================================================================================
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

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

                                    FORM 10-K

(MARK ONE)
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
      ACT OF 1934 [FEE REQUIRED] FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1996
                                       OR
[   ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
      EXCHANGE ACT OF 1934 [NO FEE REQUIRED] FOR THE TRANSITION PERIOD
      FROM ___________________ TO ___________________


                          COMMISSION FILE NUMBER 1-6613

                              VALUE PROPERTY TRUST
             (Exact name of registrant as specified in its charter)

                MARYLAND                                       23-1862664
     (State or other jurisdiction of                        (I.R.S. employer
     incorporation or organization)                      identification number)

      120 ALBANY STREET, 8TH FLOOR                                08901
        NEW BRUNSWICK, NEW JERSEY                              (Zip code)
(Address of principal executive offices)

        Registrant's telephone number, including area code: 908-296-3080

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

           SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:

                                                          NAME OF EACH EXCHANGE
           TITLE OF EACH CLASS                             ON WHICH REGISTERED
--------------------------------------------------------------------------------
Common Shares, par value $1.00 per share                 New York Stock Exchange
<PAGE>
        Indicate by check mark whether the  registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days. Yes [ X ] No [   ]
        Indicate by check mark if the 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 the  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 ]
        Indicate by check mark whether the  registrant  has filed all  documents
and reports  required  to be filed by Section 12, 13 or 15(d) of the  Securities
Exchange Act of 1934 subsequent to the  distribution of securities  under a plan
confirmed by a court. Yes [ X ] No [   ]
        The aggregate  market value of the Common Shares held by  non-affiliates
of the  registrant  at December 13,  1996,  computed by reference to the closing
sale price of such shares as reported in the Consolidated  Transaction Reporting
System, was $15,777,437. The number of Common Shares outstanding at December 13,
1996 was 11,226,310.

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

                       DOCUMENTS INCORPORATED BY REFERENCE

        Portions of the  Registrant's  definitive Proxy Statement for the Annual
Shareholder  Meeting to be held February 25, 1997 are  incorporated by reference
into Part III of this 10-K.
<PAGE>
                                     PART I

ITEM 1.  BUSINESS.

                                     GENERAL

        Value  Property Trust (the "Trust") is a self  administered  real estate
investment trust (a "REIT") engaged in the business of managing its portfolio of
real estate  investments.  The Trust was organized in 1970 under the laws of the
State of Maryland  as PNB  Mortgage  and Realty  Investors.  In 1984,  the Trust
changed  its name to  Mortgage  and Realty  Trust.  In October  1995,  the Trust
changed  its name to Value  Property  Trust.  The  Trust is  organized  under an
Amended  and  Restated  Declaration  of Trust  dated  September  29, 1995 and as
amended  through  October 26, 1995 (the  "Amended  and Restated  Declaration  of
Trust"),  and  conducts  its  business in such a fashion as to qualify as a REIT
under  Sections  856-860 of the Internal  Revenue Code of 1986,  as amended (the
"Code").

        As of September 30, 1996,  the Trust had: (1) cash and cash  equivalents
of $29.5 million; (2) restricted cash of $12.2 million which is restricted as to
use under terms of various  escrow and lease  agreements  and the New  Indenture
(See  "Developments  During  Fiscal  1996"  below  and  "Liquidity  and  Capital
Resources" under Item 7); and (3) invested assets consisting of 7 mortgage loans
and 31 investments  in real estate owned.  Based upon the amounts of the Trust's
invested  assets as of September  30, 1996,  approximately  47.1% of the Trust's
portfolio was invested in  California,  15.6% in  Pennsylvania  and 15.9% in New
England states.  Nationally,  22.7% of the amounts of its invested assets are in
industrial or research and development  properties,  27.0% in office  buildings,
36.9% in shopping  centers,  12.9% in apartments and 0.5% in other types of real
estate properties.

            PREVIOUS CHAPTER 11 CASE AND 1991 PLAN OF REORGANIZATION

        On  April  12,   1990,   the  Trust  filed  a  voluntary   petition  for
reorganization  under Chapter 11 in the United States  Bankruptcy  Court for the
Central District of California (the "Bankruptcy Court"), commencing a bankruptcy
case,  Bankruptcy  Case No. LA 90-08976-SB  (the "Prior  Bankruptcy  Case").  On
November 21, 1990, a Joint Plan of Reorganization  (the "1991 Plan") proposed by
the Trust, the creditors'  committee and the equity committee was filed with the
Bankruptcy  Court pursuant to section 1121 of the Bankruptcy Code. The 1991 Plan
was confirmed by the Bankruptcy Court by an order entered February 27, 1991. The
Prior Bankruptcy Case was closed on November 4, 1994,  pursuant to a final order
of the Bankruptcy Court.

        The 1991 Plan provided that the holders of outstanding indebtedness were
to receive payments in installments  over a period ending on June 30, 1995, with
the right of the Trust to defer payment of certain amounts for up to twenty-four
months or until  December 31, 1995,  when all  deferred  payments  would be due.
Interest was payable  initially at Bank of America N.T. & S.A.'s  reference rate
plus one  percent,  increasing  by 0.25%  every six  months,  with  interest  on
deferred amounts  accruing at the adjusted rate plus two percent.  The 1991 Plan
also  included  certain  financial,  affirmative  and  negative  covenants.  The
forecast upon which the 1991 Plan was based assumed that the real estate markets
would  begin to  improve in fiscal  1992.  However,  the  markets  continued  to
deteriorate materially. Despite these conditions, the Trust was able to make all
required  interest  payments  and to exceed the required  amortization  payments
through December 31, 1991. These results were achieved through liquidating Trust


                                     - 1 -
<PAGE>
assets at substantial discounts from their acquisition cost. However, due to the
continued deterioration of the real estate markets, the Trust could not meet the
amortization  payment at June 30, 1992,  which  required the Trust to reduce the
debt to  $291,250,000,  taking into account  deferrals  permitted under the 1991
Plan. This  deterioration  also precluded the Trust from maintaining  compliance
with the financial  covenants of the 1991 Plan.  Thus, the Trust determined that
it was necessary to defer a portion of the principal payments on the outstanding
debt and limit certain future cash interest  payments to allow  sufficient  time
for liquidity to return to the United States real estate  market.  Such deferral
was  accomplished  by an  out-of-court  modification to the 1991 Plan (the "1992
Restructuring").

                             THE 1992 RESTRUCTURING

        Pursuant to the Trust's negotiations with the creditors'  committee,  on
June 15, 1992,  the Trust  commenced a  solicitation  of  acceptances to certain
modifications (the "1992  Modifications") to the outstanding debt obligations of
the Trust and to a prepackaged plan of reorganization (the "Proposed 1992 Plan")
to effect the 1992 Modifications. The 1992 Modifications to the outstanding debt
obligations  provided,  among  other  things,  for (i) an  increased  amount  of
required  principal  payments that could be deferred (while  retaining the final
payment date for deferred  payments at December 31, 1995),  (ii) an extension of
the permitted  repayment  period of such  deferred  amounts from 24 months to 30
months from the date a deferral is utilized,  (iii) the establishment of a limit
on the  maximum  rate of  interest  to be paid in cash on a current  basis at 9%
through  June 30, 1994,  with any excess being  accrued and paid at December 31,
1995,  (iv)  changes in certain  required  financial  covenants  to reflect  the
then-existing financial condition of the Trust and the then-existing real estate
market,  (v) with the approval of the holders of 66-2/3% of the outstanding debt
obligations,  the release of collateral for certain financings by the Trust, and
(vi) the payment of additional  consideration  to the holders of the outstanding
debt obligations equal to one percent of the principal amount of the outstanding
debt  obligations,  payable in four semi-annual  installments  commencing on the
date the 1992 Restructuring became effective. The Trust received 100% acceptance
of the  1992  Modifications  and,  on July  15,  1992,  the  Trust  successfully
restructured  its  outstanding  debt by issuance of new notes in accordance with
the proposed 1992  Modifications (the "Old Notes") and entered into an indenture
(the "Old Note Indenture")  with Wilmington Trust Company,  as trustee (the "Old
Note Trustee"),  entered into a second amendment to the Trust's then outstanding
Collateral and Security Agreement dated as of February 21, 1991 (as amended, the
"Old Collateral  Agreement")  and amended the 1991 Plan (as amended  pursuant to
the 1992 Restructuring, the "Prior Plan").

       RECENT CHAPTER 11 CASE AND 1995 PREPACKAGED PLAN OF REORGANIZATION

        The financial  projections upon which the 1992  Restructuring  was based
assumed that the real estate  markets  would stop or slow their  decline by 1993
with some  improvement  in 1994.  Instead,  after the effective date of the 1992
Restructuring,  these markets failed to improve materially. The Trust's business
operations,  including its ongoing  efforts to refinance and sell property,  did
not  generate  cash flow  sufficient  to service the Old Notes during the fiscal
years ended  September  30,  1993 and 1994.  Because  its  operating  income had
declined due to the  continued  deterioration  of the real estate  markets,  the
Trust was not able to meet its scheduled June 30, 1993 principal  payment on the
Old  Notes of  $20,000,000,  and  subsequently  the  Trust  also  failed to make
additional principal payments, constituting events of default under the Old Note
Indenture.  The Trust also failed to make interest payments on the Old Notes. In


                                     - 2 -
<PAGE>
addition,  the Trust  failed to meet certain  ratios set forth in the  financial
covenants  of the Old Note  Indenture  which  constituted  additional  events of
default under the Old Note Indenture.

        Throughout  the second and third  quarters of fiscal  1994,  the Trust's
management and advisors continued  discussions with certain principal holders of
the Old Notes and their  representatives  to explore  various  alternatives  for
restructuring the Old Notes. In March 1994, the principal holders requested that
the  Trust  agree to pay  certain  fees and  expenses  of legal  counsel  to the
principal  holders.  The Trust agreed,  and in March 1994, the principal holders
retained  counsel  to  advise  them  in  the  Trust's  financial  restructuring.
Thereafter,  in June 1994, the principal  holders requested and the Trust agreed
to pay certain fees and  expenses of a new  financial  advisor to the  principal
holders.  The negotiations among the Trust, the various creditor  constituencies
and other interested  parties in the Trust's financial  restructuring  continued
into the fourth quarter of fiscal 1994.

        On  November  17,  1994,  the  Trust  announced  that it had  reached  a
non-binding  agreement in principle with the Old Note holders to restructure the
indebtedness represented by the Old Notes (the "1995 Restructuring").

        Under  the 1995  Restructuring,  the  Trust  and the  Board of  Trustees
recommended to the Old Note holders that the Trust utilize a "prepackaged  plan"
of reorganization  (the  "Prepackaged  Plan") governed by Chapter 11 title 11 of
the United States Bankruptcy Code, as amended (the "Bankruptcy  Code").  The use
of the Prepackaged  Plan allowed the Trust, the Board of Trustees and holders of
the Old Notes to agree in advance  on the  method  and  course of  restructuring
prior to the filing of the  bankruptcy  petition in Chapter 11. To this end, the
Trust and certain  holders  who had  acquired a  significant  portion of the Old
Notes   entered  into  an  agreement  of   understanding   (the   "Agreement  of
Understanding")  pursuant to which the Trust agreed to distribute to the holders
of the Old Notes $25.0 million in cash prior to the Prepackaged  Plan's petition
date. Under this agreement,  the principal holders (who held in excess of 80% of
the Old Notes),  among other things,  agreed to vote in favor of the Prepackaged
Plan when solicited. On April 11, 1995, the Trust paid $25.0 million pursuant to
the  Agreement of  Understanding,  with such payment to be credited  against the
cash  payment of at least  $50.0  million  to be made to the  holders of the Old
Notes pursuant to the Prepackaged Plan.

        On July  12,  1995,  the  Trust  mailed  to each  holder  of Old  Notes,
outstanding   common  shares,   other  secured   claims  and  unsecured   claims
(collectively,  the  "Holders") as of the close of business on July 7, 1995 (the
"Record Date"),  a copy of the Disclosure  Statement and Proxy Statement for the
Solicitation  of  Votes  for  the  Prepackaged  Plan  of   Reorganization   (the
"Disclosure Statement").

        Pursuant to the Disclosure  Statement,  the  solicitation  of ballots in
favor of the Prepackaged  Plan expired at midnight (New York time) on August 17,
1995.   On  August  18,  1995,   the  Trust  filed  a  voluntary   petition  for
reorganization  under Chapter 11 in the Bankruptcy Court commencing a bankruptcy
case, Bankruptcy Case No. LA 95-31101-SB.  The Prepackaged Plan was confirmed by
the Bankruptcy  Court by an order entered  September 22, 1995. The Trust entered
into an amended and restated  indenture (the "Prior  Indenture") with Wilmington
Trust  Company as  trustee,  an amended and  restated  collateral  and  security
agreement  (the "Prior  Security  Agreement"),  a pledge  agreement  (the "Prior
Pledge  Agreement"),  and a registration  rights  agreement  (the  "Registration
Rights  Agreement").  The Prepackaged Plan became  effective  September 29, 1995


                                     - 3 -
<PAGE>
(the "Effective  Date") and provided for, among other things,  (i) a 1 for 33.33
reverse stock split of the outstanding  common shares affecting the shareholders
of record as of  September  29,  1995,  and (ii) the  issuance to holders of the
Trust's  debt  securities:  (a)  $110,000,000  principal  amount of newly issued
11-1/8%  Senior  Secured  Notes  due  2002  (the  "Prior  Senior  Notes"),   (b)
$71,000,000 in cash and (c)  approximately  10,889,430  new common  shares,  par
value $1.00 per share, representing, in the aggregate,  approximately 97% of the
common  shares   outstanding   after  the  Effective  Date  (all  common  shares
outstanding  after the  Effective  Date  hereinafter  referred to as the "Common
Shares").

                                  BUSINESS PLAN

        After the emergence  from  bankruptcy  on September 29, 1995,  the Trust
determined  that its  strategic  goals  should focus on  maximizing  the Trust's
overall return to shareholders.  The Trust conducted a thorough investigation of
its real estate  properties  in order to determine  the future  direction of the
Trust's operations.  The Trust refinanced its outstanding long-term indebtedness
at a  substantially  lower  rate of  interest.  The Trust also  entered  into an
engagement  letter  with  Merrill  Lynch & Co. on October 15, 1996 to advise the
Board with  respect  to options in  achieving  its  strategic  goals,  including
possible business combinations or bulk sales of assets.

        As a result  of the  property  evaluations,  the  Trust  will  focus its
ongoing operating activities in the California  (primarily San Francisco and Los
Angeles)  and  Mid-Atlantic  markets.   Specifically,   the  Trust  believes  an
opportunity  exists to enhance the value of its portfolio of retail,  industrial
and office  properties in these  geographic  regions through active  management,
improvement in occupancy levels and market appreciation.  Generally, real estate
holdings  outside  these  geographic  regions  and  property  types that are not
consistent with the strategic plan will be divested in an orderly manner.

        Consistent with this policy,  seven properties were  transferred  during
fiscal 1996 from Held for  Investment  to Held for Sale.  At September 30, 1996,
the Trust owned 31 properties of which ten are classified as Held for Sale.

        Management  may,  from  time to  time,  determine  to  sell  one or more
properties  consistent with the Trust's  strategic plan. In addition,  the Trust
may receive  unsolicited  bids for one or more properties and will consider such
bids in light of  management's  assessment  of such factors as the price offered
for the  properties,  their  possibility  for future  appreciation,  the current
return  to the  Trust  from  operating  such  properties,  and  the  fit of such
properties with the then existing portfolio of properties.

        As of September 30, 1996, the Trust had cash and  marketable  securities
valued at  approximately  $41.7 million of which $12.2 million was restricted as
to use under terms of various escrow and lease  agreements and the New Indenture
(See  "Developments  During  Fiscal  1996"  below  and  "Liquidity  and  Capital
Resources" under Item 7). The Trust intends to use certain funds,  together with
funds  from  operations  and net  proceeds  from  the  sale of  assets,  to make
appropriate  capital and tenant  improvements to its  properties.  The Trust may
also  use  available  funds  to  reduce  leverage,  to  make  other  investments
(including  investments in the Trust's Common Shares),  or to make distributions
to its  shareholders,  in each case subject to the terms of its debt instruments
as in effect from time to time.




                                     - 4 -
<PAGE>
                         DEVELOPMENTS DURING FISCAL 1996

        In March 1996, the Trust completed the disposition of substantially  all
of its mortgage loan  portfolio.  The Trust  received  $55.5 million in net cash
proceeds  through a series of transactions  which included loan repayments and a
bulk sale of certain mortgage loans. The carrying value of the loans involved in
these transactions totaled $50.5 million.

        On March 28, 1996,  the Trust  entered into a financing  agreement  with
BlackRock  Capital Finance L.P. which provided for the issuance of $67.4 million
of new Floating Rate Notes ("Floating Rate Notes") to BlackRock  Capital,  which
issuance  occurred  April 30, 1996.  The Floating Rate Notes bear interest at 30
day LIBOR + 1.375 percent,  payable monthly,  and have a stated maturity date of
May 1, 1999. The proceeds  received from the Floating Rate Notes,  together with
approximately  $56.5  million  of cash on hand,  were used to prepay in full the
Trust's outstanding 11.125% Senior Secured Notes and Mortgage Payable.  The face
amounts outstanding of the 11.125% Senior Secured Notes and the Mortgage Payable
at the time of repayment were $110.0 million and $13.9 million, respectively.

        During the first quarter of fiscal 1996, the Trust received net proceeds
of $0.3 million from the sale of land located in California.

        During the third quarter of fiscal 1996, the Trust received net proceeds
of $13.9 million from the sale of five real estate  properties.  The  properties
comprised a total of 481,000 square feet of industrial or warehouse/office  type
facilities.  Two were  located  in  Massachusetts  and one each was  located  in
California, Minnesota and Pennsylvania.

        During  the  fourth  quarter  of fiscal  1996,  the Trust  received  net
proceeds  of  $12.4  million  from the sale of  three  real  estate  properties.
Included in these sales were two industrial/office type facilities, representing
154,000  square feet,  and a 168 unit apartment  complex.  The  properties  were
located in California, Pennsylvania and Indiana.

                   COMPETITION, REGULATION, AND OTHER FACTORS

        The success of the Trust  depends  upon,  among other  factors,  general
economic  conditions and trends,  including real estate trends,  interest rates,
government regulations and legislation, income tax laws and zoning laws.

        The Trust's real estate investments are located in markets in which they
face significant competition. Many of the Trust's investments,  particularly the
office buildings,  are located in markets which have an over-supply of available
space, resulting in intense competition for tenants and low rents.

                              GOVERNMENT REGULATION

        The Trust's  properties are subject to various federal,  state and local
regulatory   requirements  such  as  local  building  codes  and  other  similar
regulations. The Trust believes that the properties are currently in substantial
compliance with all applicable regulatory requirements, although expenditures at
properties  owned by the Trust may be required  to comply with  changes in these
laws. No material  expenditures are contemplated at this time in order to comply
with any such laws or regulations.





