<PAGE>   1
                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-K/A
                                 AMENDMENT NO. 1

(Mark One)

[X]   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
      ACT OF 1934 [FEE REQUIRED]

For the quarterly period ended          DECEMBER 31, 1996

                                       or

[ ]   TRANSITION REPORT PURSUANT TO 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
      OF 1934 [NO FEE REQUIRED]

For the transition period from                       to

Commission file number                       0-9174

                          CORPORATE PROPERTY ASSOCIATES
             (Exact name of registrant as specified in its charter)

<TABLE>
<S>                                                               <C>
          CALIFORNIA                                                                  94-2572215
(State or other jurisdiction of incorporation or organization)    (I.R.S. Employer Identification No.)

50 ROCKEFELLER PLAZA, NEW YORK, NEW YORK                                        10020
(Address of principal executive offices)                                      (Zip Code)
</TABLE>

Registrant's telephone number, including area code              (212) 492-1100

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

Title of each class                    Name of each exchange on which registered

        NONE                                              NONE

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

                            LIMITED PARTNERSHIP UNITS
                                (Title of Class)


                                (Title of Class)

      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.

                                                              [X] Yes  [ ] No

      Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K (Section 229.405 of this chapter) is not contained herein,
and will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [ X ]

      Aggregate market value of the voting stock held by non-affiliates of
Registrant: There is no active market for Limited Partnership Units.
<PAGE>   2
                                     Part II




Item 8.  Financial Statements and Supplementary Data.


     (i) Report of Independent Accountants.

    (ii) Balance Sheets as of December 31, 1995 and 1996.

   (iii) Statements of Income for the years ended December 31, 1994, 1995 and
         1996.

    (iv) Statements of Partners' Capital for the years ended December 31, 1994,
         1995 and 1996.

     (v) Statements of Cash Flows for the years ended December 31, 1994, 1995
         and 1996.

    (vi) Notes to Financial Statements.


                                      -5-
<PAGE>   3
                        REPORT of INDEPENDENT ACCOUNTANTS



To the Partners of
  Corporate Property Associates:


            We have audited the accompanying balance sheets of Corporate
Property Associates (a California limited partnership) as of December 31, 1995
and 1996, and the related statements of income, partners' capital and cash flows
for each of the three years in the period ended December 31, 1996. We have also
audited the financial statement schedule included on pages 16 to 17 of this
Annual Report. These financial statements and financial statement schedule are
the responsibility of the General Partners. Our responsibility is to express an
opinion on these financial statements and financial statement schedule based on
our audits.

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

            In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Corporate Property
Associates (a California limited partnership) as of December 31, 1995 and 1996,
and the results of its operations and its cash flows for each of the three years
in the period ended December 31, 1996, in conformity with generally accepted
accounting principles. In addition, in our opinion, the Schedule of Real Estate
and Accumulated Depreciation as of December 31, 1996, when considered in
relation to the basic financial statements taken as a whole, presents fairly, in
all material respects, the financial information required to be included therein
pursuant to Securities and Exchange Commission Regulation S-X Rule 12-28.





                                                  /s/ Coopers & Lybrand L.L.P.
New York, New York
March 17, 1997


                                      -5-
<PAGE>   4
                          CORPORATE PROPERTY ASSOCIATES
                       (a California limited partnership)

                                 BALANCE SHEETS

                           December 31, 1995 and 1996


<TABLE>
<CAPTION>
                                                  1995            1996
                                                  ----            ----
<S>                                           <C>             <C>
     ASSETS:

Real estate leased to others:
  Accounted for under the
    operating method:
      Land                                    $ 3,546,994     $ 3,335,260
      Buildings                                30,785,997      29,769,093
                                              -----------     -----------
                                               34,332,991      33,104,353
      Accumulated depreciation                 17,950,541      18,252,546
                                              -----------     -----------
                                               16,382,450      14,851,807
  Net investment in direct
    financing leases                            4,895,886       4,660,571
                                              -----------     -----------
      Real estate leased to others             21,278,336      19,512,378
Real estate held for sale                                         434,339
Cash and cash equivalents                         872,864         864,889
Escrow funds                                      100,000
Accrued interest and rents receivable             377,471         397,309
Other assets, net of accumulated
  amortization of $56,946 in 1995
  and $119,157 in 1996                            901,434       1,017,079
                                              -----------     -----------
         Total assets                         $23,530,105     $22,225,994
                                              ===========     ===========

