<PAGE>   1
                                  UNITED STATES
                       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 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                       0-11948

                         CORPORATE PROPERTY ASSOCIATES 5
             (Exact name of registrant as specified in its charter)

          CALIFORNIA                                     13-3164925
(State or other jurisdiction of             (I.R.S. Employer Identification No.)
 incorporation or organization)

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

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 I


Item 1.  Business.


            Registrant is engaged in the business of investing in commercial and
industrial real estate properties which are net leased to commercial and
industrial entities. Registrant was organized as a California limited
partnership on April 12, 1983. The General Partners of Registrant are Carey
Corporate Property, Inc. (the "Corporate General Partner"), a Delaware
corporation and William Polk Carey (the "Individual General Partner"). The
Corporate General Partner is 79.9% owned by W. P. Carey & Co., Inc. ("W.P.
Carey"), 10.1% owned by William P. Carey ("Carey") and 10% by Lehman Brothers,
Inc. Affiliates of the Corporate General Partner and the Individual General
Partner are also the General Partners of affiliates of Registrant, Corporate
Property Associates ("CPA(R):1"), Corporate Property Associates 2 ("CPA(R):2"),
Corporate Property Associates 3 ("CPA(R):3"), Corporate Property Associates 4, a
California limited partnership ("CPA(R):4"), Corporate Property Associates 6 - a
California limited partnership ("CPA(R):6"), Corporate Property Associates 7 - a
California limited partnership ("CPA(R):7"), Corporate Property Associates 8,
L.P., a Delaware limited partnership ("CPA(R):8"), Corporate Property Associates
9, L.P., a Delaware limited partnership ("CPA(R):9"), and the advisor of
Corporate Property Associates 10 Incorporated ("CPA(R):10"), Carey Institutional
Properties Incorporated ("CIP(TM)") and Corporate Property Associates 12
Incorporated ("CPA(R):12"). Registrant has a management agreement with Carey
Corporate Property Management Company ("Carey Management"), a division of W.P.
Carey. According to the terms of this agreement, Carey Management performs a
variety of management services for Registrant. Registrant has entered into an
agreement with Fifth Rock L.P., an affiliate, for the purpose of leasing office
space. Reference is made to the Prospectus of Registrant dated August 2, 1983,
as supplemented by a Supplement dated September 29, 1983, filed pursuant to
Rules 424(b) and 424(c), respectively, under the Securities Act of 1933 and
incorporated herein by reference (said Prospectus, as so supplemented, is
hereinafter called the "Prospectus").

            Registrant has two industry segments consisting of the investment in
and the leasing of industrial and commercial real estate and the operation of a
hotel business at two properties. See Selected Financial Data in Item 6 and
Management's Discussion and Analysis in Item 7 for a summary of Registrant's
operations. By assuming the operation of the hotel businesses from former
tenants, Management intends to preserve the value of the underlying investment
while generating a contribution to Registrant's operating cash flow. Also see
the material contained in the Prospectus under the heading INVESTMENT OBJECTIVES
AND POLICIES.

            The properties owned by Registrant are described in Item 2.
Registrant's entire net proceeds from the public offering, less a working
capital reserve have been fully invested in net leased commercial and industrial
real estate since March 17, 1988, the date of Registrant's final real estate
acquisition.

            Except for the two hotel properties, Registrant's properties are
leased to corporate tenants under net leases. A net lease generally requires
tenants to pay all operating expenses relating to the leased properties
including maintenance, real estate taxes, insurance and utilities which under
other forms of leases are often paid by the lessor. Lessees are required to
include Registrant as an additional insured party on all insurance policies
relating to the leased properties. In addition, substantially all of the net
leases include indemnification provisions which require the lessees to indemnify
Registrant and the General Partners for liabilities on all matters related to
the leased properties. Registrant believes that the insurance and indemnity
provided on its behalf by its lessees provides adequate coverage for property
damage and any liability claims which may arise against Registrant's ownership
interests. In addition to the insurance and indemnification provisions of the
leases, Registrant has contingent property and liability insurance on its leased
properties and primary property and liability coverages on its two hotel
properties. Management believes that its insurance is adequate. To the extent
that any lessees are not financially able to satisfy indemnification obligations
which exceed insurance reimbursements, Registrant may incur the costs necessary
to repair property and settle liabilities.

            As described above, lessees generally retain the obligation for the
operating expenses of their leased properties so that, other than rental income,
there are no significant operating data reportable on Registrant's leased
properties. Current rental income is reported in Note 9 to the Financial
Statements in Item


                                      -1-
<PAGE>   3
8. As discussed in Item 7, Management's Discussion and Analysis, Registrant's
leases generally provide for periodic rent increases which are either fixed or
based on formulas indexed to increases in the Consumer Price Index. Leases
provide for purchase options which are exercisable between 1997 and 1999 on
properties leased to Stoody Deloro Stellite, Inc. ("Stoody"), Arley Merchandise
Corporation and Gould, Inc. ("Gould"), respectively. The purchase options
generally provide for an exercise price based on the greater of fair market
value, as defined in the lease, or a stated amount. Stoody has the option to
purchase its leased property in December 1997 at a purchase price of the greater
of $3,000,000 or fair market value.

            As Registrant's objective has been to invest in properties which are
occupied by a single corporate tenant and subject to long-term net leases with
such lease obligation backed by the credit of the corporate lessee, Registrant's
properties are not generally subject to the competitive conditions of local and
regional real estate markets. In selecting its real estate investments,
Registrant's strategy was to identify properties of material importance to the
lessee so that the lessee may be more likely to extend its lease beyond the
initial term or exercise a purchase option if such option was provided for in
the lease agreement. None of Registrant's leases expire until 1998. Registrant
is more likely to be affected by the financial condition of its lessees rather
than the competitive conditions of the real estate marketplace. Registrant's
strategy has been to diversify its investments among tenants, property types and
industries with geographical diversification being only a secondary objective.
The Alpena, and Petoskey businesses are seasonal in nature with occupancy rates
for the year ended December 31, 1996 of 58% and 49%, respectively. The occupancy
rates increased by 6% for Alpena and 14% Petoskey from that of the prior year.
Registrant sold the Rapid City hotel in October 1996.

            During 1996, Registrant sold a multi-tenant office building in
Helena, Montana, a property formerly leased to GATX Logistics, Inc. ("GATX") and
the Rapid City, South Dakota hotel. In connection with these sales, the related
mortgages were either assumed by the purchaser or satisfied with sales proceeds.
Additionally, Registrant paid off mortgage loans on the Gould, Exide Electronics
Corporation and Stoody properties.