                                     - 5 -
<PAGE>
        The Trust  believes that it is in  compliance  in all material  respects
with all federal,  state and local laws regarding hazardous or toxic substances.
To date,  compliance  with  federal,  state and local  environmental  protection
regulations has not had a material effect upon the Trust.

        The Trust has made an  application  to the New  Hampshire  Department of
Environmental  Protection  for a  ground  water  monitoring  permit.  The  Trust
believes the cost of the  monitoring  program  will not have a material  adverse
effect on the  business,  financial  condition or results of  operations  of the
Trust.

                                OTHER INFORMATION

        As of September 30, 1996, the Trust  employed 16 people.  The Trust also
has  engaged  19  independent  property  management  firms to  manage  27 of its
properties.  The Trust's current business constitutes a single business segment.
The Trust is not dependent upon a single tenant or a limited number of tenants.

        The  Trust's  principal  offices  are  currently  located  at 120 Albany
Street,  8th Floor, New Brunswick,  New Jersey 08901 and 22120 Clarendon Street,
Suite 230,  Woodland Hills,  California 91367; the Trust's telephone numbers are
(908) 296-3080 and (818) 594-8586, respectively.

                              FRESH START REPORTING

        In connection with its emergence from Chapter 11 proceedings,  the Trust
implemented  Fresh Start  Reporting as provided in  Statement of Position  90-7,
"Financial  Reporting by Entities in  Reorganization  Under the Bankruptcy Code"
("Fresh Start Reporting"). As a result, as of September 30, 1995 all assets were
recorded at  reorganization  value and all liabilities  were recorded to reflect
their fair value. For additional information on this reporting method, see Notes
to  the  Consolidated   Financial  Statements  -  Note  1  "Basis  of  Financial
Information and Plan of Reorganization."


ITEM 2.  PROPERTIES.

                                 INVESTED ASSETS

        Although the Trust has continued to fund previously  existing investment
commitments  and to fund limited  tenant  improvements  and similar  investments
necessary  to  retain  or  obtain  tenants,  the  Trust  has  not  made  any new
investments in loans or properties since its Prior  Bankruptcy Case filing,  but
it has continued to manage its investment portfolio.

        Loans are secured by first or junior mortgages.  Loans made by the Trust
were secured by  mortgages  on  income-producing  properties,  including  office
buildings,  shopping centers,  industrial  projects,  apartments and condominium
projects.  When the Trust made  investments,  it abided by various  restrictions
consisting principally of loan-to-value ratios, investment ranges and percentage
of total assets invested in loans to a single borrower.








                                     - 6 -
<PAGE>
        The Trust has 38 assets under  management  consisting  of 7 loans and 31
real estate  investments.  At September 30, 1996, the Trust has classified these
assets as follows:
<TABLE>
<CAPTION>
                                                                                                   INVESTED ASSETS
                                                                                        -----------------------------------
                                                                   Number               Carrying Value                %
                                                                   ------               -----------------------------------
                                                                                            ($000)
<S>                                                                   <C>                  <C>                     <C>   
Assets Held for Sale:
  Investments in partnerships ...............................          2                   $ 10,219                  8.1%
  Real estate investments ...................................          8                     38,171                 30.4%
                                                                   -----                   --------                -----
                                                                      10                     48,390                 38.5%
                                                                   -----                   --------                -----
Assets Held for Investment:
  Mortgage loans ............................................          7                        663                  0.5%
  Investments in partnerships ...............................          3                     13,486                 10.7%
  Real estate investments ...................................         18                     63,196                 50.3%
                                                                   -----                   --------                -----
                                                                      28                     77,345                 61.5%
                                                                   -----                   --------                -----

Total Invested Assets .......................................         38                   $125,735                100.0%
                                                                   =====                   ========                =====
</TABLE>

        The Trust's invested assets are primarily located in major  metropolitan
areas  throughout  the United  States.  As of September 30, 1996, the Trust held
investments in mortgage loans, investments in real estate and other interests in
real properties located in 14 states.

        The location,  general character and occupancy  information with respect
to the  Trust's  invested  assets  at  September  30,  1996 are set forth in the
schedules contained on the following pages.






















                                     - 7 -
<PAGE>
<TABLE>
<CAPTION>
                                                        VALUE PROPERTY TRUST

                                                       REAL ESTATE INVESTMENTS

                                                         SEPTEMBER 30, 1996


                                                                                        DATE                             OCCUPANCY
    ASSET NAME                     CITY                ST            ACQUIRED         OWNERSHIP         TOTAL SQ. FT.    @ 9/30/96
    ----------                     ----                --            --------         ---------         -------------    ---------
<S>                            <C>                     <C>            <C>                <C>           <C>                 <C>  
Junipers                       Yarmouth                ME             Feb-92             100%            188,087 SF         97.0%
Villa del Cresta               Florissant              MO             Feb-92             100%            333,038 SF         93.0%
                                                                                                       ---------                 
TOTAL APARTMENTS                                                                                         521,125 SF         94.4%
                                                                                                       ---------           ----- 

Parkway                        Richmond                CA             Jan-89             100%             87,654 SF         60.2%
Bay City Holdings*             Santa Monica            CA             Jan-95              85%            114,375 SF        100.0%
Moreno Valley                  Moreno Valley           CA             Nov-92             100%            251,090 SF        100.0%
Oaktree Industrial Park        San Dimas               CA             Oct-95             100%             27,095 SF         69.9%
Chino Business Park            Chino                   CA             Oct-95             100%             94,527 SF         56.0%
Avenue Hall                    Valencia                CA             Jul-91             100%             86,980 SF        100.0%
900 Bldg..                     Minneapolis             MN             Sep-93             100%            216,000 SF         94.8%
Keystone I Partnership*        Bristol Twp.            PA             Jun-93              70%            100,725 SF        100.0%
Fife-TPIP II*                  Fife (Tacoma)           WA             Dec-92              15%            332,508 SF        100.0%
                                                                                                       ---------                 
TOTAL INDUSTRIAL                                                                                       1,310,954 SF         92.7%
                                                                                                       ---------           ----- 

Stadium Towers                 Anaheim                 CA             Aug-88             100%             64,574 SF         85.4%
Nash                           El Segundo              CA             Jan-94             100%             45,851 SF         74.0%
Clarewood                      Woodland Hills          CA             May-92             100%             38,568 SF         91.2%
Summer Street                  Boston                  MA             Jan-90             100%             67,216 SF         81.9%
Turnpike                       Canton                  MA             Jan-91             100%             43,157 SF         46.9%
Burtonsville Commerce          Burtonsville            MD             Mar-95             100%             91,274 SF         91.9%
Keewaydin                      Salem                   NH             Aug-92             100%            125,230 SF         84.2%
Hoes Lane                      Piscataway              NJ             Aug-91             100%             37,238 SF         84.4%
Two Executive Campus           Cherry Hill             NJ             Oct-92             100%            102,310 SF         53.3%
Riverside Centre               Portland                OR             Aug-89             100%             99,233 SF        100.0%
Chestnut Street                Philadelphia            PA             Jan-91             100%             49,953 SF         75.6%
Pinebrook I                    King of Prussia         PA             May-87             100%             57,835 SF         88.7%
Pinebrook II                   King of Prussia         PA             May-87             100%             58,521 SF         95.1%
Six Sentry Parkway             Blue Bell               PA             Jun-94             100%             89,781 SF         74.8%
                                                                                                       ---------                 
TOTAL OFFICE                                                                                             970,741 SF         81.0%
                                                                                                       ---------           ----- 




                                                            (Continued)





                                                               - 8 -
<PAGE>
<CAPTION>
                                                        VALUE PROPERTY TRUST

                                                REAL ESTATE INVESTMENTS -- Continued

                                                         SEPTEMBER 30, 1996


                                                                                        DATE                             OCCUPANCY
    ASSET NAME                     CITY                ST            ACQUIRED         OWNERSHIP         TOTAL SQ. FT.    @ 9/30/96
    ----------                     ----                --            --------         ---------         -------------    ---------
<S>                            <C>                     <C>            <C>                <C>           <C>                 <C>  
Creekside Partnership*         Vacaville               CA             Oct-94              80%            116,215 SF         72.9%
Newark Partnership*            Newark                  CA             Oct-94              90%             65,760 SF         80.4%
Paseo Padre                    Fremont                 CA             Oct-90             100%            195,092 SF         91.1%
Arcade Square                  Sacramento              CA             Sep-93             100%             76,452 SF         89.1%
Berdon Plaza                   Fairhaven               MA             Apr-91             100%            112,478 SF         72.7%
Bradford Plaza                 West Chester            PA             Aug-95             100%            123,881 SF         80.0%
                                                                                                       ---------                 

TOTAL RETAIL                                                                                             689,878 SF         81.8%
                                                                                                       ---------           ----- 

TOTAL PORTFOLIO                                                                                        3,492,698 SF         87.5%
                                                                                                       =========           ===== 

</TABLE>

*The Trust has a partnership interest in this property.

See Notes to the Consolidated  Financial  Statements - Note 5 "Borrowings" for a
discussion of encumbrances on real estate properties.



























                                      - 9 -
<PAGE>
<TABLE>
<CAPTION>
                                                        VALUE PROPERTY TRUST

                                             GEOGRAPHIC DISTRIBUTION OF INVESTED ASSETS

                                                         SEPTEMBER 30, 1996


State                                        Apartments               Industrial                  Office                   Retail
-----                                        ----------               ----------                  ------                   ------
<S>                                         <C>                      <C>                        <C>                      <C>        
California                                  $        --              $ 18,217,670               $ 7,195,087              $33,811,522
Delaware                                             --                        --                        --                       --
Georgia                                              --                        --                        --                       --
Maine                                         7,815,525                        --                        --                       --
Maryland                                             --                        --                 3,892,380                       --
Massachusetts                                        --                        --                 2,647,607                6,912,007
Minnesota                                            --                 2,187,439                        --                       --
Missouri                                      8,350,360                        --                        --                       --
New Hampshire                                        --                        --                 2,635,815                       --
New Jersey                                           --                        --                 2,020,401                       --
Oregon                                               --                        --                 6,337,362                       --
Pennsylvania                                         --                 4,706,280                 9,274,891                5,628,875
Virginia                                             --                        --                        --                       --
Washington                                           --                 3,438,377                        --                       --
                                            -----------              ------------               -----------              -----------
Totals                                      $16,165,885              $ 28,549,766               $34,003,543              $46,352,404
                                            ===========              ============               ===========              ===========

Percentage                                       12.86%                    22.71%                    27.04%                   36.86%
                                            ===========              ============               ===========              ===========

<CAPTION>
                                              Residential
State                                          Mortgages               Totals                   Percentage
-----                                          ---------               ------                   ----------
<S>                                            <C>                   <C>                             <C>   
California                                     $ 39,442              $ 59,263,721                    47.13%
Delaware                                        101,372                   101,372                     0.08%
Georgia                                          35,611                    35,611                     0.03%
Maine                                                --                 7,815,525                     6.22%
Maryland                                        401,255                 4,293,635                     3.41%
Massachusetts                                        --                 9,559,614                     7.60%
Minnesota                                            --                 2,187,439                     1.74%
Missouri                                             --                 8,350,360                     6.64%
New Hampshire                                        --                 2,635,815                     2.10%
New Jersey                                           --                 2,020,401                     1.61%
Oregon                                               --                 6,337,362                     5.04%
Pennsylvania                                         --                19,610,046                    15.60%
Virginia                                         85,454                    85,454                     0.07%
Washington                                           --                 3,438,377                     2.73%
                                               --------              ------------                    ----- 
Totals                                         $663,134              $125,734,732
                                               ========              ============

Percentage                                        0.53%                                             100.00%
                                               =======                                              ====== 
</TABLE>
                                     - 10 -
<PAGE>
ITEM 3.  LEGAL PROCEEDINGS.

        A discussion of events surrounding the Trust's Prior Bankruptcy Case and
an  explanation of the material  terms of the Trust's  reorganization  under the
1991 Plan are set forth in the section  entitled  "Previous  Chapter 11 Case and
1991 Plan of  Reorganization"  under Item 1 above. The Prior Bankruptcy Case was
closed on November 4, 1994 pursuant to a final order of the Bankruptcy Court.

        A  discussion  of  events   surrounding  the  Trust's  1995  prepackaged
bankruptcy  filing  and an  explanation  of the  material  terms of the  Trust's
reorganization  under the Prepackaged Plan are set forth in the section entitled
"Recent Chapter 11 Case and 1995 Prepackaged Plan of Reorganization"  under Item
1 above.  Notwithstanding the confirmation of the Trust's Prepackaged Plan as of
September 29, 1995, the bankruptcy  court continued to have  jurisdiction  among
other things, to resolve disputes that may arise under the Prepackaged Plan.

        A third party has  alleged the  existence  of a purchase  contract  with
respect to one of the Trust's properties which the Trust disputes.  This dispute
has led to litigation.  However,  the Trust believes that this litigation,  when
resolved,  will not have a material  adverse  effect on the business,  financial
condition or results of operations of the Trust.

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

        No matter was submitted to a vote of security  holders during the fourth
quarter of the fiscal year covered by this report.

                                     PART II

ITEM 5.  MARKET FOR REGISTRANT'S COMMON SHARES AND RELATED
         SHAREHOLDER MATTERS.

                  (a) MARKET INFORMATION

        The Trust's  Common  Shares are listed for trading on the New York Stock
Exchange  ("NYSE")  under the symbol "VLP".  Prior to October 27, 1995 they were
traded under the symbol "MRT".  No dividends  have been declared by the Trust in
the past two years.  The following  table shows the high and low sales prices of
the Trust's Common Shares as reported by the NYSE during each fiscal quarter for
the past two years.  The fiscal 1995 stock prices are adjusted to give effect to
a 1 for 33.33 reverse stock split which occurred on October 2, 1995.
<TABLE>
<CAPTION>
                                         High                Low
                                         ----                ---
<S>                                    <C>                 <C>     
1996
  First Quarter                        $11                 $10     
  Second Quarter                       $13                 $10-1/2 
  Third Quarter                        $12-5/8             $12-1/8 
  Fourth Quarter                       $12-5/8             $11-3/4 
                                                                   
1995                                                               
  First Quarter                        $ 8-11/32           $ 4-5/32
  Second Quarter                       $12-1/2             $ 6-1/4 
  Third Quarter                        $11-15/32           $ 7-9/32
  Fourth Quarter                       $11-15/32           $ 9-3/8 
</TABLE>

                                     - 11 -
<PAGE>
        Pursuant to the conditions of the Prepackaged  Plan, on October 2, 1995,
the Trust  directed the NYSE to  effectuate a 1 for 33.33 reverse stock split of
the Trust's  outstanding  Common  Shares  which  resulted in a reduction  of the
Trust's outstanding Common Shares from approximately 11,226,215 to approximately
336,820. Simultaneously,  and also pursuant to the conditions of the Prepackaged
Plan in exchange for the release of certain debt by the Trust's noteholders, the
Trust directed the NYSE to issue approximately 10,889,430 new Common Shares. The
combined result of these actions by the Trust on the NYSE is that, as of October
2, 1995,  substantially  the same  amount of Common  Shares are  authorized  and
outstanding  as before the reverse stock split and issuance of new Common Shares
and on October 2, 1995 the Trust's Common Shares were trading at $10-1/2.

        The Trust incurred net operating  losses  ("NOLs") for tax purposes from
fiscal 1991 to 1996.  Beginning in fiscal 1997, NOLs available to offset taxable
income in future years will be  approximately  $102 million.  These NOLs will be
subject to Internal  Revenue Code Section 382 annual  limitations  on the use of
the NOLs. The Trust  estimates  this annual  limitation to be  approximately  $6
million.  Any  portion of the NOLs not used in any  taxable  year can be carried
forward up to fifteen years.

                  (b) HOLDERS OF COMMON SHARES

        There were  approximately  4,050  record  holders of the Trust's  Common
Shares at December 4, 1996.

                  (c) DIVIDENDS

        The Trust did not declare or pay any dividends  during either the fiscal
year ended September 30, 1996 or the fiscal year ended September 30, 1995.






























                                     - 12 -
<PAGE>
<TABLE>
<CAPTION>
ITEM 6.  SELECTED FINANCIAL DATA.


                                                  SELECTED FINANCIAL DATA
                                     (dollars in thousands, except for per share data)

                                                  Post-Confirmation                             Pre-Confirmation
                                              ------------------------       -------------------------------------------------------
                                              Year Ended September 30,                      Years Ended September 30,
                                              ------------------------       -------------------------------------------------------
                                                        1996                   1995            1994           1993            1992
                                                      --------           |   --------        --------       --------       --------
<S>                                                   <C>                    <C>             <C>            <C>            <C>     
OPERATING DATA                                                           
Total revenue                                         $ 35,066           |   $ 39,464        $ 36,277       $ 38,342       $ 42,009
Interest and other operating expenses                   25,746           |     52,120          47,668         43,967         42,077
Depreciation and amortization                            2,347           |      7,306           5,839          5,500          4,470
Provision for losses                                        --           |      3,000           2,000         37,000         32,000
                                                      --------           |   --------        --------       --------       --------
Income (loss) from operations                                            |
  before reorganization items                                            |
  and extraordinary items                                6,973           |    (22,962)        (19,230)       (48,125)       (36,538)
Reorganization items                                                     |
Professional fees and other                                              |
  expenses, net                                             --           |      5,778           2,360          5,844            934
Write down of invested assets                                            |
  to reorganization value                                   --           |     66,597              --             --             --
                                                      --------           |   --------        --------       --------       --------
Income (loss) before                                                     |
  extraordinary item                                     6,973           |    (95,337)        (21,590)       (53,969)       (37,472)
Extraordinary item - gain on                                             |
  extinguishment of debt                                    --           |     75,304              --             --             --
                                                      --------           |   --------        --------       --------       --------
Net income (loss)                                     $  6,973           |   $(20,033)       $(21,590)      $(53,969)      $(37,472)
                                                      ========           |   ========        ========       ========       ======== 
                                                                         |
Net income per share*                                   $ 0.62           |
                                                      ========           |
                                                                         |
OTHER DATA                                                               |
Funds from Operations (a):                                               |
  Net income (loss)                                     $6,973           |   $(20,033)       $(21,590)      $(53,969)      $(37,472)
  Depreciation and amortization                          2,347           |      7,306           5,839          5,500          4,470
  Reorganization expenses                                   --           |     72,375           2,360          5,844            934
  Extraordinary item-gain on                                             |
    the extinguishment of debt                              --           |    (75,304)             --             --             --
                                                      --------           |   --------        --------       --------       --------
Total                                                 $  9,320           |   $(15,656)       $(13,391)      $(42,625)      $(32,068)
                                                      ========           |   ========        ========       ========       ======== 
</TABLE>                                                                







                                     - 13 -
<PAGE>
<TABLE>
<CAPTION>
                                                  Post-Confirmation                                   Pre-Confirmation
                                            -----------------------------                -------------------------------------------
                                            September 30,   September 30,                September 30,  September 30,  September 30,
                                                1996            1995                         1994           1993           1992
                                            -------------   -------------       |        -------------  -------------  -------------
<S>                                           <C>             <C>                            <C>            <C>            <C>     
BALANCE SHEET DATA                                                              |
Invested assets                               $125,735        $207,120          |            $309,973       $347,526       $424,394
Total assets                                  $172,411        $232,329          |            $364,740       $353,874       $427,268
Allowance for losses                          $     --        $     --          |            $ 13,430       $ 11,808       $ 19,353
Senior notes (due 1999)                       $ 63,226        $     --          |            $     --       $     --       $     --
Senior notes (due 2002)                       $     --        $109,975          |            $     --       $     --       $     --
Senior notes (due 1995)                       $     --        $     --          |            $290,000       $290,000       $312,000
Mortgage payable                              $     --        $ 17,535          |            $ 17,593       $ 17,572       $ 15,615
Shareholders' equity                          $107,047        $100,074          |            $ 20,033       $ 41,623       $ 95,592
</TABLE>
*   Net  income  (loss)  per  share  for  all  pre-confirmation  periods  is not
    presented  because this  information  is not  meaningful  as a result of the
    Reorganization  and the  adoption of "Fresh  Start  Reporting".  See Item 7.
    Management's  Discussion and Analysis of Financial  Condition and Results of
    Operations.