     LIABILITIES:

Mortgage notes payable                        $14,888,807     $13,429,484
Accrued interest payable                          190,843         108,755
Accounts payable and accrued expenses              81,726          83,443
Prepaid rental income and security deposits       263,548         198,610
Accounts payable to affiliates                     46,304          45,840
                                              -----------     -----------
         Total liabilities                     15,471,228      13,866,132
                                              -----------     -----------

Commitments and contingencies

     PARTNERS' CAPITAL:

General Partners                                  (98,679)        (95,847)

Limited Partners (40,000
  Limited Partnership Units
  issued and outstanding)                       8,157,556       8,455,709
                                              -----------     -----------
         Total partners' capital                8,058,877       8,359,862
                                              -----------     -----------

         Total liabilities and
         partners' capital                    $23,530,105     $22,225,994
                                              ===========     ===========
</TABLE>

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


                                      -6-
<PAGE>   5
                          CORPORATE PROPERTY ASSOCIATES
                       (a California limited partnership)

                              STATEMENTS of INCOME

              For the years ended December 31, 1994, 1995 and 1996



<TABLE>
<CAPTION>
                                                     1994            1995           1996
                                                  -----------     -----------    -----------
<S>                                               <C>             <C>            <C>
Revenues:
  Rental income                                   $ 3,907,692     $ 3,994,281    $ 4,030,182
  Interest income from direct financing leases        518,483         525,673        510,293
  Other interest income                                54,285          66,654         48,670
  Other income                                                        244,010
                                                  -----------     -----------    -----------
                                                    4,480,460       4,830,618      4,589,145
                                                  -----------     -----------    -----------

Expenses:
  Interest on mortgages                             1,598,614       1,524,837      1,280,995
  Depreciation                                      1,106,712       1,089,758        969,570
  General and administrative                          222,086         237,800        202,551
  Property expenses                                   428,358         109,460        123,722
  Amortization                                         16,511          27,068         62,211
                                                  -----------     -----------    -----------
                                                    3,372,281       2,988,923      2,639,049
                                                  -----------     -----------    -----------

    Income before loss on sale and
      extraordinary item                            1,108,179       1,841,695      1,950,096

Loss on sale of real estate                                                           22,871
                                                  -----------     -----------    -----------

    Income before extraordinary item                1,108,179       1,841,695      1,927,225

Extraordinary charge on extinguishment of debt                                       255,438
                                                  -----------     -----------    -----------

    Net income                                    $ 1,108,179     $ 1,841,695    $ 1,671,787
                                                  ===========     ===========    ===========

Net income allocated to:
  Individual General Partner                      $     1,108     $     1,842    $     1,672
                                                  ===========     ===========    ===========

  Corporate General Partner                       $     9,974     $    16,575    $    15,046
                                                  ===========     ===========    ===========

  Limited Partners                                $ 1,097,097     $ 1,823,278    $ 1,655,069
                                                  ===========     ===========    ===========

Net income per Unit:
  (40,000 Limited Partnership
  Units outstanding)
   Income before extraordinary item               $     27.43     $     45.58    $     47.70
   Extraordinary item                                                                  (6.32)
                                                  -----------     -----------    -----------
                                                  $     27.43     $     45.58    $     41.38
                                                  ===========     ===========    ===========
</TABLE>

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


                                      -7-
<PAGE>   6
                          CORPORATE PROPERTY ASSOCIATES
                       (a California limited partnership)

                         STATEMENTS of PARTNERS' CAPITAL

              For the years ended December 31, 1994, 1995 and 1996



<TABLE>
<CAPTION>
                                                        Partners' Capital Accounts
                                        -----------------------------------------------------------
                                                                                         Limited
                                                                                         Partners'
                                                          General         Limited       Amount Per
                                           Total          Partners        Partners       Unit (a)
                                        -----------     -----------     -----------     -----------
<S>                                     <C>             <C>             <C>             <C>
Balance, December 31, 1993              $ 7,690,289     $  (102,363)    $ 7,792,652     $       195

Distributions                            (1,269,699)        (12,699)     (1,257,000)            (31)

Net income, 1994                          1,108,179          11,082       1,097,097              27
                                        -----------     -----------     -----------     -----------

Balance, December 31, 1994                7,528,769        (103,980)      7,632,749             191

