEFICIARIES' CAPITAL                         310,681       292,881
                                          ---------------------------
 
                                            $1,002,288    $1,124,480
                                          ===========================
</TABLE>
See accompanying report of independent auditors and notes to financial 
statements.

                                                                               2
<PAGE>
 
                  Realty Business Partners Liquidating Trust

                           Statements of Operations
<TABLE>
<CAPTION>


                                                               

                                                                                                              For the Period
                                                                                                              August 10, 1994
                                                                            YEAR ENDED                      (Date of Inception)
                                                                            DECEMBER 31,                    through December 31,
                                                                    1996                   1995                     1994
                                                              ------------------------------------------------------------------
<S>                                                               <C>                    <C>                      <C>
INCOME                                                                                                  
  Gain on sale of property and equipment                                                                               
    (Note 2)                                                      $ 123,119              $ 179,000                $    -  
  Interest and dividends                                             51,699                 50,081                12,339
  Other                                                                 609                      -                   478
                                                              ------------------------------------------------------------------
                                                                    175,427                229,081                12,817
                                                              ------------------------------------------------------------------
                                                                                                                   
EXPENSES                                                                                                           
  Salaries paid to related parties                                   14,258                 16,279                16,741
  Professional fees and services, including $6,254             
    and $3,953 paid to related parties during 1995 
    and 1994, respectively (Note 3)                                  10,545                 41,082                15,518
  Other - including $950 and $1,362 paid to 
    related parties during 1996 and 1995, 
    respectively (Note 3)                                             9,705                 18,529                   626  
  Miscellaneous partnership expenses                                      -                  9,997                36,784
                                                              ------------------------------------------------------------------
                                                                     34,508                 85,887                69,669
                                                              ------------------------------------------------------------------

NET INCOME (LOSS)                                                 $ 140,919              $ 143,194             $ (56,852)
                                                              ==================================================================
NET (LOSS) INCOME PER 1% BENEFICIARY  
  INTEREST (Note 4)                                               $1,409.19              $1,431.94              $(568.52)
                                                              ==================================================================
</TABLE>

See accompanying report of independent auditors and notes to financial
statements.


                                                                               3
<PAGE>
 
                  Realty Business Partners Liquidating Trust

                Statement of Changes in Beneficiaries' Capital

                  Years Ended December 31, 1996 and 1995 and
 For the Period August 10, 1994 (Date of Inception) through December 31, 1995
<TABLE>
<CAPTION>


<S>                                                                            <C>
BALANCE - August 10, 1994 (date of inception)                                       -

CAPITAL CONTRIBUTIONS - for the period from August 10, 1994
 (date of inception) through December 31, 1994                                 $ 656,539

NET LOSS - for the period from August 10, 1994 (date of inception)
 through December 31, 1994                                                       (56,852)
                                                                             ----------------
BALANCE - January 1, 1995                                                        599,687

CAPITAL DISTRIBUTIONS - for the year ended
 December 31, 1995                                                             (450,000)

NET INCOME - for the year ended December 31, 1995                                143,194
                                                                             ----------------
BALANCE - December 31, 1995                                                      292,881

CAPITAL DISTRIBUTIONS - for the year ended December 31, 1996                    (123,119)

NET INCOME - for the year ended December 31, 1996                                140,919
                                                                             ----------------
BALANCE - December 31, 1996                                                    $ 310,681
                                                                             ================
</TABLE>

See accompanying report of independent auditors and notes to financial 
statements.


                                                                               4
<PAGE>
 
                  Realty Business Partners Liquidating Trust

                           Statements of Cash Flows
<TABLE>
<CAPTION>

                                                                                                              FOR THE PERIOD
                                                                                                              AUGUST 10, 1994
                                                                              YEAR ENDED                    (DATE OF INCEPTION)
                                                                              DECEMBER 31,                  THROUGH DECEMBER 31,
                                                                      1996                  1995                    1994
                                                                 ----------------------------------------------------------------
<S>                                                                  <C>                   <C>              <C>
OPERATING ACTIVITIES
  Gross rents received from real estate operations                          -                     -               $  72,444
  Cash paid to suppliers, including $15,208, $23,895, and
    $20,771 paid to related parties during 1996, 1995 and
    1994, respectively                                               $ (51,381)            $(100,386)               (788,944)
  Interest and other income                                             56,019                44,287                  23,051
                                                                 ----------------------------------------------------------------
        Net cash provided by (used in) operating activities              4,638               (56,099)               (693,449)