(a) Funds From Operations ("FFO") is defined as net income,  excluding gains and
    losses from debt  restructuring and sales of real estate,  plus depreciation
    and amortization of assets related to real estate and after  adjustments for
    unconsolidated partnerships and joint ventures.






























                                     - 14 -
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
        RESULTS OF OPERATIONS.

                              MANAGEMENT DISCUSSION

        Value  Property  Trust is a Maryland  REIT  engaged in the  business  of
managing its  portfolio  of real estate  investments.  On October 26, 1995,  the
Trust's name was changed from Mortgage and Realty Trust to Value Property Trust.
On September  29,  1995,  the Trust's  Prepackaged  Plan of  Reorganization  was
declared  effective  by the  United  States  Bankruptcy  Court  for the  Central
District of California.

        Under  the  Prepackaged  Plan,  holders  of  the  Trust's   $290,000,000
principal  amount of Old Notes received:  (i)  $110,000,000  principal amount of
newly issued Senior Notes;  (ii)  $71,000,000 in cash;  and (iii)  approximately
10,889,430 new Common Shares representing in the aggregate  approximately 97% of
the Common Shares  outstanding  after the Effective Date. In connection with the
Prepackaged  Plan,  the Trust  effected a 1 for 33.33 reverse stock split of its
outstanding Common Shares.

        In connection with its emergence from Chapter 11 proceedings,  the Trust
implemented  Fresh  Start  Reporting  as of  September  30,  1995.  Fresh  Start
Reporting  was required  because:  (1) the  reorganization  value of the Trust's
assets  immediately  before the date of confirmation  was less than the total of
all  post-petition  liabilities;  (2) there  was more  than a 50%  change in the
ownership of the Trust;  and (3) there was a permanent and  substantive  loss of
control by existing  shareholders.  As a result, all assets and liabilities were
restated to reflect their appropriate value or fair value. The post-confirmation
financial  statements and schedules amounts have been segregated by a black line
in order to signify that the  financial  statements  and schedules are that of a
new reporting  entity and have been prepared on a basis which is not  comparable
to the  pre-confirmation  financial  statements  and schedules (See Notes to the
Consolidated  Financial Statements - Note 1 "Basis of Financial  Information and
Plan of  Reorganization"  for  additional  information  concerning  Fresh  Start
Reporting).

        The following  section includes a discussion and analysis of the results
of operations for the years ended  September 30, 1996,  1995 and 1994 and should
be read in conjunction with the consolidated  financial statements and the notes
thereto.  The Trust has, for the past several years,  reported  significant  net
losses.  As a result  of the 1995  Restructuring,  past  results  should  not be
indicative of future operating performance.  Future results of operations of the
Trust will not be comparable to the historical operating performance.

                              RESULTS OF OPERATIONS

        The Trust  reported  net income for fiscal 1996 of $7.0 million or $0.62
per share compared to a net loss of $20.0 million for fiscal 1995 and a net loss
of $21.6 million for fiscal 1994.  The 1995 loss  includes:  (1)  reorganization
items for professional fees of $6.2 million, interest income of $0.4 million and
an adjustment  that reduced  invested assets by $66.6 million as a result of the
adoption  of  Fresh  Start  Reporting;  and (2) an  extraordinary  item of $75.3
million reflecting the gain on extinguishment of debt. The Trust had income from
operations,  before  reorganization  and extraordinary  items of $7.0 million in
fiscal 1996  compared to the loss of $23.0 million for fiscal 1995 and a loss of
$19.2 million for fiscal 1994.



                                     - 15 -
<PAGE>
        Rental  income was $26.9  million  for  fiscal  1996  compared  to $24.6
million for fiscal 1995 and $18.5 million for fiscal 1994. In addition to rental
income, the Trust received  reimbursement of certain operating expenses totaling
$3.6  million,  $2.3 million and $1.7  million for fiscal  1996,  1995 and 1994,
respectively.  The increases in rental income and reimbursed  expenses on rental
properties are the result of continued foreclosure on real estate properties and
improvement in occupancy  levels. At September 30, 1996, the Trust owned 31 real
estate  properties  compared  to 38 and  34 at  September  30,  1995  and  1994,
respectively.  Two properties were added early during fiscal 1996 as a result of
foreclosures.  Nine  properties  were sold during  fiscal  1996,  of which eight
occurred during the last two quarters.  Two of the eight property sales occurred
during  the  last  month  of  fiscal  1996.  As a result  of the  timing  of the
foreclosures  and the property  sales,  the Trust  recorded  operations  on real
estate  properties  for a longer time period on a greater  number of  properties
during  fiscal 1996 than fiscal  1995.  Occupancy  levels  increased to 87.5% at
September  30, 1996  compared to 81.1% and 79.6% at September 30, 1995 and 1994,
respectively.

        Interest  and fee income on mortgage  loans was $2.9  million for fiscal
1996 compared to $9.4 million in fiscal 1995. In March 1996, the Trust completed
the disposition of substantially  all of its mortgage loan portfolio.  The Trust
received  $55.5  million in net cash proceeds  through a series of  transactions
which included loan  repayments and a bulk sale of certain  mortgage loans. As a
result,   interest  income  earned  on  the  mortgage  loan  portfolio  will  be
substantially  reduced  in the  future.  The  Trust's  remaining  mortgage  loan
portfolio is currently less than $0.7 million. Interest and fee income decreased
from $14.7  million in fiscal 1994 to $9.4  million in fiscal  1995.  The fiscal
1995 decrease  resulted  primarily  from a reduction in earning  mortgage  loans
which  averaged  $97.8  million for fiscal 1995  compared to $131.4  million for
fiscal 1994. During fiscal 1995,  mortgage loans of approximately  $10.9 million
were transferred to real estate and $22.7 million have been repaid.

        Interest  on  short-term  investments  was $1.7  million for fiscal 1996
compared  to $3.1  million  and $1.2  million  for  fiscal  years 1995 and 1994,
respectively.  The  decrease  in  fiscal  1996 is due to the  reduction  in cash
balances as a result of a $25.0  million  payment  made on April 11, 1995 and an
additional  $46.0  million  payment made on  September  29, 1995 to the Old Note
Holders in conjunction with the 1995 Restructuring. Prior to these payments, the
Trust was  continuing to accumulate  cash and since  September 30, 1993, had not
made  payments of interest or  principal  on its  indebtedness.  Available  cash
averaged  $28.9  million  for fiscal 1996  compared  to $57.6  million and $32.0
million in fiscal years 1995 and 1994, respectively. At September 30, 1996, cash
and cash equivalents,  including restricted cash, were $41.7 million compared to
$16.8 million at September 30, 1995.

        Interest expense for fiscal 1996 totaled $10.5 million compared to $35.9
million and $33.0  million  for fiscal  years 1995 and 1994,  respectively.  The
Trust's  average  borrowing cost for fiscal 1996 was 10.6% compared to 13.3% and
10.7% for fiscal years 1995 and 1994, respectively. Included in interest expense
is the amortization of deferred costs incurred in obtaining debt financing which
are amortized over the term of the debt agreement.








                                     - 16 -
<PAGE>
        Depreciation and  amortization on rental  properties for fiscal 1996 was
$2.3 million compared to $7.3 million and $5.8 million for fiscal 1995 and 1994,
respectively. The decrease in fiscal 1996 was primarily a result of the adoption
of Fresh Start Reporting.  Prior to Fresh Start Reporting, the Trust depreciated
all real estate  investments.  At September 30, 1995,  the Trust  segregated the
real  estate  portfolio  into  two  categories:  Held  for  Sale  and  Held  for
Investment.  Additionally, all assets and liabilities of the Trust were restated
to  reflect  their  respective  reorganization  value or fair  value.  The Trust
depreciates the Held for Investment  category over the estimated useful lives of
the assets.  The Held for Sale category is not depreciated.  During fiscal 1996,
the Trust reclassified seven properties  totaling $18.7 million to Held for Sale
from Held for Investment.

        Operating  expenses on rental  properties  increased to $12.1 million in
fiscal 1996 from $11.7 million for fiscal 1995 and $9.8 million for fiscal 1994.
The  increases  in expenses  on rental  properties  are the result of  continued
foreclosure of real estate  properties and improvement in occupancy  levels.  At
September 30, 1996 the Trust owned 31 real estate properties  compared to 38 and
34 at September 30, 1995 and 1994, respectively.  A total of two properties were
added early during the year as a result of  foreclosures.  Nine  properties were
sold during fiscal 1996,  eight of which occurred  during the last two quarters.
Occupancy  levels increased to 87.5% at September 30, 1996 compared to 81.1% and
79.6% at September 30, 1995 and 1994, respectively.

        Other  operating  expenses were $3.2 million for fiscal 1996 compared to
$4.5 million and $4.8 million for fiscal years 1995 and 1994, respectively.  The
fiscal  1996  decrease  was a result of reduced  staffing,  insurance  premiums,
occupancy  costs,  Trustee fees and  expenses  and office and computer  expense.
Partially  offsetting  the decline was an  increase in  professional  fees which
includes legal and accounting fees. The decrease in fiscal 1995 from fiscal 1994
was primarily due to a decrease in professional fees and expenses.

        The  Trust,  in fiscal  1995,  recorded  a $75.3  million  extraordinary
item-gain on extinguishment of debt against interest and principal due of $331.4
million on the Old Notes.

        As a result of implementing Fresh Start Reporting on September 30, 1995,
the  Trust  wrote  down  its  real  estate   investments  by  $66.6  million  to
reorganization value. In addition,  net reorganization  expenses incurred by the
Trust were $5.8 million in fiscal 1995, compared to $2.4 million in fiscal 1994.
These expenses  reflected  professional fees incurred by the  representatives of
the creditors,  shareholders and the Trust. The 1995 Restructuring was completed
in the fourth quarter of fiscal 1995.

        The Trust did not provide for a provision for losses in fiscal 1996. The
provision for losses was $3.0 million and $2.0 million in fiscal 1995 and fiscal
1994,  respectively.  With the  implementation  of Fresh Start Reporting,  as of
September  30,  1995,  the  allowance  for  losses  was  reset to zero.  Further
provisions for losses on mortgage loans and related investments may be necessary
if there is  deterioration  in real estate  markets,  or there is a  significant
increase in the Trust's cost of capital.








                                     - 17 -
<PAGE>
                         LIQUIDITY AND CAPITAL RESOURCES

        Prior to its 1995 Restructuring,  the Trust faced significant  liquidity
problems. The Trust did not generate sufficient cash flow from normal operations
and was not able to  liquidate  mortgage  loans and real estate  investments  in
order to meet scheduled  amortization  on its  indebtedness.  As a result of the
1995 Restructuring,  management believes the cash flow from operating activities
will be sufficient to meet minimum debt service requirements.  The Trust expects
to fund capital  expenditures  from available  funds from operations and cash on
hand.  However,  the  Trust's  present  liquidity,   cash  flow  from  operating
activities and ability to liquidate  existing assets to meet its obligations can
be adversely impacted by a negative change in the economy, particularly as those
changes may relate to real estate assets.

        Taxable  income  required  to be  distributed  in order for the Trust to
maintain  its REIT  status  will be less  than  income  reported  for  financial
statement  purposes  under  generally  accepted  accounting  principles  due  to
differences  related to  depreciation,  use of NOLs (subject to the Code Section
382 limitations) and timing differences related to bad debt deductions.

        On March 28, 1996,  the Trust entered into a financing  agreement  which
provided  for the  issuance  of $67.4  million of  Floating  Rate  Notes,  which
issuance occurred on April 30, 1996. The Floating Rate Notes bear interest at 30
day LIBOR + 1.375 percent,  payable monthly,  and have a stated maturity date of
May 1, 1999.

        The New Indenture generally requires that, on a monthly basis, the Trust
deposit into a Trapped Funds Account maintained by the New Indenture Trustee all
Cash Flow and Asset Sale Proceeds. Cash Flow from the Trapped Funds Account will
be distributed by the New Indenture  Trustee to pay the New Indenture  Trustee's
expenses,  pay all accrued but unpaid  interest on the  Floating  Rate Notes and
maintain a Debt  Service  Reserve  Account  before any funds are released to the
Trust. In the event of a sale of, or certain casualty or indemnification  events
with  respect to, any of the  properties  mortgaged  under the terms of the debt
instruments,  the  proceeds  therefrom  will be used to  retire  up to 125% of a
portion of the  Floating  Rate Notes that has been  allocated  to such  property
before  any  funds  are  released  to the  Trust.  The  New  Indenture  includes
affirmative  covenants and negative covenants.  At September 30, 1996, the Trust
was in compliance with the New Indenture.

        The  proceeds  received  from the  Floating  Rate Notes,  together  with
approximately  $56.5  million of cash on hand,  were used to prepay the  Trust's
Senior Secured Notes and Mortgage  Payable.  The face amount  outstanding of the
Senior  Secured  Notes and the  Mortgage  Payable at the time of  repayment  was
$110.0  million and $13.9  million,  respectively.  The Senior Secured Notes and
Mortgage Payable were repaid in full on April 30, 1996.

        Effective  April 30,  1996,  the Trust  entered  into an  interest  rate
protection  agreement  (the  "Cap")  that  serves to cap the  floating  interest
component  of the  Floating  Rate Notes at 8%. The Trust paid a one-time  fee of
$377,000 to the counterparty to the Cap.

        During  fiscal 1996 the Trust  reclassified  seven  properties  totaling
$18.7 million to Real Estate Owned Held for Sale from Real Estate Owned Held for
Investment.  During fiscal 1996 the Trust received $26.6 million in net proceeds
from  the  sale of nine  properties  with a  carrying  value  of  $19.2  million
classified as Real Estate Owned Held for Sale.


                                     - 18 -
<PAGE>
        The Trust's cash flow is derived from operating, investing and financing
activities.  Cash flow  provided  from  operating  activities  increased to $9.4
million in fiscal 1996  compared to a decrease of $50.9  million in fiscal 1995.
In 1995, cash flow provided from operating activities decreased substantially as
a result of a $32.6  million  reduction in interest  payable.  Interest  payable
increased  $32.2  million in fiscal 1994 from 1993 as the Trust did not generate
cash flow  sufficient  to  service  the Old Notes and was in  default  as to the
payment of principal and interest.

        Cash provided by investing activities  increased  substantially to $79.8
million in fiscal  1996  compared to $12.1  million and $32.4  million in fiscal
1995 and 1994, respectively. Real estate sales activity increased in fiscal 1996
to $27.1  million  from $3.3  million and $6.4  million in fiscal 1995 and 1994,
respectively.   In  fiscal  1996,  the  Trust   completed  the   disposition  of
substantially  all of the its  mortgage  loan  portfolio  through  a  series  of
transactions  which  contributed  $55.5  million  of the $79.8  million  in cash
provided by  investing  activities.  Repayments  on mortgage  loans  declined in
fiscal 1996 to $0.3 million from $22.7  million and $34.3 million in fiscal 1995
and 1994, respectively.  Prior to the 1995 Restructuring,  the Trust had offered
discounts  on the  repayment  of  mortgage  loans and had sold real estate in an
effort to  generate  cash to meet  principal  and  interest  payments on the Old
Notes.

        Cash used in financing  activities  increased to $69.7 million in fiscal
1996  compared  to $8.5  million  and $3.0  million  in  fiscal  1995 and  1994,
respectively.  The fiscal 1996  increase is  primarily  due to the  repayment of
$114.1  million and $17.5  million on its  indebtedness  and  Mortgage  Payable,
respectively,  offset by the issuance of $67.4  million in Floating  Rate Notes.
The increase in fiscal 1995 is  primarily a result of a $4.6  million  principal
payment on the Old Notes.  Principal payments were not made in 1994 as the Trust
was in default as to principal and interest payments on the Old Notes.

        In fiscal 1994, as a result of being in default and not making scheduled
payments with respect to the Old Notes, cash and cash equivalents increased from
$11.5 million to $57.3 million.  However, as a result of the Prepackaged Plan of
Reorganization,  principal  and interest  payments  were made in fiscal 1995 and
cash and cash equivalents  decreased to $10.0 million at the end of fiscal 1995.
In fiscal 1996, cash and cash equivalents increased to $29.5 million as a result
of refinancing the Trust's indebtedness, the disposition of substantially all of
the mortgage loan portfolio and the sale of real estate properties.


ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

        The financial  statements and supplementary data are as set forth in the
"Index to Financial Statements."


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

        Information  with  respect  to the  Changes  In and  Disagreements  With
Accountants on Accounting and Financial  Disclosure is incorporated by reference
under  caption  "Independent  Auditors"  of the  Registrant's  definitive  Proxy
Statement  for the Annual  Shareholder  Meeting to be held  February  25,  1997.
Reference is also made in Exhibit 16.



                                     - 19 -
<PAGE>
                                    PART III


ITEM 10. TRUSTEES AND EXECUTIVE OFFICERS OF THE REGISTRANT.

        Information with respect to the Trust's Trustees and Executive  Officers
is  incorporated by reference under captions  "Information  Regarding  Executive
Officers" and "Information  Regarding  Nominees for Election as Trustees" of the
Registrant's definitive Proxy Statement for the Annual Shareholder Meeting to be
held February 25, 1997.


ITEM 11. TRUSTEE AND EXECUTIVE COMPENSATION.

        Information   with  respect  to  the  Trust's   Trustees  and  Executive
compensation is incorporated by reference under captions "Trustee Compensation",
"Executive  Compensation"  and "Option  Grants in Fiscal  Year 1996;  Aggregated
Option  Exercises in Fiscal Year 1996 and Fiscal Year-End 1996 Option Values" of
the Registrant's  definitive Proxy Statement for the Annual Shareholder  Meeting
to be held February 25, 1997.


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

        Information with respect to the Security Ownership of Certain Beneficial
Owners and  Management is  incorporated  by reference  under  caption  "Security
Ownership  of Certain  Beneficial  Owners and  Management"  of the  Registrant's
definitive  Proxy  Statement  for  the  Annual  Shareholder  Meeting  to be held
February 25, 1997.


ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

        Reference is made to the  information  contained in Note 14 of the Notes
to the  Consolidated  Financial  Statements  which  is  incorporated  herein  by
reference.























                                     - 20 -
<PAGE>
                                     PART IV


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

        (a) Documents Filed as a Part of the Report.

        The following documents are filed as part of this report.

        1.  Financial Statements.  The financial statements of the Trust are set
            forth in the "INDEX TO FINANCIAL STATEMENTS".

        2.  Financial Statement Schedules. See 3(d) below.

        3.  Exhibits.

            (a)  Exhibits are as set forth in the "INDEX TO EXHIBITS".

            (b)  REPORTS ON FORM 8-K. None.

            (c) EXHIBITS,  INCLUDING THOSE  INCORPORATED BY REFERENCE.  Exhibits
are set forth in the "INDEX TO EXHIBITS".  Where so indicated by footnote in the
index,  exhibits which were previously filed are incorporated by reference.  For
exhibits incorporated by reference,  the location of the exhibit in the previous
filing is indicated  in  parentheses.  Copies of the  exhibits are  available to
shareholders upon payment of $0.25 per page fee to cover the Trust's expenses in
furnishing the exhibits.  For copies contact:  Value Property Trust,  120 Albany
Street, 8th floor, New Brunswick, New Jersey 08901.

            (d) Financial  Statement  Schedules,  except those  indicated in the
"INDEX  TO  FINANCIAL  STATEMENTS",  have  been  omitted  because  the  required
information  is included in the financial  statements or notes  thereto,  or the
amounts are not significant.


























                                     - 21 -
<PAGE>
                                   SIGNATURES

        Pursuant to the  requirements  of Section 13 or 15(d) of the  Securities
Exchange Act of 1934, the registrant has duly caused this Form 10-K to be signed
on its behalf by the undersigned, thereunto duly authorized.


                                                  VALUE PROPERTY TRUST



                                                  By: /s/ George R. Zoffinger
                                                      --------------------------
                                                          George R. Zoffinger
                                                          President and Chief
                                                          Executive Officer
Date: December 27, 1996


        Pursuant to the  requirements  of the  Securities  Exchange Act of 1934,
this Form 10-K has been signed below by the  following  persons on behalf of the
registrant and in the capacities and on the dates indicated.

        Each person in so signing also makes  constitutes and appoints George R.
Zoffinger,  President and Chief Executive  Officer of Value Property Trust,  and
each of them, his true and lawful attorney-in-fact, in his name, place and stead
to execute and cause to be filed with the Securities and Exchange Commission any
and all amendments to this report.


/s/ Jeffrey A. Altman           Chairman and Trustee           December 27, 1996
--------------------------
    Jeffrey A. Altman

/s/ George R. Zoffinger         President, Chief Executive     December 27, 1996
--------------------------      Officer and Trustee
    George R. Zoffinger         (Principal Executive Officer)
                          

/s/ Robert T. English           Secretary, Treasurer and       December 27, 1996
--------------------------      Chief Financial Officer 
    Robert T. English           (Principal Financial and                    
                                Accounting Officer)                         
                                                    















                                     - 22 -
<PAGE>
/s/ Martin Bernstein            Trustee                        December 27, 1996
--------------------------
    Martin Bernstein

/s/ Richard S. Frary            Trustee                        December 27, 1996
--------------------------
    Richard S. Frary

/s/ Richard B. Jennings         Trustee                        December 27, 1996
--------------------------
    Richard B. Jennings

/s/ John B. Levy                Trustee                        December 27, 1996
--------------------------
    John B. Levy

/s/ Carl A. Mayer, Jr.          Trustee                        December 27, 1996
--------------------------
    Carl A. Mayer, Jr.








































                                     - 23 -
<PAGE>
                              VALUE PROPERTY TRUST


                          INDEX TO FINANCIAL STATEMENTS




Report of Independent Auditors                           

Consolidated Financial Statements

    Consolidated Statement of Operations
    (Years ended September 30, 1996, 1995 and 1994)      

    Consolidated Balance Sheet
    (September 30, 1996 and 1995)                        

    Consolidated Statement of Cash Flows
    (Years ended September 30, 1996, 1995 and 1994)      

    Consolidated Statement of Shareholder's Equity
    (Years ended September 30, 1996, 1995 and 1994)      

Notes to the Consolidated Financial Statements           

Financial Statements Schedules

    Schedule XI -- Real Estate Accumulated
    Depreciation and Amortization (September 30, 1996)   

    Schedule XII -- Mortgage Loans on Real Estate
    (September 30, 1996)                                 


























                                     - 24 -
<PAGE>
                         REPORT OF INDEPENDENT AUDITORS











To the Trustees and Shareholders of
Value Property Trust:

        We have audited the consolidated  financial statements and the financial
statement  schedules of Value  Property  Trust listed in Item 14(a) of this Form
10-K as of and for the year ended September 30, 1996. These financial statements
and  financial  statement  schedules  are  the  responsibility  of  the  Trust's
management.  Our  responsibility is to express an opinion on these  consolidated
financial  statements and financial  statement schedules based on our audit. The
financial  statements and financial  statement schedules of Value Property Trust
as of September 30, 1995,  and for the years ended  September 30, 1995 and 1994,
were audited by other auditors whose report dated November 10, 1995, included an
emphasis  of  matter  paragraph  which  described  the  reorganization  and  the
implementation  of Fresh Start Reporting as discussed in Note 1 to the financial
statements.

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

        In our opinion,  the 1996 consolidated  financial statements referred to
above present fairly, in all material respects,  the financial position of Value
Property Trust as of September 30, 1996, and the  consolidated  results of their
operations  and their cash flows for the year then  ended,  in  conformity  with
generally  accepted  accounting  principles.  In addition,  in our opinion,  the
related 1996 financial statement schedules referred to above, when considered in
relation to the basic financial  statements taken as a whole,  present fairly in
all material aspects, the information required to be included therein.



COOPERS & LYBRAND L.L.P.



New York, New York
November 27, 1996





                                     - 25 -
<PAGE>
                         REPORT OF INDEPENDENT AUDITORS





Trustees and Shareholders
Value Property Trust

        We have audited the balance  sheets of Value  Property  Trust  (formerly
Mortgage  and  Realty  Trust) at  September  30,  1995 and 1994 and the  related
statements of operations,  shareholders'  equity, and cash flows for each of the
three years in the period ended September 30, 1995.  These financial  statements
are the  responsibility  of the Trust's  management.  Our  responsibility  is to
express an opinion on these financial statements based on our audits.

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

        As more fully  described in the financial  statements,  on September 22,
1995, the Bankruptcy  Court confirmed the Trust's plan of  reorganization  which
was  consummated  on  September  29,  1995  permitting  the Trust to emerge from
proceedings  under the Bankruptcy Code. The Trust implemented the guidance as to
the accounting  for entities  emerging from Chapter 11 set forth in Statement of
Position  90-7,  "Financial  Reporting by Entities in  Reorganization  under the
Bankruptcy Code" ("Fresh Start  Reporting") as of September 30, 1995. Due to the
reorganization  and the  implementation  of Fresh Start  Reporting,  assets were
recorded at reorganization  value,  liabilities were recorded at fair values and
outstanding  obligations  were  discharged  primarily in exchange for cash,  new
indebtedness  and equity.  As a result,  the balance sheet at September 30, 1995
reflects  a new basis of  accounting  and,  accordingly,  is not  comparable  to
balance sheets prior to that date.

        In our  opinion,  the  financial  statements  referred to above  present
fairly,  in all material  respects,  the  financial  position of Value  Property
Trust, at September 30, 1995 and 1994, and the results of its operations and its
cash flows for each of the three years in the period ended  September  30, 1995,
in conformity with generally accepted accounting principles.



ERNST & YOUNG LLP



Philadelphia, Pennsylvania
November 10, 1995






                                     - 26 -
<PAGE>
<TABLE>
                                                        VALUE PROPERTY TRUST
                                                CONSOLIDATED STATEMENTS OF OPERATIONS
                                                  FOR THE YEARS ENDED SEPTEMBER 30
                                               (amounts in thousands except per share)
<CAPTION>
                                                                                POST-                             PRE-
                                                                            CONFIRMATION                      CONFIRMATION
                                                                            ------------             ------------------------------
                                                                                1996                  1995                   1994
                                                                            ------------    |        --------              --------
<S>                                                                           <C>                    <C>                   <C>     
Revenue:                                                                                    |  
Rental properties:                                                                          |
  Rental income                                                               $ 26,925      |        $ 24,608              $ 18,495
  Operating expense reimbursement                                                3,557      |           2,286                 1,705
Interest and fee income on mortgage loans                                        2,853      |           9,353                14,725
Interest on short-term investments                                               1,713      |           3,086                 1,238
Other                                                                               18      |             131                   114
                                                                              --------      |        --------              --------
                                                                                35,066      |          39,464                36,277
                                                                              --------      |        --------              --------
Expenses:                                                                                   |
Interest                                                                        10,489      |          35,900                33,002
Rental properties:                                                                          |
  Depreciation and amortization                                                  2,347      |           7,306                 5,839
  Operating                                                                     12,084      |          11,702                 9,827
Other operating expenses                                                         3,173      |           4,518                 4,839
Provision for losses on mortgage loans and related investments                      --      |           3,000                 2,000
                                                                              --------      |        --------              --------
                                                                                28,093      |          62,426                55,507
                                                                              --------      |        --------              --------
Income (loss) from operations before reorganization items,                                  |
  and extraordinary item                                                         6,973      |         (22,962)              (19,230)
                                                                              --------      |        --------              --------
Reorganization items:                                                                       |
  Professional fees and other                                                       --      |           6,219                 2,360
  Interest income                                                                   --      |            (441)                   --
  Write down of invested assets to reorganization value                             --      |          66,597                    --
                                                                              --------      |        --------              --------
Total reorganization items                                                          --      |          72,375                 2,360
                                                                              --------      |        --------              --------
Income (loss) before extraordinary item                                          6,973      |         (95,337)              (21,590)
                                                                              --------      |        --------              --------
Extraordinary item-gain on extinguishment of debt                                   --      |          75,304                    --
                                                                              --------      |        --------              --------
Net income (loss)                                                             $  6,973      |        $(20,033)             $(21,590)
                                                                              ========      |        ========              ======== 
Net income per share*                                                           $ 0.62      |
                                                                              ========      |
Weighted average number of common shares outstanding                            11,226      |          11,226                11,226
</TABLE>
*Net income (loss) per share for all  pre-confirmation  periods is not presented
 because this  information is not  meaningful as a result of the  Reorganization
 and  the  adoption  of  "Fresh  Start  Reporting".  See  Item  7.  Management's
 Discussion and Analysis of Financial Condition and Results of Operations.

          See accompanying notes to consolidated financial statements.

                                     - 27 -
<PAGE>
<TABLE>
                              VALUE PROPERTY TRUST

                           CONSOLIDATED BALANCE SHEETS
                               AS OF SEPTEMBER 30

                             (dollars in thousands)
<CAPTION>
                                                                   1996         1995
                                                                 --------     --------
<S>                                                              <C>          <C>     
                                ASSETS
Assets Held For Sale:
     Mortgage loans ........................................     $   --       $ 21,966
     Investment in partnerships ............................       10,219        5,220
     Real estate owned .....................................       38,171       42,059
                                                                 --------     --------
                                                                   48,390       69,245
                                                                 --------     --------
Assets Held For Investment:
     Mortgage loans ........................................          663       35,013
     Investment in partnerships ............................       13,486       20,648
     Real estate owned .....................................       63,196       81,581
     Notes receivable ......................................         --            633
                                                                 --------     --------
                                                                   77,345      137,875
                                                                 --------     --------

Total Invested Assets ......................................      125,735      207,120

Cash and cash equivalents ..................................       29,501        9,977
Restricted cash ............................................       12,213        6,791
Interest receivable and other assets .......................        4,962        8,441
                                                                 --------     --------

Total Assets ...............................................     $172,411     $232,329
                                                                 ========     ========

                            LIABILITIES

Senior Secured Notes (Due 1999) ............................     $ 63,226          $--
Senior Secured Notes (Due 2002) ............................         --        109,975
Mortgage payable ...........................................         --         17,535
Accounts payable and accrued expenses ......................        1,804        4,745
Interest payable ...........................................          334         --
                                                                 --------     --------
Total Liabilities ..........................................       65,364      132,255
                                                                 --------     --------
Commitments and contingencies
</TABLE>

(Continued)







                                     - 28 -
<PAGE>
<TABLE>
                              VALUE PROPERTY TRUST

                           CONSOLIDATED BALANCE SHEETS
                         AS OF SEPTEMBER 30 -- Continued

                             (dollars in thousands)
<CAPTION>
                                                                   1996         1995
                                                                 --------     --------
<S>                                                              <C>          <C>     
                      SHAREHOLDERS' EQUITY

Preferred Shares, $1 par value: 3,500,000 shares authorized,
  none issued ..............................................         --           --
Common Shares, $1 par value: 20,000,000 shares authorized,
  11,226,310 and 11,226,215 shares issued and outstanding ..       11,226       11,226
Additional paid-in capital .................................       88,848       88,848
Accumulated earnings .......................................        6,973         --
                                                                 --------     --------
Total Shareholders' Equity .................................      107,047      100,074
                                                                 --------     --------
Total Liabilities and Shareholders' Equity .................     $172,411     $232,329
                                                                 ========     ========
</TABLE>































          See accompanying notes to consolidated financial statements.


                                     - 29 -
<PAGE>
<TABLE>
                                                        VALUE PROPERTY TRUST

                                                CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                  FOR THE YEARS ENDED SEPTEMBER 30

                                                       (dollars in thousands)

<CAPTION>
                                                                                       POST-                        PRE-
                                                                                    CONFIRMATION                CONFIRMATION
                                                                                    ------------        ---------------------------
                                                                                        1996              1995               1994
                                                                                    ------------   |    ---------         ---------
<S>                                                                                   <C>               <C>               <C>       
Net income (loss) ............................................................        $   6,973    |    $ (20,033)        $ (21,590)
Adjustments to reconcile net income (loss) to net cash                                             |
  provided by (used in) operating activities:                                                      |
    Write down of invested assets to reorganization value ....................             --      |       66,597              --
    Extraordinary item-gain on extinguishment of debt ........................             --      |      (75,304)             --
    Depreciation and amortization on real estate .............................            2,347    |        7,306             5,839
    Provision for losses .....................................................             --      |        3,000             2,000
  (Decrease) increase in accounts payable and accrued expenses ...............           (2,942)   |          199              (217)
  Increase (decrease) in interest payable ....................................              334    |      (32,568)           32,156
  Decrease (increase) in receivables and other assets ........................            2,675    |         (576)           (1,160)
  Net change in interest reserves, deferred income ...........................             --      |         (162)             (582)
  Recoveries of charge-offs to allowance for losses ..........................             --      |          631             1,019
  Other ......................................................................             --      |         --                (967)
                                                                                      ---------    |    ---------         ---------
Total adjustments ............................................................            2,414    |      (30,877)           38,088
                                                                                      ---------    |    ---------         ---------
Net cash provided by (used in) operating activities ..........................            9,387    |      (50,910)           16,498
                                                                                      ---------    |    ---------         ---------
                                                                                                   |
Cash flows from investing activities: Investment in real estate:                                   |
    Real estate owned ........................................................           (4,550)   |      (11,283)           (7,116)
    Advances on mortgage loans ...............................................              (73)   |         (733)           (1,337)
    Partnerships .............................................................             (344)   |       (2,211)             --
  Principal repayments on mortgage loan receivables ..........................              332    |       22,711            34,308
  Proceeds from the sale of real estate ......................................           27,093    |        3,350             6,360
  Proceeds from the sale of mortgage loans and notes receivable ..............           57,047    |         --                --
  Repayments on notes receivable .............................................              338    |          217               168
                                                                                      ---------    |    ---------         ---------
Net cash provided by investing activities ....................................           79,843    |      12,051            32,383
                                                                                      ---------    |   ---------         ---------
</TABLE>


(Continued)









                                                               - 30 -
<PAGE>
<TABLE>
                                                        VALUE PROPERTY TRUST

                                                CONSOLIDATED STATEMENTS OF CASH FLOWS

                                            FOR THE YEARS ENDED SEPTEMBER 30 -- Continued

                                                       (dollars in thousands)

<CAPTION>
                                                                                       POST-                        PRE-
                                                                                    CONFIRMATION                CONFIRMATION
                                                                                    ------------        ---------------------------
                                                                                        1996              1995               1994
                                                                                    ------------   |    ---------         ---------
<S>                                                                                   <C>               <C>               <C>       
Cash flows from financing activities:                                                              |
  Payment of mortgage payable ................................................          (17,535)   |          (58)             --
  Principal payment of senior secured notes (due 2002) .......................         (109,975)   |       (4,647)             --
  Principal payment of senior secured notes (due 1999) .......................           (4,153)   |         --                --
  Borrowing of senior notes (due 1999) .......................................           67,379    |         --                --
  Increase in restricted cash ................................................           (5,422)   |       (3,808)           (2,983)
                                                                                      ---------    |    ---------         ---------
Net cash used in financing activities ........................................          (69,706)   |       (8,513)           (2,983)
                                                                                      ---------    |    ---------         ---------
Net increase (decrease) in cash and cash equivalents .........................           19,524    |      (47,372)           45,898
Cash and cash equivalent and beginning of period .............................            9,977    |       57,349            11,451
                                                                                      ---------    |    ---------         ---------
Cash and cash equivalent at end of period ....................................        $  29,501    |    $   9,977         $  57,349
                                                                                      ---------    |    ---------         ---------
                                                                                                   |
Supplemental schedule of non-cash investing activities:                                            |
  Charge-offs against allowance for losses ...................................        $    --      |    $   5,515         $     378
                                                                                      ---------    |    ---------         ---------
  Transfer of mortgage loans to real estate owned ............................        $   5,120    |    $  10,900         $  13,100
                                                                                      ---------    |    ---------         ---------
                                                                                                   |
Interest Paid ................................................................        $   9,972    |    $    --           $    --
                                                                                      ---------    |   ---------         ---------

</TABLE>














          See accompanying notes to consolidated financial statements.



                                     - 31 -
<PAGE>
<TABLE>
                                                        VALUE PROPERTY TRUST


                                           CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

                                        FOR THE YEARS ENDED SEPTEMBER 30, 1996, 1995 AND 1994

                                                       (amounts in thousands)

<CAPTION>
                                                                         ADDITIONAL           ACCUMULATED                TOTAL
                                               COMMON SHARES              PAID-IN              (DEFICIT)             SHAREHOLDERS'
                                           SHARES        AMOUNT           CAPITAL              EARNINGS                 EQUITY
                                           ------       --------          --------             --------                --------

<S>                                        <C>          <C>               <C>                 <C>                      <C>     
Balance at September 30, 1993              11,226       $ 11,226          $182,375            $(151,978)               $ 41,623

Net loss                                       --             --                --              (21,590)                (21,590)
                                           ------       --------          --------             --------                --------

Balance at September 30, 1994              11,226         11,226           182,375             (173,568)                 20,033

Net loss                                       --             --                --              (20,033)                (20,033)

Reverse stock split                       (10,889)       (10,889)         (268,905)                  --                (279,794)
Issuance of Common Stock                   10,889         10,889           175,378                   --                 186,267

Adjustment to restate
  accumulated deficit to zero                  --             --                --              193,601                 193,601
                                           ------       --------          --------             --------                --------


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



Balance at September 30, 1995              11,226         11,226            88,848                    0                 100,074
                                           ------       --------          --------             --------                --------

Net income                                     --             --                --                6,973                   6,973
                                           ------       --------          --------             --------                --------

Balance at September 30, 1996              11,226       $ 11,226          $ 88,848             $  6,973                $107,047
                                           ======       ========          ========             ========                ========



</TABLE>







          See accompanying notes to consolidated financial statements.