            For the year ended December 31, 1996, revenues from properties
occupied by lease obligors which accounted for 10% or more of the revenues of
the industrial and commercial real estate segment of Registrant were as follows:
Gould 18%; Spreckels Industries, Inc., 15% and DeVlieg Bullard, Inc., 14%. No
other property owned by Registrant accounted for 10% or more of its total real
estate operating revenue during 1996. Revenues from the industrial and
commercial real estate segment represent approximately 50% of total revenues.
See Note 9 to the Financial Statements in Item 8.

            For the year ended December 31, 1996, gross revenues from the hotel
operations business segment were $6,360,000 (approximately 48% of total
revenues). The 1996 gross revenues include the operations from the hotel
property in Rapid City, South Dakota through the date of sale, October 1, 1996.

            In 1994, Registrant voluntarily conducted Phase II reviews of
certain of its properties based on the results of the Phase I environmental
reviews contracted for in 1993. Registrant believes, based on the results of
such reviews, that its leased 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. Phase II investigations have been
recommended for some properties based upon the Phase I reports. For those
conditions which were identified, Registrant advised its tenants of such
findings and of their obligations, if any, to perform any required remediation.
Tenants are generally subject to environmental statutes and regulations
regarding the discharge of hazardous materials and any related remediation
obligations. In addition, Registrant's leases generally require tenants to
indemnify Registrant from all liabilities and losses related to the leased
properties. Accordingly, Management believes that the ultimate resolution of the
aforementioned environmental matters will not have a material effect on
Registrant's financial condition, liquidity or results of operations.


                                      -2-
<PAGE>   4
            Registrant does not have any employees. The Corporate General
Partner of Registrant together with its affiliates employ twelve individuals who
perform accounting, secretarial and transfer services for Registrant. Gemisys,
Inc. performs certain transfer services for Registrant and The Bank of New York
performs certain banking services for Registrant. In addition, Registrant has
entered into an agreement with Carey Management pursuant to which Carey
Management provides certain management services to Registrant. W.P. Carey has
substantially the same officers as the Corporate General Partner.



Item 2.  Properties.

<TABLE>
<CAPTION>
     LEASE                                                          TYPE OF OWNERSHIP
    OBLIGOR            TYPE OF PROPERTY         LOCATION                INTEREST
----------------       ----------------         --------            -----------------
<S>                    <C>                      <C>                 <C>
SPRECKELS INDUSTRIES   Manufacturing and        Forrest City,       Ownership of land
INC.                   Office Facility          Arkansas            and building

ARLEY MERCHANDISE      Manufacturing            Columbia and        Ownership of land
CORPORATION            Facilities -             Sumter, South       and buildings (1)
                       2 locations              Carolina

ROCHESTER BUTTON       Manufacturing            Kenbridge,          Ownership of land
COMPANY                Facilities -             South Boston,       and buildings (2)
                       2 locations              Virginia

PENN VIRGINIA          Office and               Duffield,           Ownership of land
CORPORATION            Manufacturing            Virginia            and building (3)
                       Facilities -             Cuyahoga Falls,
                       3 locations              Ohio and
                                                Broomall,
                                                Pennsylvania

(4)                    Hotels                   Petoskey and        Ownership of 65%
                                                Alpena,             interest in land
                                                Michigan            and buildings (1)

EXIDE ELECTRONICS      Office and               Raleigh,            Ownership of land
CORPORATION            Research Facility        North Carolina      and building

HARCOURT GENERAL       Movie Theater            Canton,             Ownership of land
CORPORATION                                     Michigan            and building (3)

INNO TECH              Office, and Manufac-     Elyria,             Ownership of land
INDUSTRIES, INC.       turing Facility          Ohio                and buildings
</TABLE>


                                      -3-
<PAGE>   5
<TABLE>
<CAPTION>
     LEASE                                                           TYPE OF OWNERSHIP
    OBLIGOR                  TYPE OF PROPERTY       LOCATION             INTEREST
----------------             ----------------       --------         -----------------
<S>                          <C>                    <C>              <C>
GOULD, INC.                  Manufacturing and      Oxnard,          Ownership of land
                             Research Facility      California       and building


DEVLIEG BULLARD, INC.        Manufacturing          Frankenmuth,     Ownership of land
                             Facilities -           Michigan         and buildings (3)
                             2 locations            McMinnville,
                                                    Tennessee


PENBERTHY                    Manufacturing          Prophetstown,    Ownership of land
PRODUCTS, INC.               Facility               Illinois         and building (3)


STOODY DELORO                Manufacturing          Goshen,          Ownership of land
STELLITE, INC.               Facility               Indiana          and building


WINN-DIXIE                   Supermarket            Montgomery,      Ownership of land
STORES, INC.                                        Alabama          and buildings (3)


SUNDS DEFIBRATOR             Manufacturing          Carthage,        Ownership of land
WOODHANDLING, INC.           Facility               New York         and buildings
(formerly FMP/RAUMA, CO.)
</TABLE>


(1)  These properties are encumbered by mortgage notes payable.

(2)  These properties are subject to a mortgage as collateral for loans issued
     by unaffiliated parties to the lessee.

(3)  These properties are encumbered by mortgages and/or lease assignments in
     connection with mortgage notes payable on other of Registrant's properties.

(4)  Registrant operates a hotel business at these properties.


                                      -4-
<PAGE>   6
            The material terms of Registrant's leases with its significant
tenants are summarized in the following table:


<TABLE>
<CAPTION>
                 Registrant's
                    Share                   Current     Lease
Lease             of Current     Square     Rent Per    Expiration    Renewal    Ownership    Terms of                    Gross
Obligor          Annual Rents    Footage     Sq.Ft.     (Mo/Year)     Terms      Interest     Purchase Option             Costs (1)
-------          ------------    -------    --------    ----------    -------    ---------    ---------------             ---------
<S>              <C>             <C>        <C>         <C>           <C>        <C>          <C>                        <C>
Spreckels         $1,020,717     265,000     $3.85        12/12         YES        100%       The greater of             $5,500,000
Industries,                                                                                   fair market value
Inc.                                                                                          or $5,500,000.

Gould,             1,215,000     142,796      8.51        11/99         YES        100        Fair market value           9,875,087
Inc.

DeVlieg              953,803     409,391      2.33        04/06         YES        100        The greater of              5,092,699
Bullard,                                                                                      fair market value
Inc.                                                                                          or the sum of the
                                                                                              purchase price, of
                                                                                              $5,075,000, and any
                                                                                              mortgage prepayment
                                                                                              premium.

Arley                600,000     255,600      3.56        06/02         YES        100        The greater of              7,808,555
Merchandise                                                                                   fair market value
Corporation                                                                                   or the unpaid principal
                                                                                              balance due on the
                                                                                              mortgage loan.