Distributions                            (1,313,535)        (13,135)     (1,300,400)            (33)

Change in unrealized appreciation
  in marketable securities                    1,948              19           1,929

Net income, 1995                          1,841,695          18,417       1,823,278              46
                                        -----------     -----------     -----------     -----------

Balance, December 31, 1995                8,058,877         (98,679)      8,157,556             204

Distributions                            (1,417,554)        (14,354)     (1,403,200)            (35)

Change in unrealized appreciation in
 marketable securities                       46,752             468          46,284               1

Net income, 1996                          1,671,787          16,718       1,655,069              41
                                        -----------     -----------     -----------     -----------

Balance, December 31, 1996              $ 8,359,862     $   (95,847)    $ 8,455,709     $       211
                                        ===========     ===========     ===========     ===========
</TABLE>

(a)  Based on 40,000 Units issued and outstanding during all periods.

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


                                      -8-
<PAGE>   7
                          CORPORATE PROPERTY ASSOCIATES
                       (a California limited partnership)

                            STATEMENTS of CASH FLOWS
              For the years ended December 31, 1994, 1995 and 1996




<TABLE>
<CAPTION>
                                                                   1994            1995            1996
                                                               -----------     -----------     -----------
<S>                                                            <C>             <C>             <C>
Cash flows from operating activities:
   Net income                                                  $ 1,108,179     $ 1,841,695     $ 1,671,787
   Adjustments to reconcile net income
     to net cash provided by operating activities:
     Depreciation and amortization                               1,123,223       1,116,826       1,031,781
     Scheduled rents on direct financing leases in
      excess of (less than) amortization of unearned income         38,590          23,576         (16,780)
     Scheduled rents on operating leases less
      than income recognized                                       (67,500)        (67,500)        (67,500)
     Securities received in connection with settlement                             (44,561)
     Loss on sale of real estate                                                                    22,871
     Extraordinary charge on extinguishment of debt                                                255,438
     Net change in operating assets and liabilities                 13,980        (203,857)        (71,066)
                                                               -----------     -----------     -----------
        Net cash provided by operating
          activities                                             2,216,472       2,666,179       2,826,531
                                                               -----------     -----------     -----------

Cash flows from investing activities:
   Proceeds from sale of real estate, net                                                          355,958
   Release of escrow funds                                                                         100,000
   Purchase of note receivable                                     (77,254)
                                                               -----------                     -----------
        Net cash (used in) provided by
          investing activities                                     (77,254)                        455,958
                                                               -----------                     -----------

Cash flows from financing activities:
   Distributions to partners                                    (1,269,699)     (1,313,535)     (1,417,554)
   Proceeds from mortgage note payable                           2,400,000                       6,400,000
   Deferred refinancing costs                                     (272,746)                       (158,149)
   Prepayment charges paid on extinguishment of debt                                              (255,438)
   Payments of mortgage principal                               (1,305,967)     (1,417,411)     (1,424,875)
   Prepayment of mortgage payable                               (2,112,194)                     (6,434,448)
                                                               -----------     -----------     -----------
        Net cash used in financing activities                   (2,560,606)     (2,730,946)     (3,290,464)
                                                               -----------     -----------     -----------

        Net decrease in cash
          and cash equivalents                                    (421,388)        (64,767)         (7,975)

Cash and cash equivalents, beginning of year                     1,359,019         937,631         872,864
                                                               -----------     -----------     -----------

     Cash and cash equivalents, end of year                    $   937,631     $   872,864     $   864,889
                                                               ===========     ===========     ===========
</TABLE>

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


                                      -9-
<PAGE>   8
                         CORPORATE PROPERTY ASSOCIATES
                       (a California limited partnership)

                          NOTES to FINANCIAL STATEMENTS


1.   Summary of Significant Accounting Policies:

      Use of Estimates:

        The preparation of financial statements in conformity with generally
           accepted accounting principles requires management to make estimates
           and assumptions that affect the reported amounts of assets and
           liabilities and disclosure of contingent assets and liabilities at
           the date of the financial statements and the reported amounts of
           revenues and expenses during the reporting period. Actual results
           could differ from those estimates.

      Real Estate Leased to Others:

        Real estate is leased to others on a net lease basis, whereby the tenant
           is generally responsible for all operating expenses relating to the
           property, including property taxes, insurance, maintenance, repairs,
           renewals and improvements.