                                     - 32 -
<PAGE>
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


1. BASIS OF FINANCIAL INFORMATION AND PLAN OF REORGANIZATION

        On September 29, 1995, the Trust's  Prepackaged  Plan of  Reorganization
was declared  effective by the United  States  Bankruptcy  Court for the Central
District of California.

        Under  the  Prepackaged  Plan,  holders  of  the  Trust's   $290,000,000
principal  amount of Senior Secured  Uncertificated  Notes due 1995 received (i)
$110,000,000  principal  amount of newly issued 11-1/8% Senior Secured Notes due
2002,  (ii)  $71,000,000  ($25,000,000  paid in April  1995)  in cash and  (iii)
approximately  10,889,430  newly  issued  Common  Shares  representing,  in  the
aggregate,  approximately  97%  of  the  Common  Shares  outstanding  after  the
effective date. In connection with the Prepackaged  Plan, the Trust effected a 1
for 33.33 reverse stock split of all outstanding Common Shares.

        In connection  with its emergence  from the Chapter 11  proceeding,  the
Trust  implemented  Fresh Start Reporting as of September 30, 1995, as set forth
in Statement of Position 90-7 "Financial Reporting by Entities in Reorganization
Under the Bankruptcy  Code." The Trust adopted Fresh Start Reporting because (i)
the holders of existing voting shares immediately before filing and confirmation
of the  Prepackaged  Plan received less than 50% of the voting shares of the new
entity  and  (ii)  the  reorganization  value  immediately  before  the  date of
confirmation  was less  than  the  total of all  post-petition  liabilities  and
allowed claims, as shown below:

                                                                      ($ in 000)
                                                                      ---------
Total post-petition liabilities and allowed claims ...........        $ 351,833
Reorganization value .........................................         (278,354)
                                                                      ---------

Excess of liabilities over reorganization value ..............        $  73,479
                                                                      =========


        The  post-confirmation  financial  statements and schedules amounts have
been  segregated  by a  black  line in  order  to  signify  that  the  financial
statements  and  schedules  are that of a new  reporting  entity  and have  been
prepared on a basis which is not  comparable to the  pre-confirmation  financial
statements and schedules.

        The Trust based the  reorganization  value of assets on the mid-point of
the range of values  prepared by  independent  specialists  in the field of real
estate valuation.  The valuation of its real estate  investments was prepared as
of March 31, 1995 and was  adjusted to September  30, 1995 for various  accounts
such as cash and cash equivalents, accounts receivable and accounts payable.

        The Trust's  liabilities were stated at their fair value. The difference
between reorganization value of the assets and the fair value of the liabilities
was  recorded as an  adjustment  to  shareholders'  equity with the  accumulated
deficit restated to zero.





                                     - 33 -
<PAGE>
        The real estate valuation  analysis reflected the selection of 26 assets
which represented 81% of the Trust's book value at March 31, 1995. The selection
was divided  between east coast and west coast assets and generally  represented
the highest dollar values in the portfolio.

        The  analysis  factored  in,  among  other  things,  (i) the most recent
property  cash  flow  projections  for  the  properties  selected,   (ii)  where
applicable,  the most recent operating rent roll and other financial information
relative to the assets selected,  (iii) the most recent third party, independent
appraisals, where applicable and available, (iv) discussions with the respective
asset  managers to determine  loan  status,  property  characteristics,  current
occupancy,  existing market rental rates, new leases, current payoff discussions
and  asset  sales,  and (v) a  review  of  limited  market  information  for the
properties.

        The valuation of the asset portfolio assumed continued  operation of the
portfolio  for several  years.  Sales and  pay-offs of certain  assets  occurred
throughout the analysis  period (six years) and no additional  investments  were
made.  Property cash flows,  loan payments and pay-offs,  and reversion  amounts
(based on normalized capital expenditures in the reversion year) were discounted
to present  value at 12 percent per year.  Amounts do not include  extraordinary
expenses for reorganization or litigation.

        The going  concern  value was reduced by other  operating  expenses that
would be incurred  over a six year  period.  The present  value of expenses  was
calculated by applying a capitalization  rate of 10 percent to Year 6 stabilized
other expenses and discounting both the capitalized,  stabilized Year 6 expenses
and the annual  expenses  at 12  percent.  The net  present  value of  operating
expenses was $27.3 million.






























                                     - 34 -
<PAGE>
        The effect of the Fresh Start  Reporting on the Trust's  historical cost
balance sheet at September 30, 1995 is as follows:
<TABLE>
<CAPTION>
                                                     PRE-               REORGANIZATION           FRESH START             POST-
                                                 CONFIRMATION             ADJUSTMENTS            ADJUSTMENTS         CONFIRMATION
                                                 ------------             -----------            -----------         ------------
(dollars in thousands)
<S>                                                 <C>                 <C>                    <C>                      <C>     
ASSETS
     Assets held for sale:
         Mortgage loans                             $ 30,225                                   ($  8,259) (E)           $ 21,966
         Investments in partnerships                   6,478                                      (1,258) (E)              5,220
         Real estate owned                            50,406                                      (8,347) (E)             42,059
                                                    --------             --------              ---------                --------
                                                      87,109                    0                (17,864) (E)             69,245
                                                    --------             --------              ---------                --------
     Assets held for investment:
         Mortgage loans                               46,721                                     (11,708) (E)             35,013
         Investments in partnerships                  26,249                                      (5,601) (E)             20,648
         Notes receivable                                700                                         (67) (E)                633
         Real estate owned                           124,484                                     (42,903) (E)             81,581
                                                    --------             --------              ---------                --------
                                                     198,154                    0                (60,279) (E)            137,875
                                                    --------             --------              ---------                --------
                                                     285,263                    0                (78,143) (E)            207,120
Less: allowance for losses                           (11,546)                                     11,546  (E)                  0
                                                    --------             --------              ---------                --------
                                                     273,717                    0                (66,597) (E)            207,120

Cash and cash equivalents                             56,002              (46,025) (A)                                     9,977
Restricted cash                                        6,791                                                               6,791
Interest receivable and other assets                   8,441                                                               8,441
                                                    --------             --------              ---------                --------
         Total Assets                               $344,951             ($46,025)              ($66,597)               $232,329
                                                    --------             --------              ---------                --------
LIABILITIES
     Senior Notes Due 1995                          $290,000            ($290,000) (B)                                  $      0
     Senior Notes Due 2002                                 0              109,975  (B)                                   109,975
     Mortgage payable                                 17,535                                                              17,535
     Interest payable                                 41,378              (41,378) (B)                                         0
     Accounts payable and other                        2,920                1,825  (C)                                     4,745
                                                    --------             --------              ---------                --------
         Total Liabilities                           351,833             (219,578)                     0                 132,255
                                                    --------             --------              ---------                --------
SHAREHOLDERS' EQUITY
     Common Stock at par                              11,226                                                              11,226
     Additional paid in capital                      182,375              175,378  (D)          (268,905) (F)             88,848
     Accumulated deficit                            (200,483)              (1,825) (C)           202,308  (F)                  0
                                                    --------             --------              ---------                --------

         Total Shareholders' Equity                   (6,882)             173,553                (66,597)                100,074
                                                    --------             --------              ---------                --------
         Total Liabilities and
           Shareholders' Equity                     $344,951             $(46,025)             $ (66,597)               $232,329
                                                    ========             ========              =========                ========
</TABLE>


                                     - 35 -
<PAGE>
ADJUSTMENTS TO REFLECT REORGANIZATION

(A) Reflects a $46,025 payment to creditors made at implementation of the plan.

(B) Reflects the  cancellation  of the Senior Secured Notes due 1995 in the face
    amount of  $290,000  and the  related  interest  payable  on these  notes of
    $41,378  and the  recording  of the new  Senior  Notes  due 2002 in the face
    amount of $109,975.

(C) Reflects the cost of the  termination pay plan (See Note 9) ($1,325) and the
    cost associated with the restructuring ($500).

(D) Reflects the conversion of amounts  previously owed under the Senior Secured
    Notes due 1995  converted  to a 97%  interest  in the  common  shares of the
    reorganized Trust as follows:

                                                                      ($ in 000)
                                                                      ---------
Face amount of Senior Notes due 1995 .........................        $ 290,000
Interest payable .............................................           41,378
                                                                      ---------

Total amount payable to creditors ............................          331,378
Less: Senior Notes due 2002 ..................................         (109,975)
Less: Cash payment to creditors ..............................          (46,025)
                                                                      ---------

Amount previously due creditors converted to equity ..........        $ 175,378
                                                                      =========

        The following unaudited table reflects the ownership (as between holders
of Outstanding  Common Shares and holders of  Outstanding  Notes) of the Trust's
Common Shares before and after consummation of the 1995 Restructuring.
<TABLE>
<CAPTION>
                               COMMON SHARES BEFORE                   COMMON SHARES AFTER                       COMMON
                                REVERSE STOCK SPLIT                 REVERSE STOCK SPLIT BUT                  SHARES AFTER
                                  OR CONSUMMATION                   BEFORE CONSUMMATION OF                   CONSUMMATION
                               OF THE RESTRUCTURING                    THE RESTRUCTURING                 OF THE RESTRUCTURING
                           ------------------------------       -----------------------------        -------------------------------
                           NUMBER OF         PERCENT OF         NUMBER OF        PERCENT OF          NUMBER OF         PERCENT OF
                            SHARES          COMMON SHARES        SHARES         COMMON SHARES         SHARES          COMMON SHARES
                           ---------        -------------       ---------       -------------        ---------       ---------------
(in 000)
<S>                         <C>                 <C>                <C>               <C>              <C>                  <C>
Holders of Outstanding
   Notes                         0                0                  0                 0              10,889               97%
Holders of Outstanding
   Common Shares            11,226              100%               337               100%                337                3%
</TABLE>









                                     - 36 -
<PAGE>
                  ADJUSTMENT TO REFLECT FRESH START ACCOUNTING

(E) Reflects adjustment made to carrying value of loans and owned real estate to
    adjust to reorganization values.

(F) Reflects an adjustment of the accumulated deficit to zero as a result of the
    restructure and the adjustment of additional paid in capital as follows:

                                                                      ($ in 000)
                                                                      ---------
Adjust accumulated deficit to reset to zero .................         $(202,308)
Adjustment to carrying value of invested assets .............           (66,597)
                                                                      ---------
                                                                      $(268,905)
                                                                      =========

        The following  unaudited Pro Forma  Statement of Operations is presented
as if the Prepackaged Plan of Reorganization  and  implementation of Fresh Start
Reporting  had  occurred as of October 1, 1994.  Such pro forma  information  is
based upon the  historical  financial  statements of Value  Property  Trust.  In
management's  opinion all adjustments  necessary to reflect the effects of those
transactions  have been made.  The following  unaudited  Pro Forma  Statement of
Operations  is  not  necessarily  indicative  of  what  the  actual  results  of
operations of the Trust would have been assuming such  transaction  had occurred
as of  October  1,  1994,  nor does it  purport  to  represent  the  results  of
operations for future periods.

































                                     - 37 -
<PAGE>
<TABLE>
                                                  PRO FORMA STATEMENT OF OPERATIONS
                                                    Year Ended September 30, 1995
                                                             (Unaudited)
                                               (dollars in thousands except per share)

                                                                                                       PRO FORMA
                                                                                    1995              ADJUSTMENTS          PRO FORMA
                                                                                  --------            -----------          ---------
<S>                                                                               <C>                  <C>                  <C>     
Revenue:
Income of rental properties:
     Rental income ...................................................            $ 24,608             $   --               $ 24,608
     Operating expense reimbursements ................................               2,286                 --                  2,286
Interest and fee income on mortgage loans ............................               9,353                 --                  9,353
Interest on short-term investments ...................................               3,086               (2,586) (G)             500
Other ................................................................                 131                 --                    131
                                                                                  --------             --------             --------
                                                                                    39,464               (2,586)              36,878
                                                                                  --------             --------             --------
Expenses:
Interest .............................................................              35,900              (21,780) (H)          14,120
Expenses of rental properties:                                                                                      
     Depreciation and amortization ...................................               7,306               (2,390) (J)           4,916
     Operating .......................................................              11,702                 --                 11,702
Other operating expenses .............................................               4,518                 --                  4,518
Provision for losses on mortgage loans and related investments .......               3,000               (3,000) (I)            --
                                                                                  --------             --------             --------
                                                                                    62,426              (27,170)              35,256
                                                                                  --------             --------             --------
Income (loss) from operations before                                                                                
     reorganization items, and extraordinary item ....................             (22,962)              24,584                1,622
Reorganization items:
     Professional fees and other .....................................              (6,219)               6,219  (K)            --
     Interest income .................................................                 441                 (441) (K)            --
     Write down of invested assets to                                                                               
     reorganization value ............................................             (66,597)              66,597  (K)            --
                                                                                  --------             --------             --------
Total reorganization items ...........................................             (72,375)              72,375                 --
                                                                                  --------             --------             --------
Income (loss) before extraordinary item ..............................             (95,337)              96,959                1,622
                                                                                  --------             --------             --------
                                                                                                                    
Extraordinary item-gain on extinguishment of debt ....................              75,304              (75,304) (L)            --
                                                                                  --------             --------             --------

Net income (loss) ....................................................            $(20,033)            $ 21,655             $  1,622
                                                                                  ========             ========             ========

Weighted average number of common shares outstanding .................              11,226                                    11,226
Net income per share .................................................                   *                                  $    .14
</TABLE>

*Net income (loss) per share is not presented  because this  information  is not
 meaningful as a result of the  Reorganization  and the adoption of "Fresh Start
 Reporting".  See Item 7.  Management's  Discussion  and  Analysis of  Financial
 Condition and Results of Operations.


                                     - 38 -
<PAGE>
              Notes To Unaudited Pro Forma Statement of Operations
                              Pro Forma Adjustments

(G) Reflects  an  adjustment  to  investment  income to reflect an average  cash
    position of  approximately  $10.0 million at an average  investment  rate of
    5.0% for fiscal 1995.

(H) Reflects the reversal of interest  expense related to the Outstanding  Notes
    ($34.0  million) which were  cancelled and the addition of interest  expense
    for the New Senior Notes ($12.2 million) which bear interest at a fixed rate
    of 11.125%.

(I) Reflects the reversal of the $3.0 million  provision  for losses which would
    be  eliminated  as  a  result  of  the  adjustment  of  invested  assets  to
    reorganization value.

(J) Reflects an adjustment to depreciation and  amortization  resulting from the
    reduced basis in owned real estate as a result of the adjustment of invested
    assets to reorganization value.

(K) Reflects the reversal of  reorganization  expenses based upon the assumption
    that the Restructuring  was completed and no non-recurring  expenses related
    to the Restructuring were incurred.

(L) Reflects  the  reversal  of gain on  extinguishment  of debt  based upon the
    assumption that the Restructuring was completed October 1, 1994.


2. SIGNIFICANT ACCOUNTING POLICIES

           USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS

        The  preparation  of financial  statements in conformity  with generally
accepted  accounting  principles  requires  management  to  make  estimates  and
assumptions  that  affect the  reported  amounts of assets and  liabilities  and
disclosure of  contingent  assets and  liabilities  at the date of the financial
statements  and the  reported  amounts  of  revenues  and  expenses  during  the
reporting period. The most significant of these estimates relate to the carrying
value of the assets held for sale and the estimated  useful lives of assets held
for investment. Actual results could differ from those estimates.

                           PRINCIPLES OF CONSOLIDATION

        The  accounts  of the  Trust  and  its  wholly  owned  subsidiaries  are
consolidated  in  the  accompanying   financial   statements.   All  significant
intercompany balances and transactions have been eliminated in consolidation.

                                  INCOME TAXES

        The Trust is a real estate  investment trust (a "REIT") that has elected
to be taxed under  Sections  856-860 of the Internal  Revenue  Code of 1986,  as
amended.  Accordingly,  the Trust does not pay  Federal  income tax on income as
long as income  distributed  to  shareholders  is at least  equal to real estate
investment trust taxable income, and pays no Federal income tax on capital gains
distributed to shareholders.




                                     - 39 -
<PAGE>
        For the fiscal years ended September 30, 1996, 1995 and 1994, there were
significant  differences  between  taxable  net loss and net  income  (loss)  as
reported  in the  financial  statements.  The  differences  were  related to the
recognition of bad debt deductions and accounting for  reorganization  costs and
Fresh  Start  Reporting.  For  financial  accounting  purposes,  these items are
expensed  currently,  while for tax  purposes  some  portion of these  items are
deferred to future  periods or may not be  deductible.  In  addition,  the Fresh
Start Reporting discussed in Note 1 is not recognized for tax purposes, and will
result in future years financial reporting and tax basis differences.

        The Trust has  approximately  $102 million in net operating  losses (the
"NOLs") for tax purposes  attributable to losses  generated in fiscal years 1991
through 1996. The NOLs  attributable  to each year can be carried  forward up to
fifteen  years  from the year  the  loss was  generated.  The use of NOLs in any
taxable  year  (together  with  any  recognized  losses  that  are  economically
attributable to the period up to the Restructuring) will be subject to an annual
limitation  under  Internal  Revenue Code section 382. The Trust  estimates that
this annual limitation is approximately $6 million.

                                 INTEREST INCOME

        Interest  income on each loan is recorded as earned.  Interest income is
not recognized if, in the opinion of the management, collection is doubtful. The
Trust  generally  considers  loans as delinquent  if payment of interest  and/or
principal,  as required by the terms of the note, is more than 60 days past due.
Accrual of interest income is generally  terminated and foreclosure  proceedings
are started if payment is more than 60 days past due.

                              ALLOWANCE FOR LOSSES

        Prior to the implementation of Fresh Start Reporting,  the allowance for
losses on mortgage  loans and related  investments  was determined in accordance
with The  American  Institute  of  Certified  Public  Accountants  Statement  of
Position on  Accounting  Practices of Real Estate  Investment  Trusts 75-2 ("SOP
75-2"), as amended.  This statement requires adjustment of the carrying value of
mortgage  loans to the lower of their carrying value or estimated net realizable
value.  Estimated  net  realizable  value is the  estimated  selling  price of a
property  offered for sale in the open market allowing a reasonable time to find
a buyer,  reduced  by the  estimated  cost to  complete  and  hold the  property
(including  the estimated cost of capital),  net of estimated cash income.  With
the  implementation  of Fresh Start  Reporting,  as of September  30, 1995,  the
allowance for losses was reset to zero.