Penn Virginia        498,750     116,059      4.30        08/99         YES        100        The greater of              3,703,112
Corporation                                                                                   fair market value
                                                                                              of $3,700,000.
</TABLE>


(1)  Includes original cost of investment and net increases or decreases to net
     investment subsequent to purchase.


                                      -5-
<PAGE>   7
            The material terms on the mortgage debt of Registrant's properties
is summarized in the following table:

<TABLE>
<CAPTION>
                                            Mortgage
                      Annual Interest       Balance        Annual Debt     Maturity    Estimated Payment
  Lease Obligor            Rate             12/31/95         Service         Date      Due at Maturity      Prepayment Provisions
-----------------     ---------------       --------       -----------     --------    -----------------    ---------------------
<S>                   <C>                <C>               <C>            <C>          <C>                  <C>
Arley Merchandise
Corporation           10.00%             $ 4,754,940        $570,000        06/95        $4,619,000

Alpena, Michigan
hotel property         6.60       -       94,764,500(1)      519,591      9/97-9/15         257,250(1)

Petoskey, Michigan
hotel property         6.60       -       94,764,500(1)      519.591      9/97-9/15         257,250(1)
</TABLE>

(1)  Financing consists of a series of bonds maturing between 1997 and 2015 with
     interest rates varying from 6.6% to 9%.


                                      -6-
<PAGE>   8
Item 3. Legal Proceedings.

            As of the date hereof, Registrant is not party to any material
pending legal proceedings.



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

            No matter was submitted during the fourth quarter of the year ended
December 31, 1996 to a vote of security holders, through the solicitation of
proxies or otherwise.



                                     PART II



Item 5. Market for Registrant's Common Equity and Related Stockholder Matters.


            Information with respect to Registrant's common equity is hereby
incorporated by reference to page 28 of Registrant's Annual Report contained in
Appendix A.



Item 6. Selected Financial Data.

            Selected Financial Data are hereby incorporated by reference to page
1 of Registrant's Annual Report contained in Appendix A.




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


            Management's Discussion and Analysis are hereby incorporated by
reference to pages 2 to 5 of Registrant's Annual Report contained in Appendix A.


Item 8. Financial Statements and Supplementary Data.

            The following financial statements and supplementary data are hereby
incorporated by reference to pages 6 to 21 of Registrant's Annual Report
contained in Appendix A:

(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.

Item 9. Disagreements on Accounting and Financial Disclosure.

            NONE


                                      -7-
<PAGE>   9
                                    PART III


Item 10. Directors and Executive Officers of the Registrant.


            Registrant has no officers or directors. The directors and executive
officers of the Corporate General Partner are as follows:


<TABLE>
<CAPTION>
                                                                       Has Served as a
                                                                       Director and/or
      Name              Age          Positions Held                    Officer Since (1)
      ----              ---          --------------                    -----------------
<S>                     <C>    <C>                                     <C> 
William Polk Carey       66    Chairman of the Board                          4/84
                               Director
Francis J. Carey         71    President                                      4/84
                               Director                                       
George E. Stoddard       80    Chairman of the Investment Committee           4/84
                               Director                                       
Madelon DeVoe Talley     65    Vice Chairman of the Board                     4/86
                               Director                                       
Lawrence R. Klein        76    Chairman of the Economic Policy                4/84
                                   Committee                                  
                               Director                                       
Barclay G. Jones III     36    Executive Vice President                       4/84
                               Director                                       
Claude Fernandez         44    Executive Vice President                       4/84
                               Chief Administrative Officer                   
H. Augustus Carey        39    Senior Vice President                          8/88
Anthony S. Mohl          34    Senior Vice President                          9/87
John J. Park             32    Senior Vice President                          7/91
                               Treasurer                                   
Michael D. Roberts       45    First Vice President                           4/89
                               Controller
</TABLE>
                            

(1)  Each officer and director of the Corporate General Partner will hold office
     until the next annual meeting of the Board of Directors and thereafter
     until his successor shall have been elected and shall have qualified or
     until his prior death, resignation or removal.




            William Polk Carey and Francis J. Carey are brothers.  H. Augustus
Carey is the nephew of William Polk Carey and the son of Francis J. Carey.

            A description of the business experience of each officer and
director of the Corporate General Partner is set forth below:

            William Polk Carey, Chairman and Chief Executive Officer, has been
active in lease financing since 1959 and a specialist in net leasing of
corporate real estate property since 1964.  Before founding W.P. Carey & Co.,
Inc. ("W.P. Carey") in 1973, he served as Chairman of the Executive Committee of
Hubbard,


                                      -8-
<PAGE>   10
Westervelt & Mottelay (now Merrill Lynch Hubbard), head of Real Estate and
Equipment Financing at Loeb Rhoades & Co. (now Lehman Brothers), head of Real
Estate and Private Placements, Director of Corporate Finance and Vice Chairman
of the Investment Banking Board of duPont Glore Forgan Inc. A graduate of the
University of Pennsylvania's Wharton School of Finance and Commerce, Mr. Carey
is a Governor of the National Association of Real Estate Investment Trusts
(NAREIT). He also serves on the boards of The Johns Hopkins University, The
James A. Baker III Institute for Public Policy at Rice University, Templeton
College of Oxford University and other educational and philanthropic
institutions. He founded the Visiting Committee to the Economics Department of
the University of Pennsylvania and co-founded with Dr. Lawrence R. Klein the
Economics Research Institute at that University. Mr. Carey is also a Director of
CPA(R):10, CIP(TM) and CPA(R):12.


            Francis J. Carey was elected President and a Managing Director of
W.P. Carey in April 1987, having served as a Director since its founding in
1973. Prior to joining the firm full-time, he was a senior partner in
Philadelphia, head of the Real Estate Department nationally and a member of the
executive committee of the Pittsburgh based firm of Reed Smith Shaw & McClay,
counsel for Registrant, the General Partners, the CPA(R) Partnerships, W.P.
Carey and some of its affiliates. He served as a member of the Executive
Committee and Board of Managers of the Western Savings Bank of Philadelphia from
1972 until its takeover by another bank in 1982 and is former chairman of the
Real Property, Probate and Trust Section of the Pennsylvania Bar Association.
Mr. Carey served as a member of the Board of Overseers of the School of Arts and
Sciences of the University of Pennsylvania from 1983 through 1990. He has also
served as a member of the Board of Trustees of the Investment Program
Association since 1990 and on the Business Advisory Council of the Business
Council for the United Nations since 1994. He holds A.B. and J.D. degrees from
the University of Pennsylvania. Mr. Carey is also a Director of CPA(R):10 and
CIP(TM).


