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

                                    FORM 10-K


        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 1997 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

                                     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 anticipated net sales prices.
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. 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>   3



                                     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>   4


                                     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>   5



                                     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>   6


                                     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>   7

<TABLE>
<CAPTION>
                                                                          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.


                                                         Percentage
                                                 Year      Leased      Square       Total      Accumulated    Valuation    Mortgage
             Description                       Acquired    (A) (B)     Footage      Cost      Depreciation     Reserve       Debt
--------------------------------------       ---------------------------------------------------------------------------------------
OFFICE BUILDINGS:                                                                (-------------in thousands------------------)
  Colorado:
<S>                                   <C>        <C>         <C>          <C>         <C>           <C>           <C>         <C>
    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>   8





                                     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>   9


                                     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>   10



                                     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 9/30/96
       ----         --------      --------   --------------   ----------------
                                                            
       <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>   11




                                     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>   12



                                     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 9/30/96
              ----         --------        --------   --------------      ----------------
                                                    
              <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>   13



                                     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       

<FN>
       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.

</TABLE>

(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>   14


                                     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>   15
                                    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      
<FN>
    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.
</TABLE>

(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>   16



                                     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                                    
<FN>

       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.
</TABLE>                                           

(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>   17


                                     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                                    
<FN>
       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.
</TABLE>                            

(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>   18


                                     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                                   
<FN>
       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.
</TABLE>


(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>   19



                                     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                  
<FN>
       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.

</TABLE>

(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>   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: 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                                                
<FN>
       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.
</TABLE>

(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>   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: 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                                 
<FN>
       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.
</TABLE>




                                      -20-

<PAGE>   22


                                     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>   23

                                     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.

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

The following information regarding executive officers of the Trust is provided
pursuant to Instruction 3 to Item 401(b) of Regulation S-K.


<TABLE>
<CAPTION>
                                           Position(s) with the Trust,
                                              Principal Occupation,
                                              Business, Experience,
            Name (age)                       and Other Directorships
            ----------                       -----------------------
                            
                            
<S>                           <C>
John C. 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>                    
                            


                                      -22-



<PAGE>   24

                                     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

<FN>
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.

</TABLE>

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
                                ======                             ======
<FN>
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.
</TABLE>




                                      -23-



<PAGE>   25

<TABLE>
<CAPTION>
                                                              PART II
                                                          --------------


Item 6.   Selected Financial Data
----------------------------------------------

          Year Ended September 30,           1996           1995          1994          1993          1992
----------------------------------      ------------      -----------  ---------     ---------     ---------
                                                            (in thousands, except per share data)
<S>                                         <C>           <C>          <C>           <C>           <C>     
OPERATIONS:

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

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

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>   26

                                     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 anticipated sales price. The Trust, therefore, established a
valuation reserve for these four properties which totaled $3,307,000. 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. 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>   27


                                     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 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. 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>   28


                                     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>   29


                                     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>   30



                                     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>   31


                                     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>   32


                                     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>   33




                                    PART III


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

Except as set forth under "Executive Officers of the Registrant" following Item
4 of Part I, which is incorporated by reference, all information required by
this Item is incorporated by reference to the material under the caption
"Election of Trustees" to be contained in the definitive Proxy Statement to be
filed with the Commission not later than 120 days after the end of the fiscal
year covered by this report.



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

All information required by this Item is incorporated by reference to the
material under the caption "Executive Compensation" to be contained in the
definitive Proxy Statement to be filed with the Commission not later than 120
days after the end of the fiscal year covered by this report.


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

All information required by this Item is incorporated by reference to the
material under the caption "Beneficial Ownership of Principal Holders and
Management" of the definitive Proxy Statement to be filed with the Commission
not later than 120 days after the end of the fiscal year covered by this report.


Item 13.    Certain Relationships and Related Transactions.
--------    -----------------------------------------------

Information required by this Item with respect to certain relationships and
related transactions is incorporated by reference to the material under the
caption "Certain Transactions" to be contained in the definitive Proxy Statement
to be filed with the Commission not later than 120 days after the end of the
fiscal year covered by this report.




                                      -32-




<PAGE>   34

                                     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.




                                      -33-




<PAGE>   35

                                   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>




                                      -34-


<PAGE>   36





                           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>   37

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>   38

                         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 perfortn 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>   39

STATEMENT OF FINANCIAL CONDITION

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

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>

See notes to financial statements.

                                       F-3






<PAGE>   40
STATEMENT OF OPERATIONS

CLEVETRUST REALTY INVESTORS

<TABLE>
<CAPTION>
                                                 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       2,082

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
                                            =======       =======     =======

</TABLE>

See notes to financial statements.


                                      F-4
<PAGE>   41


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>   42



STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY

CLEVETRUST REALTY INVESTORS

Years Ended September 30,  1996,  1995,  and  1994
<TABLE>
<CAPTION>

                                      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>   43


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 for Long-Lived
Assets to be Disposed of" the Trust reviews long-lived assets whenever events or
changes in circumstances indicated that the carrying amount of an asset may not
be recoverable. If, based on this review, the sum of expected future cash flows
from an asset is less than the carrying amount, an impairment loss is recognized
to the extent that the carrying amount exceeds the asset's fair value.
Additionally, SFAS No. 121 requires that long-lived assets to be disposed of be
carried at the lower of amortized cost or fair market value, less cost to sell,
whichever is lower.

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 this 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 certain properties had a carrying value
lower than the estimated fair market value, less cost to sell. Therefore, a
valuation reserve was established for those properties. (See NOTE C)

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>   44

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>   <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>   45

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>   46
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)
<S>                                           <C>                 <C>              <C>         <C>          <C>         <C>
Office Buildings:
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>   47


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>   48
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>   49

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>   50

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, $3,3716,000; 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>   51

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)              .00         .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>   52

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

                                                                                           Amount   at which   carried at      
                                                Initial Coto 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     
                              ==============    ====================================    ===================================    
<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>   53

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
                                                                    ===============     ============     =============

</TABLE>
(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:

<TABLE>
<S>                                                                  <C>             
    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
                                                                    ===============
</TABLE>

(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



<PAGE>   54

                           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>   55

                           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
      -------------                             -----------                               -------
      <S>                  <C>                                                     <C>
Exhibits (10) (1) through (10) (5) represent Management contracts or compensation plans or arrangements.

         (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>