<PAGE>   1
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                  FORM 10-K/A


                ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934 
                  For the fiscal year ended September 30, 1996

                          Commission File Number 0-5641
                                                 ------

                           CleveTrust Realty Investors
                           ---------------------------
             (Exact name of Registrant as specified in its charter)


     Massachusetts                                          34-1085584
     -------------                                          ----------
(State or other jurisdiction of                             (I.R.S. Employer
incorporation or organization)                              Identification No.)


2001 Crocker Road,  Suite 400, Westlake, Ohio                     44145
---------------------------------------------                     ------
(Address of principal executive offices)                        (Zip Code)

Registrant's telephone number, including area code: (216) 899-0909 
Securities registered pursuant to Section 12(b) of the Act: None 
Securities registered pursuant to Section 12(g) of the Act:

                 Shares of Beneficial Interest, $1.00 Par Value
                 ----------------------------------------------
                                (Title of class)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Sections 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 .
            ---

At December 2, 1996, 5,136,616 Shares of Beneficial Interest, par value $1.00
per Share, were outstanding, and the aggregate market value of the Shares of the
Registrant held by non-affiliates (based upon the closing price of the
Registrant's Shares on December 2, 1996, which was $4.875) was approximately
$7,128,000. For purposes of this information, the outstanding Shares
beneficially owned by all Trustees and Officers of the Registrant, were deemed
to be the shares held by affiliates.

                       DOCUMENTS INCORPORATED BY REFERENCE

Portions of the CleveTrust Realty Investors Proxy Statement for the 1996 Annual
Meeting of Shareholders (the "Proxy Statement") are incorporated by reference
into Part III of this report. With the exception of those portions which are
expressly incorporated by reference into this annual report on Form 10-K, the
documents incorporated by reference are not deemed filed as part of this report.

<PAGE>   2
   
                           CLEVETRUST REALTY INVESTORS
                          Year Ended September 30, 1996

                                  FORM 10-K/A

                                EXPLANATORY NOTE


This Form 10-K/A is filed to amend the following portions of the CleveTrust
Realty Investors Form 10-K for the year ended September 30, 1996:

1.   PART I - Item 1 - Business - Portfolio - paragraph one on page 1. 

2.   PART II - Item 7 - Management's Discussion and Analysis of Financial
     Condition and Results of Operations - paragraph one on page 25.

3.   PART III Items 10 (Directors and Executive Officers of the Registrant), 11
     (Executive Compensation), and 12 (Security Ownership of Certain Beneficial
     Owners and Management) - pages 32 - 38 - Full text inserted instead of
     incorporated by reference to the definitive Proxy Statement.

4.   PART III - Item 13 - Certain Relationships and Related Transactions - page
     32 changed to read None.

5.   PART IV - Item 14(a)(1) and (2) - Notes To Financial Statements - NOTE A
     - Summary of Significant Accounting Policies - Real Estate - paragraph one
     changed on page F-7.
    

<PAGE>   3
                                     PART I
                                     ------


Item  1.   Business.
-------    ---------

General:
-------
CleveTrust Realty Investors (the "Trust") is a business trust organized in
Massachusetts which commenced operations in 1971. The Trust's assets are
composed principally of investments in real estate. The Trust directly manages
all of its improved properties. At September 30, 1996 the Trust had 19 full-time
employees.

On September 24, 1996 the Board of Trustees of the Trust unanimously voted to
recommend a Plan for the Orderly Liquidation of the Trust (the "Plan"). The
Plan, as proposed, would involve the sale of the Trust's properties during a
period of approximately three years. The Trustees will also consider proposals
for a merger, combination or sale of all or a portion of its properties in a
single transaction. The Plan will be submitted for approval by the Shareholders
of the Trust at the Annual Meeting to be held in February, 1997. The Trustees,
who in the aggregate own more than 70 percent of the outstanding shares of the
Trust, have agreed to vote their shares in favor of the Plan.

Portfolio:
---------

   
At September 30, 1996, the Trust's investment portfolio consisted primarily of
ownership interests in eight multi-tenanted office buildings, four
multi-tenanted shopping centers, and one retail center (collectively, the
"Properties"). Based on the above referenced announcement of the Plan, the Trust
has classified all of its Properties as "Properties held for sale" at September
30, 1996, in accordance with Statement of Financial Accounting Standards No. 121
"Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets to be
Disposed of" ("SFAS No. 121"). The Trust made a review of the carrying value of
all the Properties at September 30, 1996 and determined that four of the Trust's
Properties had a carrying value higher than the estimated fair value, less cost
to sell. Therefore a valuation reserve of $3,307,000 was established. In
determining the estimated fair value, less cost to sell, the Trust applied an
estimated capitalization rate to the individual properties' cash flow. The Trust
did not deem it necessary to obtain appraisals of any of its properties. See
Item 2 of Part I for allocation of the valuation reserve. The significant
investment portfolio activity of the last three fiscal years is discussed under
Item 7 of Part II below. Information pertaining to the operating revenues,
operating income or loss and total assets of the Trust for each of the last
three fiscal years is provided under Item 6 of Part II below.
    

The Trust's primary business objective will be to sell the Trust's assets for
the highest possible price. The proceeds from these sales will be distributed to
the Shareholders after establishment of reserves, determined by Management of
the Trust which should be adequate so as to satisfy outstanding obligations of
the Trust. In order to sell the properties for the highest prices the Trust has
reviewed its operating strategy and implemented one that is intended to achieve
the Trust's business objective. One focus of this operating strategy is to
maximize funds from operations from each of the Trust's Properties, thereby
enhancing their value, through (i) rental rate increases, to the extent that
competitive conditions permit; (ii) improvements in tenant retention; (iii)
emphasis on expense controls consistent with the proper maintenance of the
Properties; and (iv) strategic capital investments in order to increase the
competitive position of the Properties. The Trust also believes that funds from
operations from its investments may increase as a result of cyclical market
recoveries and growth. The Trust strives to maintain operating expenses at its
Properties at the lowest practical levels given the need to adequately operate
and maintain its Properties, the majority of which were constructed in the
mid-1970's to mid-1980's. Maintenance is emphasized because it is considered
critical to the appreciation of the Properties.


                                       -1-
<PAGE>   4
                                     PART I
                                     ------

Item: 1.       Business  (continued):
-------        ---------------------

The second focus of the Trust's operating strategy will be to find buyers for
the properties. The Trust has contacted and will continue to contact certain
principals to see if a direct sale can be initiated. If the Trust is unable to
find buyers by itself, then the trust will engage licensed real estate agents to
seek buyers on behalf of the Trust. The Trust has established targeted sales
prices for each of the Properties and will make every attempt to achieve or
exceed these prices during the liquidation period. However, no assurances may be
given that any or all of the Properties will be sold for the targeted prices
established by the Trust or will be sold at all.

On October 7, 1996 the Trust completed a $2,450,000 sale of the Littleton Bank
Building located in Littleton, Colorado. The sale resulted in a gain of
approximately $563,000 which will be reported in the first quarter of fiscal
year 1997. Additionally, the Trust currently has four of its properties under
contracts of sale. The Englewood Bank Building located in Englewood, Colorado is
under a contract of sale for a sales price of $5,350,000. The Executive Club
Building located in Denver, Colorado is under a contract of sale for $5,300,000.
The Spring Village Shopping Center located in Davenport, Iowa is under a
contract of sale for a sales price of $5,350,000. The Warren Plaza Shopping
Center located in Dubuque, Iowa is under a contract of sale for a sales price of
$5,950,000. All four of these contracts provide for "due diligence" periods,
during which time the buyer could cancel the contract at his option. After the
completion of the due diligence period the buyer will place a non-refundable
deposit with the Trust. Should the buyers fail to complete the sale these
deposits would be forfeited and retained by the Trust. However, no assurance may
be given that these properties will actually be sold at the prices stated. Also,
the Trust has signed letters of intent with various buyers for the sale of three
additional properties. The total gross sales prices for these three properties
is $15,640,000. Letters of intent are only agreements in principle on the most
fundamental terms and the parties do not intend that there be any binding
obligation to buy or sell the property until such time as a contract of sale is
executed by both the buyer and the Trust. In all cases, the sales prices exceed
the carrying value or the net book value of the properties.

The Trust's portfolio of Properties has generated sufficient revenue to cover
all operating expenses (excluding depreciation, a non-cash expense and in 1996
the provision for valuation reserve, also a non-cash expense), amortization of
mortgage notes payable, required amortization of bank notes payable, and capital
improvements to existing properties.

Financing and Leverage:
-----------------------

The Trust used borrowed funds in purchasing certain properties which the Trust
believes has helped to improve the Trust's return on investment in these
properties. At September 30, 1996 two of the Trust's investments were leveraged
with long-term non-recourse individual mortgage financing and one property was
leveraged with a $2,612,000 loan of which the first $750,000 is recourse and the
balance is non-recourse. At September 30, 1996 six of the Trust's remaining
improved properties served as collateral for the Trust's bank notes payable. See
Note F of the Notes to the Financial Statements presented in Part II, Item 8 of
this report.

Effective November 30, 1994 the Trust and two banks, National City Bank of
Cleveland ("NCB") and Manufacturer's and Traders Trust Company of Buffalo ("M &
T") signed a revolving line of credit agreement for up to $25,000,000 (but
limited by the value of the collateral provided). Of this amount a maximum of
$15,000,000 is currently available and $10,000,000 will be available at the
Trust's discretion upon payment of an activation fee of 3/4 of 1% on the
$10,000,000. This loan was for an initial term of three years. The banks review
the loan annually, and if satisfied, they extend the loan for an additional year
at that time. During 1996 the banks extended the maturity date to March 1, 1999.
Therefore, the Trust will

                                       -2-
<PAGE>   5

                                     PART I
                                     ------

Item  1.      Business  (continued):
-------       ---------------------

have an annually renewed three year loan or two years in which to replace the
loan. At the Trust's option interest on any loan will be at any of the following
rates (i) the prime lending rate plus 1/4 of 1%; (ii) 250 basis points over the
LIBOR rate; or (iii) NCB's fixed rate of interest in effect from time to time.

Real Estate Market Conditions:
-----------------------------

Investments in real estate equities tend to be long term investments, and
accordingly, tend to limit the ability of the Trust to vary its portfolio of
real estate owned promptly in response to changing economic, financial and
investment conditions, such as overbuilding in certain markets and the resulting
intense competition for tenants. Although the Trust requires leases from all
tenants occupying space in its properties, in the event of a default by a
tenant, the Trust may modify the lease terms or evict the tenant. Tenant
evictions result in increased expenses and the possibility of lost rents until
the space is re-leased.

The tenant occupying the largest amount of space in any of the Trust's
Properties currently pays rent totaling $974,000 or 9.2% of the Trust's 1996
total revenues. This tenant has a lease which matures September 30, 2005 but the
lease contains six 10-year option provisions at the tenant's discretion which,
if exercised, would extend the maturity date to September 30, 2065. The rent
paid by this tenant is subject to an annual adjustment based on the increase or
decrease in operating expenses of the property.

The Trust, in order to remain competitive, leases space at its properties at
rates which are dictated by the market in which the property exists. The market
rates, which are quoted to both new tenants and tenants who are renewing their
leases, were at their highest levels in the early 1980's. These rates began to
decline at most of the properties in 1984 and continued to decline through 1988.
At that time, the market rates at all of the Trust's properties were at their
lowest levels. Since 1989, the market rates have tended to increase. In 1996 the
market rates at the majority of the properties were higher than those in 1988
but have not returned to the high rates that existed in 1983. The Trust is
encouraged by the current trends in rates. Additionally, the majority of leases
at the Properties include provisions for the tenant to pay additional rent if
operating expenses of the property increase.

Taxes:
-----

Through fiscal 1992 the Trust qualified as a real estate investment trust (a
"REIT") as defined by Sections 856 through 860 of the Internal Revenue Code of
1986, as amended (the "Code"). Effective April 1, 1993 the Trust automatically
failed to qualify as a REIT under the Code as on such date more than 50% in
value of the Trust's shares (after the application of certain constructive
ownership rules) were owned by five or fewer individuals.

Although the Trustees had the right pursuant to Section 8.5 of the Declaration
of Trust to prevent the transfer, and/or call for the redemption of, securities
of the Trust sufficient in the opinion of the Trustees to meet requirements for
REIT status, the Trustees in their discretion determined that maximizing
proceeds from the December 1992 rights offering (the "1992 Rights Offering")
outweighed the benefits of REIT status. The primary impact on the Trust as a
result of the failure to qualify as a REIT was that the Trust is now required to
file its federal and state income tax returns as a corporation and is subject to
taxation as a corporation. As a result, distributions to shareholders are
subject to double taxation to the extent of current and accumulated earnings and
profits of the Trust. The Trust will not be able to re-qualify as a REIT until
fiscal year 1998. At September 30, 1996 the Trust has net operating and capital
loss carryforwards (NOL's) of approximately $10.2 million available to offset
taxable income. In future years, the Trust can use approximately $298,000 per
year of NOL's, plus it can apply gains on the sales of properties ("built in

                                       -3-

<PAGE>   6

                                     PART I
                                     ------


Item 1.     Business (continued):
------      --------------------

gains") for those properties which were owned by the Trust on December 28, 1992,
plus any prior year's unused portion (limited by carryforward periods) for NOL's
generated prior to December, 28, 1992. The Trust can also use NOL carryforwards
generated after December 28, 1992. These carryforwards of approximately $9.5
million expire through 2011. The balance of the carryforwards of $700,000 may be
recognized for a period through fiscal 1998 against built in gains, if any, to
the extent that fair market values of these properties exceeded their tax bases
as of December 28, 1992.

Once the Plan is approved, distributions to shareholders will be considered
liquidating distributions and reported as return of capital to shareholders to
the extent of the individual shareholders basis in their shares. Shareholders
are encouraged to consult their tax advisors for information concerning these
distributions.

Competition and Limited Resources:
---------------------------------

The Trust's Properties are subject to competition from similar types of
properties in the vicinities in which they are located. Additionally, the Trust
is relatively small in comparison to many of its competitors. This size limits
the Trust's resources and may limit its ability to compete effectively in the
geographic markets in which the Trust owns property. However, since the Trust's
objective is to sell its properties, the Trust will concentrate its efforts on
being able to satisfy the requirements of prospective tenants so that they lease
space in the Trust's Properties rather than the competitors'.

                                       -4-

<PAGE>   7

                                     PART I
                                     ------


Item 2.    Properties.
------     ----------

General:
-------

At September 30, 1996 the Trust had total invested assets of $39,015,000. The
invested assets included $38,896,000 of properties held for sale and $119,000 of
real estate mortgage loans.

The Trust's $38,896,000 of properties held for sale at September 30, 1996
included the following: eight office buildings with a carrying value of
$20,304,000; five commercial properties with a carrying value of $18,552,000;
and one investment in land with a carrying value of $40,000. Carrying value
represents amounts included in the Trust's Statement of Financial Condition at
September 30, 1996 after depreciation and the valuation reserve. On September
24, 1996 the Trustees of the Trust announced that they unanimously voted to
recommend a Plan for the Orderly Liquidation (the "Plan") of the Trust. Since
the Trust had previously adopted Statement of Financial Accounting Standards No.
121 "Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets to
be Disposed of" ("SFAS No. 121") the Trust, effective September 30, 1996,
classified all real estate owned as "Properties held for sale." A review of the
properties at September 30, 1996 determined that four properties required a
valuation reserve, as the market values, less cost to sell, of these properties
were less than their carrying value. Therefore a valuation reserve of $3,307,000
was established. In determining the estimated net sales prices the Trust applied
an estimated capitalization rate to the individual properties' cash flow. The
Trust did not deem it necessary to obtain appraisals of any of its properties.

 Management will from time to time undertake a major renovation of a Property in
order to keep it competitive within its market. Currently, the Cannon West
Shopping Center located in Austin, Texas is having a trench drain installed at a
cost of approximately $150,000. This work is being done in order to combat a
sub-soil problem at the property. Management believes that the installation of
this trench drain will alleviate the problem. The cost of this work will be
reported in the first two quarters of fiscal year 1997. Additionally, Management
is reviewing plans for the installation of new store fronts at Tiffany Plaza, a
shopping center located in Ardmore, Oklahoma. The current estimated cost of this
work is $250,000. If the Trust proceeds with this work it should begin in the
spring of 1997.

In the opinion of Management, all Properties in the Trust's portfolio are
adequately covered by insurance. Additionally, Management believes all
properties are suitable and adequate for their intended use.

The amount of leverage varies among the Properties which the Trust owns. At
September 30, 1996 two of the Trust's Properties were leveraged with long-term
non-recourse individual mortgage financing and one property was leveraged with a
$2,612,000 loan of which the first $750,000 is recourse and the balance is
non-recourse. Additionally, as of September 30, 1996 six of the Trust's
remaining investments serve as collateral for the Trust's bank notes payable.

At September 30, 1996 the Trust owned two real estate mortgage loans with a
total balance of $119,000. Both loans are purchase money mortgages received by
the Trust in connection with sales of vacant land in Akron, Ohio. The first was
a $290,000 loan received in connection with the $834,000 March, 1994 sale of 70
acres. The second was a $212,000 loan received in connection with the $212,000
May, 1994 sale of 17.7697 acres.


                                       -5-
<PAGE>   8


                                     PART I
                                     ------

Item 2.  Properties (Continued):
------------------------------

Properties Held for Sale:
------------------------

The following table analyzes the properties held for sale at September 30, 1996 
by type of property.

<TABLE>
<CAPTION>
                                                       Percentage  
                                             Year        Leased       Square       Total      Accumulated    Valuation    Mortgage
             Description                   Acquired      (A) (B)     Footage       Cost      Depreciation     Reserve       Debt
--------------------------------------    -----------------------------------------------------------------------------------------
<S>                                        <C>           <C>          <C>          <C>            <C>             <C>       <C>
OFFICE BUILDINGS:                                                               (---------------in thousands----------------------)
 Colorado:
  Englewood Bank Bldg. - Englewood  (C)(E) 1971          97%          129,000      $6,103          $3,108           $0          $0
  Executive Club Bldg. - Denver     (F)    1972          73            96,000       4,623           2,966            0           0
  Littleton Bank Bldg. - Littleton  (D)    1973          99            58,000       3,166           1,398            0       1,209
 Oklahoma:
  Petroleum Club Bldg. - Tulsa      (G)    1972          82           115,000       6,959           4,408          551           0
 Texas:
  Walnut Stemmons O. P. - Dallas    (H)    1975          71            60,000       2,452           1,792            0           0
  Office Alpha - Dallas             (I)    1983          90           103,000      11,048           3,502        2,546           0
  14800 Quorum Bldg. - Dallas       (J)    1994          92           104,000       4,312             272            0       2,612
  Brookside Office Bldg. - Arlington(K)    1996          100           44,000       2,208              24            0           0
                                                      -----------------------------------------------------------------------------
            TOTAL OFFICE BUILDINGS:                      88           709,000      40,871          17,470        3,097       3,821

COMMERCIAL PROPERTIES:
 South Carolina:
  Triangle Square - Hilton Head     (L)    1976          87            93,000       1,911           1,104            0           0
 Texas:
  Cannon West - Austin              (M)    1987          95           123,000       8,225           2,174            0       5,742
 Iowa:
  Spring Village - Davenport        (N)    1987          99           103,000       5,579           1,078            0           0
  Warren Plaza - Dubuque            (O)    1987          98            90,000       5,367           1,174            0           0
 Oklahoma:
  Tiffany Plaza - Ardmore           (P)    1989          98           147,000       4,081             948          133           0
                                                      ----------------------------------------------------------------------------
TOTAL COMMERCIAL PROPERTIES:                             96           556,000      25,163           6,478          133       5,742

LAND:
  Ohio:
    Vacant land - Akron                    1975          N/A         N/A              117       N/A                 77           0
                                                                                    -----------------------------------------------

TOTAL PROPERTIES HELD FOR SALE                                                        $66,151         $23,948       $3,307   $9,563
                                                                                    ===============================================
</TABLE>
                                     -6-
<PAGE>   9
                                     PART I
                                     ------

Item 2.   Properties (Continued):
------    ----------------------

Investments in Real Estate:  (Continued):
----------------------------------------

(A)  At September 30, 1996 the Trust had 338 tenants under lease in its office
     buildings (excluding the Littleton Bank Bldg., Littleton Colorado which was
     sold October 7, 1996), and its commercial properties, all of which are
     shopping centers, with Triangle Square also having mini-warehouse
     facilities behind the retail area (excluding the mini warehouses at
     Triangle Square). These tenants are under leases of one year or more.
     Additionally, the Trust had 215 month-to-month leases for mini-warehouse
     spaces at Triangle Square.