                              NET INCOME PER SHARE

        Net income  per share is  computed  using the  weighted  average  common
shares   outstanding   during   the   period.   Net  loss  per   share  for  all
pre-confirmation  periods  is not  presented  because  this  information  is not
meaningful as a result of the  Reorganization  and the  implementation of "Fresh
Start Reporting". See Note 1.









                                     - 40 -
<PAGE>
                          DEPRECIATION AND AMORTIZATION

        At September 30, 1995, as a result of Fresh Start Reporting,  all assets
and  liabilities  of  the  Trust  were  restated  to  reflect  their  respective
reorganization value or fair value. The accumulated  depreciation on real estate
owned was reset to zero as a result of the adoption of Fresh Start Reporting. At
September 30, 1995,  the Trust  segregated  the real estate  portfolio  into two
categories:  Held for Sale and Held for  Investment.  The Trust  depreciates the
Held for Investment  category over the estimated useful lives of the assets;  40
years for buildings, three to five years for other property and over the term of
the related lease for lease  commissions and tenant  improvements.  The Held for
Sale category is not  depreciated.  During fiscal 1996,  the Trust  reclassified
seven  properties  totaling $18.7 million to real estate held for sale from real
estate held for investment and no longer depreciates these assets.

                            CASH AND CASH EQUIVALENTS

        Cash  and  cash  equivalents  and  restricted  cash  include  short-term
investments (high grade commercial  paper, bank CDs and US Treasury  Securities)
with original maturities not exceeding a term greater than 90 days.

                           INVESTMENT IN PARTNERSHIPS

        Investment in  partnerships  represents  the Trust's  investment in real
estate  partnerships.  The Trust owns a majority  percentage interest in most of
these  partnerships and receives  substantially  all of the cash flow. The Trust
accounts for all of these partnerships,  except one, in a similar manner as real
estate  investments;  the one  partnership  is  accounted  for using the  equity
method.

                                REAL ESTATE OWNED

        As of September 30, 1995, the Trust's  invested  assets were adjusted to
reorganization  value which became the new historical cost basis.  Subsequently,
real estate held for investment is carried at historical cost less depreciation.
Real  estate  held for sale is  carried  at the lower of cost or net  realizable
value.  In conjunction  with the adoption of Fresh Start  Reporting on September
30, 1995,  all gains or losses for a period of one year after such  adoption are
applied  against the carrying  value of long lived  assets held for  investment.
Through  September 30, 1996, the Trust has reduced the carrying values of assets
Held for  Investment  by $12.6  million as a result of the net gains on both the
disposition  of  substantially  all of its mortgage loan portfolio in March 1996
and the sale of nine  properties  classified  as real estate  held for sale.  At
September 30, 1996, the Trust owned 31 properties of which ten are classified as
Held for Sale.  The fiscal 1996 revenue and net operating  income from these ten
properties were $10.3 million and $6.0 million, respectively.

                                 DEFERRED COSTS

        Included in other assets are costs  incurred in obtaining debt financing
which are deferred and  amortized  over the term of the related debt  agreement.
Amortization  expense  is  included  in  interest  expense  in the  accompanying
statement of operations for fiscal 1996. Net deferred  financing  costs included
in other assets in the  accompanying  balance sheet  amounted to $2.2 million at
September 30, 1996.




                                     - 41 -
<PAGE>
                               REVENUE RECOGNITION

        The  Trust  recognizes  base  rental  revenue  for  financial  statement
purposes ratably as earned over the term of the lease.

                          INTEREST RATE SWAP AGREEMENT

        The  Trust is a party to an  interest  rate  protection  agreement  (the
"Cap") used to hedge its interest  rate exposure on floating rate debt (See Note
5  "Borrowings").  The  differential to be paid or received is recognized in the
period incurred and included in interest expense.

3. MORTGAGE LOANS AND INVESTMENT IN REAL ESTATE AND PARTNERSHIPS

        The following table summarizes the Trust's mortgage loan portfolio:
<TABLE>
<CAPTION>
                                                             SEPTEMBER 30, 1996                           SEPTEMBER 30, 1995
                                                     --------------------------------             --------------------------------
                                                      NUMBER OF              CARRYING              NUMBER OF              CARRYING
TYPE OF UNDERLYING SECURITY                          INVESTMENTS              AMOUNT              INVESTMENTS              AMOUNT
---------------------------                          -----------              ------              -----------              ------
                                                                              ($000)                                       ($000)
<S>                                                    <C>                       <C>                 <C>                   <C>     
Apartments                                                --                     $ --                   1                  $    170
Residential/Condominium*                                   7                      663                   8                       909
Office Buildings                                          --                       --                   3                     4,579
Industrial Buildings                                      --                       --                  10                    19,046
Research & Development Bldgs.                             --                       --                   4                    17,081
Retail Buildings                                          --                       --                   4                    13,208
Hotel/Motels                                              --                       --                   1                     1,986
                                                        ----                     ----                ----                  --------
Total                                                      7                     $663                  31                  $ 56,979
                                                        ====                     ====                ====                  ========
</TABLE>

----------------
*Includes 71 mortgage end loans on 7  investments  at September  30, 1996 and 80
 mortgage end loans on 8 investments at September 30, 1995.

        During  the second  quarter  of fiscal  1996,  the Trust  completed  the
disposition  of  substantially  all of its mortgage  loan  portfolio.  The Trust
received  $55.5  million in net cash proceeds  through a series of  transactions
which included loan repayments and a bulk sale of certain  mortgage  loans.  The
carrying  value of the mortgage  loans  involved in these  transactions  totaled
$50.5 million. Early in fiscal 1996, the Trust foreclosed on the two non-earning
loans  totaling $5.1 million and has obtained  title to the related  properties.
During  fiscal  1995 loans  totaling  $38,834,000  were  extended  beyond  their
original  contractual   maturity  dates.  In  addition,   seven  loans  totaling
$26,101,000  had interest rate  reductions due to financial  difficulties of the
borrower.  Loan terms are extended or modified in the normal  course of business
due to financial difficulties of the borrower.

        At September 30, 1996 and 1995, mortgage loans outstanding  consisted of
fixed rate loans of $663,000 and  $41,050,000,  floating  rate loans of $-0- and
$15,929,000 and  participating  loans of $-0- and $1,529,000,  respectively.  At
September 30, 1996,  the mortgage loan portfolio had interest rates ranging from
6.20% to 9.50% with maturities ranging from June 2000 to June 2009.

                                     - 42 -
<PAGE>
        The following  table  summarizes  the Trust's real estate owned,  net of
accumulated  depreciation  of $1.9  million at  September  30,  1996 and $-0- at
September 30, 1995:
<TABLE>
<CAPTION>
                                                             SEPTEMBER 30, 1996                            SEPTEMBER 30, 1995
                                                     --------------------------------             ----------------------------------
                                                      NUMBER OF              CARRYING              NUMBER OF              CARRYING
TYPE OF PROPERTY                                     INVESTMENTS              AMOUNT              INVESTMENTS              AMOUNT
----------------                                     -----------             --------             -----------             ----------
                                                                              ($000)                                        ($000)
<S>                                                     <C>                  <C>                     <C>                   <C>     
Apartments                                                 2                 $ 16,166                   3                  $ 19,517
Office Buildings                                          14                   34,004                  14                    38,352
Industrial Buildings                                       6                   14,892                   9                    19,904
Retail Buildings                                           4                   36,305                   5                    41,133
Research & Development Bldgs                              --                       --                   2                     4,734
                                                        ----                 --------                ----                  --------
Total                                                     26                 $101,367                  33                  $123,640
                                                        ====                 ========                ====                  ========
</TABLE>

        The following table  summarizes the Trust's  investment in partnerships,
net of accumulated  depreciation  of $0.3 million at September 30, 1996 and $-0-
at September 30, 1995:
<TABLE>
<CAPTION>
                                                             SEPTEMBER 30, 1996                            SEPTEMBER 30, 1995
                                                     --------------------------------             ----------------------------------
                                                      NUMBER OF              CARRYING              NUMBER OF              CARRYING
TYPE OF PROPERTY                                     INVESTMENTS              AMOUNT              INVESTMENTS              AMOUNT
----------------                                     -----------             --------             -----------             ----------
                                                                              ($000)                                        ($000)
<S>                                                     <C>                  <C>                     <C>                   <C>     
Industrial Buildings                                       3                 $ 13,658                   3                  $ 13,988
Retail Buildings                                           2                   10,047                   2                    11,880
                                                        ----                 --------                ----                  --------
Total                                                      5                 $ 23,705                   5                  $ 25,868
                                                        ====                 ========                ====                  ========
</TABLE>

        The Trust may be liable for  environmental  problems on sold properties.
At September 30, 1996, the Trust was not aware of any environmental  problems on
sold properties.















                                     - 43 -
<PAGE>
4. ALLOWANCE FOR LOSSES

        The changes in the  allowance  for losses for the years ended  September
30, 1995 and 1994 were as follows:
<TABLE>
<CAPTION>
                                                              1995        1994
                                                            -------      -------
                                                           (dollars in thousands)
<S>                                                         <C>          <C>    
Balance at beginning of year .........................      $13,430      $11,808
Provisions charged to expense ........................        3,000        2,000
                                                            -------      -------
                                                             16,430       13,808
Less charges against allowance, net of recoveries
  or reorganization adjustments ......................       16,430          378
                                                            -------      -------
Balance at end of year ...............................      $  --        $13,430
                                                            =======      =======
</TABLE>

        For the year ended  September 30, 1996, the Trust did not provide for an
allowance for losses.

        Approximately  $6,276,000  of the  allowance for losses at September 30,
1994 is applicable to real estate properties acquired through foreclosure.

        The Trust  adjusted the balance of allowance for losses at September 30,
1995 as part of "Fresh Start Reporting" (See Note 1).


5. BORROWINGS

                                MORTGAGE PAYABLE

        On April 30, 1996,  the Trust prepaid the mortgage loan of $13.9 million
(the  "Mortgage  Payable").  See  discussion  below with  respect to the Trust's
prepayment of the Prior Notes.

                              SENIOR SECURED NOTES

        The Holders of the Prior Notes had a first  priority  lien on all of the
Trust's collateral. The Prior Notes were governed by the Prior Indenture between
the Trust and Wilmington  Trust Co., as Trustee,  dated as of the effective date
of the Trust's reorganization  (September 29, 1995). Interest on the Prior Notes
accrued at 11-1/8%  per annum and was payable  semi-annually  in arrears on each
June 30 and December 31. The Prior  Indenture  included  affirmative  covenants,
negative covenants and financial covenants.

        On March 28, 1996,  the Trust entered into a financing  agreement  which
provided  for the  issuance  of $67.4  million of new  Floating  Rate Notes (the
"Floating Rate Notes"),  which issuance occurred on April 30, 1996. The Floating
Rate Notes bear interest at 30 day LIBOR + 1.375 percent,  payable monthly,  and
have a stated maturity date of May 1, 1999.





                                     - 44 -
<PAGE>
        The indenture  relative to the Floating Rate Notes (the "New Indenture")
generally  requires that, on a monthly  basis,  the Trust deposit into a Trapped
Funds  Account,  as  defined,  maintained  by the  indenture  trustee  (the "New
Indenture  Trustee")  for the  Floating  Rate Notes all Cash Flow and Asset Sale
Proceeds  (each as defined  in the New  Indenture).  Cash Flow from the  Trapped
Funds Account will be distributed to pay the New Indenture  Trustee's  expenses,
pay all accrued but unpaid interest on the Floating Rate Notes and to maintain a
Debt Service  Reserve Account before any funds are released to the Trust. In the
event of a sale of, or certain casualty, or indemnification  events with respect
to  any of the  remaining  twenty-one  properties  of the  original  twenty-four
properties  mortgaged  under the terms of the  Floating  Rate Notes  (underlying
collateralized  carrying  value of $86.5  million at September  30,  1996),  the
proceeds  therefrom  will be  used to  retire  up to  125% of a  portion  of the
allocated debt of such property before any funds are released to the Trust.  The
New  Indenture  includes  affirmative  covenants  and  negative  covenants.   At
September 30, 1996, the Trust was in compliance with the New Indenture.

        The  proceeds  received  from the  Floating  Rate Notes,  together  with
approximately  $56.5  million of cash on hand,  were used to prepay the  Trust's
Prior Notes and Mortgage Payable. The face amount outstanding of the Prior Notes
and the Mortgage  Payable at the time of repayment was $110.0  million and $13.9
million,  respectively. The Prior Notes and Mortgage Payable were repaid in full
on April 30, 1996.

        Effective  April 30,  1996,  the Trust  entered  into an  interest  rate
protection  agreement  (the  "Cap")  that  serves to cap the  floating  interest
component  of the  Floating  Rate Notes at 8%. The Trust paid a one-time  fee of
$377,000 to the counterparty to the Cap.

        During fiscal 1996, the Trust sold nine real estate properties, three of
which were  encumbered  under the terms of the New  Indenture.  The Trust used a
portion of the net proceeds from the sale of the encumbered properties to prepay
a portion of the  Floating  Rate Notes,  as required  under the terms of the New
Indenture.  In July of fiscal  1996,  the Trust  used  $4.2  million  of the net
proceeds  and in October and  November of fiscal 1997 used $2.6 million and $5.8
million, respectively of the fiscal 1996 net proceeds to prepay a portion of the
Floating Rate Notes.


6. FAIR VALUE OF FINANCIAL INSTRUMENTS

        The Financial  Accounting Standards Board Statement No. 107 - Disclosure
of Fair Value of Financial  Statements ("SFAS 107") requires  disclosure of fair
value information about financial instruments,  whether or not recognized in the
balance  sheet,  for which it is  practicable  to estimate that value.  In cases
where quoted market prices are not available, fair values are based on estimates
using present value or other valuation techniques.

        The carrying value of cash and cash equivalents  approximates their fair
value because of the liquidity and short-term maturities of these instruments.

        The  carrying  value  and fair  value of  off-balance  sheet  derivative
financial  instruments  used to manage  the  interest  rate  sensitivity  of the
Floating   Rate  Notes  were  $325,000  and  $186,000  at  September  30,  1996,
respectively.




                                     - 45 -
<PAGE>
        Although the off-balance sheet derivative  financial instrument does not
expose the Trust to credit risk equal to the notional  amount of $67.4  million,
the Trust is exposed  to credit  risk equal to the extent of the fair value gain
of an off-balance sheet derivative  financial instrument should the counterparty
fail to perform.  The Trust  minimized  such credit risk by dealing  only with a
high quality  counterparty.  In addition,  the Trust's policy is to require that
the Cap be governed by an International Swaps and Derivatives Association Master
Agreement.  Bilateral  collateral  arrangements  are in place for the all dealer
counterparty.

        The  carrying  value of the Floating  Rate Notes at  September  30, 1996
approximates their fair value because of the floating rate of these instruments.


7. SHARE OPTION PLAN

                             1984 SHARE OPTION PLAN

        As part of the Plan of  Reorganization,  the 1984 Share  Option Plan was
terminated and 348,500 common stock options were canceled.

                             1995 SHARE OPTION PLAN

        On October 2, 1995,  the Board of Trustees  adopted a 1995 Share  Option
Plan (the "1995 Plan") for Trustees,  officers,  employees and other key persons
of the Trust.  On February  15,  1996,  the Trust's  shareholders  approved  the
adoption of the 1995 Plan at the Trust's 1996 Annual Meeting of Shareholders.

        The 1995  Plan  provides  for the grant of  options  to  purchase  up to
870,000  common  shares at not less than  100% of the fair  market  value of the
common  shares,  subject to  adjustment  for share splits,  share  dividends and
similar  events.  To the extent that  awards  under the 1995 Plan do not vest or
otherwise revert to the Trust, the common shares  represented by such awards may
be the subject of subsequent awards.

        The  1995  Plan  provides  for the  grant  of  incentive  stock  options
("Incentive   Options")  which  qualify  under  Section  422  of  the  Code  and
non-qualified stock options ("Non-Qualified  Options").  Holders of options also
receive dividend  equivalent  rights.  Under the 1995 Plan,  894,000 shares were
granted with a price  ranging from $10.00 to $12.25 per share and 55,000  shares
were  forfeited at a price of $10.00 per share during fiscal 1996.  The weighted
average  exercise  price is $10.13 per share.  The options  vest  equally over a
three year period  starting one year from the date of grant.  The options expire
four years from the date of grant.















                                     - 46 -
<PAGE>
8. BENEFIT PLANS

                                  PENSION PLANS

        Effective  September  30,  1989,  the  Trustees  adopted  an  Employees'
Retirement  Plan.  On December 16, 1992,  the Trustees  amended and restated the
Employees'  Retirement  Plan  effective  January 1, 1992 (as amended on July 20,
1994,  and  effective  January  1,  1994  and  as may be  further  amended,  the
"Retirement  Plan").  In November 1995, the Trustees amended the Retirement Plan
effective   January  1,  1996  to  switch  from  the  Pension  Benefit  Guaranty
Corporation  ("PBGC")  interest rate used for valuing lump sum  distributions to
the new General Agreement on Tariffs and Trade interest rate and mortality table
for valuing lump sum distributions.  As a result of this amendment,  the current
market value of Retirement Plan assets  approximates the current  aggregate lump
sum amounts due to  participants.  In July 1996, the Trustees voted to terminate
the pension plan effective July 1, 1996.

        All  employees as of the  termination  date of the plan were eligible to
participate in the Retirement  Plan provided that they were at least 21 years of
age and had been employed for twelve consecutive months, during which period the
employee  completed at least 1000 hours of service.  Under the Retirement  Plan,
each eligible  employee after  completing  five years of vesting  service become
100% vested and entitled to a retirement pension.

        The  Trust  has  submitted  the  required  applications  to the  PBGC to
formally  terminate the plan.  There were 15 former employees who received final
payouts under the plan in fiscal 1996. There are four current  employees and one
former  employee that are due benefits  under the plan as of July 1, 1996.  Upon
the formal  termination  of the plan,  the Trust will  distribute  the remaining
benefits of approximately $100,000 to the remaining eligible employees.

                           SAVINGS AND INVESTMENT PLAN

        The  Trust  also  maintains  a 401(k)  profit  sharing  plan and  trust.
Employer contributions are limited to 6% of participant's  compensation,  with a
maximum per year of $3,000 per participant.  Profit sharing expense was $49,000,
$72,000  and  $61,000  for  years  ended  September  30,  1996,  1995 and  1994,
respectively.

                                 INCENTIVE PLAN

        During  fiscal  1996,  the Board of  Trustees  adopted  the  Performance
Incentive Bonus Plan (the "Bonus Plan").  All of the Trust's executive  officers
and  employees  are eligible  for an annual cash bonus under the Bonus Plan.  In
determining  the  amount  of  annual  cash  bonuses,  if any,  to be  paid,  the
Compensation  Committee,  at the end of the fiscal year, reviews the performance
of the  Trust to the  performance  measurement  targeted  by the  Bonus  Plan to
promote the long-term  strategic  growth of the Trust.  The amount awarded under
the Bonus Plan for fiscal 1996 was $215,500.