        Corporate Property Associates (the "Partnership") diversifies its real
           estate investments among various corporate tenants engaged in
           different industries and by property type throughout the United
           States.

        The leases are accounted for under either the direct financing or
           operating methods. Such methods are described below:

               Direct financing method - Leases accounted for under the direct
               financing method are recorded at their net investment (Note 5).
               Unearned income is deferred and amortized to income over the
               lease terms so as to produce a constant periodic rate of return
               on the Partnership's net investment in the lease.

               Operating method - Real estate is recorded at cost, revenue is
               recognized as rentals are earned and expenses (including
               depreciation) are charged to operations as incurred.

        The Partnership assesses the recoverability of its real estate assets,
           including residual interests, based on projections of undiscounted
           cash flows over the life of such assets. In the event that such cash
           flows are insufficient, the assets are adjusted to their estimated
           net realizable value.

        Substantially all of the Partnership's leases provide for either
           scheduled rent increases, periodic rent increases based on formulas
           indexed to increases in the Consumer Price Index or sales overrides.

      Depreciation:

        Depreciation is computed using the straight-line method over the
           estimated useful lives of components of the particular properties,
           which range from 5 to 50 years.

      Cash Equivalents:

        The Partnership considers all short-term, highly-liquid investments that
           are both readily convertible to cash and have a maturity of generally
           three months or less at the time of purchase to be cash equivalents.
           Items classified as cash equivalents include commercial paper and
           money market funds. Substantially all of the Partnership's cash and
           cash equivalents for both years ended December 31, 1995 and 1996 were
           held in the custody of three financial institutions.

      Other Assets:

        Included in other assets are deferred rental income, deferred charges
           and marketable equity securities. Deferred rental income is the
           aggregate difference for operating method leases between scheduled
           rents which vary during the lease term and income recognized on a
           straight-


                                   Continued

                                      -10-
<PAGE>   9
                          CORPORATE PROPERTY ASSOCIATES
                       (a California limited partnership)

                    NOTES to FINANCIAL STATEMENTS, Continued


           line basis. Deferred charges are primarily costs incurred in
           connection with mortgage note refinancing and are amortized on a
           straight-line basis over the terms of the mortgages.

        The Partnership's marketable equity securities, which consist of 1,948
           shares of Storage Technology Corporation common stock are classified
           as available-for-sale securities and are reported at fair market
           value with the Partnership's interest in unrealized gains and losses
           on these securities reported as a separate component of partners'
           capital.

      Income Taxes:

        A partnership is not liable for federal income taxes as each partner
           recognizes his proportionate share of the partnership income or loss
           in his tax return. Accordingly, no provision for income taxes is
           recognized for financial statement purposes.

      Reclassification:

        Certain 1994 and 1995 amounts have been reclassified to conform to the
           1996 financial statement presentation.

 2.  Partnership Agreement:

        The Partnership was organized on July 24, 1978 under the Uniform Limited
           Partnership Act of the State of California for the purpose of
           engaging in the business of investing in and leasing industrial and
           commercial real estate. The Corporate General Partner purchased 200
           limited partnership units in connection with the Partnership's public
           offering. The Partnership will terminate on December 31, 2016, or
           sooner, in accordance with the terms of the Amended Agreement of
           Limited Partnership (the "Agreement").

        The Agreement provides that the General Partners are allocated 1% (1/10
           of 1% to the Individual General Partner, William P. Carey, and 9/10
           of 1% to the Corporate General Partner, W. P. Carey & Co., Inc.
           ("W.P. Carey")) and the Limited Partners are allocated 99% of the
           profits and losses as well as distributions of Distributable Cash
           From Operations, as defined in the Agreement. The partners are also
           entitled to receive net proceeds from the sale of the Partnership
           properties as defined in the Agreement. The General Partners may be
           entitled to receive a subordinated preferred return, measured based
           upon the cumulative proceeds arising from the sale of Partnership
           assets. Pursuant to the subordination provisions of the Agreement,
           the preferred return may be paid only after the limited partners
           receive 100% of their initial investment from the proceeds of asset
           sales and a cumulative annual return ranging from 6% to 9% since the
           inception of the Partnership. The General Partners interest in such
           preferred return amounts to $144,773 based upon the cumulative
           proceeds from the sale of assets since the inception of the
           Partnership through December 31, 1996. The Partnership's ability to
           satisfy the subordination provisions of the Agreement may not be
           determinable until liquidation of a substantial portion of the
           Partnership's assets has been made, formal plans of liquidation are
           adopted or limited partnership units are converted to other
           securities which provide the security holder with greater liquidity
           than a limited partnership unit. Management believes that as of the
           report date, ultimate payment of the preferred return is reasonably
           possible but not probable, as defined pursuant to Statement of
           Financial Accounting Standards No. 5.