(B)  The following lists individually those tenants who occupy 10,000 square
     feet or more, and whose original lease terms expire five years or more from
     September 30, 1996. Seventeen (17) other tenants occupy less than 10,000
     square feet and have leases which expire in five years or more from
     September 30, 1996. These are grouped together and shown as "Others" on the
     table below:
<TABLE>
<CAPTION>
                                       Expiration    Square       Annual
  Property          Tenant                Date       Footage     Base Rent
 ---------        ----------------      ----------    -------     -----------
<S>              <C>                   <C>           <C>         <C>
Englewood Bank   Bank One, Denver      9/30/2005     108,000     $974,000
Petroleum Club   Petroleum Club        4/30/2003      25,000      157,000
Cannon West      Premiere Lady's Fit   8/31/2001      15,000       68,000
Cannon West      H. E. Butt            10/05/2001     50,000      250,000*
Spring Village   Eagle Foods           6/30/2005      46,000      204,000*
Spring Village   Bombay Rest           1/31/2011      10,000       98,000*
Spring Village   Walgreens             11/30/2010     11,000       67,000*
Spring Village   I. H. Miss            11/30/2011     10,000       34,000
Warren Plaza     HY-VEE                9/08/2013      52,000      256,000*
Tiffany Plaza    Orscheln Farm         8/31/2001      30,000      102,000
Tiffany Plaza    Fleming Companies     3/20/2001      42,000       87,000*
Tiffany Plaza    C. R. Anthony         3/07/2001      24,000       69,000*
14800 Quorum     Preston               3/21/2002      13,000      131,000
Brookside        Schrickel, Rollins    8/31/2003      15,000      169,000
Various          Others                Various        45,000      460,000* 
                                                     -------   ----------
                                                     496,000   $3,126,000
                                                     =======   ==========
<FN>
*    Leases marked with an asterisk have additional rent provisions to be paid
     based on a percentage of the gross sales over a base sales figure.
</TABLE>
     All  leases listed on the table are subject to an annual adjustment in rent
     based on the increase or decrease in the operating expenses of the
     Property.

     The annual base rents of the tenants listed in the table equal 30% of the
     total 1996 rental income, and these tenants occupy 496,000 square feet
     (45%) of the total 1,100,000 square feet (excluding the Littleton Bank
     Bldg. which was sold October 7, 1996) currently occupied. The remaining
     604,000 square feet are occupied by 307 tenants. These tenants' leases
     expire during the next five years. The loss of rentals from any one of
     these leases, if the Trust would not be able to renew or replace, would not
     have a significant effect on the Trust's operations.

(C)  The following is the only tenant who occupies 50% or more of a Property:
     Englewood Bank Building -- Bank One, Denver -- 108,000 sq. ft. (84%).

                                       -7-
<PAGE>   10
                                     PART I
                                     ------

Item 2.   Properties (Continued):
------    ----------------------

Investments in Real Estate:  (Continued):
----------------------------------------
(D)  The Littleton Bank Building was sold on October 7, 1996. The sale resulted
     in a gain of approximately $563,000 which will be reported in the first
     quarter of Fiscal Year 1997.

(E)  ENGLEWOOD BANK BUILDING. The Englewood Bank Building is located in
     Englewood, Colorado. The building contains 10 stories and is suitable and
     adequate for its use as a bank and office building.

     The main tenant is Bank One, Denver which occupies 84% of the building. The
     balance of the building is primarily leased to small service or
     professional organizations for use as general offices. The Trust's policy
     is to sign leases of three to five years in order to take advantage of
     changes in the market.

     The Trust has been notified by the City of Englewood that the City has
     recently passed a law that would require the Trust to install a sprinkler
     system and fire pull stations on every floor of this property. The law
     requires that this work be done over a five (5) year period starting in
     1997. The Trust is currently reviewing all of its options relating to this
     required work. At this time the Trust does not have any estimates as to the
     costs that would be involved in undertaking this work. Other than this
     required work there are no other significant renovations planned for this
     property beyond normal maintenance and repairs and tenant improvements done
     in conjunction with the leasing of space.

     The Englewood Bank Building is subject to limited direct competition from
     comparable office projects in the general vicinity. There is only one
     competing high-rise office building in the area of similar size, quality,
     condition and location to the Englewood Bank Building. Other competing
     projects consist of low-rise office buildings and converted retail space
     generally considered to be of lesser quality.

     The occupancy rates for the fiscal years ended September 30, 1992 through
     1996 were as follows: 89% in 1992, 91% in 1993, 98% in 1994, 97% in 1995
     and 1996 . The Property's average rental rate per occupied square foot for
     the same period was $6.65 in 1992, $6.69 in 1993, $6.80 in 1994, $6.63 in
     1995, and $6.67 in 1996.

     Bank One, Denver is the only tenant occupying over 10% of the rentable
     space. Its annual rent is currently $974,000 but is subject to an annual
     adjustment based on increases or decreases in property expenses. This lease
     expires September 30, 2005 and has six ten-year renewal options available.

     Based upon leases in place at September 30, 1996 lease expirations for the
     next ten fiscal years ended September 30, 2006 are as follows:
<TABLE>
<CAPTION>

               Number    Total                         Percent of Gross
             of Leases   Sq. Ft.    Annual Base        Annual Base Rents
   Year      Expiring   Expiring   Rents Expiring         at 9/30/96
   ----      ---------  --------   --------------      -----------------
<S>              <C>     <C>          <C>                   <C>
   1997          5       7,738        $ 79,356                7% 
   1998          2       1,826          19,824                2  
   1999          3       8,051          77,892                7  
   2000 -2004  NONE   
   2005          1     107,663         973,690               84   
   2006        NONE   
                                        
</TABLE>
                                       -8-
<PAGE>   11

                                     PART I

Item  2   Properties (Continued):
-------   ----------------------

Investments in Real Estate: (Continued)
---------------------------------------

     The Englewood Bank Building is depreciated for tax purposes using the
     straight line method over 40 years for the building and improvements. The
     depreciable tax basis was $1,896,000 at September 30, 1996. The 1995 real
     estate taxes for the Property were $107,539 based on a millage rate of
     $8.252 per $1,000 of assessed value. The 1996 real estate taxes are not yet
     known.

(F)  EXECUTIVE CLUB BUILDING. The Executive Club Building is located in Denver,
     Colorado. The building contains eleven floors and has a health club, which
     includes a swimming pool, located in the basement. The building is suitable
     and adequate for its use as an office building.

     Space in the building is leased to service and professional organizations
     for use as general offices. The Trust's policy is to sign new leases with
     new and renewal tenants for periods of three to five years in order to take
     advantage of changes in the market.

     Presently, the Trust has no plans for any significant renovations of the
     property beyond normal maintenance and repairs and tenant improvements done
     in conjunction with the leasing of space within the Property.

     There are numerous office buildings in the direct vicinity, some of higher
     quality, and numerous projects of similar age, condition and quality that
     directly compete with the Executive Club Building. The Trust believes that
     the advantage that this building has is that the building caters to small
     tenant users, while the majority of the properties in the area prefer
     larger tenants.

     Occupancy for the fiscal years ended September 30, 1992 through 1996 was as
     follows: 92% in 1992; 97% in 1993 and 1994; 93% in 1995 and 73% in 1996.
     The Property's average rental rates per occupied square foot for the same
     periods were: $9.69 in 1992; $9.55 in 1993; $10.15 in 1994; $11.63 in 1995
     and $11.78 in 1996.

     There are no tenants in this property occupying 10% or more of the space.

     Based upon leases in place as of September 30, 1996 lease expirations for
     the next ten fiscal years ended September 30, 2006 are as follows:


<TABLE>
<CAPTION>

           Number       Total                        Percent of Gross
          of Leases    Sq. Ft.      Annual Base         Annual Base
Year      Expiring     Expiring    Rents Expiring    Rents at 9/30/95
----      ---------    --------    --------------    -----------------
<S>          <C>      <C>          <C>                   <C> 
1997         32       33,353       $392,920                42% 
1998         20       21,688        253,392                27  
1999         14       20,722        247,224                26  
2000          1        1,282         15,120                 2  
2001        NONE  
2002          1        2,169         27,108                 3  
2003-2006   NONE

</TABLE>

                                          
                                        
                                       -9-
<PAGE>   12

                                     PART I
                                     ------



Item  2.   Properties (Continued):
-------    ----------------------

Investments in Real Estate:  (Continued)
----------------------------------------

     The Executive Club Building is depreciated for tax purposes using the
     straight line method with the building and improvements having a 40 year
     life. The depreciable tax basis was $1,862,000 at September 30, 1996. The
     1995 real estate taxes for the Property were $79,693 based on a millage
     rate of $8.1161 per $1,000 of assessed value. The 1996 real estate taxes
     are not yet known.

(G)  PETROLEUM CLUB BUILDING. The Petroleum Club Building is located in Tulsa,
     Oklahoma. The building contains sixteen floors with an attached four level
     parking garage which is leased out to American Parking for an annual rent
     plus a percentage rent determined at the end of each year and offers valet,
     self parking both covered and uncovered. The building is suitable and
     adequate for its use as an office building.

     The main tenant is The Petroleum Club which occupies the top four floors.
     The balance of the building is leased to service and professional
     organizations for use as general offices. The Trust's policy is to sign new
     leases with new and renewal tenants for periods of three to five years in
     order to take advantage of changes in the market.

     Presently, the Trust has no plans for any significant renovations of the
     property beyond normal maintenance and repairs and tenant improvements done
     in conjunction with the leasing of space within the Property.

     This property is located in the downtown area of Tulsa and, as such, there
     are numerous office buildings in the direct vicinity, some of higher
     quality, and numerous projects of similar age, condition and quality that
     directly compete with the Petroleum Club Building. The floor size of this
     property is only 7,800 square feet and as such the Trust can offer small
     tenants a substantial portion of a floor without the tenant competing with
     larger tenants who usually dominate downtown office space. Despite the
     stagnate economy of Tulsa, which depends primarily on the oil and gas
     industry, the Trust has made strides in recent years in increasing the
     occupancy of this property. One recent benefit has been the Petroleum Clubs
     willingness to open its membership to others outside of the petroleum
     industry. The majority of the tenants in the building now belong to the
     Club.

     Occupancy for the fiscal years ended September 30, 1992 through 1996 was as
     follows: 75% in 1992; 72% in 1993; 78% in 1994; 81% in 1995; and 82% in
     1996. The property's average rental rates per occupied square foot for the
     same periods were: $8.47 in 1992; $8.69 in 1993; $7.84 in 1994; $8.22 in
     1995; and $8.84 in 1996.

     There are no tenants in this property occupying 10% or more of the space.


                                     -10-
<PAGE>   13


                                     PART I
                                     ------

Item  2.   Properties (Continued):
-------    ----------------------

Investments in Real Estate:  (Continued)
----------------------------------------

     Based upon leases in place as of September 30, 1996 lease expirations for
     the next ten fiscal years ended September 30, 2006 are as follows:
<TABLE>
<CAPTION>

            Number         Total                           Percent of Gross
          of Leases       Sq. Ft.          Annual Base       Annual Base
Year      Expiring        Expiring         Rents Expiring  Rents at 9/30/95
----      --------        --------         --------------  -----------------
<S>          <C>           <C>               <C>                  <C> 
1997         17            36,054            $366,996             40% 
1998          3             6,346             132,444(i)          14  
1999          7            24,255             223,872             24  
2000        NONE  
2001          1             5,741              47,364              5  
2002        NONE  
2003          1            24,579             155,040             17  
2004-2006   NONE
<FN>
                                             
     (i) Includes $69,780 for American Parking who leases the garage. Their
     lease expires March 31, 1998. There is no square footage included for this
     tenant.
</TABLE>
     The Petroleum Club Building is depreciated for tax purposes using the
     straight line method with the building and improvements having a 40 year
     life. The depreciable tax basis was $2,618,000 at September 30, 1996. The
     1995 real estate taxes for the Property were $27,558 based on a millage
     rate of $10.021 per $1,000 of assessed value. The 1996 real estate taxes
     are not yet known.

(H)  WALNUT STEMMONS OFFICE PARK. Walnut Stemmons Office Park is located in
     Dallas, Texas. The complex is currently composed of three single story
     buildings. This property originally was composed of nine single story
     buildings. Four of the buildings were sold in November, 1992. Two more
     buildings were sold September 30, 1996. All six buildings were sold to the
     same buyer. The remaining three buildings all have exterior entrances for
     the tenants, with no common areas.

     Space in the buildings is leased to small businesses, the majority of which
     are just commencing operations. The Trust's policy is to sign three to five
     year leases with both new and renewal tenants with the tenant being
     responsible for all services within their space, such as, electricity and
     cleaning.

     Presently, the Trust has no plans for any significant renovations of the
     property beyond normal maintenance and repairs and tenant improvements done
     in conjunction with the leasing of space within the Property.

     There are similar properties in the immediate area of this Property. The
     surrounding area features restaurants, a bowling alley, and a chiropractic
     college. Since this property is primarily leased to first time businesses,
     there is significant turnover. The Trust believes that these three
     buildings will be purchased by the same buyer who purchased the other six
     buildings.

     Occupancy for the fiscal years ended September 30, 1992 through 1996 was as
     follows: 73% in 1992; 97% in 1993; 86% in 1994; 79% in 1995; and 71% in
     1996. The Property's average rental rates per occupied square foot for the
     same periods were: $5.09 in 1992; $4.62 in 1993; $5.11 in 1994; $5.34 in
     1995; and $5.38 in 1996.


                                      -11-
<PAGE>   14


                                     PART I
                                     ------
Item 2.    Properties (Continued):
------     ----------------------

Investments in Real Estate:  (Continued)
---------------------------------------

     There are no tenants in this property occupying 10% of more of the space.

     Based upon leases in place at September 30, 1996 lease expirations for the
     next ten fiscal years ended September 30, 2006 are as follows:
<TABLE>
<CAPTION>

            Number        Total                       Percent of Gross
          of Leases      Sq. Ft.       Annual Base      Annual Base
  Year    Expiring      Expiring     Rents Expiring   Rents at 9/30/96
  ----    --------      --------     --------------   ----------------
<S>         <C>         <C>            <C>                  <C>
 1997       10          15,443         $74,772              33%
 1998        5           7,105          41,772              18
 1999        5          11,426          66,576              29
 2000        2           8,531          32,004              14
 2001        1           1,875          11,244               6
 2002-2006 NONE
</TABLE>


     Walnut Stemmons Office Park is depreciated for tax purposes using the
     straight line method with the building and improvements having a 40 year
     life. The depreciable tax basis was $643,000 at September 30, 1996. The
     1995 real estate taxes for the Property were $53,755 based on a millage
     rate of $2.56 per $100 of assessed value. The 1996 real estate taxes are
     not yet known.

(I)  OFFICE ALPHA. Office Alpha is located in the North-Dallas LBJ-East office
     market of Dallas, Texas. Office Alpha contains five stories and is suitable
     and adequate for its use as an office building.

     Space in the building is leased to service and professional organizations
     for use as general offices. The Trust's policy is to sign leases with new
     and renewal tenants for periods of three to five years in order to take
     advantage of changes in the market.

     Presently, the Trust has no plans for any significant renovations of the
     Property beyond normal maintenance and repairs and tenant improvements done
     in conjunction with the leasing of space within the Property.

     There are numerous office buildings in the direct vicinity, some of higher
     quality, and numerous projects of similar age, style, condition and quality
     that directly compete with Office Alpha. Leasing proposals for both new and
     renewal tenants in this submarket are highly competitive. Many of the
     Trust's competitors in this submarket have substantially greater capital
     and resources than the Trust.

     Occupancy for the fiscal years ended September 30, 1992 through 1996 was as
     follows: 73% for 1992; 84% for 1993; 83% for 1994; 91% for 1995; and 90%
     for 1996. The Property's average rental rates per occupied square foot for
     the same period were: $9.61 in 1992; $8.91 in 1993; $9.00 in 1994; $9.52 in
     1995; and $10.01 in 1996.

     At September 30, 1996 Jewish Family Services of Dallas, Inc., a non-profit
     organization which performs social services primarily for the Jewish
     community in Dallas, was the only tenant occupying 10% or more of the space
     in Office Alpha. This tenant's annual rent is $98,000. Its lease expires
     September 30, 1999.


                                      -12-
<PAGE>   15

                                     PART I
                                     ------

Item 2.    Properties (Continued):
------     ----------------------
Investments in Real Estate:  (Continued)
----------------------------------------

     Based upon leases in place at September 30, 1996 lease expirations for the
     next ten fiscal years ended September 30, 2006 are as follows:
<TABLE>
<CAPTION>

                   Number        Total                       Percent of Gross
                 of Leases      Sq. Ft.       Annual Base      Annual Base
  Year           Expiring      Expiring    Rents Expiring   Rents at 9/30/96
  ----           ---------     --------    --------------   ----------------
<S>                  <C>        <C>           <C>                  <C>
  1997               14         18,578        $197,532             20%
  1998               12         23,823         248,424             25
  1999               14         35,037         353,796             35
  2000                5         14,241         156,852             16
  2001                2          4,517          46,830              4
  2002-2006         NONE
</TABLE>


     Office Alpha is depreciated for tax purposes using the straight line basis
     with the building and improvements having a 15 year life. The depreciable
     tax basis was $1,776,000 at September 30, 1996. The 1995 real estate taxes
     for the Property were $82,636 based on a millage rate of $2.71 per $100 of
     assessed value. The 1996 real estate taxes are not yet known.

(J)  14800 QUORUM BUILDING. 14800 Quorum Building is located in the
     North-Dallas, Quorum office market of Dallas, Texas. 14800 Quorum contains
     five stories and is suitable and adequate for its use as an office
     building.

     The Trust owns this Property in fee simple, subject to a first mortgage
     loan, at a rate of 8.3%, which matures August 19, 2000. The loan is
     non-recourse except the first $750,000. At September 30, 1996 the balance
     of this loan was $2,612,000. By maturity $174,000 of scheduled amortization
     payments are required and therefore a balance of $2,438,000 will be due at
     maturity. There is a prepayment penalty of 2.0% if the loan is paid off
     early.

     Space in the building is leased to service and professional organizations
     for use as general offices. The Trust's policy is to sign leases with new
     and renewal tenants for periods of three to five years in order to take
     advantage of changes in the market.

     Presently, the Trust has no plans for any significant renovations of the
     Property beyond normal maintenance and repairs and tenant improvements done
     in conjunction with the leasing of space within the Property.

     There are numerous office buildings in the direct vicinity, some of higher
     quality, and numerous projects of similar age, style, condition and quality
     that directly compete with 14800 Quorum. Leasing proposals for both new and
     renewal tenants in this submarket are highly competitive. Many of the
     Trust's competitors in this submarket have substantially greater capital
     and resources than the Trust.

     The Trust purchased the Property on August 26, 1994. The occupancy for the
     two full fiscal years ended September 30, 1995 and 1996 that the Trust has
     operated the Property was as follows: 90% in 1995 and 92% in 1996. The
     Property's average rental rates per occupied square foot for the same two
     years were as follows: $9.87 in 1995 and $11.02 in 1996.


                                      -13-
<PAGE>   16

                                     PART I

Item 2.    Properties (Continued):
------     ----------------------

Investments in Real Estate:  (Continued)
----------------------------------------

     At September 30, 1996 Preston Equities, Inc., who runs executive suites for
     general office use, was the only tenant occupying 10% or more of the space
     in 14800 Quorum. This tenant's annual rent is $131,108. Its lease expires
     March 31, 2002.

     Based upon leases in place at September 30, 1996 lease expirations for the
     next ten fiscal years ended September 30, 2006 are as follows:
<TABLE>
<CAPTION>

                  Number         Total                         Percent of Gross
                  of Leases      Sq. Ft.       Annual Base       Annual Base
       Year       Expiring      Expiring      Rents Expiring   Rents at 9/30/96
       ----       --------      --------      --------------   ----------------
    <S>           <C>        <C>             <C>                  <C>
       1997          9          20,538          $223,627             20%
       1998          2           3,135            37,308              3
       1999          9          29,517           358,764             32
       2000          5          15,762           185,558             17
       2001          5          12,973           158,628             14
       2002          2          14,651           159,332             14
       2003-2006   NONE
</TABLE>

     14800 Quorum is depreciated for tax purposes using the straight line basis
     with the building and improvements having a 40 year life. The depreciable
     tax basis was $3,772,000 at September 30, 1996. The 1995 real estate taxes
     for the Property were $93,990 based on a millage rate of $2.41 per $100 of
     assessed value. The 1996 real estate taxes are not yet known.