            George E. Stoddard, Chief Investment Officer, was until 1979 head of
the bond department of The Equitable Life Assurance Society of the United
States, with responsibility for all activities related to Equitable's portfolio
of corporate investments acquired through direct negotiation. Mr. Stoddard was
associated with Equitable for over 30 years. He holds an A.B. degree from
Brigham Young University, an M.B.A. from Harvard Business School and an LL.B.
from Fordham University Law School.


            Madelon DeVoe Talley, Vice Chairman, is a member of the New York
State Controller's Investment Committee, a Commissioner of the Port Authority of
New York and New Jersey, former CIO of New York State Common Retirement Fund and
a Trustee of the New York State Teachers Retirement System. She also served as a
managing director of Rothschild, Inc. and as the President of its asset
management division. Mrs. Talley was also a former Governor of the N.A.S.D. and
a director of Biocraft Laboratories, a New York Stock Exchange company. She is
an alumna of Sarah Lawrence College and the graduate school of International and
Public Affairs at Columbia University.


            Lawrence R. Klein, Chairman of the Economic Policy Committee since
1984, is Benjamin Franklin Professor of Economics Emeritus at the University of
Pennsylvania, having joined the faculty of Economics and the Wharton School in
1958. He holds earned degrees from the University of California at Berkeley and
Massachusetts Institute of Technology and has been awarded the Nobel Prize in
Economics as well as over 20 honorary degrees. Founder of Wharton Econometric
Forecasting Associates, Inc., Dr. Klein has been counselor to various
corporations, governments, and government agencies including the Federal Reserve
Board and the President's Council of Economic Advisers.


            Barclay G. Jones III, Executive Vice President, Managing Director,
and head of the Investment Department.  Mr. Jones joined W.P. Carey as Assistant
to the President in July 1982 after his graduation from the Wharton School of
the University of Pennsylvania, where he majored in Finance and Economics.  He
was elected to the Board of Directors of W.P. Carey in April 1992.  Mr. Jones is
also a Director of the Wharton Business School Club of New York.


                                      -9-
<PAGE>   11
            Claude Fernandez, Chief Administrative Officer, Managing Director,
and Executive Vice President, joined W.P. Carey in 1983.  Previously associated
with Coldwell Banker, Inc. for two years and with Arthur Andersen & Co., he is a
Certified Public Accountant.  Mr. Fernandez received his B.S. degree in
accounting from New York University in 1975 and his M.B.A. in finance from
Columbia University Graduate School of Business in 1981.

            H. Augustus Carey, Senior Vice President, returned to W.P. Carey in
1988 and is President of W.P. Carey's broker-dealer subsidiary.  Mr. Carey
previously worked for W.P. Carey from 1979 to 1981 as Assistant to the
President.  Prior to rejoining W.P. Carey, Mr. Carey served as a loan officer of
the North American Department of Kleinwort Benson Limited in London, England.
He received an A.B. from Amherst College in 1979 and an M.Phil. in Management
Studies from Oxford University in 1984.  Mr. Carey is a trustee of the Oxford
Management Centre Associates Council.

            Anthony S. Mohl, Senior Vice President and Director of Portfolio
Management, joined W.P. Carey & Co., in 1987 as Assistant to the President after
receiving his M.B.A. from the Columbia University Graduate School of Business.
Mr. Mohl was employed as an analyst in the strategic planning group at Kurt
Salmon Associates after receiving an undergraduate degree from Wesleyan
University.

            John J. Park, Senior Vice President, Treasurer and Director of
Research, joined W.P. Carey as an Investment Analyst in December 1987.  Mr. Park
received his undergraduate degree from Massachusetts Institute of Technology and
his M.B.A. in Finance from New York University.

            Michael D. Roberts joined W. P. Carey as a Second Vice President and
Assistant Controller in April 1989 and is currently First Vice President and
Controller.  Prior to joining W.P. Carey, Mr. Roberts was employed by Coopers &
Lybrand for over 8 years, where he attained the title of audit manager.  A
certified public accountant, Mr. Roberts received a B.A. in sociology from
Brandeis University and an M.B.A. from Northeastern University.

            The officers and directors of W.P. Carey are substantially the same
as above.


Item 11. Executive Compensation.

            Under the Amended Agreement of Limited Partnership of Registrant
(the "Agreement"), 5% of Distributable Cash From Operations is payable to the
Corporate General Partner and 1% of Distributable Cash From Operations is
payable to the Individual General Partner. The Corporate General Partner and the
Individual General Partner received $222,847 and $44,570 respectively, from
Registrant as their share of Distributable Cash From Operations during the year
ended December 31, 1996. As owner of 200 Limited Partnership Units, the
Corporate General Partner received cash distributions of $7,402 during the year
ended December 31, 1996. See Item 6 for the net income allocated to the General
Partners under the Agreement. Registrant is not required to pay, and has not
paid, any remuneration to the officers or directors of the Corporate General
Partner, W.P. Carey or any other affiliate of Registrant during the year ended
December 31, 1996.

            In the future, the Corporate General Partner will continue to
receive 5% of Distributable Cash From Operations, the Individual General Partner
will continue to receive 1% of Distributable Cash From Operations and each
General Partner will continue to be allocated the same percentage of the profits
and losses of Registrant as had been allocated in the past. For a description of
the subordinated interest of the Corporate General Partner and the Individual
General Partner in Cash From Sales and Cash From Financings, reference is made
to the materials contained in the Prospectus under the heading MANAGEMENT
COMPENSATION.


                                      -10-
<PAGE>   12
Item 12. Security Ownership of Certain Beneficial Owners and Management.

            As of December 31, 1996, no person owned of record or was known by
Registrant to own beneficially more than 5% of the Limited Partnership Units of
Registrant.

            The following table sets forth as of March 15, 1997 certain
information as to the ownership by directors and executive officers of
securities of Registrant:

<TABLE>
<CAPTION>
                                                      Number of Units
                              Name of                  and Nature of        Percent
Title of Class            Beneficial Owner          Beneficial Ownership    of Class
--------------            ----------------          --------------------    --------
<S>                       <C>                       <C>                     <C>
Limited
  Partnership Units       William Polk Carey (1)         210  units            .19%
                          Francis J. Carey
                          George E. Stoddard
                          Madelon DeVoe Talley
                          Barclay G. Jones III
                          Lawrence R. Klein
                          Claude Fernandez
                          H. Augustus Carey
                          Anthony S. Mohl
                          John J. Park
                          Michael D. Roberts
                                                         ---                   ---
All executive officers
and directors as a
group (11 persons)                                       210  units            .19%
                                                         ===                   ===
</TABLE>


     (1) As of March 15, 1997, the Corporate General Partner, Carey Corporate
     Property, Inc. ("Carey Property"), owned 200 Limited Partnership Units of
     Registrant.  William Polk Carey, the majority shareholder of Carey
     Property, is the beneficial owner of these Units.