 3.  Transactions with Related Parties:

        The Partnership holds a 60% ownership interest in a property as
           tenants-in-common with an affiliate which holds the remaining 40%
           interest. The Partnership accounts for its assets and liabilities
           relating to tenants-in-common interests on a proportional basis.


                                   Continued

                                      -11-
<PAGE>   10
                          CORPORATE PROPERTY ASSOCIATES
                       (a California limited partnership)

                    NOTES to FINANCIAL STATEMENTS, Continued


        Under the Agreement, a division of W.P. Carey is entitled to receive a
           property management fee and reimbursement of certain expenses
           incurred in connection with the Partnership's operations. General and
           administrative expense reimbursements consist primarily of the actual
           cost of personnel needed in providing administrative services
           necessary for the operation of the Partnership. Property management
           fees and general and administrative expense reimbursements are
           summarized as follows:

<TABLE>
<CAPTION>
                                                 1994        1995        1996
                                                 ----        ----        ----
                  <S>                          <C>        <C>         <C>
                  Property management fee      $44,581    $ 72,881    $ 66,815
                  General and administrative
                    expense reimbursements      51,607      44,250      43,956
                                               -------    --------    --------
                                               $96,188    $117,131    $110,771
                                               =======    ========    ========
</TABLE>

        During 1994, 1995 and 1996, fees aggregating $97,438, $18,338 and
           $10,329, respectively, were incurred for legal services performed by
           a firm in which the Secretary of the Corporate General Partner and
           other affiliates is a partner.

        The Partnership is a participant in an agreement with W.P. Carey and
           certain other affiliates for the purpose of leasing office space used
           for the administration of real estate entities and W.P. Carey and for
           sharing the associated costs. Pursuant to the terms of the agreement,
           the Partnership's share of rental, occupancy and leasehold
           improvement costs is based on adjusted gross revenues, as defined.
           Net expenses incurred in 1994, 1995 and 1996 were $15,615, $61,243
           and $30,477, respectively.


 4.  Real Estate Leased to Others Accounted for Under the Operating Method:

        Scheduled future minimum rents, exclusive of renewals, under
           noncancellable operating leases amount to approximately $3,708,000 in
           1997; $3,804,000 in each of the years 1998 through 2001; and
           aggregate approximately $23,526,000 through 2006.

        Contingent rents were approximately $56,000 in 1995 and $89,000 in 1996.
           There were no contingent rents in 1994.


 5.  Net Investment in Direct Financing Leases:

        Net investment in direct financing leases is summarized as follows:

<TABLE>
<CAPTION>
                                                       December 31,
                                                       ------------
                                                  1995              1996
                                                  ----              ----
               <S>                            <C>               <C>
               Minimum lease payments
                 receivable                   $ 6,666,724       $ 5,945,229
               Unguaranteed residual value      5,075,137         4,823,041
                                              -----------       -----------
                                               11,741,861        10,768,270
                 Less, Unearned income          6,845,975         6,107,699
                                              -----------       -----------
                                              $ 4,895,886       $ 4,660,571
                                              ===========       ===========
</TABLE>

        Scheduled future minimum rents, exclusive of renewals, under
           noncancellable direct financing leases amount to approximately
           $477,000 in each of the years 1997 to 1999, $492,000 in each of the
           years 2000 and 2001 and aggregate approximately $5,945,000 through
           2009.


                                   Continued

                                      -12-
<PAGE>   11
                          CORPORATE PROPERTY ASSOCIATES
                       (a California limited partnership)

                    NOTES to FINANCIAL STATEMENTS, Continued


 6.  Mortgage Notes Payable:

        Mortgage notes payable, all of which are limited recourse obligations of
           the Partnership or the partners, are collateralized by real property
           with a carrying amount as of December 31, 1996 of approximately
           $34,206,000, before accumulated depreciation, and the assignment of
           various leases. As of December 31, 1996, mortgage notes payable bear
           interest at rates varying from 7.25% to 10.5% per annum and mature
           between 1998 and 2011.