(K)  BROOKSIDE OFFICE BUILDING. The Brookside Office Building is a three-story
     brick office building located in Arlington, Texas. The Trust purchased the
     Property on March 28, 1996. The Property is suitable and adequate for its
     use as an office building.

     Space in the building is leased to service and professional organizations
     for use as general offices. The Property was 100% occupied at the time of
     purchase and has remained such during the balance of the fiscal year. It is
     the Trust's intention to sign new leases with any new and renewal tenants
     for periods of three to five years in order to take advantage of changes in
     the market. Several of the existing tenants have informed the Trust that
     should any current tenant vacate its space they would like to expand their
     space. The Trust will make every effort to accommodate these tenants should
     the situation arise.

     Presently, the Trust has no plans for any significant renovations of the
     Property beyond normal maintenance and repairs and tenant improvements done
     in conjunction with the leasing of space within the Property.

     There are numerous office buildings in the direct vicinity, some of higher
     quality, and numerous projects of similar age, style, condition and quality
     that directly compete with the Brookside Office Building. As stated above,
     with several tenants desiring to expand the Trust believes that the size of
     the Property will be the only drawback in retaining tenants. Since the
     Property is new to the Trust's portfolio it remains to be seen what other
     competitive actions will be needed in the future to keep the Property at
     100% occupied at a competitive rate.

     The occupancy for the six months in the fiscal year ended September 30,
     1996 that the Trust has owned the Property was 100%. The average rental
     rate per occupied space for this same period was $11.69.

                                      -14-
<PAGE>   17

                                     PART I
                                     ------

Item 2.    Properties (Continued):
------     -----------------------
Investments in Real Estate:  (Continued)
----------------------------------------

     At September 30, 1996 two tenants occupied more than 10% of the Property.
     The first was Schrickel, Rollins and Associates, Inc. an architectural
     firm. This tenant's annual rent is $168,660 and their lease expires August
     31, 2003. the second tenant was Vestal-Loftis-Kalista, Architects, Inc., an
     architectural firm. This tenant's annual rent is $64,000 and their lease
     expires January 31, 2000.

     Based upon leases in place at September 30, 1996 lease expirations for the
     next ten fiscal years ended September 30, 2006 are as follows:
<TABLE>
<CAPTION>

                 Number         Total                         Percent of Gross
               of Leases       Sq. Ft.         Annual Base      Annual Base
   Year         Expiring       Expiring      Rents Expiring   Rents at 9/30/96
   ----        ---------       --------      --------------   -----------------
<S>               <C>           <C>            <C>                    <C>
   1997           4             6,836          $ 77,210               15%
   1998           2             8,507            97,040               19
   1999           3             7,862            96,975               19
   2000           1             5,774            64,000               13
   2001         NONE
   2002         NONE
   2003           1            14,607           168,660               34
   2004-2006    NONE
</TABLE>

     Brookside Office Building is depreciated for tax purposes using the
     straight line basis with the building and improvements having a 40 year
     life. The depreciable tax basis was $1,884,000 at September 30, 1996. The
     1995 real estate taxes for the Property were $48,730 based on a millage
     rate of $2.55 per $100 of assessed value. The 1996 real estate taxes are
     not yet known.

(L)  TRIANGLE SQUARE SHOPPING CENTER. The Triangle Square Shopping Center is
     composed of three one-story retail shopping center buildings and nine all
     concrete block mini-warehouse buildings (including one two-story building)
     located in Hilton Head, South Carolina. The main tenants of the three
     retail buildings are service oriented businesses. The Property is suitable
     and adequate for its use as a retail center and mini-warehouse facility.

     The Trust has no plans for significant renovations of the Property beyond
     normal maintenance and repairs and tenant improvements done in conjunction
     with the leasing of space within the Property.

     There are numerous shopping centers located in the direct vicinity, some of
     higher quality, and numerous projects of similar age, condition and quality
     of the Property. However, the majority of these centers are composed of
     retail tenants, while Triangle Square's tenant are primarily service
     oriented. There are no mini-warehouse facilities in the immediate area.

     Occupancy of the combined project for the fiscal years ended September 30,
     1992 through 1996 was as follows: 72% in 1992; 74% in 1993; 78% in 1994;
     89% in 1995; and 88% in 1996. The average rental rate per occupied square
     foot during the same period was $6.58 in 1992; $6.25 in 1993; $5.99 in
     1994; $5.74 in 1995; and $6.55 in 1996.

     There are no tenants in this property occupying 10% or more of the space.

     All leases for storage space in the mini-warehouses are less than one year.
     At September 30, 1996 there were 215 leases for 86,570 square feet at an
     annual rental of $272,400 (44% of gross annual base

                                      -15-
 
<PAGE>   18

                                     PART I
                                     ------

Item 2.    Properties (Continued):
-------    ----------------------

Investments in Real Estate:  (Continued)
----------------------------------------

     rents). Based upon leases in place as of September 30, 1996 in the three
     retail buildings, lease expirations for the next ten fiscal years ended
     September 30, 2006 are as follows:
<TABLE>
<CAPTION>

                                     Number     Total                    Percent of Gross
                                   of Leases   Sq. Ft.    Annual Base     Annual Base
           Year                     Expiring   Expiring  Rents Expiring  Rents at 9/30/96
           ----                    ---------   --------  -------------   -----------------
           <S>                        <C>       <C>        <C>                <C> 
           1997                        11       19,830     $189,132           31%
           1998                         4        4,543       45,396            7
           1999                         5        5,927       57,144            9
           2000                         2        2,886       29,805            5
           2001-2003                  NONE 
           2004                         1        1,745       25,488            4
           2005-2006                  NONE
</TABLE>

     Triangle Square is depreciated for tax purposes using the straight line
     method with the buildings and improvements having a 35 year life. The
     depreciable tax basis was $723,000 at September 30, 1996. The 1995 real
     estate taxes for the Property were $33,457.37 based on a millage rate of
     $2.441 per $1,000 of assessed value. The 1996 real estate taxes are not yet
     known.

(M)  CANNON WEST SHOPPING CENTER. The Cannon West Shopping Center is a
     grocery-anchored neighborhood strip center located in Austin, Texas. Cannon
     West's main tenants operate retail businesses. The Property is suitable and
     adequate for its use as a strip shopping center.

     The Trust is currently installing a Trench Drain at a cost of approximately
     $150,000 at the Property. This work is being done in order to combat a
     sub-soil problem at the property. Other than this work, which is currently
     under way, the Trust has no other plans for significant renovations of the
     Property beyond normal maintenance and repairs and tenant improvements done
     in conjunction with the leasing of space within the Property.

     The Trust owns this Property in fee simple, subject to a first mortgage
     loan, at a rate of 8.3%, which matures May 1, 2002. At September 30, 1996
     the balance of this loan was $5,742,000. By maturity $1,231,000 of
     scheduled amortization payments are required and therefore a balance of
     $4,511,000 will be due at maturity.

     The Cannon West Shopping Center is subject to a limited amount of direct
     competition in its immediate trade area. Although there are a number of
     grocery anchored shopping centers located in South Austin serving the
     south-side communities that are located along William Cannon Drive -- a 
     major East-West highway serving the South Austin area -- Cannon West 
     Shopping Center is the only retail shopping center located at the 
     intersection of William Cannon Drive and Westgate Boulevard that serves 
     the immediate surrounding neighborhoods.

     Occupancy for the fiscal years ended September 30, 1992 through 1996 was as
     follows: 88% in 1992; 93% in 1993; 75% in 1994; 82% in 1995; and 95% in
     1996. The average rental rate, including percentage rents, per occupied
     square foot during the same period was $7.44 in 1992; $7.05 in 1993; $8.38
     in 1994; $9.01 in 1995; and $9.39 in 1996.




                                      -16-
<PAGE>   19

                                     PART I

Item  2.   Properties (Continued):
-------    ----------------------

Investments in Real Estate:  (Continued)
----------------------------------------

     Cannon West has two tenants that occupy more than 10% of the Property. The
     first is H.E. Butt Grocery Store ("HEB"). Their annual base rent is
     $250,000. The lease also calls for tax, insurance and maintenance
     escalations and has a percentage rent clause. For 1996 the percentage rent
     paid was $105,000. This lease expires October 5, 2001 and has four
     five-year renewal options. In September, 1995 the Trust was notified by HEB
     that they had purchased a parcel of land approximately one mile from Cannon
     West. As of September 30, 1996 this land had not yet been rezoned for a
     grocery store center, however, the Trust is of the understanding that HEB
     is in the process of having this land rezoned. Should HEB build a store
     and/or a shopping center on this parcel of land, it could effect Cannon
     West. The second tenant is Premiere Lady's Fitness Center, a health club,
     fitness center for women only. Their annual rent is $68,000. The lease also
     calls for tax, insurance and maintenance escalations. This lease expires
     August 31, 2001.

     Based upon leases in place at September 30, 1996 lease expirations for the
     ten fiscal years ended September 30, 2006 are as follows:
<TABLE>
<CAPTION>

                        Number          Total                           Percent of Gross
                       of Leases       Sq. Ft.         Annual Base         Annual Base
        Year           Expiring        Expiring       Rents Expiring    Rents at 9/30/96
        ----           ---------       --------       --------------    ----------------
       <S>             <C>          <C>            <C>                      <C>    
       1997                9            13,899           $168,886                18%
       1998                5             5,951             84,696                 9
       1999                5             6,220             70,356                 8
       2000                3            11,099            157,380                17
       2001                4            19,818            140,291                15
       2002                1            49,585            250,000                27
       2003                1             2,373             54,620                 6
      2004 - 2006        NONE
</TABLE>


     The building and improvements are depreciated for tax purposes using the
     straight line method over 18 years. The depreciable tax basis was
     $3,624,000 at September 30, 1996. The 1995 real estate taxes were $153,100
     based on a millage rate of $2.394 per $100 of assessed value. The 1996 real
     estate taxes are not yet known.


(N)  SPRING VILLAGE SHOPPING CENTER. The Spring Village Shopping Center is a
     grocery-anchored neighborhood strip center located in Davenport, Iowa.
     Spring Village's main tenants operate retail businesses. The Property is
     suitable and adequate for its use as a strip shopping center.

     The Trust has no plans for significant renovations of the Property beyond
     normal maintenance and repairs and tenant improvements done in conjunction
     with the leasing of space within the Property.

     The Spring Village Shopping Center is subject to direct competition in its
     immediate trade area. There are several grocery anchored shopping centers
     located on Kimberly Road, the major retail East-West road servicing
     Davenport. At September 30, 1996 Spring Village was 99% occupied primarily
     due to the attractiveness of the center's grocery store which was remodeled
     and expanded in 1994 at the cost of the Store.


                                      -17-
<PAGE>   20

                                     PART I
                                     ------

Item  2.   Properties (Continued):
-------    ----------------------

Investments in Real Estate:  (Continued)
----------------------------------------

     Occupancy for the fiscal years ended September 30, 1992 through 1996 was as
     follows: 98% in 1992; 99% in 1993; 98% in 1994; 100% in 1995; and 99% in
     1996. The average rental rate, including percentage rents, per occupied
     square foot during the same period was $8.00 in 1992; $8.00 in 1993; $8.26
     in 1994; $7.89 in 1995; and $8.58 in 1996.

     Spring Village has two tenants that occupy more than 10% of the Property.
     The first is Eagle Food Centers, whose annual base rent is $204,000. Their
     lease also calls for tax, insurance and maintenance escalations and has a
     percentage rent clause. There was no percentage rent due for 1996. This
     lease expires June 30, 2005. The second is the Walgreen Company, which
     operates a drug store, and pays annual base rent of $67,000. Its lease also
     calls for tax, insurance and maintenance escalations. This lease expires
     November 30, 2010.

     Based upon leases in place at September 30, 1996 lease expirations for the
     ten fiscal years ended September 30, 2006 are as follows:
<TABLE>
<CAPTION>

                             Number          Total                         Percent of Gross
                            of Leases       Sq. Ft.         Annual Base       Annual Base
         Year               Expiring        Expiring       Rents Expiring  Rents at 9/30/96
         ----               --------        --------       --------------  -----------------
          <S>                <C>        <C>             <C>                 <C>     
          1997                  2            2,175          $ 26,016              4%
          1998                  2            4,200            47,136              7
          1999                  4            7,450            82,000             12
          2000                  3           10,825           136,535             20
          2001 - 2004         NONE
          2005                  1           45,763           204,000             29
          2006                NONE
</TABLE>



     The building and improvements are depreciated for tax purposes using the
     straight line method over 31-1/2 years. The depreciable tax basis was
     $3,292,000 at September 30, 1996. The 1996 real estate taxes are $148,234
     based on a millage rate of $34.5287 per $1,000 of assessed value.

(O)  WARREN PLAZA SHOPPING CENTER. The Warren Plaza Shopping Center is a
     grocery-anchored neighborhood strip center located in Dubuque, Iowa. Warren
     Plaza's main tenants operate retail businesses. The Property is suitable
     and adequate for its use as a strip shopping center.

     The Trust has no plans for significant renovations of the Property beyond
     normal maintenance and repairs and tenant improvements done in conjunction
     with the leasing of space within the Property.

     In addition to the 90,000 square feet owned by the Trust, there is a 97,000
     square foot Target discount store attached to the property, which is not
     owned by the Trust. The Property is subject to direct competition in its
     immediate trade area. There are several grocery anchored shopping centers
     located on both Dodge Street and John F. Kennedy Blvd. (this Property is
     located on the corner of these two streets). Across the street from the
     Property is a mall, which the Trust does not consider competition.
     Additionally, there is both a K-Mart and Wal-mart in the area which compete
     with the Target store. For both 1994 and 1995 this Property was 100%
     occupied, dropping to 98% for 1996. The Trust attributes this high
     occupancy for the past two years to both the grocery store and the Target
     Store. Both of these stores have been recently remodeled and expanded at
     the cost of the stores.

                                    -18-
<PAGE>   21

                                     PART I
                                     ------

Item  2.   Properties (Continued):
---------------------------------

Investments in Real Estate:  (Continued)
----------------------------------------

     Occupancy for the fiscal years ended September 30, 1992 through 1996 was as
     follows: 92% in 1992; 99% in 1993; 100% in 1994 and 1995; and 98% in 1996.
     The average rental rate, including percentage rent, per occupied square
     foot during the same period was $8.86 in 1992; $8.60 in 1993; $9.67 in
     1994; $9.24 in 1995; and $9.17 in 1996.

     Warren Plaza has one tenant that occupies more than 10% of the Property,
     HY-VEE Food Store. Its annual base rent is $256,000. The lease also calls
     for tax, insurance and maintenance escalations and has a percentage rent
     clause. There was no percentage rent due for 1996. The lease expires June
     30, 2013.

     Based upon leases in place at September 30, 1996 lease expirations for the
     ten fiscal years ended September 30, 2006 are as follows:
<TABLE>
<CAPTION>

                         Number          Total                                 Percent of Gross
                        of Leases       Sq. Ft.             Annual Base           Annual Base
          Year          Expiring        Expiring           Rents Expiring      Rents at 9/30/96
          ----          --------        --------           --------------      -----------------
       <S>               <C>            <C>                 <C>                      <C>
          1997              2              3,900                $42,010                 7%
          1998              1              1,050                 10,680                 2
          1999              4              5,500                 61,644                10
          2000              3             11,160                168,274                27
          2001              2              8,500                 57,624                 9
          2002              1              3,200                 35,736                 6
          2003            NONE             
          2004              1              1,400                 14,940                 2
          2005 - 2006     NONE 
</TABLE>


     The building and improvements are depreciated for tax purposes using the
     straight line method over 31-1/2 years. The depreciable tax basis was
     $3,568,000 at September 30, 1996. The 1996 real estate taxes are $108,178
     based on a millage rate of $30.85536 per $1,000 of assessed value.

(P)  TIFFANY PLAZA SHOPPING CENTER. The Tiffany Plaza Shopping Center is a
     grocery-anchored neighborhood strip center located in Ardmore, Oklahoma.
     Tiffany Plaza's main tenants operate retail businesses. The Property is
     suitable and adequate for its use as a strip shopping center.

     The Trust is reviewing plans for the installation of new store fronts at
     the Property. The Trust believes that the Property, which was constructed
     in 1975, has begun to look old and that the new store fronts will give the
     center a new look. The estimated cost of this work is $250,000. If the
     Trust proceeds with this work it should begin in the spring of 1997. No
     other renovation work beyond normal maintenance and repairs and tenant
     improvements done in conjunction with the leasing of space within the
     Property is planned.

     The main competition for this center is a mall and a Wal-mart center, both
     of which are located more than a mile away from Tiffany Plaza.


                                      -19-

<PAGE>   22

                                    PART I
                                    ------

Item  2.   Properties (Continued):
-------    ----------------------

Investments in Real Estate:  (Continued)
----------------------------------------

     Occupancy for the fiscal years ended September 30, 1992 through 1996 was as
     follows: 89% in 1992; 92% in 1993; 97% in 1994; 95% in 1995; and 98% in
     1996. The average rental rate, including percentage rent, per occupied
     square foot during the same period was: $4.10 in 1992; $4.05 in 1993; $3.59
     in 1994; $3.66 in 1995; and $3.93 in 1996.

     Tiffany plaza has three tenants who occupy more than 10% of the Property.
     The first is Flemming Companies who operate a Buy-For-Less grocery store.
     The annual rent is $86,625. The lease also calls for tax, insurance and
     maintenance escalations and has a percentage rent clause. There was no
     percentage rent due for 1996. The lease expires March 20, 2001. The second
     tenant is Orscheln Farm and Home Supply, Inc., who sell farm equipment and
     supplies. The annual rent is $102,000. The lease also calls for tax,
     insurance and maintenance escalations. The lease expires August 31, 2001.
     The third tenant is CR Anthony Company, a family clothing store. The annual
     rent is $69,300. The lease also calls for tax, insurance and maintenance
     escalations and has a percentage rent clause. There was no percentage rent
     due for 1996. The lease expires March 7, 2001.

     Based upon leases in place at September 30, 1996 lease expirations for the
     ten fiscal years ended September 30, 2006 are as follows:
<TABLE>
<CAPTION>

                             Number                   Total                               Percent of Gross
                            of Leases                Sq. Ft.             Annual Base        Annual Base
          Year              Expiring                Expiring           Rents Expiring     Rents at 9/30/96
          ----              ---------               ---------          --------------     ----------------- 
          <S>                <C>                  <C>                   <C>                   <C> 
          1997                  6                     12,774                $94,332              19%
          1998                  3                      7,708                 34,440               7
          1999                  4                     10,986                 57,624              12
          2000                  1                      7,192                 30,972               6
          2001                  4                    100,551                258,000              53
          2003                NONE
          2004                  1                      5,108                 14,928               3
          2005 - 2006         NONE                                                
</TABLE>


     The building and improvements are depreciated for tax purposes using the
     straight line method over 31-1/2 years. The depreciable tax basis was
     $2,609,000 at September 30, 1996. The 1995 real estate taxes are $32,304
     based on a millage rate of $8.3681 per $100 of assessed value. The 1996
     real estate taxes are not yet known.



                                      -20-
<PAGE>   23

                                     PART I
                                     ------

Item 2.    Properties (Continued):
------     -----------------------

Geographic Distribution:
-----------------------

The Trust's properties are located in six states. The table below demonstrates
the geographic distribution of the Trust's properties at September 30, 1996:

<TABLE>
<CAPTION>
                                                            Percentage of
                   Number of            Percentage of       Assets Based
                  Investments           Rental Income         on Cost
                  -----------           -------------       -------------
<S>                    <C>                    <C>               <C>
Texas:
  Dallas               4                      23%               27%
  Arlington            1                       2                 3
  Austin               1                      11                12
Colorado:
  Englewood            1                      11                 9
  Denver               1                      10                 7
  Littleton            1                       5                 5
Oklahoma:  
  Tulsa                1                       9                11
  Ardmore              1                       6                 6
Iowa:
  Davenport            1                       9                 8
  Dubuque              1                       8                 8
South Carolina:
  Hilton Head          1                       6                 3
Ohio:
  Akron                1                      --                 1
                      --                     ---               ---
                      15                     100%              100%
                      ==                     ===               ===
</TABLE>


                                      -21-

<PAGE>   24



                                    PART I
                                    ------

Item  3.    Legal Proceedings
-------     -----------------

The Trust is involved in a number of legal proceedings arising in the normal
course of its business activities, none of which, in the opinion of the
Management, is expected to have a material adverse effect on the financial
position or liquidity of the Trust.