            There exists no arrangement, known to Registrant, the operation of
which may at a subsequent date result in a change of control of Registrant.




Item 13. Certain Relationships and Related Transactions.

            For a description of transactions and business relationships between
Registrant and its affiliates and their directors and officers, see Notes 2 
and 3 to the Financial Statements in Item 8. Michael B. Pollack, Senior Vice
President and Secretary of the Corporate General Partner, is a partner of Reed
Smith Shaw & McClay which is engaged to perform legal services for Registrant.


            No officer or director of the Corporate General Partner, W.P. Carey
or any other affiliate of Registrant or any member of the immediate family or
associated organization of any such officer or director was indebted to
Registrant at any time since the beginning of Registrant's last fiscal year.


                                      -11-
<PAGE>   13
                                     PART IV




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


   (a)      1.    Financial Statements:

                  The following financial statements are filed as a part of this
                  Report:

   Report of Independent Accountants.

   Balance Sheets as of December 31, 1995 and 1996.

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

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

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

   Notes to Financial Statements.

   The financial statements are hereby incorporated by reference to pages 6 
   to 21 of Registrant's Annual Report contained in Appendix A.







   (a)      2.    Financial Statement Schedule:

                  The following schedule is filed as a part of this Report:

   Schedule III -Real Estate and Accumulated Depreciation as of December 31,
   1996.

   Notes to Schedule III.


   Schedule III and notes thereto are hereby incorporated by reference to pages
   22 to 25 of Registrant's Annual Report contained in Appendix A.





                  Financial Statement Schedules other than those listed above
are omitted because the required information is given in the Financial
Statements or the Notes thereto, or because the conditions requiring their
filing do not exist.


                                      -12-
<PAGE>   14
   (a)  3.  Exhibits:

            The following exhibits are filed as part of this Report. Documents
other than those designated as being filed herewith are incorporated herein by
reference.

<TABLE>
<CAPTION>
Exhibit                                                             Method of
  No.        Description                                             Filing
-------      -----------                                            ---------
<S>        <C>                                             <C>
  3.1      Amended Agreement of Limited Partnership of     Exhibit 3(B) to Amendment
           Registrant dated as of June 1, 1983.            No. 2 to Registration
                                                           Statement (Form S-11)
                                                           No. 2-83092

  4.4      $4,500,000 Mortgage Note dated January 2,       Exhibit 4.6 to Form 10-K
           1984 from Registrant to Empire of America       filed April 10, 1984
           FSA ("Empire").

  4.5      Deed of Trust, Mortgage, Deed to Secure         Exhibit 4.7 to Form 10-K
           Debt, Security Agreement and Assignment         filed April 10, 1984
           dated January 2, 1984 from Registrant
           to Empire.

  4.6      Assignment of Rents and Lessor's Interest       Exhibit 4.8 to Form 10-K
           in Lease dated January 2, 1984 from             filed April 10, 1984
           Registrant to Empire.

  4.7      $2,400,000 Deed of Trust Note dated             Filed as Exhibit 4.7 to
           April 11, 1984 from Registrant to Mellon        Registrant's Report on
           Bank, N.A.                                      Form 8-K dated April 25,
                                                           1984

  4.8      Deed of Trust and Security Agreement dated      Filed as Exhibit 4.8 to
           April 11, 1984 from Registrant to               Registrant's Report on
           Robert A. Johnson and John L. Ostby, as         Form 8-K dated April 25,
           trustees for Mellon Bank, N.A., and             1984
           Mellon Bank.

  4.9      Assignment of Rentals and Leases dated          Filed as Exhibit 4.9 to
           April 11, 1984 from Registrant, as assignor,    Registrant's Report on
           to Mellon Bank, N.A., as assignee.              Form 8-K dated April 25,
                                                           1984

  4.10     $3,000,000 Promissory Note dated June 29,       Filed as Exhibit 4.1 to
           1984 from Registrant to TRW Inc.                Registrant's Report on
                                                           Form 8-K dated July 26,
                                                           1984

  4.11     $5,000,000 Promissory Note dated July 13,       Filed as Exhibit 4.2 to
           1984 from Registrant to FCA American            Registrant's Report on
           Mortgage Corporation ("FCA").                   Form 8-K dated July 26,
                                                           1984

  4.16     Mortgage, Security Agreement and                Filed as Exhibit 4.7 to
           Assignment of Leases and Rents dated            Registrant's Report on
           July 13, 1984 by Registrant to FCA.             Form 8-K dated July 26,
                                                           1984
</TABLE>


                                      -13-
<PAGE>   15
<TABLE>
<CAPTION>
Exhibit                                                             Method of
  No.        Description                                             Filing
-------      -----------                                            ---------
<S>        <C>                                             <C>
  4.17     $3,000,000 Promissory Note dated                Filed as Exhibit 4.17 to
           April 30, 1984 from Registrant to FCA.          Registrant's Annual Report
                                                           on Form 10-K dated
                                                           March 29, 1985
          
  4.18     Mortgage and Security Agreement dated           Filed as Exhibit 4.18 to
           April 30, 1984 by Registrant to FCA.            Registrant's Annual Report
                                                           on Form 10-K dated
                                                           March 29, 1985
          
  4.19     Collateral Assignment of Leases and Rents       Filed as Exhibit 4.19 to
           dated April 30, 1984 from Registrant            Registrant's Annual Report
           to FCA.                                         on Form 10-K dated
                                                           March 29, 1985
          
  4.45     Agreement to Assign Contract of Sale            Filed as Exhibit 4.1 to
           dated July 2, 1985 between American             Registrant's Form 10-Q
           Industrial Warehouses, Inc. ("AIW")             dated August 15, 1985
           and Registrant.
          
  4.46     Assignment of Rights in Contract of             Filed as Exhibit 4.2 to
           Sale dated July 16, 1985 between AIW            Registrant's Form 10-Q
           and Registrant.                                 dated August 15, 1985
          
  4.47     $4,600,000 Promissory Note dated                Filed as Exhibit 4.1 to
           August 30, 1985 from Registrant to              Registrant's Report on
           Mellon Bank, N.A. ("Mellon").                   Form 8-K dated
                                                           September 12, 1985
          
  4.56     Seller's/Lessee's Certificate dated             Filed as Exhibit 4.1 to
           November 25, 1985 from Gould Inc. to            Registrant's Report on
           Registrant.                                     Form 8-K dated
                                                           December 9, 1985
          
  4.57     Assignment of Rights in Purchase                Filed as Exhibit 4.2 to
           Agreement dated November 21, 1985               Registrant's Report on
           between JB Properties, as Assignor,             Form 8-K dated
           and Registrant as Assignee.                     December 9, 1985
          
  4.60     Mortgage, Assignment of Leases and              Filed as Exhibit 4.2 to
           Security Agreement dated January 30,            Registrant's Report on
           1986 between Registrant, as                     Form 8-K dated
           Mortgagor, and Lloyds and Texas                 March 4, 1986
           Commerce, collectively as Mortgagee,
           on Broomall, PA property.
</TABLE>
          

                                      -14-
<PAGE>   16
<TABLE>
<CAPTION>
Exhibit                                                             Method of
  No.        Description                                             Filing
-------      -----------                                            ---------
<S>        <C>                                             <C>
  4.61     Modification Agreement dated March 1,           Exhibit 4.61 to Form 10-K
           1986 in connection with the Mortgage,           Filed April 18, 1986
           Assignment of Leases and Security Agreement
           dated January 30, 1986 on Broomall, PA
           property.
        