INVESTING ACTIVITIES
  Addition to restricted cash                                                -                     -                (972,130)
  Release of restricted cash                                           123,119               179,000                       -
                                                                 ----------------------------------------------------------------
        Net cash provided by (used in) investing activities            123,119               179,000                (972,130)
                                                                 ----------------------------------------------------------------

FINANCING ACTIVITIES
  Capital contributions                                                      -                     -               2,317,510
  Capital distributions                                               (123,119)             (450,000)                      -
                                                                 ----------------------------------------------------------------
        Net cash (used in) provided by financing activities           (123,119)             (450,000)              2,317,510 
                                                                 ----------------------------------------------------------------
NET INCREASE (DECREASE) IN CASH                                          4,638              (327,099)                651,931

CASH AT BEGINNING OF PERIOD                                            324,832               651,931                       -
                                                                 ----------------------------------------------------------------

CASH AT END OF PERIOD                                                $ 329,470             $ 324,832              $  651,931
                                                                 ================================================================

RECONCILIATION OF NET INCOME (LOSS) TO NET CASH PROVIDED BY 
  (USED IN) OPERATING ACTIVITIES
    Net income                                                       $ 140,919             $ 143,194              $  (56,852)
    Adjustments to reconcile net income (loss) to net cash 
      provided by (used in) operations:
    Gain on sale of property and equipment                            (123,119)             (179,000)                      -
    Changes in operating assets and liabilities:
    Decrease (increase) in interest receivable                           3,711                (5,794)                 91,836
    Decrease in accounts payable and accrued expenses                  (16,873)              (14,499)               (728,433)
                                                                 ----------------------------------------------------------------

        Net cash provided by (used in) operating activities          $   4,638             $ (56,099)             $ (693,449)
                                                                 ================================================================
</TABLE>

See accompanying report of independent auditors and notes to financial 
statements.

                                                                               5
<PAGE>
 
                  Realty Business Partners Liquidating Trust

                     Statements of Cash Flows (Continued)


NONCASH ACTIVITY
On September 30, 1994, Realty Business Partners was liquidated and various
assets and liabilities were transferred to the Realty Business Partners
Liquidating Trust (Notes 1 and 2). The noncash assets and liabilities that were
transferred consisted of accounts receivable of $92,560, accounts payable and
accrued expenses of $781,401, and unrecognized gain of $972,130.

See accompanying report of independent auditors and notes to financial 
statements.

                                                                               6
<PAGE>
 
                  Realty Business Partners Liquidating Trust

                         Notes to Financial Statements

              For the Years Ended December 31, 1996 and 1995 and
 For the Period August 10, 1994 (Date of Inception) through December 31, 1994


1.  ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION

Realty Business Partners Liquidating Trust (the Trust) was formed on August 10,
1994 to acquire the remaining assets, assume the remaining liabilities and wind
up the affairs of Realty Business Partners (the Partnership), pursuant to a plan
of liquidation of the Partnership. The Partnership ceased operations and
dissolved as of August 18, 1994, and subsequently terminated on November 10,
1994. Subsequent to August 18, 1994, all of the remaining assets and liabilities
of the Partnership and its reserves and the right to reserves held in various
trusts, were contributed to the Trust by the Partnership on behalf of the
beneficiaries of the Trust, of which Herbert M. Gelfand, former operating
general partner of the Partnership, is the trustee (Trustee). The Trust will
settle Partnership liabilities and will terminate upon final release and
distribution of reserves. Beneficial interest in the Trust will be maintained by
the Partnership's former limited partners in accordance with each partner's pro
rata class ownership interest in the Partnership.

INCOME TAXES

No provision for income taxes has been included in the accompanying financial
statements, since the beneficiaries are responsible for reflecting their share
of income or loss on their respective income tax returns.

CASH AND CASH EQUIVALENTS

The Trust invests cash not needed for working capital in highly liquid short-
term investments consisting primarily of money market funds and certificates of
deposit, with original maturities generally ranging from one to three months.
The Trust considers all such items to be cash equivalents. At December 31, 1996,
and periodically, balances in various accounts exceeded federally insured
limits. No losses have been experienced to date related to such accounts. The
Trust places its cash and cash equivalents with quality financial institutions
and believes it is not exposed to any significant concentration of credit risk
on cash and cash equivalents.

See accompanying report of independent auditors.