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

No matters were submitted to a vote of the Trust's Shareholders during the
fourth quarter of the fiscal year covered by this report.

                                      -22-
<PAGE>   25




                                     PART II
                                     -------
Item 5.  Market for the Registrant's Common Equity and Related Stockholder 
         -----------------------------------------------------------------
         Matters
         -------

Market Price Range:
------------------

The shares of the Trust are traded in the Nasdaq National Market (symbol CTRIS).
The table below contains the quarterly high and low closing bid prices for such
Shares.


<TABLE>
<CAPTION>
                Fiscal 1996                        Fiscal 1995
---------------------------------------   -----------------------------------
Quarter Ended       High      Low         Quarter Ended       High         Low
-------------       ----      ---         -------------       ----         ---
<S>                 <C>       <C>       <C>                 <C>       <C>
December 31, 1995   5-1/8     3-7/8     December 31, 1994   3-3/8     2-7/8
March 31, 1996      5/1/8     4-7/8     March 31, 1995      3-5/16    2-5/8
June 30, 1996       5         4-1/2     June 30, 1995       3-3/4     3-1/4
September 30, 1996  5         4-1/4     September 30, 1995  4-1/8     3-3/8
</TABLE>

The bid prices for the Trust's Shares shown in the table above are interdealer
prices and do not reflect retail mark ups, mark downs, or commissions and may
not be representative of actual transactions. As of December 2, 1996, there were
approximately 1,125 record holders of the Shares.

 Distributions to Shareholders:
 -----------------------------
<TABLE>
<CAPTION>

Fiscal  1996                 Amount                  Fiscal 1995           Amount
Payment Date                Per Share                Payment Date         Per Share
------------                ---------                ------------         ----------
<S>                         <C>                      <C>                  <C>   
October  20, 1995             $  .04                 October 21, 1994         $.04
January  19, 1996                .04                 January 20, 1995          .04
April  19, 1996                  .04                 April 21, 1995            .04
July  19, 1996                   .04                 July 21, 1995             .04
September 20, 1996               .04
                                ----                                          ----
                                $.20                                          $.16
                                ====                                          ====
</TABLE>

For a discussion of the tax classification of cash distributions see
Management's Discussion and Analysis of Financial Condition and Results of
Operations - Dividends.

Distributions are subject to a bank convenant which requires a minimum
Shareholders' Equity. At September 30, 1996 the amount of required Shareholders'
Equity was $20,000,000 and the amount free from this restriction was
approximately $2,500,000.
                                      -23-


<PAGE>   26
                                                                 
                                    PART II
                                    -------
<TABLE>
<CAPTION>

Item 6.   Selected Financial Data
---------------------------------
Year Ended September 30,                             1996       1995       1994       1993        1992
------------------------                             ----       ----       ----       ----        ----
                                                       (in thousands, except per share data)
OPERATIONS:
<S>                                                <C>         <C>       <C>        <C>         <C>     
Rental income                                      $ 10,368    $10,145   $ 9,650    $  9,348    $  9,400
Interest income                                          40         56        76         263         325
Dividend income                                         225          0         0           0           0
Other income                                             12         26        29          41          60
                                                   --------    -------   -------    --------    --------
Operating revenues                                   10,645     10,227     9,755       9,652       9,785
Provision for valuation reserve                       3,307          0         0           0           0
Operating expenses other than provision
 for valuation reserve                                9,398      9,631     9,870      10,384      11,125
Operating income (loss)                              (2,060)       596      (115)       (732)     (1,340)
Gains on sales of real estate                            40      2,499       445         563          51
Gains on sales of securities                            632          0         0           0           0
Extraordinary items                                       0        790       253         286           0
Net income (loss)                                    (1,388)     3,885       583         117      (1,289)
Cash distributions to shareholders                    1,037        874       735         393         117
Per Share of Beneficial Interest:
 Operating income (loss)                             ($0.40)     $0.11    ($0.02)     ($0.22)     ($0.68)
 Gains on sales of real estate                         0.01       0.46      0.09        0.17        0.02
 Gains on sales of securities                          0.12       0.00      0.00        0.00        0.00
 Extraordinary items                                   0.00       0.14      0.05        0.09        0.00
                                                   --------    -------   -------    --------    --------
 Net income (loss)                                 ($  0.27)   $  0.71   $  0.12    $   0.04    ($  0.66)
                                                   ========    =======   =======    ========    ======== 

 Cash distributions                                $   0.20    $  0.16   $  0.15    $   0.12    $   0.06
Weighted average number of Shares of
 Beneficial Interest outstanding                      5,186      5,459     4,959       3,292       1,957

</TABLE>


<TABLE>
<CAPTION>

            At September 30,                          1996       1995      1994        1993        1992
 ----------------------------------                   ----       ----      ----        ----        ----
                                                                         (in thousands)
FINANCIAL CONDITION:

<S>                                                <C>         <C>       <C>        <C>         <C>     
Properties held for sale                           $42,203     $   203   $     0    $      0    $      0
Valuation reserve                                   (3,307)          0         0           0           0
Investments in real estate                               0      40,739    45,380      49,394      51,510
Real estate mortgage loans                             119         303       236         150       1,986
Allowance for possible investment losses                 0           0         0      (6,089)     (6,089)
Investments in securities                                0         267         0          0           0
Cash and cash equivalents                            1,490         188       251         315         721
Certificates of  deposit                                 0           0       500         500         500
Insurance settlement proceeds                            0           0     3,341           0           0
Total assets                                        43,852      43,076    51,004      45,499      50,249
Mortgage notes payable                               9,563       9,266    11,111      17,126      18,807
Bank notes payable                                   9,800       6,600    11,180       8,800      15,626
Shareholders' equity                                22,500      25,126    23,150      17,669      13,714
Number of Shares of Beneficial Interest  
    outstanding at September 30                      5,179       5,217     5,471       3,716       1,957
</TABLE>


                                      -24-


<PAGE>   27


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

Financial Condition
-------------------

   
During the three-year period ended September 30, 1996 the Trust's total assets
decreased 4% to $43,852,000. On September 24, 1996 the Board of Trustees of the
Trust announced that they unanimously voted to recommend a Plan for the Orderly
Liquidation of the Trust (the "Plan"). The Plan, as proposed, would involve the
sale of the Trust's properties during a period of approximately three years.
Based on this announcement the Trust has reclassified all of its properties to
Properties held for sale at September 30, 1996, in accordance with Statement of
Financial Accounting Standards No. 121 "Accounting for the Impairment of
Long-Lived Assets and Long-Lived Assets to be Disposed of" ("SFAS No. 121"). The
Trust made a review of the carrying value of all the properties at September 30,
1996 and determined that four of the Trust's properties had a carrying value
higher than the estimated fair value, less cost to sell. The Trust, therefore,
established a valuation reserve for these four properties which totaled
$3,307,000. In determining the estimated fair value, less cost to sell, the
Trust applied an estimated capitalization rate to the individual properties'
cash flow. The Trust did not deem it necessary to obtain appraisals of any of
its properties. See Item 2, Part I for allocation of the valuation reserve. In
1994 the Trust applied the allowance for possible investment losses to three
previously foreclosed properties for which it had been previously provided. This
application was done in connection with the Trust's regular evaluation of its
portfolio of properties. The evaluation concluded that it was unlikely that
these properties would recover in value and, therefore, they were written down
to their net realizable value.
    

During this three-year period the carrying value of the Trust's invested assets
decreased 10% or $4,440,000 to $39,015,000. In fiscal 1996 the Trust purchased
the land on which its Englewood Bank Building, located in Englewood, Colorado,
is located. This land, which was previously leased by the Trust, was purchased
for a price of $1,263,000. Also, the Trust purchased a 52,554 square foot
suburban office building located in Arlington, Texas, for a purchase price of
$2,202,000. Additionally, during 1996 the Trust sold three improved properties.
The first was the sale during January and February of three condominium units
located in Davie, Florida, for a combined sales price of $138,000 which resulted
in a gain of $69,000. The second was the $600,000 sale of European Crossroads in
Dallas, Texas, which resulted in a loss of $313,000. The third was a $615,000
sale of two of the five buildings comprising the Walnut Stemmons Office Park
located in Dallas, Texas and resulted in a gain of $261,000. In fiscal 1995 the
Trust sold three improved properties. The first was the sale of the 197 room
Quality Hotel in St. Louis, Missouri for $2,650,000, which resulted in a gain of
$452,000. The second was the sale of the 124 unit Parkwood Place Apartments in
Greeley, Colorado for $2,595,000, which resulted in a gain of $1,859,000. The
third was the sale of the 51,000 square foot Walnut Hill West office building in
Dallas, Texas for $800,000 which resulted in a gain of $97,000. In fiscal 1994
the Trust purchased a 104,000 square foot office building located in Dallas,
Texas for $3,918,000. Of this amount, $2,170,000 was provided by a first
mortgage loan on the property which the Trust obtained at the time of the
purchase. Additionally, the Trust sold four vacant land parcels during this
three-year period. The result of the three purchases during this three-year
period was an increase of approximately $7,387,000 to the carrying value of the
Trust's portfolio of invested assets. The result of all the sales during this
three year period was a decrease of approximately $5,328,000 to the carrying
value of the Trust's portfolio of invested assets. Additionally, the recording
of $5,648,000 of depreciation, a non-cash adjustment, reduced the carrying value
during this three-year period. Also, during this three-year period, the Trust
made improvements to its existing properties of $2,491,000 and received payments
totaling $533,000 on real estate mortgage loans.



                                      -25-


<PAGE>   28

                                     PART II
                                     -------

Item 7.    Management's Discussion and Analysis of Financial Condition and 
           ---------------------------------------------------------------
           Results of Operations  -  (Continued)         
           --------------------

Financial Condition - (Continued)
-------------------

During the three-year period ended September 30, 1996 the Trust's mortgage notes
payable decreased 44% or $7,563,000 to $9,563,000. This resulted from additional
borrowings of $500,000 under one of the existing mortgage loans, amortization
payments of $1,029,000, the repayment of a $7,689,000 maturing loan, and
additional repayments/paydowns which reduced the mortgage notes payable
$1,515,000. Of this $1,515,000, the actual cash outlay by the Trust was
$1,463,000 with $52,000 representing discounts obtained by the Trust.
Additionally, the Trust obtained a $2,170,000 first mortgage loan in connection
with its purchase of a 104,000 square foot office building, as referenced above.
The Trust's bank notes payable increased $1,000,000 during the three-year period
ended September 30, 1996 to $9,800,000. The Trust borrowed $10,899,000,
$7,689,000 of which was used to repay the above referenced maturing mortgage
loan and the remaining $3,200,000 was used for the purchase of properties during
1996, and made principal amortization and repayments of $9,889,000.


During the three-year period ended September 30, 1996 the Trust's shareholders'
equity increased 27% or $4,831,000 to $22,500,000. This increase was primarily
the result of the Trust receiving $5,929,000 from its 1993 rights offering,
which expired January 28, 1994, net of $1,532,000 to repurchase 38,000 of the
Trust's Shares in fiscal 1996, 253,553 of the Trust's Shares in fiscal 1995 and
103,210 of the Trust's Shares in fiscal 1994, $3,080,000 of net income and
$2,646,000 of distributions to shareholders during this three-year period. As a
result of the Trust's total debt being reduced approximately $6,563,000 and
total shareholders' equity increasing $4,831,000, the Trust's debt to
shareholders' equity ratio has decreased to .86-to-1.00 at September 30, 1996
from 1.47-to-1.00 at September 30, 1993.

Liquidity and Capital Resources
-------------------------------

For each of the fiscal years ended September 30, 1996, 1995 and 1994, the
Trust's portfolio of invested assets generated sufficient revenues to cover all
operating expenses (excluding depreciation, a non-cash expense and in 1996 the
provision for valuation reserve, also a non-cash expense), required mortgage
notes amortization payments, required bank amortization payments, capital
improvements to existing properties, and distributions to shareholders. During
this three-year period the year end occupancy of the Trust's portfolio has been
79% at September 30, 1994, 81% at September 30, 1995, and 91% at September 30,
1996 while the average rental rates per square foot have increased from $8.47
for the year ended September 30, 1994 to $8.61 for the year ended September 30,
1995 to $9.14 for the year ended September 30, 1996. At this time Management
assumes that the Trust will be implementing its Plan of liquidation during
fiscal 1997. On October 7, 1996 the Trust completed a $2,450,000 sale of the
Littleton Bank Building located in Littleton, Colorado. This sale resulted in a
gain of approximately $563,000 which will be reported in the first quarter of
Fiscal 1997. Currently, the Trust has four of its properties under contracts of
sales. The Englewood Bank Building located in Englewood, Colorado is under a
contract of sale for a sales price of $5,350,000. The Executive Club Building
located in Denver, Colorado is under a contract of sale for $5,300,000. The
Spring Village Shopping Center located in Davenport, Iowa is under a contract of
sale for a sales price of $5,350,000. The Warren Plaza Shopping Center loacated
in Dubuque, Iowa is under a contract of sale for a sales price of $5,950,000.
All four of these contracts provide for due diligence periods, during which time
the buyer could cancel the contract at his option. Additionally, after the
completion of the due diligence period the buyer will place a non-refundable
deposit with the Trust. Should the buyer fail to complete the sale, these
deposits would be forfeited and retained by the Trust. Therefore,


                                      -26-
<PAGE>   29


                                     PART II
                                     -------

Item 7.    Management's Discussion and Analysis of Financial Condition and 
           ---------------------------------------------------------------
           Results of Operations  -  (Continued)
           ---------------------

Liquidity and Capital Resources  -  (Continued)
-------------------------------

there is no guarantee that these properties will actually be sold at the prices
stated. Also, the Trust has signed Letters of Intent with various buyers for the
sales of three additional properties. The total gross sales prices for these
three properties is $15,640,000. Letters of intent are only agreements in
principle on the most fundamental terms and the parties do not intend that there
be any binding obligation to buy or sell the property until such time as a
contract of sale is executed by both the buyer and the Trust. However, even
though additional properties could be sold during fiscal 1997 the Trust's
estimate for fiscal year 1997 is that operating revenues should be sufficient to
cover all operating expenses (excluding depreciation, a non-cash expense),
required monthly mortgage amortization payments and anticipated improvements to
existing properties. Under the Plan the only distributions the Trust will make
to Shareholders will be liquidating distributions resulting from the sales of
Properties. Additionally, during 1997 the Trust will accrue certain employee
severance payments which will be made to terminated employees primarily from the
proceeds of Property sales.

Management has from time to time undertaken a major renovation of a Property in
order to keep it competitive within its market. Currently, the Cannon West
Shopping Center located in Austin, Texas is having a trench drain installed at a
cost of approximately $150,000. This work is being done in order to combat a
sub-soil problem at the property. Management believes that the installation of
the trench drain will alleviate the problem. The cost of this work will be
reported in the first two quarters of fiscal year 1997. Additionally, Management
is reviewing plans for the installation of new store fronts at Tiffany Plaza, a
shopping center located in Ardmore, Oklahoma. The current estimated cost of this
work is $250,000. If the Trust proceeds with this work it should begin in the
spring of 1997. No other renovation projects are currently contemplated or in
process.

The Trust's cash flow from operations decreased $1,213,000 (55%) when comparing
1996 to 1995. The decrease was primarily due to the net activity of the
following items:

  *  In 1996 the Trust had an operating loss of $2,060,000 compared to an
     operating income of $596,000 in 1995, or a decrease of $2,656,000. Included
     in the 1996 results was a $3,307,000 provision for valuation reserve, which
     was a non-cash expense. Also, income from real estate operations was
     $424,000 higher in 1996 than 1995. Additionally, 1996 included $225,000 of
     dividend income with no like income in 1995.

  *  Other assets increased $1,971,000 from 1995 to 1996. Of this amount
     $1,918,000 represents the amount due the Trust on its sale of securities,
     which amount was received by the Trust on October 1, 1996.

For 1996 the net cash used in investing activities was $1,995,000. As previously
discussed, the Trust purchased land and a suburban office building for a total
of $3,465,000. The Trust also purchased securities for $2,057,000. Additionally,
the Trust expended $972,000 for improvements to existing properties. Cash
inflows included proceeds from the sale of three condominiums, two small office
buildings and a retail center totaling $1,386,000, $2,929,000 from the sale of
securities and $184,000 in real estate mortgage loan repayments. During 1995, as
previously discussed, the Trust sold three improved properties and a vacant land
parcel. The proceeds from these sales totaled $5,545,000. Additionally, at the
completion of the


                                      -27-
  
<PAGE>   30


                                     PART II
                                     -------

Item 7.    Management's Discussion and Analysis of Financial Condition and 
------     ---------------------------------------------------------------
           Results of Operations  -  (Continued)
           ---------------------

Liquidity and Capital Resources  -  (Continued)
-------------------------------

renovation and repair project on the Tulsa, Oklahoma Petroleum Club Building the
insurance settlement proceeds exceeded the expenditures for the work by
$738,000. The Trust also received $145,000 in real estate loan repayments. The
only net cash outflow was the $666,000 (primarily tenant improvements) spent on
improvements to existing properties and the $240,000 which the Trust invested in
the purchase of 14,000 shares in a real estate company. In 1996 net cash from
financing activities totaled $2,286,000 while in 1995 net cash used in financing
activities totaled $7,809,000, a variance of $10,095,000. Mortgage notes payable
amortization payments were $203,000 in 1996 and $330,000 in 1995. Principal
prepayments were $1,463,000 in 1995, as the Trust repaid a $498,000 first
mortgage loan and settled a $1,017,000 first mortgage loan for $965,000 (the
settlement resulted in a $52,000 extraordinary income item). In 1996 the Trust
borrowed an additional $500,000 on one of its existing mortgage loans. In 1995
the Trust paid off its $3,460,000 1986 loan and paid down the 1994 Credit
(defined below) $1,089,000. In 1996 the Trust borrowed $3,200,000 which was used
in the purchase of property, as previously discussed. In 1996 the Trust
repurchased and retired 38,000 of its shares at a cost of $174,000. In 1995 the
Trust repurchased and retired 14,000 of its shares for a cost of $48,000 and
through a tender offer made to all shareholders of the Trust repurchased and
retired 239,553 of its shares for a cost of $1,014,000. In 1995 the Trust
redeemed a $500,000 certificate of deposit. In 1996 the Trust made five
distributions of $.04 per share to shareholders of the Trust for a total of
$1,037,000. In 1995 the Trust made four distributions of $.04 per share for a
total of $874,000.

On November 30, 1994 the Trust and National City Bank of Cleveland, Ohio and
Manufacturer's and Traders Trust Company of Buffalo, New York executed a
revolving line of credit agreement for a maximum of $25,000,000 (limited by the
value of the collateral provided) ("1994 Credit"). The 1994 Credit was for an
initial term of three years. Each year the lenders review the 1994 Credit with
the option of extending the credit for one additional year. During 1996 the
lenders extended the 1994 Credit to March 1, 1999. If the lenders do not extend
the credit then, absent an event of acceleration, the Trust will have two years
in which to repay all borrowings outstanding under the 1994 Credit. The loans
will bear interest at the Trust's option at any of the following rates: (i) 1/4
of 1% over the prime lending rate; (ii) 250 basis points over the LIBOR rate; or
(iii) NCB's fixed interest rate available from time to time.

In addition to the required monthly amortization payments under the terms of the
first mortgage loans the Trust currently has (see Note E to the financial
statements), during the next five fiscal years the Trust's major debt maturities
are: in fiscal 1999 the 1994 Credit, which currently has a balance of $9,800,000
outstanding and on August 19, 2000 a $2,612,000 first mortgage loan.

Since Management is currently under the assumption that the Trust will be
selling its Properties under the Plan, the 1994 Credit and the first mortgage
loans should be repaid through the sales of the Properties. The first mortgage
loans will be required to be paid off at the closing of the sale of the Property
securing the loan. The 1994 Credit will be paid down at the time any of the
Properties securing the 1994 Credit are sold.