  4.62     Mortgage, Assignment of Leases and              Filed as Exhibit 4.3 to
           Security Agreement dated January 30,            Registrant's Report on
           1986 between Registrant, as                     Form 8-K dated
           Mortgagor, and Lloyds and Texas                 March 4, 1986
           Commerce, collectively as Mortgagee,
           on Cuyahoga Falls, OH property.
        
  4.63     Modification Agreement dated March 1,           Exhibit 4.63 to Form 10-K
           1986 in connection with the Mortgage,           Filed April 18, 1986
           Assignment of Leases and Security Agreement
           dated January 30, 1986 on Cuyahoga Falls,
           OH property.
        
  4.64     Deed of Trust, Assignment of Leases             Filed as Exhibit 4.4 to
           and Security Agreement dated January            Registrant's Report on
           30, 1986, between Registrant, as                Form 8-K dated
           Grantor, and Lawyers Title Insurance,           March 4, 1986
           as Trustee on Duffield, VA property.
        
  4.65     Deed of Trust Modification Agreement            Exhibit 4.65 to Form 10-K
           dated March 1, 1986 in connection               Filed April 18, 1986
           with the Deed of Trust, Assignment of
           Leases and Security Agreement dated
           January 30, 1986 on Duffield, VA
           property.
        
  4.66     Trust Indenture dated as of January             Filed as Exhibit 4.5 to
           1, 1986 between Michigan Strategic              Registrant's Report on
           Fund ("MSF") and Texas Commerce.                Form 8-K dated March
                                                           4, 1986
        
  4.74     $3,700,000 Promissory Note dated                Filed as Exhibit 4.9 to
           January 30, 1986 from CPA(R):5, as              Registrant's Report on
           Payee, to Registrant and CPA(R):6,              Form 8-K dated March
           collectively as Payor.                          4, 1986
        
  4.75     Deed of Trust, Assignment of Rents,             Filed as Exhibit 4.10 to
           dated February 14, 1986 from                    Form 8-K dated March
           Registrant, as Trustor, to Chicago              4, 1986
           Title Insurance Company, as Trustee,
           for the benefit of New York Life
           Insurance Company ("New York Life"),
           as Beneficiary.
        
  4.76     $7,000,000 Promissory Note Secured by           Filed as Exhibit 4.11 to
           Deed of Trust, dated February 18,               Registrant's Report on
           1986 from Registrant to New York Life.          Form 8-K dated March
                                                           4, 1986
</TABLE>


                                      -15-
<PAGE>   17
<TABLE>
<CAPTION>
Exhibit                                                             Method of
  No.        Description                                             Filing
-------      -----------                                            ---------
<S>        <C>                                             <C>
  4.77     Assignment of Lessor's Interest in              Filed as Exhibit 4.12 to
           Lease with Assignment of Rents,                 Registrant's Report on
           Income and Cash Collateral, dated               Form 8-K dated March
           February 14, 1986, from Registrant to           4, 1986
           New York Life.
           
  4.78     $1,500,000 Promissory Note from                 Exhibit 4.78 to Form 10-K
           Registrant to First Southern Federal            Filed April 18, 1986
           Savings and Loan Association ("First
           Southern") dated March 10, 1986.
           
  4.79     Deed of Trust, Assignment of Rents              Exhibit 4.79 to Form 10-K
           and Security Agreement between                  Filed April 18, 1986
           Registrant, William A. Mann, Trustee
           and for the benefit of First Southern
           dated March 10, 1986.
           
  4.80     Estoppel Certificate and                        Exhibit 4.80 to Form 10-K
           Subordination Attornment and                    Filed April 18, 1986
           Recognition Agreement between First
           Southern and Exide dated March 10, 1986.
           
  4.92     $1,500,000 First Mortgage Note dated            Filed as Exhibit 4.1 to
           December 22, 1986 from the Registrant, as       Registrant's Report on
           Borrower, to 1st Source Bank ("1st Source"),    Form 8-K dated
           as Lender.                                      January 7, 1987
           
  4.93     Mortgage and Security Agreement dated           Filed as Exhibit 4.2 to
           December 22, 1986 between the Registrant,       Registrant's Report on
           as Borrower, and 1st Source, as Lender          Form 8-K dated
           and Secured Party.                              January 7, 1987
           
  4.94     $5,000,000 Promissory Note dated December 14,   Filed as Exhibit 4.1 to
           1987, from Registrant, as Borrower, to          Registrant's Report on
           Prudential, as Lender.                          Form 8-K dated
                                                           December 28, 1987
           
  4.95     Unconditional Guaranty of Payment and           Filed as Exhibit 4.2 to
           Performance dated December 14, 1987 from        Registrant's Report on
           Arley, as Guarantor, to Prudential, as          Form 8-K dated
           Lender.                                         December 28, 1987
           
  4.96     Mortgage and Security Agreement dated           Filed as Exhibit 4.3 to
           December 14, 1987 between Registrant, as        Registrant's Report on
           Mortgagor, and Prudential, as Mortgagee.        Form 8-K dated
                                                           December 28, 1987
           
  4.97     Assignment of Leases, Rents, Issues,            Filed as Exhibit 4.4 to
           Income and Profits dated December 14, 1987      Registrant's Report on
           from Registrant, as Assignor, to                Form 8-K dated
           Prudential, as Assignee.                        December 28, 1987
           
 10.1      Agreement of Sale dated December 30, 1983       Exhibit 10.1 to Form 10-K
           between Eaton Corporation and Registrant.       filed April 10, 1984
</TABLE>
         

                                      -16-
<PAGE>   18
<TABLE>
<CAPTION>
Exhibit                                                             Method of
  No.        Description                                             Filing
-------      -----------                                            ---------
<S>        <C>                                             <C>
  10.2     Lease Agreement dated December 30, 1983         Exhibit 10.2 to Form 10-K
           between Registrant, as landlord, and Yale       filed April 10, 1984
           Industrial Products, Inc. ("Yale"), as
           tenant.
           