                                     - 47 -
<PAGE>
                              EMPLOYMENT AGREEMENT

        The  Trust  entered  into  an  Employment   Agreement  (the  "Employment
Agreement") with George R. Zoffinger on September 29, 1995. The original term of
the  Employment  Agreement  is three  years  and is  automatically  renewed  for
additional  one-year  periods  unless  otherwise  terminated by the Trust or Mr.
Zoffinger.  In addition,  Mr. Zoffinger is eligible for compensation in the form
of bonuses under the Trust's Performance  Incentive Bonus Plan and option grants
under  the  1995  Share  Option  Plan.  Mr.   Zoffinger  has  agreed  to  devote
substantially  all of his business  time and efforts to the business and affairs
of the Trust.

        If the  employment  of Mr.  Zoffinger is terminated by the Trust without
cause or by Mr.  Zoffinger upon  occurrence of certain events such as a material
breach of the Employment  Agreement by the Trust, Mr. Zoffinger will be entitled
to  continue  to receive  the Base  Salary at the same rate for six (6)  months.
Additionally, any unexercised vested options will remain exercisable only to the
extent provided in the applicable share option plan and option agreement.


9. EMPLOYEE TERMINATION PLAN

        A  termination  pay  plan  was  established  to  cover   termination  of
employment without cause during the period that the Old Notes, as defined,  were
outstanding.  Employees were entitled to compensation  ranging from a minimum of
twelve weeks to a maximum of eighteen  months pay. In addition,  certain  health
benefits  would  continue to be paid by the Trust over a period of time equal to
the employee's  severance  period.  At September 30, 1995, the Trust accrued the
$1.3  million  cost of the  Termination  Pay Plan.  After  fiscal year end,  the
majority of existing  employees were terminated and the Trust commenced payments
to those employees. The Trust has liquidated the termination plan by payments to
those employees terminated and the repayment of the Old Notes.



























                                     - 48 -
<PAGE>
10. SELECTED QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

        The quarterly results of operations for fiscal 1996  (post-confirmation)
and 1995 (pre-confirmation) are summarized as follows:
<TABLE>
<CAPTION>
                                                                                    QUARTER ENDED
                                                  ----------------------------------------------------------------------------------
                                                  DECEMBER 31               MARCH 31             JUNE 30              SEPTEMBER 30
                                                  -----------               --------             -------              ------------  
                                                                     (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                                 <C>                     <C>                  <C>                     <C>     
FISCAL 1996
(Post-confirmation)
Total revenue                                       $  9,395                $  9,438             $  8,462                $  7,771
Interest expense                                    $  3,565                $  3,420             $  2,064                $  1,440
Net income                                          $  1,437                $  1,450             $  2,016                $  2,070
                                                    ========                ========             ========                ========

Net income per share                                $   0.13                $   0.13             $   0.18                $   0.18
                                                    ========                ========             ========                ========


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


FISCAL 1995
(Pre-confirmation)
Total revenue                                       $ 10,002                $  9,774             $ 10,038                $  9,650
Interest expense                                    $  9,559                $ 10,273             $ 10,378                $  5,690
Provision for losses                                $     --                $  3,000             $     --                $     --
Reorganization expense                              $    370                $  1,135             $  1,063                $  3,651
Write down of invested assets to
  reorganization value                              $     --                $     --             $     --                $(66,597)
Gain on extinguishment
  of debt                                           $     --                $     --             $     --                $ 75,304
Net income (loss)                                   $ (5,454)               $(10,263)            $ (7,326)               $  3,010
                                                    ========                ========             ========                ========

Net income (loss) per share*
</TABLE>

*Net income (loss) per share for all  pre-confirmation  periods is not presented
 because this  information is not  meaningful as a result of the  Reorganization
 and  the  adoption  of  "Fresh  Start  Reporting".  See  Item  7.  Management's
 Discussion  and Analysis of Financial  Condition  and Results of  Operations on
 Page 15.












                                     - 49 -
<PAGE>
11. ACCOUNTING PRONOUNCEMENTS

        In March 1995, the FASB issued  Statement No. 121,  "Accounting  for the
Impairment of Long-Lived  Assets and for  Long-Lived  Assets to be Disposed Of",
which requires that long-lived assets and certain identifiable intangibles to be
held and used by an entity be reviewed for impairment whenever events or changes
in  circumstances  indicate  that the  carrying  amount  of an asset  may not be
recoverable.  An estimate  of the future cash flows  expected to result from the
use of the asset and its  eventual  disposition  should  be  performed  during a
review for  recoverability.  An impairment  loss,  based on the  estimated  fair
value,  is recognized if the sum of expected future  undiscounted  cash flows is
less than the carrying amount of the asset. In addition,  SFAS 121 requires that
long-lived  assets and  certain  identifiable  intangibles  to be disposed of be
reported at the lower of carrying amount or fair value less cost to sell.  These
assets will  continue  to be  reported  at the lower of  carrying  amount or net
realizable  value.  This statement is required for fiscal years  beginning after
December 15, 1995.  The Trust will adopt  Statement  121 in the first quarter of
fiscal 1997 and, based on current circumstances,  does not believe the effect of
adoption  will have a material  effect on the  Trust's  financial  condition  or
results of operations.

        In October  1995,  the FASB issued  Statement No. 123,  "Accounting  for
Stock-Based  Compensation,"  which  requires  that  the fair  value of  employee
stock-based  compensation  plans be  recorded  as a  component  of  compensation
expense in the statement of income as of the date of grant of awards  related to
such plans or that the impact of such fair value on net income and  earnings per
share be  disclosed on a pro-forma  basis in a footnote to financial  statements
for awards  granted after  December 14, 1994, if the  accounting for such awards
continues to be in accordance with Accounting  Principles  Board Opinion No. 25,
"Accounting  for Stock  Issued to  Employees"  ("APB  25").  This  statement  is
required  for fiscal years  beginning  after  December 15, 1995.  The Trust will
elect to provide  footnote  disclosure  under the fair value method of SFAS 123.
Since the Trust expects to continue to account for employee  stock  compensation
under APB 25, the adoption of SFAS 123 is not expected to have a material effect
on the Trust's financial condition or results of operations.


12. LEGAL PROCEEDINGS

        A discussion of events surrounding the Trust's Prior Bankruptcy Case and
an  explanation of the material  terms of the Trust's  reorganization  under the
1991 Plan are set forth in the section  entitled  "Previous  Chapter 11 Case and
1991 Plan of  Reorganization"  under Item 1 above. The Prior Bankruptcy Case was
closed on November 4, 1994 pursuant to a final order of the Bankruptcy Court.

        A  discussion  of  events   surrounding  the  Trust's  1995  prepackaged
bankruptcy  filing  and an  explanation  of the  material  terms of the  Trust's
reorganization  under the Prepackaged Plan are set forth in the section entitled
"Recent Chapter 11 Case and 1995 Prepackaged Plan of Reorganization"  under Item
1 above. Notwithstanding the confirmation of the Trust's Prepackaged Plan, as of
September 29, 1995, the bankruptcy  court continued to have  jurisdiction  among
other things, to resolve disputes that may arise under the Prepackaged Plan.

        A third party has  alleged the  existence  of a purchase  contract  with
respect to one of the Trust's properties which the Trust disputes.  This dispute
has led to litigation.  However,  the Trust believes that this litigation,  when
resolved,  will not have a material  adverse  effect on the business,  financial
condition or results of operations of the Trust.

                                     - 50 -
<PAGE>
13. LEASING ARRANGEMENTS

        For real  estate  held  for  investment  future  minimum  rentals  to be
received under existing non-cancelable operating leases as of September 30, 1996
are as follows:

                                             Amount
                 Year                (dollars in thousands)
                ------               ----------------------           
                 1997                       $ 13,139
                 1998                         11,634
                 1999                          9,976
                 2000                          7,593
                 2001                          6,170
                 thereafter                   40,664
                                            --------
                 Total                      $ 89,176
                                            ========

14. RELATED PARTY TRANSACTIONS

        The Trust is  subleasing a portion of the 8th floor of 120 Albany Street
from  the  New  Brunswick  Development  Authority,  a  not-for-profit  501(c)(3)
corporation  for the  benefit of the City of New  Brunswick  of which  George R.
Zoffinger,  C.E.O., President and Trustee of the Trust, is Chairman of the Board
of Trustees.  The sublease  covers 4000 square feet at an annual  rental rate of
$75,000.  The sublease is in effect until  December 31, 1997, at which point the
Trust has the option to renew at the same rate for another  year.  The Trust has
three more  subsequent  options to renew the sublease at the current rental rate
in December 1997, 1998 and 1999.





























                                     - 51 -
<PAGE>
<TABLE>
<CAPTION>
                                                        VALUE PROPERTY TRUST

                                                             SCHEDULE XI

                                   REAL ESTATE OWNED AND ACCUMULATED DEPRECIATION AND AMORTIZATION

                                                         SEPTEMBER 30, 1996
                                                       (Dollars in thousands)

                                                                    Reorganization Value (b)    
                                                                    --------------------         Costs Capitalized                 
                                                                                                   Subsequent to                   
                                                                                                Reorganization Value
                                                                                               ---------------------     Adjust for 
                                                                             Buildings &                 Buildings &       Unreal.
Classification                                    Encumbrances (a)  Land    Improvements       Land     Improvements       Gain (b)
--------------                                    ------------      ----    ------------       ----     ------------   ------------
<S>                                                  <C>           <C>          <C>            <C>           <C>             <C>
Apartments:

    McLaughlin Apartments
    Hammond, IN ...............................      $3,552        $  730        $2,929        $    0        $   68          $    0

    Junipers of Yarmouth
    Yarmouth, ME ..............................       5,478         1,530         6,120             0           166               0

    Villa Del Cresta
    Florissant, MO ............................       6,868         1,640         6,568             0           142               0


Industrial:

    Parkway Business Center
    Richmond, CA ..............................       2,056           430         1,730             0            43            (302)

    North County
    Yorba Linda, CA ...........................           0           850         3,380             0           122               0

    Slauson
    Whittier, CA ..............................       2,082           520         2,090             0            89               0

    Moreno Valley
    Moreno Valley, CA .........................       2,490           950         3,820             0             1            (655)

    Oaktree Industrial Park
    San Dimas, CA .............................         976             0             0           345         1,373            (235)

    Chino Business Park
    Chino, CA .................................       1,983             0             0           670         2,818               0

    Avenue Hall Executive Center
    Valencia, CA ..............................       1,082           450         1,800             0           120               0





                                     - 52 -
<PAGE>
<CAPTION>
                                                        VALUE PROPERTY TRUST

                                                             SCHEDULE XI

                                   REAL ESTATE OWNED AND ACCUMULATED DEPRECIATION AND AMORTIZATION

                                                         SEPTEMBER 30, 1996
                                                       (Dollars in thousands)
                                                             (Continued)

                                               Gross Amount Carried at End of Period                                           
                                               -------------------------------------                                           
                                                           Buildings &                   Accumulated       Date of       Life for   
Classification                                   Land     Improvements      Total       Depreciation    Construction   Depreciation 
--------------                                   ----     ------------    ---------     ------------    ------------   ------------ 
<S>                                             <C>            <C>          <C>           <C>             <C>            <C>
Apartments:

    McLaughlin Apartments
    Hammond, IN ..........................      $    0        $    0        $    0        $    0          1970           N/A

    Junipers of Yarmouth
    Yarmouth, ME .........................       1,530         6,286         7,816             0          1971           (b)

    Villa Del Cresta
    Florissant, MO .......................       1,640         6,710         8,350             0          1967/1974      (b)


Industrial:

    Parkway Business Center
    Richmond, CA .........................         430         1,471         1,901            47          1986           3-40 years

    North County
    Yorba Linda, CA ......................           0             0             0            48          1987-1989      N/A

    Slauson
    Whittier, CA .........................           0             0             0            48          1985           N/A

    Moreno Valley
    Moreno Valley, CA ....................         950         3,166         4,116            96          1993           3-40 years

    Oaktree Industrial Park
    San Dimas, CA ........................         345         1,138         1,483            37          1985           3-40 years

    Chino Business Park
    Chino, CA ............................         592         2,509         3,101            38          1992           (b)

    Avenue Hall Executive Center
    Valencia, CA .........................         450         1,920         2,370            48          1988           (b)

</TABLE>






                                     - 53 -
<PAGE>
<TABLE>
<CAPTION>

                                                        VALUE PROPERTY TRUST

                                                             SCHEDULE XI



                                   REAL ESTATE OWNED AND ACCUMULATED DEPRECIATION AND AMORTIZATION

                                                         SEPTEMBER 30, 1996
                                                       (dollars in thousands)
                                                             (Continued)

                                                                    Reorganization Value (b)    
                                                                    --------------------         Costs Capitalized                 
                                                                                                   Subsequent to                   
                                                                                                Reorganization Value
                                                                                               ---------------------     Adjust for 
                                                                             Buildings &                 Buildings &       Unreal.
Classification                                    Encumbrances (a)  Land    Improvements       Land     Improvements       Gain (b)
--------------                                    ------------      ----    ------------       ----     ------------   ------------
<S>                                                  <C>           <C>          <C>            <C>           <C>             <C>
Industrial:
(continued)

    80 South Street
    Hopkinton, MA .......................                0          350          1,405          0              0                0
                                                                                                                                 
    Mellen Street                                                                                                                
    Framingham, MA ......................                0          110            430          0             49                0
                                                                                                                                 
    900 Building                                                                                                                 
    Minneapolis, MN .....................            1,508          410          1,630          0            148                0
                                                                                                                                 
    6950 Washington Avenue                                                                                                       
    Eden Prairie, MN ....................                0          480          1,914          0              0                0
                                                                                                                                 
    Maryland Road                                                                                                                
    Willow Grove, PA ....................                0          310          1,220          0              9                0
                                                                                                                                 
Land:                                                                                                                            
                                                                                                                                 
    L.A. Industrial                                                                                                              
    Los Angeles, CA .....................                0          270              0          0              0                0
                                                                                                                                
Office:

    Stadium Towers
    Anaheim, CA .........................            1,842          700          2,810          0            403             (534)

    615 Nash Street
    El Segundo, CA ......................            1,325          470          1,870          0            168             (340)





                                     - 54 -
<PAGE>
<CAPTION>
                                                        VALUE PROPERTY TRUST

                                                             SCHEDULE XI



                                   REAL ESTATE OWNED AND ACCUMULATED DEPRECIATION AND AMORTIZATION

                                                         SEPTEMBER 30, 1996
                                                       (dollars in thousands)
                                                             (Continued)

                                                Gross Amount Carried at End of Period                                           
                                                -------------------------------------                                           
                                                            Buildings &                  Accumulated      Date of        Life for  
Classification                                   Land      Improvements       Total      Depreciation   Construction   Depreciation
--------------                                   ----      ------------     ---------    ------------   ------------   ------------ 
<S>                                              <C>           <C>            <C>             <C>         <C>            <C>
Industrial:
(continued)

    80 South Street
    Hopkinton, MA ......................           0               0              0            0          1970-1974      N/A

    Mellen Street
    Framingham, MA .....................           0               0              0            7          1915           N/A

    900 Building
    Minneapolis, MN ....................         410           1,778          2,188            0          1910           (b)

    6950 Washington Avenue
    Eden Prairie, MN ...................           0               0              0            0          1970           N/A

    Maryland Road
    Willow Grove, PA ...................           0               0              0            0          1962           N/A

Land:

    L.A. Industrial
    Los Angeles, CA ....................           0               0              0            0          N/A            N/A

Office:

    Stadium Towers
    Anaheim, CA ........................         700           2,679          3,379          100          1984           3-40 years

    615 Nash Street
    El Segundo, CA .....................         470           1,698          2,168           80          1987           3-40 years

</TABLE>








                                     - 55 -
<PAGE>
<TABLE>
<CAPTION>
                                                        VALUE PROPERTY TRUST

                                                             SCHEDULE XI

                                   REAL ESTATE OWNED AND ACCUMULATED DEPRECIATION AND AMORTIZATION

                                                         SEPTEMBER 30, 1996

                                                       (dollars in thousands)
                                                             (Continued)

                                                                    Reorganization Value (b)    
                                                                    --------------------         Costs Capitalized                 
                                                                                                   Subsequent to                   
                                                                                                Reorganization Value
                                                                                               ---------------------     Adjust for 
                                                                             Buildings &                 Buildings &       Unreal.
Classification                                    Encumbrances (a)  Land    Improvements       Land     Improvements       Gain (b)
--------------                                    ------------      ----    ------------       ----     ------------   ------------
<S>                                                 <C>            <C>          <C>            <C>           <C>             <C>
Office:
(continued)

Clarewood
Woodland Hills, CA ......................           1,124            400        1,580           0            239             (298)

268 Summer Street
Boston, MA ..............................             823            330        1,327           0             59             (228)

250 Turnpike Street
Canton, MA ..............................             721            290        1,150           0              1             (198)

Burtonsville Commerce Center
Burtonsville, MD ........................           2,745            920        3,670           0             33             (634)

Keewaydin Drive
Salem, NH ...............................           1,339            610        2,450           0             80             (429)

501 Hoes Lane
Piscataway, NJ ..........................             551            180          715           0            115             (136)

Two Executive Campus
Cherry Hill, NJ .........................             894            240          939           0             27                0

Riverside Centre
Portland, OR ............................           3,452          1,170        4,680           0            491                0

Pinebrook II
King of Prussia, PA .....................               0              0        1,790           0             49             (251)








                                     - 56 -
<PAGE>
<CAPTION>
                                                        VALUE PROPERTY TRUST

                                                             SCHEDULE XI

                                   REAL ESTATE OWNED AND ACCUMULATED DEPRECIATION AND AMORTIZATION

                                                         SEPTEMBER 30, 1996

                                                       (dollars in thousands)
                                                             (Continued)


                                                 Gross Amount Carried at End of Period                                           
                                                 -------------------------------------                                           
                                                           Buildings &                   Accumulated      Date of        Life for  
Classification                                    Land     Improvements      Total       Depreciation   Construction   Depreciation
--------------                                    ----     ------------    ---------     ------------   ------------   ------------
<S>                                              <C>           <C>            <C>             <C>         <C>            <C>
Office:
(continued)

    Clarewood
    Woodland Hills, CA .....................       400         1,521          1,921           93          1980           3-40 years

    268 Summer Street
    Boston, MA .............................       330         1,158          1,488           55          1897           3-40 years

    250 Turnpike Street
    Canton, MA .............................       290           953          1,243           29          1980           3-40 years

    Burtonsville Commerce Center
    Burtonsville, MD .......................       920         3,069          3,989           97          1989           3-40 years

    Keewaydin Drive
    Salem, NH ..............................       610         2,101          2,711           75          1973           3-40 years

    501 Hoes Lane
    Piscataway, NJ .........................       180           694            874           36          1987           3-40 years

    Two Executive Campus
    Cherry Hill, NJ ........................       240           966          1,206           23          1970           (b)

    Riverside Centre
    Portland, OR ...........................     1,170         5,171          6,341            3          1945           (b)

    Pinebrook II
    King of Prussia, PA ....................         0         1,588          1,588           49          1983           3-40 years