Results of Operations
---------------------

FISCAL YEAR COMPARISON:

Income from real estate operations in 1996 increased $424,000 (14%) and $781,000
(29%) as compared to


                                      -28-
<PAGE>   31

                                     PART II
                                     -------

Item 7.    Management's Discussion and Analysis of Financial Condition and 
           ---------------------------------------------------------------
           Results of Operations  -  (Continued)
           ---------------------

Results of Operations  -  (Continued)
---------------------

1995 and 1994, respectively. The increases related primarily to higher rental
income in 1996 compared to both 1995 and 1994 and lower depreciation expense in
1996 compared to both 1995 and 1995. Rental income was $223,000 (2%) higher in
1996 than 1995, and $718,000 (7%) higher in 1996 than 1994. Depreciation expense
in 1996 was $16,000 (1%) and $142,000 (7%) lower than in 1995 and 1994,
respectively. Real estate operating expenses were $185,000 (4%) lower in 1996
than 1995, but $79,000 (2%) higher in 1996 than 1994. The reasons for these
variances in rental income, real estate operating expenses and depreciation
expense are described below.

The Trust considers the cyclical nature of real estate markets a normal part of
portfolio risk. The performance of the various real estate markets and economies
of the Southwest remains mixed. Improvement in the Trust's operations will
depend partially upon further economic recovery of the Southwest and, in
particular, the local markets and properties where the Trust operates,
especially Dallas, Texas.

1996 - 1995

Income from real estate operations increased $424,000 (14%) from 1995 to 1996.
Rental income increased $223,000 (2%) from 1995 to 1996. Real estate operating
expenses were $185,000 lower in 1996 than 1995. The increase in rental income
was primarily due to an increase in occupancy (91% at September 30, 1996 versus
81.5% at September 30, 1995) and an increase in average rental rates ($9.14 per
occupied square foot at September 30, 1996 versus $8.61 per occupied square foot
at September 30, 1995). The decrease in real estate operating expenses was
primarily due to the sales during 1995 of the 124 unit Parkwood Place Apartments
located in Greeley, Colorado and the 51,000 square foot Walnut Hill West office
building located in Dallas, Texas, as well as the March, 1996 sale of the
European Crossroads a office/retail complex located in Dallas, Texas. During
1996 the Trust received $225,000 of dividend income on securities owned. There
was no dividend income reported in 1995. At September 30, 1996, in accordance
with the Plan the Trust made a provision for valuation reserve of $3,307,000.
There was no provision made in 1995.

In 1996 the Trust recorded net gains on the sales of real estate totaling
$40,000 as the result of four sales. The sales were as follows: (i) In January
and February, 1996 the sale of three condominium units located in Davie, Florida
for a combined sale of $138,000, resulting in a total gain of $69,000; (ii)
March, 1996 $600,000 sale of the European Crossroads located in Dallas, Texas,
which resulted in a loss of $313,000; (iii) April, 1996 $115,000 sale of 7.42
acres of vacant land located in Akron, Ohio, which resulted in a gain of
$23,000; and (iv) September, 1996 $615,000 sale of two of the five buildings of
the Walnut Stemmons Office Park located in Dallas, Texas, which resulted in a
gain of $261,000. In 1995 the Trust reported gains on the sales of real estate
totaling $2,499,000 on the sales of four properties. These sales are described
in detail under the 1995 - 1994 analysis below.

In 1996 the Trust recorded gains on the sales of securities of $632,000. There
were no gains on the sales of securities for 1995. For 1996 there were no
extraordinary items. For 1995 the Trust reported $790,000 of extraordinary items
which are described under the 1995 - 1994 analysis below.

1995 - 1994

Income from real estate operations increased $357,000 (13%) from 1994 to 1995.
Rental income increased 

                                      -29-
<PAGE>   32


                                    PART II
                                    -------

Item 7.     Management's Discussion and Analysis of Financial Condition and 
            ---------------------------------------------------------------
            Results of Operations  -  (Continued)
            ---------------------

Results of Operations  -  (Continued)
---------------------
$495,000 (5%) from 1994 to 1995. Real estate operating expenses were $264,000
(5%) higher in 1995 compared to 1994. The increase in rental income and real
estate operating expenses were primarily due to the Trust's purchase in August,
1994 of a 104,000 square foot office building located in Dallas, Texas.
Additionally, depreciation expense was $126,000 (6%) lower in 1995 than 1994.
The $343,000 (16%) decrease in interest expense was primarily due to lower
outstanding balances. In March, 1995 the Trust repaid a $498,000 first mortgage
loan on its shopping center located in Ardmore, Oklahoma. In May, 1995 the Trust
settled at a discount a $1,017,000 first mortgage loan on its office building
located in Englewood, Colorado. In February and March, 1995 the Trust repaid the
$3,460,000 1986 loan it had with a bank. Additionally, the Trust reduced the
1994 Credit balance from $7,689,000 to $6,600,000 (a reduction of $1,089,000)
during 1995.

In 1995 the Trust recorded gains totaling $2,499,000 as the result of four
property sales. The sales and gains were as follows: (i) February, 1995
$2,650,000 sale of the 197 room Quality Hotel located in St. Louis, Missouri,
which resulted in a gain of $452,000; (ii) March, 1995 $2,595,000 sale of the
124 unit Parkwood Place Apartments located in Greeley, Colorado which resulted
in a gain of $1,859,000; (iii) March, 1995 $800,000 sale of the 51,000 square
foot Walnut Hill West office building located in Dallas, Texas which resulted in
a gain of $97,000; and (iv) May, 1995 $212,000 sale of 17.7697 acres of vacant
land located in Akron, Ohio which resulted in a gain of $91,000. In 1994 the
Trust recorded gains on the sales of both a 69 acre and a 17 acre vacant land
parcel located in Akron, Ohio which resulted in total gains of $445,000.

In 1995 the Trust settled at a discount a $1,017,000 first mortgage loan on its
office building located in Englewood, Colorado. This settlement resulted in an
extraordinary income item of $52,000. In January 1994 the Trust's Petroleum Club
Building located in Tulsa, Oklahoma sustained a major fire. In July, 1994 the
Trust and its insurance company agreed on a settlement of $6,025,000. The Trust
has completed all necessary repairs and building improvements. Upon completion
of the work there was $738,000 of the settlement which had not been expended.
The Trust has recorded this $738,000 as an extraordinary income item in fiscal
1995. In addition $253,000 was the cost of building improvements made as part of
the building restoration. This $253,000 was capitalized as building improvements
and also was recorded as an extraordinary income item in fiscal 1994.

Dividends:
---------

For 1994 the Trust paid distributions to its shareholders of $735,000 or $.15
per share. For the shareholders $.07 per share of these distributions were
classified for tax purposes as dividends and $.08 per share were classified as
return of capital.

For 1995 the Trust paid distributions to its shareholders of $874,000 or $.16
per share. For the shareholders these distributions were classified for tax
purposes as dividends.

For 1996 the Trust paid distributions to its shareholders of $1,037,000 or $.20
per share. For the shareholders the $.04 per share paid in October, 1995 was
classified for tax purposes as dividends. The $.04 ($.16 total) per share paid
in January, April, July, and September, 1996 will be classified for tax purposes
as return of capital.

                                      -30-
<PAGE>   33


                                     PART II
                                     -------

Item 7.  Management's Discussion and Analysis of Financial Condition and 
         ---------------------------------------------------------------
         Results of Operations - (Continued)
         ---------------------

Income Taxes:
------------

At September 30, 1996 the Trust had net deferred tax assets of approximately
$3,048,000. As was the case at both September 30, 1995 and 1994 the Trust has
established a valuation allowance equal to its net tax assets as there is doubt
as to whether the net deferred tax asset will be realized.

Other:
-----

Inflation, which has been at relatively low rates for the past three years, has
had an immaterial impact on the Trust's operations during the three-year period
ended September 30, 1996.


Item 8.     Financial Statements and Supplementary Data.
------      -------------------------------------------

The response to this Item is submitted in a separate section of this report. See
Item 14 of this report for information concerning financial statements and
schedules filed with this report. The quarterly financial data required by this
item is included as Note L of the Notes to Financial Statements filed in Part
IV, Item 14 (a) (1) and (2).


Item 9.   Disagreement on Accounting and Financial Disclosure.
------    ----------------------------------------------------

There has not been any change in the Trust's independent auditors, nor have
there been any disagreements concerning accounting principles, auditing
procedures, or financial statement disclosure within the twenty four (24) months
prior to the date of the most recent financial statements presented in this
report.


                                      -31-


<PAGE>   34
   
                                    PART III
                                    --------

Item  10.  Directors and Executive Officers of the Registrant.
--------   --------------------------------------------------

Trustees of the Registrant:
--------------------------

         Based upon information received from the respective Trustees as of
November 15, 1996, the following information with respect to each person is
furnished:
<TABLE>
<CAPTION>

                                                             Position(s) with the Trust,
                                                           Principal Occupation, Business
Name (Age) of Trustee                                    Experience and Other Directorships
---------------------                                    -----------------------------------
<S>                                          <C>
Howard Amster
(49)(a)                                      Trustee  of the Trust  since  December,  1992;  Investment  Consultant
                                             with Everen Securities,  Inc. (securities,  investments),  Director of
                                             Astrex, Inc. (distributor of electronic components).

Robert H. Kanner
(49)(b)                                      Trustee of the Trust since December,  1992; President,  Chairman and a
                                             Director   of   Pubco   Corporation    (computer   printer   supplies,
                                             manufacturing,  and specialty construction  products).  Until June 27,
                                             1996,   President,   Chairman   and  a  Director  of  Bobbie   Brooks,
                                             Incorporated   and   Chairman   and  a  Director   of  Aspen   Imaging
                                             International,   Inc.,   which   companies   were  merged  into  Pubco
                                             Corporation  on  that  date.  Director  of  Riser  Foods,  Inc.  (food
                                             distribution).
                                                                        
John C. Kikol
(52)                                         Trustee of the Trust  since 1982;  President  of the Trust since 1974;
                                             Chairman of the Trust since February, 1995.

Leighton A. Rosenthal
(81)(c)                                      Trustee of the Trust since  October,  1991;  President  LARS Aviation,
                                             Inc. (private aircraft charters), Cleveland, Ohio.

John D. Weil
(56)(d)                                      Trustee of the Trust since June, 1991;  President  Clayton  Management
                                             Co.  (bookkeeping  and  investment  management  services),  St. Louis,
                                             Missouri.  Director of Cliffs  Drilling (oil service),  Oglebay Norton
                                             Company  (lake  shipping,   mining  and   manufacturing),   Physicians
                                             Insurance  Company of Ohio (medical  malpractice  insurance)  and Todd
                                             Shipyards, Inc. (ship building and repair company).
<FN>
(a)      Chairman of the Audit Committee.

(b)      Chairman of Investment Committee.

(c)      Chairman of the Nominating Committee.

(d)      Chairman of Compensation Committee.
</TABLE>
    


Each Trustee is a member of all of the Committees of the Trust, except that Mr.
Kikol does not serve on the Compensation

                                      -32-
<PAGE>   35
   
                                    PART III
                                    --------

Item  10.  Directors and Executive Officers of the Registrant - (Continued)
--------   -------------------------------------------------
Committee.

Except as otherwise indicated in the above table, each Trustee has had the
principal occupation or former occupation indicated for more than five years.


Executive Officers of the Registrant:
------------------------------------

<TABLE>
<CAPTION>

                                 Position(s) with the Trust,
                                    Principal Occupation,                 
                                    Business, Experience,
Name (age)                        and Other Directorships 
----------                       ---------------------------               
<S>                       <C>
John E. Kikol (52)        Chairman; Chairman of the Board of
                          Trustees since 1995; Trustee of the Trust
                          since 1982; President of the Trust since 1974. 

Michael R. Thoms(48)      Vice President and Treasurer of the Trust since 1987. 

Raymond C. Novinc(47)     Vice  President,  Secretary  and  Counsel  of the  Trust  
                          since 1986. 

Brian D. Griesinger (35)  Vice President--Management and Acquisitions of
                          the Trust since 1989. 
</TABLE>



Item  11  Executive Compensation.
--------  ----------------------

Summary Compensation of Executive Officers:
------------------------------------------

The following table sets forth the compensation awarded to, earned by or paid to
the Chairman, President and Chief Executive Officer of the Trust, who was the
only executive officer of the Trust whose total salary and bonus exceeded
$100,000 for fiscal 1996.

<TABLE>
<CAPTION>
                                            Summary Compensation Table
                                                                                         Long-term
                                                                                        Compensation           
          Name and                   Fiscal                                             ------------            All Other
          Principal                   Year          Salary            Bonuses             Options             Compensation
          Position                    Ended            $                 $              Granted (1)               $(2)
          --------                    -----            -                 -              -----------               ----
<S>                                  <C>              <C>             <C>                 <C>    
John C. Kikol                        9/30/96         $135,000         $47,000              --                   $15,151
  Chairman, President                9/30/95          135,000          47,000              3,000                $13,197
  & Chief Executive                  9/30/94          134,872          22,500             15,000                  8,915
  Officer
</TABLE>


    
                                      -33-
<PAGE>   36
   
                                    PART III
                                    --------

Item 11.  Executive Compensation. - (Continued)
-------   ----------------------

(1)  Mr. Kikol agreed to waive all rights with respect to options granted under
     the Trust's 1992 Stock Option Plan in the Amended and Restated Employment
     Agreement, dated as of September 24, 1996, between the Trust and Mr. Kikol.
     See "New Employment Agreement."

(2)  For fiscal 1996, represents the premium paid ($2,400) by the Trust for a
     "key man" insurance policy for the benefit of the Chief Executive Officer
     and his designated heirs and pension plan contribution ($12,751) for the
     Chief Executive Officer.


Old Employment Agreement:
------------------------

Effective as of January 1, 1993, the Trust entered into an Amended and Restated
Employment Agreement (the "Agreement") with John C. Kikol, the Chief Executive
Officer of the Trust. The Agreement obligated the Trust to pay the Chief
Executive Officer an annual base salary, subject to increase at the discretion
of the Board. The Agreement also provided for an annual incentive cash bonus to
the Chief Executive Officer based upon financial goals to be established by the
Trust's Compensation Committee. Either the Trust or the Chief Executive Officer
had the right to terminate the Agreement at any time, for any reason, without
any prior notice to the other; however, in the event of the Trust's termination
of the Chief Executive Officer, or a material change in the Chief Executive
Officer's duties (other than for termination for a felony conviction as
described in the Agreement), the Chief Executive Officer was entitled to a
severance payment equal to the product of the Chief Executive Officer's base
monthly salary plus one-twelfth of the officer's prior year's incentive cash
bonus multiplied by a factor of 1.5 times the number of years the Chief
Executive Officer was employed by the Trust or its previous Adviser, up to a
maximum factor of thirty-six. Had the Trust elected to terminate the Chief
Executive Officer as of December 31, 1996, the Trust would have been obligated
to pay Mr. Kikol the sum of $546,000 as a severance payment under the Agreement.
Notwithstanding the foregoing, in the event the Chief Executive Officer refused
to accept a transfer to a location outside the Cleveland area where the Trust
has a substantial investment, the Trust's obligation for severance payment set
forth above would be reduced to 50% of the above maximum severance payment. The
Agreement also contained certain other provisions customary in executive
compensation and employment agreements.

The terms of Mr. Kikol's employment with the Trust were amended and completely
restated by the Amended and Restated Employment Agreement, dated as of September
24, 1996, between the Trust and Mr. Kikol, which will be deemed to have become
effective September 1, 1996, provided that the shareholders of the Trust approve
the Employment Agreement. See "Ratification of Employment Agreement."

New Employment Agreement:
------------------------

In connection with the adoption of the Plan by the Board of Trustees, the
Compensation Committee of the Board of Trustees has approved the Amended and
Restated Employment Agreement, effective as of September 1, 1996, between the
Trust and Mr. Kikol (the "Employment Agreement"), subject to the approval of the
Trust's shareholders. The Employment Agreement amends and completely restates
the terms of Mr. Kikol's employment as President of the Trust as formerly set
forth in an Amended and Restated Employment Agreement dated as of January 1,
1993 between Mr. Kikol and the Trust.

PURPOSE. The Trust entered into the Employment Agreement in order to induce Mr.
Kikol to remain as President to implement and oversee execution of the Plan, and
to provide incentive to Mr. Kikol to maximize the liquidating distributions to
shareholders of the Trust by tying his compensation to the aggregate amount of
such distributions.

SALARY, BONUS AND OTHER COMPENSATION. The Employment Agreement provides that the
Trust will pay Mr. Kikol a base salary, from the date of effectiveness of the
Employment Agreement through December 31, 1996, at a rate of $135,000 per year
payable in semi-monthly installments, plus a bonus of $47,000 payable on
December 1, 1996. After December 31, 1996, Mr. Kikol's base salary will be paid
by the Trust at a rate of $182,000 per year in semi-monthly installments.
                                      -34-
    
<PAGE>   37
   

                                    PART III
                                    --------

Item  11.  Executive Compensation. -  (Continued)
--------   ----------------------

Under the Employment Agreement, Mr. Kikol waived all rights to unexercised stock
options to purchase Shares of Beneficial Interest of the Trust granted to him
under the Trust's 1992 Incentive Stock Option Plan. In lieu of such options, the
Trust will pay to Mr. Kikol amounts based upon the liquidating distributions to
the Trust's shareholders from time to time (the "Payments"), including a gross
up amount (the "Gross Up Amount") that, when added to the Payments, will allow
Mr. Kikol to retain a net amount after payment of all federal, state and local
income taxes equal to the net amount of the Payments. The Payments and Gross Up
Amount will be paid to Mr. Kikol at the same time as liquidating distributions
are made to shareholders. The Payments are designed to compensate Mr. Kikol in
amounts similar to the liquidating distributions that he would receive if he
exercised the options prior to such distributions. The Payments would be net of
the exercise price of the respective options, and the Gross Up Amount would be
paid in recognition of the fact that Mr. Kikol would have been able to apply
capital loss carryforwards to any capital gains he would recognize on the sale
of Shares of Beneficial Interest acquired through exercise of the incentive
stock options. The Trust believes that it will not be economically disadvantaged
by payment of the Gross Up Amount because the Trust expects to be able to deduct
for federal income tax purposes the full amount of Payments and the Gross Up
Amount, whereas it would not be entitled to any deduction upon the exercise of
incentive stock options.

INCENTIVE COMPENSATION PROGRAM. The Employment Agreement also provides for
participation by Mr. Kikol in an incentive compensation program for officers of
the Trust (the "Incentive Compensation Program"). Under the Incentive
Compensation Program, an incentive compensation pool is created for distribution
to certain key employees. The amount to be allocated to the pool is calculated
based on amounts otherwise available to be paid by the Trust as liquidating
distributions to its shareholders. The amount allocated to the pool will be the
sum of: (a) 10% of all amounts otherwise available for distribution between
$4.75 and $5.50 per Share; and (b) 15% of all amounts otherwise available for
distribution in excess of $5.50 per Share. For purposes of computing the amount
payable to the pool, liquidating distributions when made are reduced to their
present value amount as of January 1, 1997 using a discount rate of 10%. The
amounts will be allocable to the pool and available for distribution to the key
employees at the same time, and from time to time, as liquidating distributions
are made to shareholders. Mr. Kikol is entitled to receive not less than 80% of
amounts distributed from the pool.

If the Trust continues to hold properties at the end of the Liquidation Period,
the value of such properties will be considered a deemed distribution to
shareholders as of the end of the Liquidation Period in order to complete the
determination of all present valued liquidating distributions made during the
liquidation process. The Trust will then have the option of (i) allocating to
the pool an amount based on the deemed distribution of unsold properties
(reduced to a present value number and based on the 10%/15% formula described
above) or (ii) making an in kind allocation to the pool of an ownership interest
in the remaining unsold properties equal in value to the amount described in
(i).