  10.6     Management Agreement between Registrant and     Exhibit 10(B) to Amendment
           Carey Corporate Property Management, Inc.       No. 2 to Registration
                                                           Statement (Form S-11)
                                                           No. 2-83092
           
  10.7     Support Agreement among Registrant,             Exhibit 10(C) to Amendment
           Fifth Carey Corporate Property, Inc.            No. 2 to Registration
           and W.P. Carey & Co., Inc.                      Statement (Form S-11)
                                                           No. 2-83092
           
  10.8     Lease Agreement dated April 11, 1984            Filed as Exhibit 10.5
           between Registrant, as Landlord, and            to Registrant's Report
           Rochester Button Company, Inc.,                 on Form 8-K dated
           ("Rochester") as Tenant.                        April 25, 1984
           
  10.13    Agreement Concerning Lease dated July 13,       Filed as Exhibit 10.4 to
           1984 by Shapiro & Son Bedspread Corp. as        to Registrant's Report
           Tenant, Registrant as Borrower and FCA          on Form 8-K dated
           as Lender.                                      July 26, 1984
           
  10.14    Guaranty dated July 13, 1984 from               Filed as Exhibit 10.5
           Hampshire Textile Corp. to Registrant.          to Registrant's Report
                                                           on Form 8-K dated
                                                           July 26, 1984
           
  10.15    Agreement Concerning Guaranty dated             Filed as Exhibit 10.6
           July 13, 1984 by Hampshire Textile              to Registrant's Report
           Corp. as Guarantor, Registrant as               on Form 8-K dated
           Borrower and FCA as Lender.                     July 26, 1984
           
  10.16    Agreement Amending Lease Agreement              Filed as Exhibit 10.16
           dated April 30, 1984 between Registrant         to Registrant's Annual
           and Yale.                                       Report on Form 10-K dated
                                                           March 29, 1985
           
  10.17    Subordination, Non-Disturbance and              Filed as Exhibit 10.17
           Attornment Agreement dated April 30,            to Registrant's Annual
           1984 among FCA, Registrant and Yale.            Report on Form 10-K dated
                                                           March 29, 1985
           
  10.18    Lease Agreement dated August 7, 1984            Filed as Exhibit 10.18
           between Registrant, as Landlord and             to Registrant's Annual
           Penn Virginia Resources Corporation             Report on Form 10-K dated
           ("Resources") and Pennsylvania Crusher          March 29, 1985
           Corporation ("Crusher"), as Tenants.
           
  10.19    Memorandum of Lease dated August 7,             Filed as Exhibit 10.19
           1984 between Registrant and Crusher             to Registrant's Annual
           recorded in Summit County, Ohio.                Report on Form 10-K dated
                                                           March 29, 1985
</TABLE>
           

                                      -17-
<PAGE>   19
<TABLE>
<CAPTION>
Exhibit                                                             Method of
  No.        Description                                             Filing
-------      -----------                                            ---------
<S>        <C>                                             <C>
 10.20     Memorandum of Lease dated August 7,             Filed as Exhibit 10.20
           1984 between Registrant and Crusher             to Registrant's Annual
           recorded in Delaware County,                    Report on Form 10-K dated
           Pennsylvania.                                   March 29, 1985
           
 10.21     Memorandum of Lease dated August 7,             Filed as Exhibit 10.21
           1984 between Registrant and Resources           to Registrant's Annual
           recorded in Scott County, Virginia.             Report on Form 10-K dated
                                                           March 29, 1985
           
 10.22     Lease Guaranty dated August 7, 1984             Filed as Exhibit 10.22
           by Penn Virginia Corporation ("Penn             to Registrant's Annual
           Virginia") to Registrant.                       Report on Form 10-K dated
                                                           March 29, 1985
           
 10.27     Lease Agreement between                         Filed as Exhibit 10.1 to
           Registrant as Landlord and                      Registrant's Report on
           Exide Electronics Corporation                   Form 8-K dated July 2,
           ("Exide") as Tenant dated June                  1985
           20, 1985.
           
 10.28     Memorandum of Lease between                     Filed as Exhibit 10.2 to
           Registrant and Exide dated                      Registrant's Report on
           June 20, 1985.                                  Form 8-K dated July 2,
                                                           1985
           
 10.29     Guaranty from Exide Electronics                 Filed as Exhibit 10.3 to
           Group, Inc. ("Exide                             Registrant's Report on
           Electronics") to Registrant                     Form 8-K dated July 2,
           dated June 20, 1985.                            1985
           
 10.33     Lease Agreement dated July 11,                  Filed as Exhibit 10.1 to
           1985 between Registrant as                      Registrant's Form
           landlord and General Cinema                     10-Q dated August
           Corp. ("GCC") as tenant.                        15, 1985
           
 10.34     Lease Guaranty dated July 16,                   Filed as Exhibit 10.2 to
           1985 between Registrant and GCC.                Registrant's Form
                                                           10-Q dated August
                                                           15, 1985
           
 10.35     Memorandum of Lease dated                       Filed as Exhibit 10.3 to
           July 11, 1985 between                           Registrant's Form
           Registrant and GCC.                             10-Q dated August
                                                           15, 1985
           
 10.40     Lease Agreement dated November                  Filed as Exhibit 10.1 to
           25, 1985 between Registrant, as                 Registrant's Report on
           Lessor, and Gould Inc., as                      Form 8-K dated December 9,
           Lessee.                                         1985
</TABLE>
         

                                      -18-

<PAGE>   20
<TABLE>
<CAPTION>
Exhibit                                                             Method of
  No.        Description                                             Filing
-------      -----------                                            ---------
<S>        <C>                                             <C>
 10.41     Memorandum of Lease dated                       Filed as Exhibit 10.2 to
           November 21, 1985, between                      Registrant's Report on
           Registrant, as Landlord, and                    Form 8-K dated December 9,
           Gould Inc., as Tenant.                          1985
           
 10.42     Joint Venture Agreement dated                   Filed as Exhibit 10.1 to
           January 30, 1986 between                        Registrant's Report on
           Registrant and CPA(R):6.                        Form 8-K dated March 4,
                                                           1986
           
 10.43     Lease Agreement dated as of                     Filed as Exhibit 10.2 to
           January 30, 1986 by and between                 Registrant's Report on
           Registrant and CPA(R):6,                        Form 8-K dated March 4,
           collectively as Landlord, and                   1986
           Great Lakes Hotel Corporation
           ("Great Lakes"), as Tenant.
           