        Scheduled principal payments during each of the next five years
           following December 31, 1996 are as follows:

<TABLE>
<CAPTION>
          Year Ending December 31,
          ------------------------
          <S>                                  <C>
            1997                               $ 1,607,968
            1998                                 1,361,997
            1999                                 6,325,539
            2000                                   658,765
            2001                                   727,079
            Thereafter                           2,748,136
                                               -----------
               Total                           $13,429,484
                                               ===========
</TABLE>

        Interest paid was $1,604,379, $1,536,914 and $1,363,083 in 1994, 1995
           and 1996, respectively.


 7.  Distributions to Partners:

        Distributions are declared and paid to partners quarterly and are
           summarized as follows:

<TABLE>
<CAPTION>
       Year Ending   Distributions Paid to   Distributions Paid to   Limited Partners'
       December 31,     General Partners        Limited Partners     Per Unit Amount
       ------------  ---------------------   ---------------------   -----------------
       <S>           <C>                     <C>                     <C>
        1994             $12,699               $1,257,000                $31.43
                         =======               ==========                ======

        1995             $13,135               $1,300,400                $32.51
                         =======               ==========                ======

        1996             $14,354               $1,403,200                $35.08
                         =======               ==========                ======
</TABLE>

     Distributions of $3,556 to the General Partners and $352,000 to the Limited
     Partners for the quarter ended December 31, 1996 were declared and paid in
     January 1997.

 8.  Income for Federal Tax Purposes:

        Income for financial statement purposes differs from income for Federal
           income tax purposes because of the difference in the treatment of
           certain items for income tax purposes and financial statement
           purposes. A reconciliation of accounting differences is as follows:

<TABLE>
<CAPTION>
                                                1994           1995        1996
                                                ----           ----        ----
    <S>                                     <C>            <C>         <C>
    Net income per Statements of Income     $1,108,179     $1,841,695  $1,671,787
    Excess tax depreciation                    (24,267)         1,115     (16,894)
    Other                                     (153,863)        (1,759)     38,919
                                            ----------     ----------  ----------
         Income reported for
           Federal income tax purposes      $  930,049     $1,841,051  $1,693,812
                                            ==========     ==========  ==========
</TABLE>


                                   Continued

                                      -13-

<PAGE>   12
                          CORPORATE PROPERTY ASSOCIATES
                       (a California limited partnership)

                    NOTES to FINANCIAL STATEMENTS, Continued


9.   Industry Segment Information:

        The Partnership's operations consist of the investment in and the
           leasing of industrial and commercial real estate.

        In 1994, 1995 and 1996, the Partnership earned its total operating
           revenues (rental income plus interest income from direct financing
           leases) from the following lease obligors:

<TABLE>
<CAPTION>
                              1994              %           1995              %           1996              %
                           ----------     ----------     ----------     ----------     ----------     ----------
<S>                        <C>            <C>            <C>            <C>            <C>            <C>
Pre Finish Metals
  Incorporated             $1,345,442             30%    $1,407,841             31%    $1,441,238             32%
The Gap, Inc.               1,225,994             28      1,225,994             27      1,225,994             27
IMO Industries, Inc.          846,743             19        846,743             19        846,743             19
Unisource Worldwide           332,110              8        339,300              8        329,480              7
Broomfield Tech Center
  Corporation                 269,946              6        294,136              6        300,136              7
Kobacker Stores, Inc.         303,540              7        303,540              7        294,484              6
Winn-Dixie Stores, Inc.       102,400              2        102,400              2        102,400              2
                           ----------     ----------     ----------     ----------     ----------     ----------
                           $4,426,175            100%    $4,519,954            100%    $4,540,475            100%
                           ==========     ==========     ==========     ==========     ==========     ==========
</TABLE>

10.  Sale of Real Estate:

        On October 17, 1996, Kobacker Stores, Inc. ("Kobacker") exercised
           options under the terms of its leases for properties in Eastlake and
           Cleveland, Ohio to purchase such properties for stated purchase
           prices of $165,000 and $200,000, respectively, resulting in a loss of
           $22,871. A portion of the net sales proceeds was assigned to the
           mortgage lender on the Kobacker properties as a partial prepayment.
           As a result of the sale and the related mortgage prepayment of
           $139,507, Kobacker's annual rent will decrease by $36,225 and the
           Partnership's debt service on the mortgage loan will decrease
           $23,756.