If Mr. Kikol is terminated by the Trust (a) during 1998 and he has failed to
sell at least three Trust properties before the end of calendar year 1997 or (b)
during 1999 or thereafter and he has failed to sell at least three Trust
properties during calendar year 1998, Mr. Kikol is entitled to an immediate cash
payment of $250,000 in lieu of any participation in the pool. If Mr. Kikol's
employment is terminated during 1997 or during the periods indicated above and
he has not failed to sell the required number of Trust properties as described
above, Mr. Kikol will be entitled to payments from the pool when pool
distributions are made, as if his employment had not been terminated. Mr. Kikol
will have this same entitlement if he voluntarily terminates his employment
because of a material change in his duties. If Mr. Kikol's employment is
terminated because of his death or disability and prior to such death or
disability the present valued liquidating distributions paid and payable from
the proceeds of sales of Trust properties equaled or exceeded $4.75 per share,
he or his personal representative, as the case may be, will be entitled to
receive distributions from the pool to the extent that prior pool distributions
have not taken into account such present valued liquidating distributions. If
Mr. Kikol is terminated for misappropriation of Trust funds or property in the
amount of $25,000 or more, or if he voluntarily terminates his employment with
the Trust other than because of a material change in his duties, he forfeits any
right to payment from the pool.

    

                                      -35-

<PAGE>   38
   
                                    PART III
                                    --------

Item  11.  Executive Compensation. - (Continued)
--------   ----------------------

CERTAIN BENEFITS. The Employment Agreement provides for the continuation of
certain plan benefits currently provided to Mr. Kikol, including health and
accident insurance, retirement, group life insurance and similar plan benefits.
Mr. Kikol also is entitled to payment or reimbursement of business expenses, the
use of an automobile, the payment of club dues and the payment of premiums on an
insurance policy on his life.

TERMINATION OF AGREEMENT. The Employment Agreement may be terminated by either
the Trust or Mr. Kikol at any time and for any reason without prior notice to
the other. If terminated (i) by the Trust (except on the grounds of Mr. Kikol's
misappropriation of Trust funds or property) or (ii) by the death or disability
of Mr. Kikol or (iii) by Mr. Kikol because of a material change in his duties,
the Employment Agreement provides for a severance payment to Mr. Kikol in the
amount of $546,000. Such severance payment will be paid only if Mr. Kikol
delivers to the Trust, prior to such payment, a release of all claims against
the Trust. The Employment Agreement automatically terminates upon the death or
disability of Mr. Kikol. This severance payment is in addition to any payment to
which Mr. Kikol may be entitled under the Incentive Compensation Program
described above.

PAYMENT OF LEGAL FEES. The Employment Agreement provides for the payment of Mr.
Kikol's legal fees and expenses under certain circumstances, including the
failure of the Trust to comply with its obligations under the Employment
Agreement or in the event that the Trust or any other person takes action to
declare the Employment Agreement void and unenforceable or institutes litigation
to deny or recover from Mr. Kikol the benefits intended to be provided under the
Employment Agreement.

EXCISE TAX GROSS UP PAYMENT. If amounts payable to Mr. Kikol under the
Employment Agreement become subject to the excise tax imposed by Section 4999 of
the Internal Revenue Code, he is entitled to a gross up payment such that, after
the payment of the excise tax and any federal, state or local income taxes on
such gross up payment, he retains a net amount equal to the amount he would if
retained from payments under the Employment Agreement had the excise tax not
been applicable.

MANAGEMENT AGREEMENT. The Employment Agreement provides that, if so requested by
the Trust by means of 90 days advance written notice, Mr. Kikol will manage the
remaining unsold properties of the Trust, if any, upon completion of the
liquidation process, for an annual management fee equal to five percent of the
"gross property income" of such properties (i.e., gross rental receipts without
reduction for customary on-site expenses or reasonable travel expenses related
to such property) pursuant to a separate management agreement. Mr. Kikol's
duties under such an agreement would be, among others, to attend to routine
operational obligations associated with property management, administrative
matters, investor relations and public company duties. All salary and benefits
payable to Mr. Kikol under the Employment Agreement (other than those which
become payable prior to its termination) will cease at the commencement of the
term of the management agreement. Either party may terminate such management
services upon 90 days advance written notice to the other.

RATIFICATION. Ratification by shareholders of the adoption by the Board of
Trustees of the Employment Agreement requires the affirmative vote of holders of
a majority of Shares of Beneficial Interest represented at the meeting at which
such is taken. Such ratification is assured because Trustees of the Trust
holding approximately 70% of the outstanding Shares of Beneficial Interest of
the Trust have agreed to vote their Shares in favor of ratification of the
Employment Agreement.

The Trust compensates all Trustees (other than Mr. Kikol, who does not receive
fees for service as a Trustee) at a rate of $8,000 per annum which is paid in
quarterly installments of $2,000, said sum being in lieu of all meeting and
other fees. In addition, all Trustees are reimbursed for actual expenses
incurred in connection with meetings attended or extended services provided.





                                      -36-
    
<PAGE>   39
   
                                    PART III
                                    --------

Item  12.  Security Ownership of Certain Beneficial Owners and Management.
--------   --------------------------------------------------------------

The following table sets forth, as of November 15, 1996, information furnished
to the Trust with respect to the beneficial ownership of the Trust's Shares of
Beneficial Interest by each shareholder or group of shareholders known to the
Trust to be the beneficial owner of more than five (5%) percent of the Trust's
outstanding Shares of Beneficial Interest, each present Trustee, each nominee
for election as Trustee, each executive officer of the Trust, and all present
Trustees and executive officers of the Trust as a group.
<TABLE>
<CAPTION>

                  Beneficial Owner, Trustee,                            Number of Shares
                 Officer or Number of Persons                             Beneficially             Percent of
                           in Group                                         Owned(a)                  Class
                           --------                                         --------               -----------
<S>                                                                         <C>                         <C>  
Howard Amster (Beneficial owner and Trustee)(b)                             1,152,180                   22.4%
       23811 Chagrin Blvd., Chagrin Plaza East
       Suite 200
       Beachwood, Ohio  44122

Robert H. Kanner (Beneficial owner and Trustee)(c)                          1,300,000                   25.3
       3830 Kelley Avenue
       Cleveland, Ohio  44114

John C. Kikol (Trustee and officer)(d)                                         70,479                    1.4
       2001 Crocker Road, Suite 400
       Westlake, Ohio  44145

Leighton A. Rosenthal (Beneficial owner and Trustee)                          393,000                    7.7
       The Halle Building, Suite 310
       1228 Euclid Avenue
       Cleveland, Ohio  44115

John D. Weil (Beneficial owner and Trustee)(e)                                745,000                   14.5
       200 North Broadway, Suite 825
       St. Louis, Missouri  63102-2573

Brian D. Griesinger (Officer)                                                   7,000                      *
       2001 Crocker Road, Suite 400
       Westlake, Ohio  44145

Raymond C. Novinc (Officer)                                                     8,045                      *
       2001 Crocker Road, Suite 400
       Westlake, Ohio  44145

Michael R. Thoms (Officer)(d)                                                  28,055                      *
       2001 Crocker Road, Suite 400
       Westlake, Ohio  44145

8 present Trustees and officers listed above                                3,688,820                   71.8
<FN>
* Less than one percent.

(a)      Except as noted, in each case the beneficial owner has sole voting and sole investment power.
</TABLE>

                                      -37-
    
<PAGE>   40
   
                                    PART III
                                    --------

Item  12.  Security Ownership of Certain Beneficial Owners and Management. - 
--------   --------------------------------------------------------------
           (Continued)

(b)      Includes 131,800 Shares of Beneficial Interest held by Tamra F. Gould
         (Mr. Amster's wife) in which Mr. Amster disclaims any beneficial
         interest. Excludes 27,600 Shares of Beneficial Interest held by Sonia
         Amster (Mr. Amster's mother) in which Mr. Amster disclaims any
         beneficial interest.

(c)      The shares shown as being held by Robert H. Kanner are owned by a trust
         of which Mr. Kanner is the sole beneficiary. Mr. Kanner is not a
         trustee of such trust and has neither investment nor voting power in
         such shares. Trustees of such trust are Stephen R. Kalette and Eleonora
         Grmek who have an address of 3830 Kelley Avenue, Cleveland, Ohio 44114.
         Excludes 5,000 Shares of Beneficial Interest held by Buckeye Business
         Products Bargaining Unit Pension Trust of which Mr. Kanner is a trustee
         but not a participant.

(d)      Includes 14,934 Shares of Beneficial Interest held in a trust in which
         Messrs. Kikol and Thoms are trustees with all voting and investment
         power and have an interest as beneficiaries (with respect to a portion
         of the trust's assets). The shares of Beneficial Interest held by all
         Trustees and officers as a group in the table have been adjusted to
         eliminate the duplication of beneficial ownership.

(e)      Includes 25,000 Shares of Beneficial Interest held in the name of a
         family trust of which Mr. Weil is the trustee. Also includes 100,000
         Shares of Beneficial Interest held in the name of Richard K. Weil (the
         father of Mr. Weil), 25,000 Shares of Beneficial Interest held in the
         name of Victoria L. Weil (the daughter of Mr. Weil) and 225,000 Shares
         of Beneficial Interest in the aggregate held by Richard K. Weil, Jr.,
         Mark S. Weil and Paula K. Weil (siblings of Mr. Weil), the beneficial
         ownership of which he disclaims.

Item  13.  Certain Relationships and Related Transactions.
--------   ----------------------------------------------
None.


    

                                      -38-

<PAGE>   41


                                     PART IV
                                     -------

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

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

                  (1)    The Financial Statements listed on the List of
                         Financial Statements and Financial Statement
                         Schedules are filed as a separate section of
                         this Report.

                  (2)    The Financial Statement Schedules listed on the
                         List of the Financial Statements and Financial
                         Statement Schedules are filed as a separate
                         section of this Report.

                  (3)    The exhibits required by Item 601 of Regulation
                         S-K and identified on the Exhibit Index
                         contained in this Report.

             (b)   Reports on Form 8-K filed in the fourth quarter of 
                   Fiscal Year 1996:

                    Form 8-K dated September 24, 1996 
                         Item 5. Other Events - - On September 24, 1996 the
                         Board of Trustees of CleveTrust Realty Investors
                         (the "Trust") determined that it would submit to
                         the shareholders of the Trust a plan for the
                         orderly liquidation of the Trust pursuant to
                         Article XIII of the Trust's Declaration. A copy of
                         a News Release dated September 25, 1996 was filed
                         as Exhibit 99.1.

                         Item 7.  Financial Statements and Exhibits - - Press 
                         Release dated September 25, 1996.

             (c)     The exhibits being filed with this Report are
                     identified on the Exhibit Index contained in this
                     Report.

             (d)     The Financial Statement Schedules are filed as a 
                     separate section of this Report.





                                      -39-

<PAGE>   42


                                   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.

                                    CLEVETRUST REALTY INVESTORS
Dated:   December 9, 1996           By:    /s/  Michael R. Thoms
                                           ----------------------------
                                           Michael R. Thoms
                                           Vice President and Treasurer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed by the following persons on behalf of the registrant and in the
capacities and on the date indicated:
<TABLE>
<CAPTION>

             Signature                     Title                           Date
             ---------                     -----                            ----

<S>                              <C>                                 <C>    
*/s/   John C. Kikol             Chairman of the Board of            December 9, 1996
----------------------------     Trustees, President and
John C. Kikol                    Principal Executive Officer

 /s/   Michael R. Thoms          Vice President, Treasurer
----------------------------     Principal Financial Officer         December 9, 1996
Michael R. Thoms                 and  Principal Accounting
                                 Officer

*/s/   Howard Amster             Trustee                             December 9, 1996
----------------------------
Howard Amster

*/s/   Robert H. Kanner          Trustee                             December 9, 1996
----------------------------
Robert H. Kanner

*/s/   Leighton A. Rosenthal     Trustee                             December 9, 1996
----------------------------
Leighton A. Rosenthal

*/s/   John D. Weil              Trustee                             December 9, 1996
----------------------------
John D. Weil

*/s/  By:  Michael R. Thoms                                          December 9, 1996
----------------------------
Michael R. Thoms
Attorney-in-Fact
</TABLE>



                                      -40-

<PAGE>   43

                           ANNUAL REPORT ON FORM 10-K

                PART IV, ITEM 14(a)(1) and (2) and ITEM 14(d)

         LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES



                          YEAR ENDED SEPTEMBER 30, 1996



                           CLEVETRUST REALTY INVESTORS

                                 WESTLAKE, OHIO


<PAGE>   44


Form 10-K --Part IV, Item 14(a)(1) and (2)

CLEVETRUST REALTY INVESTORS

LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES



Financial Statements:

The following financial statements of CleveTrust Realty Investors are included
in Part II, Item 8:

     Statement of Financial Condition -- September 30, 1996 and 1995

     Statement of Operations -- Years ended September 30, 1996, 1995 and 1994

     Statement of Cash Flows -- Years ended September 30, 1996, 1995 and 1994

     Statement of Changes in Shareholders' Equity -- Years ended September 30,
      1996, 1995 and 1994

     Notes to Financial Statements


Financial Statement Schedules:

The following financial statement schedules of CleveTrust Realty Investors are
included in Part IV, Item 14 (d):

     Schedule III   --  Real Estate and Accumulated Depreciation.

All other schedules for which provision is made in the applicable regulations of
the Securities and Exchange Commission are not required under the related
instructions or are inapplicable and, therefore, have been omitted.

                                       F-1



<PAGE>   45







                         Report of Independent Auditors


Trustees and Shareholders
CleveTrust Realty Investors
Westlake, Ohio

We have audited the accompanying statement of financial condition of CleveTrust
Realty Investors as of September 30, 1996 and 1995, and the related statements
of operations, changes in shareholders' equity and cash flows for each of the
three years in the period ended September 30, 1996. Our audits also included the
financial statement schedule listed in the Index at Item 14(a). These financial
statements are the responsibility of the Trust's management. Our responsibility
is to express an opinion on these financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of CleveTrust Realty Investors at
September 30, 1996 and 1995, and the results of its operations and its cash
flows for each of the three years in the period ended September 30, 1996 in
conformity with generally accepted accounting principles. Also, in our opinion,
the related financial statement schedule, when considered in relation to the
basic financial statements taken as a whole, presents fairly in all material
respects the information set forth therein.

                                       
                                       Ernst & Young LLP


November 15, 1996
Cleveland, Ohio





                                       F-2

<PAGE>   46


STATEMENT OF FINANCIAL CONDITION

CLEVETRUST REALTY INVESTORS
<TABLE>
<CAPTION>
                                                                                       September 30,
                                                                          -----------------------------------------
                                                                             1996                         1995
                                                                          ------------                -------------
                                                                                      (in thousands)
ASSETS

<S>                                                                          <C>                           <C>  
Invested assets - - NOTES A, C and D:
 Properties held for sale                                                    $ 42,203                     $    203
 Less:  Valuation reserve                                                       3,307                            0
                                                                             --------                     --------
                                                                               38,896                          203
 Investments in real estate
  Improved properties                                                               0                       63,282
  Less: Accumulated depreciation                                                    0                       22,543
                                                                             --------                     --------
                                                                                    0                       40,739
  Real estate mortgage loans                                                      119                          303
                                                                             --------                     --------
                                                                               39,015                       41,245

Cash and cash equivalents - - NOTE A                                            1,490                          188
Investments in securities - - NOTE A                                                0                          267
Other assets                                                                    3,347                        1,376
                                                                             --------                     --------
                                                 TOTAL ASSETS                $ 43,852                     $ 43,076
                                                                             ========                     ========

LIABILITIES

Mortgage notes payable - NOTE E                                              $  9,563                     $  9,266
Bank notes payable - NOTE F                                                     9,800                        6,600
Accrued interest on notes payable - NOTE F                                         14                           23
Accrued expenses and other liabilities                                          1,975                        2,061
                                                                             --------                     --------

                                            TOTAL LIABILITIES                  21,352                       17,950

SHAREHOLDERS' EQUITY

Shares of Beneficial Interest, par value 
 $1 per Share - - NOTE G: 
  Authorized - - Unlimited 
  Issued and outstanding shares
  (9/30/96 - 5,179,143;   9/30/95 - 5,217,143)                                  5,179                        5,217
Additional paid-in capital                                                     38,850                       38,986
Accumulated deficit                                                           (21,529)                     (19,104)
                                                                             --------                     --------
                                                                               22,500                       25,099
Unrealized gains on securities                                                      0                           27
                                                                             --------                     --------
                                   TOTAL SHAREHOLDERS' EQUITY                  22,500                       25,126
                                                                             --------                     --------

                   TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                 $43,852                     $ 43,076
                                                                              =======                     ========
</TABLE>

                                      F-3


<PAGE>   47
<TABLE>
<CAPTION>


STATEMENT OF OPERATIONS

CLEVETRUST REALTY INVESTORS
                                                                       Year ended September 30,
                                                              --------------------------------------------
                                                                    1996           1995          1994
                                                              -------------   -------------  ------------
                                                                 (in thousands, except per share data)
<S>                                                              <C>            <C>           <C>     
INCOME
Real estate operations:
 Rental income                                                   $ 10,368       $ 10,145      $  9,650
 Less:
  Real estate operating expenses                                    5,060          5,245         4,981
  Depreciation expenses                                             1,830          1,846         1,972
                                                                 --------       --------      --------
                                                                    6,890          7,091         6,953
                                                                 --------       --------      --------
Income from real estate operations                                  3,478          3,054         2,697
Interest income                                                        40             56            76
Dividend income                                                       225              0             0
Other                                                                  12             26            29
                                                                 --------       --------      --------
                                                                    3,755          3,136         2,802
EXPENSES
Interest:
 Mortgage notes payable - - NOTE  E                                   888            988         1,678
 Bank notes payable - - NOTE F                                        886            789           442
                                                                 --------       --------      --------
                                                                    1,774          1,777         2,120
General and Administrative                                            734            763           797
Provision for valuation reserve                                     3,307              0             0
                                                                 --------       --------      --------
                                                                    5,815          2,540         2,917
                                                                 --------       --------      --------

                          OPERATING INCOME  (LOSS)                 (2,060)           596          (115)

Net gains on sales of real estate - -NOTE  D                           40          2,499           445
Gains on sales of securities                                          632              0             0
                                                                 --------       --------      --------
          INCOME (LOSS) BEFORE EXTRAORDINARY ITEMS                 (1,388)         3,095           330

Extraordinary items - - NOTES  C and E                                  0            790           253
                                                                 --------       --------      --------

                                 NET INCOME (LOSS)               $ (1,388)      $  3,885      $    583
                                                                 ========       ========      ========

Per Share of Beneficial Interest- - NOTE A:
  Operating income  (loss)                                       $  (0.40)      $   0.11      $  (0.02)
  Net gains on sales of real estate                                  0.01           0.46          0.09
  Gains on sales of securities                                       0.12           0.00          0.00
                                                                 --------       --------      --------

          INCOME (LOSS) BEFORE EXTRAORDINARY ITEMS                  (0.27)          0.57          0.07

  Extraordinary items                                                0.00           0.14          0.05
                                                                 --------       --------      --------

                       NET INCOME (LOSS) PER SHARE               $  (0.27)      $   0.71      $   0.12
                                                                 ========       ========      ========

 Weighted average number of Shares of
 Beneficial Interest outstanding                                    5,186          5,459         4,959
                                                                 ========       ========      ========
See notes to financial statements.

</TABLE>
                                      F-4
<PAGE>   48
STATEMENT OF CASH FLOWS

CLEVETRUST REALTY INVESTORS
<TABLE>
<CAPTION>
                                                                           Year ended September 30,
                                                                 ---------------------------------------------
                                                                     1996              1995           1994
                                                                 ------------     ------------    ------------
                                                                                 (in thousands)
<S>                                                                 <C>             <C>             <C>    
Cash flow from operating activities:
Net income (loss)                                                   $(1,388)        $ 3,885         $   583
Non-cash revenues and expenses included in income:
 Depreciation                                                         1,830           1,846           1,972
 Provision for valuation reserve                                      3,307               0               0
 Decrease in accrued interest on notes payable                           (9)             (4)            (33)
 (Decrease) increase in accrued expenses and 
   other liabilities                                                    (86)           (134)            351
 Increase in other assets                                            (1,971)            (80)            (67)
Reconciliation to net cash flow from operating activities:
 Net gains on sales of real estate                                      (40)         (2,499)           (445)
 Gains on sales of securities                                          (632)              0               0
 Extraordinary items                                                      0            (790)           (253)
                                                                    -------         -------         -------
                         CASH FLOW FROM OPERATING ACTIVITIES          1,011           2,224           2,108

Cash flow from investing activities:
Equity investments:
 Improvements to existing properties                                  (972)           (666)           (853)
 Purchase of property                                               (3,465)              0          (3,918)
 Proceeds from properties sold                                       1,386           5,545             879
 Net insurance proceeds                                                  0             738             253
Real estate mortgage loans:
 Repayments                                                            184             145             204
Investments in securities:
 Securities purchased                                               (2,057)           (240)              0
 Proceeds from sales of securities                                   2,929               0               0
                                                                    -------         -------         -------
  NET CASH (USED IN) FROM INVESTING ACTIVITIES                      (1,995)          5,522          (3,435)

Cash flow from financing activities: 
Mortgage notes payable:
 Principal amortization payments                                       (203)           (330)           (496)
 Principal repayments                                                     0          (1,463)         (7,689)
 Principal borrowings                                                   500               0           2,170
Bank notes payable:
 Principal amortization payments                                          0             (31)           (147)
 Principal repayments                                                     0          (4,549)         (5,162)
 Principal borrowings                                                 3,200               0           7,689
Certificate of Deposit                                                    0             500               0
Distributions to shareholders                                        (1,037)           (874)           (735)
Shares issued pursuant to rights offerings                                0               0           5,929
Shares repurchased and subsequently retired                            (174)         (1,062)           (296)
                                                                    -------         -------         -------
 NET CASH FROM (USED IN) FINANCING ACTIVITIES                         2,286          (7,809)          1,263
                                                                    -------         -------         -------

Increase (decrease) in cash and cash equivalents                      1,302             (63)            (64)
Balance at  beginning of year                                           188             251             315
                                                                    -------         -------         -------
Balance at end of year                                              $ 1,490         $   188         $   251
                                                                    =======         =======         =======
</TABLE>

See notes to financial statements.