                                                                               7
<PAGE>
 
                  Realty Business Partners Liquidating Trust

                   Notes to Financial Statements (Continued)

              For the Years Ended December 31, 1996 and 1995 and
 For the Period August 10, 1994 (Date of Inception) through December 31, 1994


1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

RESTRICTED CASH

At December 31, 1996 and 1995, the Trust had $670,011 and $793,130,
respectively, in restricted cash. These amounts consist of a General Reserve and
Independent Committee Reserve totaling $546,892 and $123,119, respectively, in
1996 and $546,892 and $246,238, respectively, in 1995 (see Note 2).

FINANCIAL INSTRUMENTS

The carrying amount reported in the balance sheet for cash, cash equivalents,
interest receivable and accounts payable approximates fair value due to the
short maturity of these instruments.

USE OF ESTIMATES

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.

See accompanying report of independent auditors.

                                                                               8
<PAGE>
 
                  Realty Business Partners Liquidating Trust

                   Notes to Financial Statements (Continued)

              For the Years Ended December 31, 1996 and 1995 and
 For the Period August 10, 1994 (Date of Inception) through December 31, 1994


2. UNRECOGNIZED GAIN

On September 30, 1994, the Partnership contributed the following assets and
liabilities to the Liquidating Trust on behalf of the beneficiaries:
<TABLE>
<CAPTION>
 
  <S>                                        <C>
  Cash:
   MHC Reserve                               $  179,000
   General Reserve                              546,892
   Independent Committee Reserve                246,238
   Operating cash (Partnership Expense        1,345,380
    Reserve)
 
  Noncash:
   Accounts receivable                           92,560
   Accounts payable and accrued expenses       (781,401) 
   Deferred gain on sale                       (972,130)
                                            -------------
  Net capital contribution to the Trust      $  656,539
                                            =============
</TABLE>

Pursuant to the guidelines of Statements of Financial Accounting Standards No.
66, "Accounting for Sales of Real Estate," the Partnership deferred in 1994 the
recognition of gain on that portion of the sales proceeds represented by the MHC
Reserve, General Reserve and Independent Committee Reserve, totaling $972,130.
The unrecognized gain was subsequently transferred to the Trust.

The MHC Reserve was required by the amended sales agreement between the
Partnership and the buyer of the partnership properties, an affiliate of
Manufacturing Home Communities, Inc. (MHC), to fund contingencies arising from
claims by MHC against the Partnership for any misrepresentation related to the
MHC transaction. The General Reserve and Independent Committee Reserve were
established to fund contingent liabilities that may arise out of the MHC
transaction, and the Partnership Expense Reserve, consisting of the remaining
unrestricted funds, was established to fund future administrative costs and
contingencies of the Trust.

During 1995, the MHC Reserve of $179,000 and $271,000 of the Partnership Expense
Reserve was released and distributed to the beneficiaries of the Trust.  During
1996, $123,119 of the original $246,238 Independent Committee Reserve was
released and distributed to the beneficiaries of the Trust.  Accordingly, the
Trust recognized gain of

See accompanying report of independent auditors.

                                                                               9
<PAGE>
 
                  Realty Business Partners Liquidating Trust

                   Notes to Financial Statements (Continued)

              For the Years Ended December 31, 1996 and 1995 and
 For the Period August 10, 1994 (Date of Inception) through December 31, 1994

2. UNRECOGNIZED GAIN (CONTINUED)

$123,119 and $179,000, respectively, in 1996 and 1995, resulting from the
release of these reserves.  At December 31, 1996 and 1995, $670,011 and
$793,130, respectively, remained unrecognized by the Trust.

3. RELATED PARTY TRANSACTIONS

Terra Vista Management, Inc. and De Anza Leasing Corporation, a related party
and affiliate, respectively, of the Trustee, were paid in the aggregate $15,208,
$23,895 and $20,771 during the years ended December 31, 1996 and 1995 and for
the period from August 10, 1994 (date of inception) through December 31, 1994,
respectively, for performing bookkeeping, legal, computer and beneficiary
relations services necessary for the administration of the Trust.

4. INCOME (LOSS) PER 1% BENEFICIARY INTEREST

Income (loss) per 1% beneficiary interest is computed based on each
beneficiary's pro rata limited partner class ownership interest formerly held in
the dissolved Partnership. The 1996 net income of $140,919, the 1995 net income
of $143,194, and the 1994 net loss of $56,852 results in $1,409.19, and
$1,431.94 of income and $568.52 of loss, respectively, for each 1% interest in
the Trust.

See accompanying report of independent auditors.


                                                                              10