11.  Real Estate Held for Sale:

        On September 17, 1996, the Partnership entered into a purchase and sale
           agreement for the sale of the Partnership's property in Louisville,
           Kentucky, leased to Winn-Dixie Stores, Inc. ("Winn-Dixie") for
           $1,100,000, less selling costs, including a 5% brokerage commission.
           The transaction is subject to completion of certain due diligence
           procedures and the ability of the buyer to obtain debt financing.
           Accordingly, there can be no assurance that the sale of the property
           will be completed. The Winn-Dixie lease, which is scheduled to expire
           in December 1999, provides annual rentals of $102,000.


12.  Settlement Agreement:

        One of the Partnership's leases with IMO Industries, Inc. ("IMO") had
           been scheduled to terminate in March 1996. The Partnership granted
           IMO an extension of three months to enable IMO to meet its lease
           obligation to return the property in suitable condition. As IMO did
           not satisfy such


                                   Continued

                                      -14-
<PAGE>   13
                          CORPORATE PROPERTY ASSOCIATES
                       (a California limited partnership)


                    NOTES to FINANCIAL STATEMENTS, Continued


           obligation, the Partnership refused to release IMO from the lease and
           continued to collect monthly rental payments from IMO. On February
           12, 1997, the Partnership and IMO entered into an agreement which
           released IMO from the lease. Under the agreement, IMO returned the
           property in "as is" condition to the Partnership, paid $485,766,
           representing estimated repair costs and construction management fees,
           into an escrow account held by an affiliate of the Partnership. Funds
           in escrow will only be released under certain conditions including,
           but not limited to, the payment of repairs and maintenance for the
           property.



        Rents from the terminated IMO lease contributed annual revenues of
           approximately $91,000. The Partnership's lease with IMO for an
           adjacent property currently provides for annual rent of $687,750 and
           has a lease term through 2002.


13.  Disclosures About Fair Value of Financial Instruments:

        The carrying amounts of cash, receivables and accounts payable and
           accrued expenses approximate fair value because of the short maturity
           of these items.

        The Partnership's estimate of fair value of mortgage notes payable
           approximates the carrying amount of such mortgage note at December
           31, 1996. The fair value of debt instruments was evaluated using a
           discounted cash flow model with discount rates which take into
           account the credit of the tenants and interest rate risk.


14.  Environmental Matters:

        The Partnership's properties are currently leased to corporate tenants,
           all of which are subject to environmental statutes and regulations
           regarding the discharge of hazardous materials and related
           remediation obligations. The Partnership generally structures a lease
           to require the tenant to comply with all laws. In addition,
           substantially all of the Partnership's net leases include provisions
           which require tenants to indemnify the Partnership from all
           liabilities and losses related to their operations at the leased
           properties. Any costs of remediation are expected to be performed and
           paid by the affected tenant. In the event that the Partnership
           absorbs a portion of any costs because of a tenant's failure to
           fulfill its obligations, the General Partners believe such
           expenditures will not have a material adverse effect on the
           Partnership's financial condition, liquidity or results of
           operations.

        In 1994, based on the results of Phase I environmental reviews performed
           in 1993, the Partnership voluntarily conducted Phase II environmental
           reviews on certain of its properties. The Partnership believes, based
           on the results of Phase I and Phase II reviews, that its properties
           are in substantial compliance with Federal and state environmental
           statutes and regulations. Portions of certain properties have been
           documented as having a limited degree of contamination, principally
           in connection with either leakage from underground storage tanks or
           surface spills from facility activities. For those conditions which
           were identified, the Partnership advised the affected tenants of the
           Phase II findings and of their obligations to perform required
           remediation.



                                      -15-
<PAGE>   14
                                   SIGNATURES





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


                        CORPORATE PROPERTY ASSOCIATES
                        (a California limited partnership)

                        BY:   W. P. CAREY & CO., INC.



    09/3/97             BY:    /s/ Steven M. Berzin
---------------               -------------------------------
     Date                     Claude Fernandez
                              Executive Vice President and
                              Chief Financial Officer
                              (Principal Financial Officer)



    09/3/97             BY:    /s/ Claude Fernandez
---------------               -------------------------------
     Date                     Claude Fernandez
                              Executive Vice President and
                              Chief Administrative Officer
                              (Principal Accounting Officer)


                                      -16-