                                      F-5


<PAGE>   49


STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY

CLEVETRUST REALTY INVESTORS
<TABLE>
<CAPTION>

Years Ended September 30,  1996,  1995,  and  1994

                                        Shares Of       Additional                  Unrealized        Total
                                        Beneficial       Paid-In     Accumulated      Gains On    Shareholders'
                                        Interest         Capital        Deficit      Securities       Equity
                                       ------------  -------------   --------------- ------------ --------------
                                                                  (in thousands)
<S>                                    <C>            <C>            <C>            <C>           <C>     
Balance October 1, 1993                 $  3,716       $ 35,916       $(21,963)      $      0      $ 17,669

Net income for the year ended
  September 30, 1994                                                       583                          583
Cash distributions declared
    and paid -- $.15 per share                                            (735)                        (735)
Shares issued pursuant to
  rights offering -- NOTE G                1,858          4,071                                       5,929
Shares repurchased and
  subsequently retired -- NOTE G            (103)          (193)                                       (296)
                                        --------       --------       --------       --------      --------

Balance September 30, 1994                 5,471         39,794        (22,115)             0        23,150

Net income for the year ended
 September 30, 1995                                                      3,885                        3,885
Cash distributions declared
 and paid -- $.16 per share                                               (874)                        (874)
Shares repurchased and
 subsequently retired -- NOTE G             (254)          (808)                                     (1,062)
Change in unrealized gains
 on securities                                                                             27            27
                                        --------       --------       --------       --------      --------

Balance September 30, 1995                 5,217         38,986        (19,104)            27        25,126

Net (loss) for the year ended
 September 30, 1996                                                     (1,388)                      (1,388)
Cash distributions declared
 and paid -- $.20 per share                                             (1,037)                      (1,037)
Shares repurchased and
 subsequently retired -- NOTE G              (38)          (136)                                       (174)
Change in unrealized gains
 on securities                                                                            (27)          (27)
                                        --------       --------       --------       --------      --------

Balance September 30, 1996              $  5,179       $ 38,850       $(21,529)      $      0      $ 22,500
                                        ========       ========       ========       ========      ========
</TABLE>





                                       F-6


<PAGE>   50


NOTES TO FINANCIAL STATEMENTS

CLEVETRUST REALTY INVESTORS

Years Ended September 30, 1996, 1995 and 1994

NOTE A - -  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

CleveTrust Realty Investors is a business trust organized in the State of
Massachusetts, but with its headquarters in Ohio. The Trust's primary business
objective is the ownership and operation of improved real estate.

USE OF ESTIMATES: The preparation of financial statements requires Management to
make estimates and assumptions that affect amounts reported in the financial
statements and accompanying notes. Such estimates and assumptions could change
in the future as more information becomes known, which could affect the amounts
reported and disclosed herein.

INCOME RECOGNITION: Rental income from improved properties is generally recorded
as it accrues. Interest on mortgage loans is recognized as income as it accrues
during the period the loans are outstanding except where collection of interest
is considered doubtful. Contingent rents and interest are recognized as income
when determinable. Accrual of income is suspended on any investment when the
collection of rent, principal, or interest is doubtful.
   
REAL ESTATE: In accordance with Statement of Financial Accounting Standards No.
121 "Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets to
be Disposed of," the Trust's properties are reported in the Trust's financial
statements at the lower of carrying value or estimated fair value, less cost to
sell. The Trust reviews long-lived assets whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. On September 24, 1996 the Trustees of the Trust unanimously voted
to recommend a Plan for the Orderly Liquidation of the Trust (the "Plan"). The
Plan, as proposed, would involve the sale of the Trust's properties during a
period of approximately three years. Based on the announcement the Trust has
reclassified all of its properties at September 30, 1996, in accordance with
SFAS No. 121, to Properties Held for Sale. A review of the carrying value of all
the properties at September 30, 1996 determined that four properties had a
carrying value higher than the estimated fair value, less cost to sell.
Therefore, a valuation reserve, which totals $3,307,000, was established for
these four properties to lower their carrying value to their estimated fair
value, less cost to sell. (See NOTE C for carrying values of each property)
    
Prior to the adoption by the Trust of SFAS No. 121, the Trust regularly
evaluated the recoverability of each investment in the portfolio. When
appropriate, an allowance for possible investment losses was provided for
properties acquired through foreclosure or deed in lieu of foreclosures. In
fiscal 1994 the Trust applied the allowance for possible investment losses to
three previously foreclosed properties for which it had been provided. The Trust
concluded that it was unlikely that the value of these properties would recover.
Therefore, they were written down to their net realizable value through
application of the allowance.

Real estate previously acquired by the Trust pursuant to normal real estate
purchase transactions was recorded at cost. Real estate acquired by foreclosure
or deed in lieu of foreclosure was recorded at estimated fair value at the date
of acquisition, but not in excess of the unpaid balance of the related loan plus
costs of securing title to and possession of the property.

DEPRECIATION: Depreciation on equity investments is computed by the
straight-line method at rates based upon the expected economic lives of the
assets which range from 31 to 40 years for buildings, 5 to 40 years for other
property and the specific length of the tenant lease for tenant improvements.
Additionally, one building and its permanent improvements are depreciated over a
life of 55 years. In accordance with the Plan, properties held for sale will not
be depreciated in Fiscal year 1997.


                                       F-7
<PAGE>   51


NOTES TO FINANCIAL STATEMENTS - - CONTINUED

NOTE A - -  SUMMARY OF SIGNIFICANT ACCOUNTING POLICES - - CONTINUED


REPAIRS AND CAPITAL IMPROVEMENTS: Expenditures for repairs and maintenance which
do not add to the value or prolong the useful life of property owned are charged
to expense as incurred; those expenditures for improvements which do add to the
value or extend the useful life are capitalized.

CASH AND CASH EQUIVALENTS : The Trust defines cash and cash equivalents as cash
in bank accounts and investments in marketable securities, primarily short-term
commercial paper with original maturities of three months or less.

INVESTMENTS IN SECURITIES: At September 30, 1996 the Trust did not own any
equity securities. At September 30, 1995 the Trust classified its investments in
equity securities in accordance with Statement of Financial Accounting Standards
No. 115 "Accounting for Certain Investments in Debt and Equity Securities," as
available for sale and as a result they were stated at their fair value. The
effect of the unrealized gains was included as a component of Shareholders'
Equity. Realized gains are calculated on an actual cost basis.

INCOME TAXES: Deferred income taxes are recognized for temporary differences
between the financial reporting basis of assets and liabilities and their
respective tax basis and for operating and capital loss and tax credit
carryforwards based on enacted tax rates expected to be in effect when such
amounts are realized or settled. However, deferred tax assets are recognized
only to the extent that it is more likely than not that they will be realized
based on consideration of available evidence including tax planning strategies
and other factors. The effects of changes in tax laws or rates on deferred tax
assets and liabilities are recognized in the period that includes the enactment
date.

NET INCOME PER SHARE: Net income per Share of Beneficial Interest has been
computed using the weighted average number of Shares of Beneficial Interest
outstanding each year.

RECLASSIFICATION: Certain items in previously issued financial statements have
been reclassified to conform to 1996 presentations.

NOTE B - - INCOME TAXES

The Trust's deferred tax assets and liabilities at September 30, 1996 and 1995
are as follows:
<TABLE>
<CAPTION>

                                                            1996            1995
                                                           ------          ------
                                                               (in thousands)
<S>                                                      <C>             <C>
Deferred tax assets:
  Properties held for sale - valuation reserve           $ 1,124          $  -0-
  Investments in real estate - write-downs                   -0-           1,752
  Net operating and capital loss carryforwards             3,456           2,167
  Other                                                      -0-             489

Deferred tax liabilities:
  Depreciation                                           (1,489)          (1,841)
  Other                                                     (43)             -0-
                                                        -------          -------
                                                          3,048            2,567
Valuation allowance                                      (3,048)          (2,567)
                                                        -------          -------
       Net deferred tax asset/(liability)               $  -0-           $   -0-
                                                        =======          =======
</TABLE>


                                       F-8

<PAGE>   52


NOTES TO FINANCIAL STATEMENTS - - CONTINUED

NOTE  B - - INCOME TAXES - - CONTINUED

The Trust maintains a valuation reserve equal to its net deferred tax asset as
there is doubt as to whether the net deferred tax asset will be realized.

For the fiscal year ended September 30, 1996 the Trust had a net loss for tax
purposes and therefore had no income tax expense. Additionally, the Trust had no
income tax expense for the fiscal year ended September 30, 1995. A
reconciliation between the 1995 results and the amount of income tax expense
that would result from applying Federal statutory rates to pretax income is as
follows:

<TABLE>
<CAPTION>


                                                          9/30/96       9/30/95
                                                          -------       -------
                                                             (in thousands)
<S>                                                      <C>            <C>    
Expected income tax expense at
 Federal statutory tax rate                              $  (472)       $ 1,321
Increase (decrease) in taxes resulting from:
 Effect of temporary differences                            (853)          (535)
 (Recognized) unrecognized net operating
  loss carryforward                                        1,325           (786)
                                                         -------        -------
              Income Tax Expense                         $   -0-        $   -0-
                                                         =======        =======
</TABLE>

At September 30, 1996 the Trust had, for federal tax purposes, net operating
loss and capital loss carryforwards of approximately $10.2 million. The use of
the net operating loss carryforwards is limited by Section 382 of the Internal
Revenue Code with effect for losses associated with years prior to December 28,
1992. Net capital loss carryforwards can only be utilized to the extent that net
capital gains are incurred during the next five year period. The Trust can use
approximately $ 298,000 per year of net operating loss carryforwards, plus gains
of the sales of properties ("built in gains"), plus any prior years' unused
portion (limited by carryforward periods) for losses generated prior to December
28, 1992. The Trust can also use carryforwards generated post December 28, 1992.
These carryforwards of approximately $9.5 million expire through 2011. The
remaining carryforwards of $700,000 may be recognized for a period through
fiscal 1998 against gains on sales of properties, if any , to the extent that
fair market values of these properties exceeded their tax bases as of December
28, 1992.

                                       F-9

<PAGE>   53



NOTES TO FINANCIAL STATEMENTS - - CONTINUED


NOTE C - - PROPERTIES

The following is a summary of the Trust's properties held for sale and related
indebtedness at September 30, 1996:
<TABLE>
<CAPTION>

                                                                                                  Income from
                                   Total          Accumulated        Valuation      Carrying      Real Estate       Amount of
Classification                     Cost           Depreciation        Reserve        Value        Operations        Indebtness
---------------------------   ----------------   ---------------    ------------  -------------  --------------     ------------
                                                                          (in thousands)
Office Buildings:
<S>                                    <C>               <C>                 <C>        <C>               <C>                <C>
Englewood, Colorado                    $6,103            $3,108              $0         $2,995            $375               $0
Denver, Colorado                        4,623             2,966               0          1,657             351                0
Littleton, Colorado                     3,166             1,398               0          1,768             210            1,209
Tulsa, Oklahoma                         6,959             4,408             551          2,000              10                0
Dallas, Texas                           2,452             1,792               0            660              66                0
Dallas, Texas                          11,048             3,502           2,546          5,000              (3)               0
Dallas, Texas                           4,312               272               0          4,040             302            2,612
Arlington, Texas                        2,208                24               0          2,184              78                0
                              ----------------   ---------------    ------------  -------------  --------------     ------------
                                       40,871            17,470           3,097         20,304           1,389            3,821

Commercial Properties:

Hilton Head, S. C.                      1,911             1,104               0            807             277                0
Austin, Texas                           8,225             2,174               0          6,051             559            5,742
Davenport, Iowa                         5,579             1,078               0          4,501             472                0
Dubuque, Iowa                           5,367             1,174               0          4,193             447                0
Ardmore, Oklahoma                       4,081               948             133          3,000             291                0
                              ----------------   ---------------    ------------  -------------  --------------     ------------
                                       25,163             6,478             133         18,552           2,046            5,742

Land                                      117                 0              77             40              (1)               0
                              ----------------   ---------------    ------------  -------------  --------------     ------------

Total of all properties               $66,151           $23,948          $3,307        $38,896          $3,434           $9,563
                              ================   ===============    ============  =============  ==============     ============

</TABLE>

Following is a summary of activity with regards to the properties for the three
years ended September 30, 1996:
<TABLE>
<CAPTION>

                                                          1996              1995              1994
                                                     ---------------     ------------     -------------
                                                                          (in thousands)
<S>                                                     <C>              <C>               <C>
Balance, beginning of year                                  $40,942          $45,380           $49,394
Improvements to existing properties                             972              666               853
Purchase of properties                                        3,465                0             3,918
Sales of properties - NOTE D                                 (1,346)          (3,258)             (724)
Valuation reserve                                            (3,307)               0                 0
Application of allowance for investment losses                    0                0            (6,089)
Depreciation                                                 (1,830)          (1,846)           (1,972)
                                                     ---------------     ------------     -------------

Balance, end of year                                        $38,896          $40,942           $45,380
                                                     ===============     ============     =============

</TABLE>

                                      F-10



<PAGE>   54


NOTES TO FINANCIAL STATEMENTS - - CONTINUED

NOTES  C - - PROPERTIES - - CONTINUED

On February 20, 1996 the Trust completed the purchase of the land on which its
Englewood Bank Building is located. This land, which was previously leased by
the Trust, was purchased for a price of $1,263,000.

On March 28, 1996 the Trust purchased a 52,554 square foot suburban office
building located in Arlington, Texas for a purchase price of $2,202,000.

On August 26, 1994 the Trust purchased a 104,000 square foot office building
located in Dallas, Texas for $3,918,000. Of this amount $2,170,000 was provided
by a first mortgage loan on the property, which the Trust obtained at the time
of the purchase.

On January 18, 1994 the Trust's Petroleum Club Building located in Tulsa,
Oklahoma sustained a major fire. In July, 1994 the Trust and its insurance
company agreed on a settlement of $6,025,000. The Trust has completed all
necessary repairs and building improvements for an amount less than the
settlement. The Trust has recorded $738,000 as an extraordinary income item in
fiscal 1995. The cost of building improvements made as part of the building
restoration was $253,000 was capitalized and recorded as an extraordinary income
item in fiscal 1994.

NOTE  D - - REAL ESTATE SALES

The fiscal 1996 net gains on sales of real estate totaling $40,000 include the
following: (i) $69,000 which represents the gain the Trust realized on its
January and February, 1996 sales of three condominium units located in Davie,
Florida for a combined sales price of $138,000; (ii) a loss of $313,000 the
Trust realized on its March, 1996 $600,000 sale of the European Crossroads
office/retail complex on 11.5 acres of land located in Dallas, Texas; (iii)
$23,000 represents the gain the Trust realized on its April, 1996 $115,000 sale
of 7.42 acres of vacant land located in Akron, Ohio; and (iv) $261,000
represents the gain the Trust realized on its September, 1996 $615,000 sale of
two of the five buildings comprising the Walnut Stemmons Office Park located in
Dallas, Texas.

The fiscal 1995 gains on sales of real estate totaling $2,499,000 include the
following: (i) $452,000 which represents the gain the Trust realized on its
February, 1995 $2,650,000 sale of the 197 room Quality Hotel located at the
airport in St. Louis, Missouri; (ii) $1,859,000 represents the gain the Trust
realized on its March, 1995 $2,595,000 sale of the 124 unit Parkwood Place
Apartments located in Greeley, Colorado; (iii) $97,000 represents the gain the
Trust realized on its March, 1995 $800,000 sale of the 51,000 square foot Walnut
Hill West office building located in Dallas, Texas; and (iv) $91,000 represents
the gain the Trust realized on its May, 1995 $212,000 sale of 17.7697 acres of
vacant land located in Akron, Ohio. The Trust received a purchase money mortgage
for the total $212,000 purchase price in connection with the sale.

The fiscal 1994 gains on sales of real estate totaling $445,000 include the
following: (i) $361,000 which represents the gain the Trust realized on its
March, 1994 $834,000 sale of 70 acres of vacant land located in Akron, Ohio. The
Trust received a purchase money mortgage for $290,000 of the purchase price in
connection with the sale; and (ii) $84,000 which represents the gain the Trust
realized on its August, 1994 $198,000 sale of 16.6 acres of vacant land located
in Akron, Ohio.

NOTE E - - MORTGAGE NOTES PAYABLE

At September 30, 1996 the mortgage notes payable of the Trust are non-recourse
mortgages except the first $750,000 of the $2,612,000 loan maturing August 19,
2000 which is recourse to the Trust. The following data pertains to the mortgage
notes payable as of September 30, 1996.



                                      F-11

<PAGE>   55


NOTES TO FINANCIAL STATEMENTS - - CONTINUED

NOTE E - - MORTGAGE NOTES PAYABLE - - CONTINUED
<TABLE>
<CAPTION>
                              Book Value
                               Of The
                              Investment
           Mortgage            Securing                  Base Interest
        Notes Payable          The Debt       Maturity        Rate
        -------------          ------         --------        -----
                   (in thousands)
        <S>                 <C>            <C>               <C>   
          $  5,742            $  6,051       May  7, 2002      8.300%
             2,612               4,040       Aug. 19, 2000     8.300
             1,209               1,768       July  1, 2003     8.125
          --------            --------
          $  9,563            $ 11,859
          ========            ========
</TABLE>


On October 7, 1996 the Trust completed the sale of the Littleton Bank building
located in Littleton, Colorado (see NOTE J). This property secured the above
listed $1,209,000 loan which was to mature July 1, 2003. This loan was repaid on
October 7, 1996 in connection with the sale of the property.

Required payments on the Trust's two remaining mortgage notes payable for the
succeeding five years are as follows:
<TABLE>
<CAPTION>

                Year Ending
                September 30,     Principal        Interest          Total
                ------------      ---------        --------          -----
                                                (in thousands)
                <S>              <C>             <C>              <C>   
                   1997             $  221          $  682           $  903
                   1998                240             663              903
                   1999                260             643              903
                   2000              2,712             587            3,299
                   2001                252             396              648
</TABLE>

Effective December 28, 1995 the Trust and its Lender modified the first mortgage
loan on the 14800 Quorum Office Building located in Dallas, Texas as follows:
The Trust borrowed an additional $500,000, which increased the outstanding
borrowings to $2,640,000 at the time of the transaction. Additionally, the
interest rate, which was 1.75% over the prime lending rate (9.5% at the time of
the modification) adjusted every two years, was changed to a fixed rate of 8.3%,
effective January 1, 1996, until the maturity date of August 19, 2000.

Effective September 1, 1996 the Trust and its Lender modified the first mortgage
loan on the Cannon West Shopping Center located in Austin, Texas as follows: The
interest rate was reduced from 9.5% to 8.3% and the maturity date was extended
five years from May 7, 1997 to May 7, 2002.

On March 16, 1995 the Trust repaid a $498,000 first mortgage loan on its
shopping center located in Ardmore, Oklahoma. This loan had a maturity date of
June 16, 1996. On May 1, 1995 the Trust settled at a discount, a $1,017,000
first mortgage loan on its office building located in Englewood, Colorado, which
had a maturity date of February 1, 1999. This settlement resulted in an
extraordinary income item of $52,000.