</TABLE>









                                     - 57 -
<PAGE>
<TABLE>
<CAPTION>

                                                        VALUE PROPERTY TRUST

                                                             SCHEDULE XI

                                   REAL ESTATE OWNED AND ACCUMULATED DEPRECIATION AND AMORTIZATION

                                                         SEPTEMBER 30, 1996
                                                       (dollars in thousands)
                                                             (Continued)

                                                                    Reorganization Value (b)    
                                                                    --------------------         Costs Capitalized                 
                                                                                                   Subsequent to                   
                                                                                                Reorganization Value
                                                                                               ---------------------     Adjust for 
                                                                             Buildings &                 Buildings &       Unreal.
Classification                                    Encumbrances (a)  Land    Improvements       Land     Improvements       Gain (b)
--------------                                    ------------      ----    ------------       ----     ------------   ------------
<S>                                              <C>             <C>          <C>            <C>           <C>             <C>
Office:
(continued)

    421 Chestnut Street
    Philadelphia, PA ....................               0             500       2,020              0             13           (347)

    Southampton
    Southampton, PA .....................               0             390       1,561              0             63              0

    Pinebrook I
    King of Prussia, PA .................               0               0       1,629              0             77           (232)

    Six Sentry Parkway
    Blue Bell, PA .......................               0             920       3,670              0            398           (680)

Retail:

    Gateway Plaza (Paseo)
    Fremont, CA .........................          14,287           4,320      17,280            300            264         (3,042)

    Arcade Square
    Sacramento, CA ......................           3,384           1,120       4,460              0            544           (828)

    Berdon Plaza
    Fairhaven, MA .......................           4,157           1,350       5,403              0            159              0

    Bradford Plaza
    West Chester, PA ....................               0           1,330       5,330              0             25           (917)
                                                 --------        --------    --------       --------       --------       --------


Total Real Estate Owned .................        $ 64,719        $ 24,270    $ 99,370       $  1,237       $  8,434       $(10,286)
                                                 ========        ========    ========       ========       ========       ========



                                     - 58 -
<PAGE>
<CAPTION>

                                                        VALUE PROPERTY TRUST

                                                             SCHEDULE XI

                                   REAL ESTATE OWNED AND ACCUMULATED DEPRECIATION AND AMORTIZATION

                                                         SEPTEMBER 30, 1996
                                                       (dollars in thousands)
                                                             (Continued)


                                                Gross Amount Carried at End of Period                                           
                                                -------------------------------------                                           
                                                           Buildings &                    Accumulated      Date of        Life for 
Classification                                   Land     Improvements      Total        Depreciation    Construction   Depreciation
--------------                                   ----     ------------    ---------      ------------    ------------   ------------
<S>                                              <C>         <C>            <C>              <C>            <C>          <C>
Office:
(continued)

    421 Chestnut Street
    Philadelphia, PA .................             500         1,686          2,186                55       1857         3-40 years

    Southampton
    Southampton, PA ..................               0             0              0                 0       1984         N/A

    Pinebrook I
    King of Prussia, PA ..............               0         1,474          1,474                48       1981         3-40 years

    Six Sentry Parkway
    Blue Bell, PA ....................             920         3,388          4,308               130       1990         3-40 years

Retail:

    Gateway Plaza (Paseo)
    Fremont, CA ......................           4,620        14,502         19,122               442       1969         3-40 years

    Arcade Square
    Sacramento, CA ...................           1,120         4,176          5,296               212       1955         3-40 years

    Berdon Plaza
    Fairhaven, MA ....................           1,350         5,562          6,912                 0       1968         (b)

    Bradford Plaza
    West Chester, PA .................           1,330         4,438          5,768               139       1990         3-40 years
                                              --------      --------       --------          -------- 


Total Real Estate Owned ..............        $ 21,497      $ 81,802       $103,299 (c,d)    $  2,035       
                                              ========      ========       ========          ======== 






</TABLE>
                                     - 59 -
<PAGE>
                              VALUE PROPERTY TRUST

                                   SCHEDULE XI

         REAL ESTATE OWNED AND ACCUMULATED DEPRECIATION AND AMORTIZATION

                               SEPTEMBER 30, 1996

NOTES:

(a) The  encumbrances  of Senior  Notes due 1999 are  collateralized  by a first
    priority Lien on 21 of the Trust's assets,  including  personal property and
    real property held by the Trust or any subsidiary.

(b) See Note 2 "Significant  Accounting Policies" to the consolidated  financial
    statements.

(c) Cost for federal income tax purposes is approximately $160,000,000.

(d) The changes in carrying amounts during the year ended September 30, 1996 are
    summarized as follows:

Balance at September 30, 1995 ................                      $123,640,000
Reclassification from foreclosure property ...                         5,120,000
Additions during year:
   Improvements ..............................                         4,551,000
Deductions during year:
   Sale of real estate .......................     $ 19,726,000
   Adjustments for deferred gains ............       10,286,000       30,012,000
                                                   ------------     ------------
Balance at September 30, 1996 ................                      $103,299,000
                                                                    ============


    The changes in carrying amounts during the year ended September 30, 1995 are
    summarized as follows:

Balance at September 30, 1994 ................                      $ 66,880,000
Reclassification from foreclosure
   property and mortgage loans ...............                       109,565,000
Additions during year:
   Improvements ..............................                        11,283,000
Deductions during year:
   Sale of real estate .......................     $  3,350,000
   Charge off against allowance for losses ...        2,881,000
   Adjustments for fresh start reporting .....       57,857,000       64,088,000
                                                   ------------     ------------
Balance at September 30, 1995 ................                      $123,640,000
                                                                    ============










                                     - 61 -
<PAGE>
    The changes in carrying amounts during the year ended September 30, 1994 are
    summarized as follows:

Balance at September 30, 1993 ................                      $ 65,012,000
Additions during year:
   Improvements ..............................     $  1,847,000
Loan advance by construction lender ..........           21,000        1,868,000
                                                   ------------     ------------
Balance at September 30, 1994 ................                      $ 66,880,000
                                                                    ============


    The change in  accumulated  depreciation  and  amortization  during the year
    ended September 30, 1996 is summarized as follows:

Balance at September 30, 1995 ...........................                  $ -0-
Additions during year:
   Charge to income .....................................              2,035,000
Deductions during year:
   Adjustment for sold properties .......................                103,000
                                                                      ----------

Balance at September 30, 1996 ...........................             $1,932,000
                                                                      ==========

    The change in  accumulated  depreciation  and  amortization  during the year
    ended September 30, 1995 is summarized as follows:

Balance at September 30, 1994 .............................          $10,023,000
Reclassification from foreclosure property ................            8,264,000
Additions during year:
   Charge to income .......................................            6,608,000
Deductions during year:
   Adjustment for fresh start reporting ...................           24,895,000
                                                                     -----------
Balance at September 30, 1995 .............................          $       -0-
                                                                     ===========

    The change in  accumulated  depreciation  and  amortization  during the year
    ended September 30, 1994 is summarized as follows:

Balance at September 30, 1993 ..........................             $ 7,799,000
Additions during year:
   Charge to income ....................................               2,224,000
                                                                     -----------
Balance at September 30, 1994 ..........................             $10,023,000
                                                                     ===========












                                     - 62 -
<PAGE>
<TABLE>
                                                        VALUE PROPERTY TRUST

                                                            SCHEDULE XII

                                                   MORTGAGE LOANS ON REAL ESTATE

                                                         SEPTEMBER 30, 1996
<CAPTION>
                                                                                                                        PRINCIPAL
                                                                                                                        AMOUNT OF
                                                                                                                      LOANS SUBJECT
                                              NUMBER                                                CONTRACTUAL       TO DELINQUENT
                                                OF         INTEREST               FINAL              AMOUNT OF          PRINCIPAL
TYPE OF LOANS                                  LOANS         RATE             MATURITY DATE          MORTGAGES         OR INTEREST
-------------                                 ------       --------           -------------         -----------       --------------
<S>                                             <C>       <C>              <C>                      <C>                   <C>
ASSETS HELD FOR INVESTMENT:
Residential/Condominiums (a)                    71        6.20%-9.50%      June 2000-June 2009       1,008,000               --
                                                                                                    ----------            ------
Total contractual amount of mortgage loans                                                           1,008,000            $  --
                                                                                                    ==========            ======

Adjust contractual amount to
  reorganization value of mortgage loans                                                              (237,000)
Adjust contractual amount to reallocate
  unrealized gain on sale                                                                             (108,000)
                                                                                                    ----------                  
Carrying value of mortgage loans and
  investments                                                                                       $  663,000 (b)(c)
                                                                                                    ==========      

</TABLE>


























                                     - 63 -
<PAGE>
                              VALUE PROPERTY TRUST

                                  SCHEDULE XII

                          MORTGAGE LOANS ON REAL ESTATE

                               SEPTEMBER 30, 1996

NOTES:

(a) Consists of 71 mortgage end loans on 7 projects.

(b) The aggregate cost for federal income tax purposes is $1,008,000.

(c) The  change in  carrying  value of  mortgage  loans  during  the year  ended
    September 30, 1996 were as follows:

Balance at September 30, 1995 .........................            $ 56,979,000
Advances on mortgage loans ............................                 100,000
                                                                   ------------
                                                                     57,079,000
Collections of principal ..............................             (51,188,000)
Transfer to real estate ...............................              (5,120,000)
Adjustment for unrealized gains .......................                (108,000)
                                                                   ------------
                                                                   $    663,000
                                                                   ============

    The  change in  carrying  value of  mortgage  loans  during  the year  ended
    September 30, 1995 were as follows:

Balance at September 30, 1994 .........................            $ 69,322,000
Reclassification from in-substance foreclosure ........              29,441,000
Advances on mortgage loans ............................                 733,000
Net change in interest reserves .......................                 162,000
                                                                   ------------
                                                                     99,658,000
Collections of principal ..............................             (22,711,000)
Adjustment for fresh start accounting .................             (19,968,000)
                                                                   ------------
                                                                   $ 56,979,000
                                                                   ============

    The  change in  carrying  value of  mortgage  loans  during  the year  ended
    September 30, 1994 were as follows:

Balance at September 30, 1993 .........................            $104,193,000
Advances on mortgage loans ............................                    --
Transfer of real estate to mortgage loans .............                 750,000
Net change in interest reserves, deferred income ......                 480,000
                                                                   ------------
                                                                    105,423,000
Collections of principal ..............................             (25,555,000)
Transfer to real estate ...............................             (10,321,000)
Chargeoff against allowance for losses ................                (225,000)
                                                                   ------------
                                                                   $ 69,322,000
                                                                   ============

                                     - 64 -
<PAGE>
                              VALUE PROPERTY TRUST

                                INDEX TO EXHIBITS

EXHIBIT NO.                             DESCRIPTION
-----------                             -----------

3.1(a)            Amended and Restated  Declaration of Trust dated September 29,
                  1995 (1) (Exhibit 3.1).

3.1(b)            October 26, 1995 Amendment to Amended and Restated Declaration
                  of Trust dated September 29, 1995. (2)

3.2               By-Laws, as amended through June 20, 1984 (3) (Exhibit 3.3).

4.1(a)            Form of Certificate for Common Shares (2).

4.1(b)            Indenture   dated  as  of  April  30,   1996   among   certain
                  subsidiaries  of Value  Property  Trust and  LaSalle  National
                  Bank, as trustee, governing the Floating Rate Senior Notes due
                  1999 (4).

4.2(a)            Joint Plan of  Reorganization  Proposed by Debtor,  Creditors'
                  Committee and Equity Security  Holders  Committee (5) (Exhibit
                  10.11).

4.2(b)            Modification  to  Joint  Plan of  Reorganization  Proposed  by
                  Debtor,  Creditors'  Committee  and  Equity  Security  Holders
                  Committee (6) (Exhibit 2).

4.2(c)            Amendment No. 1 and Consent to Plan of Reorganization dated as
                  of September 30, 1991 (7) (Exhibit 4.4(c)).

4.2(d)            Amendment  No. 2 to Plan of  Reorganization,  dated as of July
                  15, 1992 (8) (Exhibit 4.2(d)).

4.2(e)            Prepackaged  Plan  of   Reorganization  as  confirmed  by  the
                  Bankruptcy  Court of the Central  District of  California  (1)
                  (Exhibit 2.1).

4.2(f)            Form of Mortgage,  Assignment of Rents and Leases and Security
                  Agreement between certain subsidiaries of Value Property Trust
                  and LaSalle National Bank, as trustee and mortgagee (4).

4.3(a)            Indenture  dated  as of July 15,  1992  between  Mortgage  and
                  Realty  Trust   (predecessor  to  Value  Property  Trust)  and
                  Wilmington   Trust   Company,   as  trustee,   governing   the
                  registrant's Senior Secured  Uncertificated Notes due 1995 (8)
                  (Exhibit 4.3).

4.3(b)            Indenture dated as of September 29, 1995 between  Mortgage and
                  Realty  Trust   (predecessor  to  Value  Property  Trust)  and
                  Wilmington   Trust   Company,   as  trustee,   governing   the
                  registrants   11-1/8%  Senior  Secured  Notes  due  2002.  (1)
                  (Exhibit 4.1).




                                     - 65 -
<PAGE>
4.3(c)            Amended and Restated Collateral and Security Agreement between
                  Mortgage  and  Realty  Trust  (predecessor  to Value  Property
                  Trust),  its  Subsidiaries,  its Lenders and Wilmington  Trust
                  Company and William J. Wade as Collateral  Agent,  dated as of
                  September 29, 1995 (1) (Exhibit 4.2).

4.3(d)            Letter  of  Agreement   between   Mortgage  and  Realty  Trust
                  (predecessor  to Value Property  Trust) and  Wilmington  Trust
                  Company and William J. Wade as Collateral  Agent,  dated as of
                  September 29, 1995 (1) (Exhibit 4.3).

4.3(e)            Pledge   Agreement   between   Mortgage   and   Realty   Trust
                  (predecessor  to Value Property  Trust) and  Wilmington  Trust
                  Company as  Collateral  Agent,  dated as of September 29, 1995
                  (1) (Exhibit 4.5).

4.3(f)            Form of Security  Agreement  between  certain  subsidiaries of
                  Value  Property  Trust and LaSalle  National  Bank, as trustee
                  (4).

10.1(a)           1984 Share Option Plan (9) (Exhibit 19.1).

10.1(b)           Interest Rate Swap  Agreement  among certain  subsidiaries  of
                  Value Property Trust and Merrill Lynch Derivatives Products AG
                  dated April 24, 1996, and effective April 30, 1996 (4).

10.2              Form of Incentive Stock Option  Agreement under the 1984 Share
                  Option Plan (10) (Exhibit 10.9).

10.3              Form of  Non-Qualified  Stock Option  Agreement under the 1984
                  Share Option Plan (3) (Exhibit 10.19).

10.4              Amended and Restated Savings  Incentive Plan effective January
                  1, 1992 (8) (Exhibit 10.7).

10.5              Amended and  Restated  Employees'  Retirement  Plan  effective
                  January 1, 1992 (8) (Exhibit 10.8).

10.6              Pension Plan for Trustees  dated October 1, 1989 (11) (Exhibit
                  10.13).

10.7              Employee'  Retention  Plan dated  October  17, 1990 as amended
                  January 16, 1991 and March 10, 1991 (12) (Exhibit 19.1).

10.8              Resolutions  of Amendment  to Amended and Restated  Employees'
                  Retirement Plan (13) (Exhibit 10.8).

10.9              Registration Rights Agreement between Mutual Series Fund Inc.,
                  Intermarket  Corporation,  Angelo, Gordon & Co., L.P., Emerald
                  Partners,  Strome-Susskind & Co. and Mortgage and Realty Trust
                  (predecessor  to Value Property  Trust),  dated  September 29,
                  1995  (1)  (Exhibit  10.1)  November  28,  1995  Amendment  to
                  Registration.

10.10             Rights Agreement dated September 29, 1995 (2).




                                     - 66 -
<PAGE>
10.11             Form of 1995 Share Option Plan (14) (Exhibit A).

10.12(*)          Employment contract dated September 29, 1995 between the Trust
                  and Mr. Zoffinger.

16                Change in certifying accountants (15).

20.1              Press Release (16) (Exhibit 20.1).

20.2              Term Sheet (16) (Exhibit 20.2).

21                Subsidiaries (13) (Exhibit 21).

22                Press Release (17).

23.1(*)           Consent of Ernst & Young LLPdated December 27, 1996.

23.2(*)           Consent of Coopers & Lybrand L.L.P.dated December 27, 1996.

27(*)             Financial Data Schedule.
---------------
(1)  Filed on October 13,  1995 as an exhibit to the Current  Report on Form 8-K
     (No. 1-6613) and incorporated herein by reference.
(2)  Filed on December 29, 1995 as an exhibit to the Annual  Report on Form 10-K
     (No. 1-6613) and incorporated herein by reference.
(3)  Filed on December  6, 1984 as an exhibit to the Annual  Report on Form 10-K
     (No. 1-6613) and incorporated herein by reference.
(4)  Filed on August 14, 1996 as an exhibit to the Quarterly Report on Form 10-Q
     (No. 1-6613) and incorporated herein by reference.
(5)  Filed on December 28, 1990 as an exhibit to the Annual  Report on Form 10-K
     (No. 1-6613) and incorporated herein by reference.
(6)  Filed on March 14,  1991 as an  exhibit to the  Current  Report on Form 8-K
     (No. 1-6613) and incorporated herein by reference.
(7)  Filed on December 27, 1991 as an exhibit to the Annual  Report on Form 10-K
     (No. 1-6613) and incorporated herein by reference.
(8)  Filed on December 22, 1992 as an exhibit to the Annual  Report on Form 10-K
     (No. 1-6613) and incorporated herein by reference.
(9)  Filed on August 13, 1987 as an exhibit to the Quarterly Report on Form 10-Q
     (No. 1-6613) and incorporated herein by reference.
(10) Filed on December 29, 1987 as an exhibit to the Annual  Report on Form 10-K
     (No. 1-6613) and incorporated herein by reference.
(11) Filed on December 21, 1989 as an exhibit to the Annual  Report on Form 10-K
     (No. 1-6613) and incorporated herein by reference.
(12) Filed on May 14,  1991 as an exhibit to the  Quarterly  Report on Form 10-Q
     (No. 1-6613) and incorporated herein by reference.
(13) Filed on December 29, 1994 as an exhibit to the Annual  Report on Form 10-K
     (No. 1-6613) and incorporated herein by reference.
(14) Filed on December  12, 1995 as an Exhibit to the 1995 Proxy  Statement  for
     fiscal year ended September 30, 1995.
(15) Filed on April 16,  1996 as an  exhibit to the  Current  Report on Form 8-K
     (No. 1-6613) and incorporated herein by reference.
(16) Filed on November 28, 1994 as an exhibit to the Current  Report on Form 8-K
     (No. 1-6613) and incorporated herein by reference.
(17) Filed on February 26, 1996 as an exhibit to the Current  Report on Form 8-K
     (No. 1-6613) and incorporated herein by reference.
(*)  Exhibit filed with this Form 10-K.

                                     - 67 -