Total interest expense on mortgage notes payable did not differ materially from
interest paid.


                                      F-12

<PAGE>   56


NOTES TO FINANCIAL STATEMENTS - - CONTINUED

NOTE  F - - BANK NOTES PAYABLE

At September 30, 1996 the bank notes payable included $9,800,000 of borrowings
under the 1994 Credit Agreement. At September 30, 1995 the bank notes payable
included $6,600,000 of borrowings under the 1994 Credit Agreement.

Effective November 30, 1994 the Trust converted a September 30, 1994 $7,689,000
demand note to a revolving line of credit ("1994 Credit") issued by National
City Bank of Cleveland, Ohio ("NCB") and Manufacturer's and Traders Trust
Company of Buffalo, New York ("M&T"). The 1994 Credit is for up to $25,000,000
(but is limited by the value of the collateral provided). Of this amount a
maximum of $15,000,000 is currently available and $10,000,000 will be available
at the Trust's discretion upon payment of an activation fee of 3/4 of 1% on the
$10,000,000. The initial term of the 1994 Credit was three years. Each year the
lenders will review the 1994 Credit with the right to extend it for one
additional year. The lenders have extended the 1994 Credit to March 1, 1999.
Interest only payments, which is at the option of the Trust, will be at either
(i) 1/4 of 1% over the prime rate; (ii) 250 basis points over the LIBOR rate; or
(iii) NCB's fixed interest rate available from time to time. Additionally, a
commitment fee of 3/8 of 1% is due on any funds available but not borrowed. The
1994 Credit is secured by certain of the Trust's real estate investments and
contains certain covenants including a covenant for a minimum shareholders'
equity. At September 30, 1996 the amount of shareholders' equity free from such
restriction was approximately $2,500,000.

The Trust also had a loan with another bank which was scheduled to mature
December 25, 1993 but, had been extended to December 25, 1997. The interest rate
was prime plus 1% with a minimum rate of 7.5%. The Trust was required to make
monthly amortization payments based on a twenty-year amortization schedule. On
February 28, 1995 the Trust made a principal payment of $2,200,000 and on March
15, 1995 paid off the remaining balance of $1,260,000.

Total interest expense on bank notes payable did not differ materially from
interest paid.

NOTE  G - - SHARES OF BENEFICIAL INTEREST

On December 7, 1995 the Trust repurchased 38,000 of its Shares of Beneficial
Interest for $174,000 in an open market purchase. These shares were retired by
the Trust.

On August 21, 1995 the Trust mailed an Offer to purchase for cash an aggregate
of 500,000 Shares of Beneficial Interest for a price of $4.00 per share to each
shareholder of the Trust. The Offer ended September 22, 1995 and at its
conclusion 239,553 shares were purchased and retired by the Trust. In addition
to the $4.00 per share the Trust incurred costs of $56,000 in connection with
the Offer.

On April 17, 1995 the Trust repurchased 14,000 of its Shares of Beneficial
Interest for $48,000 in an open market purchase. These shares were retired by
the Trust.

On June 26, 1994 the Trust repurchased 103,210 of its Shares of Beneficial
Interest for $296,000 in an open market purchase. These shares were retired by
the Trust.

On November 23, 1993 the Trust mailed a prospectus and certificate of rights to
all shareholders of record as of November 12, 1993. The certificates entitled
the shareholder to the right to purchase one Share of Beneficial Interest of the
Trust for every two Shares owned at a price of $3.25 per Share. Additionally,
this offering also provided for an oversubscription privilege which entitled
each holder of a right to subscribe for Shares not purchased by other holders of
rights. Oversubscriptions were allocated prorata based on the number of Shares
owned. The offering expired on January 28, 1994. All 1,857,969 Shares available
were sold. The net proceeds to the Trust totaled $5,929,000.


                                      F-13

<PAGE>   57


NOTES TO FINANCIAL STATEMENTS - - CONTINUED

NOTE G - - SHARES OF BENEFICIAL INTEREST - - CONTINUED


On February 21, 1992 the shareholders of the Trust approved the amended and
extended 1983 Incentive Stock Option Plan, now titled the 1992 Stock Option Plan
("1992 Plan"). Under the 1992 Plan, an additional 200,000 Shares of Beneficial
Interest of the Trust are reserved and made available for issuance of options to
officers and employees of the Trust at the discretion of the Board of Trustees.
The original plan had reserved 100,000 Shares. The 1992 Plan is extended to
October 21, 2011. The option price is the fair market value on the date of the
grant and no option shall be exercisable for less than 100% of this value. Under
the 1992 Plan, the share appreciation rights granted previously will be
unaffected; however, no share appreciation rights will be issued with grants of
the 200,000 new Shares or the 17,500 Shares remaining from the original 100,000
Shares. Share appreciation rights entitle the holder to receive the difference
between the market value on the date of exercise and the option price in Shares,
cash or a combination thereof, at the discretion of the Board of Trustees.

In connection with the Trustees' Plan of Liquidation, the four primary officers
of the Trust have executed new employment contracts effective September 1, 1996.
As part of these contracts the officers waive all rights with respect to
unexercised options. In return, additional compensation will be paid to the
officers, based on a calculation of a minimum threshold of the distributions to
the Shareholders during the liquidation period. Such amounts will be expensed as
incurred.

NOTE  H - - PENSION PLAN

The Trust has a defined contribution pension plan covering all full-time
employees of the Trust. Contributions are determined as a set percentage of each
covered employee's annual cash compensation. Contributions by the Trust are
accrued during the year and paid prior to the filing of the Trust's federal
income tax return for said year. For fiscal 1996 the Trust accrued $30,000 for
contributions to the pension plan (for fiscal 1995 - $24,000 and fiscal 1994 -
$31,000).


NOTE  I - - OPERATING LEASES

Minimum future rentals due the Trust on noncancelable leases for the succeeding
five fiscal years and thereafter are as follows: 1997, $7,841,000; 1998,
$6,526,000; 1999, $5,324,000; 2000, $3,716,000; 2001, $2,777,000; and $9,214,000
thereafter. Certain leases provide for contingent rentals. The Trust received
$123,000 of contingent rentals for 1996 ($123,000 for 1995 and $131,000 for
1994). The Trust's carrying amount at September 30, 1996 of these real estate
investments consists of land of $7,547,000 and improvements of $58,487,000, less
accumulated depreciation of $23,948,000 and valuation reserve of $3,307,000.

NOTE  J - - SUBSEQUENT EVENTS

On October 7, 1996 the Trust completed a $2,450,000 sale of the Littleton Bank
Building located in Littleton, Colorado. This sale resulted in a gain of
approximately $563,000 which will be reported in the first quarter of Fiscal
Year 1997.




                                      F-14

<PAGE>   58


NOTES TO FINANCIAL STATEMENTS - - CONTINUED

NOTE  K - - QUARTERLY FINANCIAL DATA  (UNAUDITED)

Summarized quarterly financial data for the years ended September 30, 1996 and
1995 is as follows:
<TABLE>
<CAPTION>


Quarter Ended                              Dec. 31       Mar. 31     June 30      Sept. 30
-------------                              -------       -------     -------      --------
                                                 (in thousands, except per share data)
1996
----
<S>                                        <C>           <C>          <C>          <C>    
Operating revenues                         $ 2,638       $ 2,657      $ 2,693      $ 2,657
Operating income (loss)                        331           316          258       (2,965)
Net Income (loss)                              331            72          281       (2,072)
Operating income (loss) per share (1)          .06           .06          .05         (.57)
Net Income (Loss)  per share (1)               .06           .01          .06         (.40)

1995
----

Operating revenues                         $ 2,666       $ 2,614      $ 2,486      $ 2,461
Operating income before
  extraordinary item                            67            94          255          180
Extraordinary item                               0             0           52          738
Net income                                      67         2,502          398          918
Operating income per share before
  extraordinary item (1)                       .01           .02          .05          .03
Extraordinary item per share(1)                .12           .00          .02          .12
Net income (loss) per share (1)                .01           .46          .08          .16



<FN>
(1)    Per Share calculations for each of the quarters is based on a weighted
       average number of shares outstanding for each period and, therefore, the
       sum of the quarters may not necessarily equal full-year amounts.

</TABLE>
                                      F-15

<PAGE>   59



<TABLE>
<CAPTION>

     SCHEULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
     CLEVETRUST REALTY INVESTORS
     As of September 30, 1996
     (In Thousands)


                                                                                             Amount at which  carried at 
                                                       Initial Cost to Trust                       September 30, 1996           
                                                 ---------------------------    Cost of   ------------------------------------------
        Description              Encumbrances       Land       Improvements Improvements     Land      Improvements   Total (1),(4)
 --------------------------     ---------------   ---------------------------------------- ----------------------------------------
<S>                             <C>                <C>          <C>         <C>            <C>            <C>            <C>

 Office Buildings:                                                                                                                 
 Englewood Bank Bldg.
 Englewood, CO                             $0         $1,263       $4,328         $512     $1,263          $4,840        $6,103     
 Executive Club Bldg
 Denver, CO                                 0            165        2,834        1,624        165           4,458         4,623     
 Littleton Bank Bldg
 Littleton, CO                          1,209              0        2,738          428          0           3,166         3,166 (6) 
 Petroleum Club Bldg
 Tulsa,OK                                   0            648        3,306        3,005        648           6,311         6,959 (3) 
 Walnut Stemmons Office Park
 Dallas, TX                                 0            228        1,489          735        228           2,224         2,452     
 Office Alpha
 Dallas, TX                                 0          1,500        8,439        1,109      1,500           9,548        11,048 (3) 
 14800 Quorum Bldg
 Dallas, TX                             2,612            335        3,583          394        335           3,977         4,312     
 Brookside Office Bldg
 Arlington, TX                              0            300        1,902            6        300           1,908         2,208     

 Commercial Properties:
 Triangle Square
 Hilton Head, SC                            0            135        1,157          619        135           1,776         1,911     
 Cannon West
 Austin, TX                             5,742            874        6,758          593        874           7,351         8,225     
 Spring Village
 Davenport, IA                              0          1,013        4,373          193      1,013           4,566         5,579     
 Warren Plaza
 Dubuque, IA                                0            401        4,800          166        401           4,966         5,367     
 Tiffany Plaza
 Ardmore, OK                                0            684        2,847          550        684           3,397         4,081 (3) 

 Vacant Land
 Akron, OH                                  0            117            0            0        117               0           117 (3) 
                              ----------------   --------------------------------------  ---------------------------------------    

                    Totals             $9,563         $7,663      $48,554       $9,934     $7,663         $58,488       $66,151     
                              ================   ======================================  =======================================    
</TABLE>



<TABLE>
<CAPTION>

                                 
                                     Accumulated          Construction     Date      Depreciation
      Description                   Depreciation (2)        Completed     Acquired      Lives (5)
     --------------------------   ------------------     -------------------------------------------
<S>                               <C>                     <C>             <C>       <C>          
     Office Buildings:                                                              (Various from)
     Englewood Bank Bldg.
     Englewood, CO                           $3,108           1970         1971      5 to 40 years
     Executive Club Bldg
     Denver, CO                               2,966           1971         1972      5 to 40 years
     Littleton Bank Bldg
     Littleton, CO                            1,398           1972         1973      5 to 55 years
     Petroleum Club Bldg
     Tulsa,OK                                 4,408           1963         1972      5 to 40 years
     Walnut Stemmons Office Park
     Dallas, TX                               1,792           1971         1975      5 to 35 years
     Office Alpha
     Dallas, TX                               3,502           1981         1983      5 to 40 years
     14800 Quorum Bldg
     Dallas, TX                                 272           1980         1994      5 to 40 years
     Brookside Office Bldg
     Arlington, TX                               24           1986         1996      5 to 40 years

     Commercial Properties:
     Triangle Square
     Hilton Head, SC                          1,104           1975         1976      5 to 35 years
     Cannon West
     Austin, TX                               2,174           1981         1987      5 to 40 years
     Spring Village
     Davenport, IA                            1,078           1980         1987      5 to 40 years
     Warren Plaza
     Dubuque, IA                              1,174           1980         1987      5 to 40 years
     Tiffany Plaza
     Ardmore, OK                                948           1975         1989     10 to 31 years

     Vacant Land
     Akron, OH                                    0           N/A          1975           N/A
                                  ------------------

                        Totals              $23,948
                                  ==================
</TABLE>
                                     F-16
<PAGE>   60


SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION - - CONTINUED
CLEVETRUST REALTY INVESTORS
<TABLE>
<CAPTION>

                                                                                    Year Ended September 30,
                                                                     --------------------------------------------------
                                                                          1996              1995              1994
                                                                     ---------------     ------------     -------------
<S>                                                                         <C>              <C>               <C>    
(1)  Reconciliation of real estate:
    Balance of real estate at October 1, 1995,
     1994 and 1993, respectively                                            $63,485          $71,028           $73,296
    Additions during period:
     Cost of Improvements                                                       972              666               853
     Purchase of Property                                                     3,465                0             3,918
                                                                     ---------------     ------------     -------------
    Total Additions                                                           4,437              666             4,771
                                                                     ---------------     ------------     -------------
                                                                             67,922           71,694            78,067

    Application of allowance for investment losses                                0                0             6,089
    Less carrying amount of real estate sold
     or disposed                                                              1,771            8,209               950
                                                                     ---------------     ------------     -------------

    Balance of real estate at September 30,
      1996, 1995 and 1994, respectively                                     $66,151          $63,485           $71,028
                                                                     ===============     ============     =============

(2)  Reconciliation of accumulated depreciation:
    Balance of accumulated depreciation at
     October 1, 1995, 1994 and 1993, respectively                           $22,543          $25,648           $23,902
    Additions charged to expenses                                             1,830            1,846             1,972
                                                                     ---------------     ------------     -------------
                                                                             24,373           27,494            25,874
    Accumulated depreciation on real estate
     sold or disposed                                                           425            4,951               226
                                                                     ---------------     ------------     -------------

    Balance of accumulated depreciation at
      September 30, 1996, 1995 and 1994, respectively                       $23,948          $22,543           $25,648
                                                                     ===============     ============     =============

(3) On September 24, 1996 the Trustees of the Trust unanimously voted to
recommend a Plan for the Orderly Liquidation of the Trust (the "Plan"). Since
the Trust had previously adopted Statement of Financial Accounting Standards No.
121 "Accounting for the Impairment of Long-Lived Assets and Long-Lived Aseets to
be Disposed of" ("SFAS No. 121") the Trust, effective September 30, 1996,
classified all real estate owned as Property held for sale. In accordance with
this classification the Trust reviewed the fair value of all of its property.
The Trust has established a valuation reserve against four of its properties as
follows:

     Petroleum Club Bldg - Tulsa OK                                        $551,000
    Office Alpha - Dallas, TX                                             2,546,000
    Tiffany Plaza - Ardmore, OK                                             133,000
    Vacant Land - Akron, OH                                                  77,000
                                                                     ---------------
                                       Total Valuation reserve           $3,307,000
                                                                     ===============

(4) The Trust's aggregate cost for federal income tax purposes at September 30,
1996 was $66,263,000. The Trust's federal income tax return for the year ended
September 30, 1996 has not yet been filed.

(5) Depreciation lives exclude tenant improvements which are depreciated over
the specific lease term involved.

(6) At September 30, 1996 the Trust owned the building improvements subject to a
long term ground lease. On October 7, 1996 the Trust sold the improvements to
gound lease holder. The Trust will recognize a gain of approximately $563,000 in
the first quarter of the fiscal year ending September 30, 1997.

                                      F-17
</TABLE>

<PAGE>   61


                           CLEVETRUST REALTY INVESTORS

          ANNUAL REPORT ON FORM 10-K FOR YEAR ENDED SEPTEMBER 30, 1996


                                  EXHIBIT INDEX

<TABLE>
<CAPTION>

   "Assigned"                                                                      Location of
   Exhibit No. *                            Description                              Exhibit
   -------------                            -----------                              -------           
<S>                         <C>                                                 <C>
         (3) (A)            Second Amended and Restated Declaration                   Incorporated by
                            of Trust.                                              reference to Exhibit
                                                                                    (3) to Registration
                                                                                       Statement on
                                                                                      Form S-2, File
                                                                                     Number, 33-46552.

         (3) (B)            By-Laws                                                   Incorporated by
                                                                                   reference to Exhibit
                                                                                     (3) to Report on
                                                                                     Form 10-K for the
                                                                                     fiscal year ended
                                                                                    September 30, 1986.
                                                                                     (File No. 0-5641)


         (4) (1)            Credit Agreement By and Amoung CleveTrust Realty     Incorporated by reference
                            Investors, Borrower, National City Bank, as Agent,     to Exhibit (4) to Form
                            and The Banks Identified Herein dated as of           10-K for the fiscal year
                            November 30, 1994.                                   ended September 30, 1994.

         (4) (2)            Amendment to Credit Agreement dated as of April      Incorporated by reference
                            28, 1995 to the Credit Agreement By and Amoung         to Exhibit (4) to Form
                            CleveTrust Realty Investors, Borrower, National       10-K for the fiscal year
                            City Bank, as Agent, and The Banks Identified        ended September 30, 1995.
                            Herein dated as of November 30, 1994.

         (4) (3)            Deed of Trust and Security Agreement made as of           Incorporated by
                            May 28, 1987 between CleveTrust Realty Investors      reference to Exhibit (4)
                            and The Northwestern Mutual Life Insurance Company.    to Report on Form 10-K
                                                                                 for the fiscal year ended
                                                                                    September 30, 1987.
                                                                                     (File No. 0-5641)

         (4) (4)            Promissory Note dated May 28, 1987 in the amount          Incorporated by
                            of $6,500,000 with respect to the Deed of Trust       reference to Exhibit (4)
                            and Security Agreement made as of May 28, 1987         to Report on Form 10-K
                            between CleveTrust Realty Investors and the          for the fiscal year ended
                            Northwestern Mutual Life Insurance Company              September 30, 1987.
                                                                                     (File No. 0-5641)
                            Certain of the Registrant's assets are subject to
                            long-term mortgage obligations each of which
                            individually relates to indebtedness totaling less
                            than 10% of the total assets of the Registrant. The
                            Registrant hereby agrees to furnish a copy of such
                            agreements to the Commission upon its request.
</TABLE>
<PAGE>   62



                          CLEVETRUST REALTY INVESTORS

         ANNUAL REPORT ON FORM 10-K FOR YEAR ENDED SEPTEMBER 30, 1996

                                 EXHIBIT INDEX
                                       
                                --(CONTINUED)--

<TABLE>
<CAPTION>

       "Assigned"                                                                      Location of
      Exhibit No. *                             Description                               Exhibit
      -------------                             -----------                             -----------

Exhibits (10) (1) through (10) (5) represent Management contracts or
compensation plans or arrangements.

      <S>                  <C>                                                 <C>
         (10) (1)           Amended and Restated Employment Agreement                  Filed herewith
                            effective as of September 1, 1996 between                  electronically
                            CleveTrust Realty Investors and John C. Kikol.

         (10) (2)           Amended and Restated Employment Agreement                  Filed herewith
                            effective as of September 1, 1996 between                  electronically
                            CleveTrust Realty Investors and Michael R. Thoms.

         (10) (3)           Amended and Restated Employment Agreement                  Filed herewith
                            effective as of September 1, 1996 between                  electronically
                            CleveTrust Realty Investors and Raymond C. Novinc.

         (10) (4)           Amended and Restated Employment  Agreement                 Filed herewith
                            effective as of September 1, 1996 between                  electronically
                            CleveTrust Realty Investors and Brian D.
                            Griesinger.

         (10) (5)           CleveTrust Realty Investors 1992                          Incorporated by
                            Incentive Stock Option Plan.                         reference to Exhibit (10)
                                                                                 to Registration Statement
                                                                                 on Form S-2, File Number,
                                                                                         33-46552.

         (11)               Computation of net income (loss) per share of              Filed herewith
                            beneficial interest.                                       electronically
                  
         (23)               Consent of Independent Auditors.                           Filed herewith
                                                                                       electronically
                  
         (24)               Power of Attorney.                                         Filed herewith
                                                                                       electronically
                  
         (27)               Financial Data Schedule.                                   Filed herewith
                                                                                       electronically
<FN>
* Exhibits 2, 9, 12, 13, 16, 18, 19, 21, 22, and 28 are either inapplicable to
the Trust or require no answer.
 </TABLE>