 10.44     Lease Agreement as of March 6,                  Exhibit 10.44 to Form 10-K
           1986 by and between Registrant                  filed April 18, 1984
           and CPA(R):6, collectively as
           Landlord, and Northwoods Hotel
           Corporation ("Northwoods"), as Tenant.
           
 10.45     Memorandum of Lease dated                       Filed as Exhibit 10.3 to
           January 30, 1986 between                        Registrant's Report on
           Registrant and CPA(R):6, as                     Form 8-K dated March 4,
           Landlord, and Northwoods, as Tenant.            1986
           
 10.46     Memorandum of Lease dated March                 Exhibit 10.46 to Form 10-K
           6, 1986 between Registrant and CPA(R):6,        filed April 18, 1984
           as Landlord, and Northwoods, as Tenant.
           
 10.47     Lease Guaranty dated January                    Filed as Exhibit 10.4 to
           30, 1986 from Landmark Hotel                    Registrant's Report on
           Corporation ("Landmark"), as                    Form 8-K dated March 4,
           Guarantor, to Registrant and                    1986
           CPA(R):6, collectively, as Landlord.
           
 10.48     Lease Guaranty dated March 6,                   Exhibit 10.48 to Form 10-K
           1986 from Landmark, as                          filed April 18, 1984
           Guarantor, to Registrant and
           CPA(R):6, collectively as Landlord.
           
 10.49     Lease Agreement dated April 3, 1987             Filed as Exhibit 10.5 to
           by and between Registrant, as Landlord,         Registrant's Report on
           and Stanwich, as Tenant.                        Form 8-K dated April 17,
                                                           1986
</TABLE>
         

                                      -19-
<PAGE>   21
<TABLE>
<CAPTION>
Exhibit                                                             Method of
  No.        Description                                             Filing
-------      -----------                                            ---------
<S>        <C>                                             <C>
 10.50     Memorandum of Lease dated April 3,              Filed as Exhibit 10.6 to
           1986 between Registrant, as Landlord,           Registrant's Report on
           and Stanwich, as Tenant.                        Form 8-K dated April 17,
                                                           1986
           
 10.53     Lease Agreement dated December 22, 1987         Filed as Exhibit 10.1 to
           by and between Registrant, as Landlord,         Registrant's Report on
           and Stoody, as Tenant.                          Form 8-K dated
                                                           January 7, 1987
           
 10.54     First Amendment to Lease dated December 14,     Filed as Exhibit 10.1 to
           1987 by and between Registrant, as Landlord,    Registrant's Report on
           and Arley, as Tenant.                           Form 8-K dated
                                                           December 28, 1987
           
 10.55     Lease Subordination Agreement dated December    Filed as Exhibit 10.2 to
           14, 1987 by and among Registrant, as Landlord,  Registrant's Report on
           Arley, as Tenant, and Prudential, as Lender.    Form 8-K dated
                                                           December 28, 1987
           
 10.56     Lease Agreement dated March 10, 1988 by         Filed as Exhibit 10.56 to
           and between Registrant, as Landlord,            Form 10-K dated
           and Winn-Dixie, as Tenant.                      April 15, 1988
           
 10.57     Lease Guaranty dated March 10, 1988 from        Filed as Exhibit 10.57 to
           Winn-Dixie Stores, as Guarantor, to             Form 10-K dated
           Registrant, as Lessor.                          April 15, 1988
           
 10.58     Lease dated September 13, 1995 between G.I.     Filed as Exhibit 10.1 to
           Pastek Limited Partnership, as Tenant, and      Registrant's Form 8-K
           G.I. Plastek Industrial Properties Limited      dated September 29, 1995
           Partnership, as Landlord.
           
 28.1      General Warranty Deed dated December 28,        Filed as Exhibit 28.1
           1983 from Eaton Corporation to                  to Registrant's Report
           Registrant.                                     on Form 8-K dated
                                                           April 25, 1984
           
 28.2      Quitclaim Deed dated January 31, 1984           Filed as Exhibit 28.2
           from Eaton Corporation to Registrant.           to Registrant's Report
                                                           on Form 8-K dated
                                                           April 25, 1984
 28.5      General Warranty Deeds dated April 11,          Filed as Exhibit 28.5
           from Rochester to Registrant.                   to Registrant's Report
                                                           on Form 8-K dated
                                                           April 25, 1984
           
 28.6      Bill of Sale dated April 11, 1984               Filed as Exhibit 28.6
           from Rochester to Registrant.                   to Registrant's Report
                                                           on Form 8-K dated
                                                           April 25, 1984
           
 28.10     Deed dated July 13, 1984 from Shapson           Filed as Exhibit 28.4
           Realty Corp. to Registrant.                     to Registrant's Report
                                                           on Form 8-K dated
                                                           July 26, 1984
</TABLE>
         

                                      -20-
<PAGE>   22
<TABLE>
<CAPTION>
Exhibit                                                             Method of
  No.        Description                                             Filing
-------      -----------                                            ---------
<S>        <C>                                             <C>
 28.11     Deed dated July 13, 1984 from Shapson           Filed as Exhibit 28.5
           Realty Corp. to Registrant.                     to Registrant's Report
                                                           on Form 8-K dated
                                                           July 26, 1984
           
 28.12     Bill of Sale dated July 13, 1984                Filed as Exhibit 28.6
           from Shapson Realty Corp. to Registrant.        to Registrant's Report
                                                           on Form 8-K dated
                                                           July 26, 1984
           
 28.13     Deed dated August 7, 1984 from                  Filed as Exhibit 28.13
           Resources to Registrant.                        to Registrant's Annual
                                                           Report on Form 10-K dated
                                                           March 29, 1985
           
 28.14     General Warranty deed dated August 7,           Filed as Exhibit 28.14
           1984 from Crusher to Registrant.                to Registrant's Annual
                                                           Report on Form 10-K dated
                                                           March 29, 1985
           
 28.15     Deed dated August 7, 1984 from Crusher          Filed as Exhibit 28.15
           to Registrant.                                  to Registrant's Annual
                                                           Report on Form 10-K dated
                                                           March 29, 1985
           
 28.16     Warranty Deed dated April 24, 1985              Filed as Exhibit 28.4 to
           between Adventure Restaurant Corp.              Registrant's Report on
           ("Adventure") and Registrant.                   Form 8-K dated May 8, 1985
           
 28.17     Bill of Sale dated April 24, 1985               Filed as Exhibit 28.5 to
           from Adventure to Registrant.                   Registrant's Report on
                                                           Form 8-K dated May 8, 1985
           
 28.27     Warranty Deed dated July 11, 1985               Filed as Exhibit 28.1 to
           from GCC to Registrant.                         Registrant's Form 10-Q
                                                           dated August 15, 1985
           
 28.28     Bill of Sale dated July 16, 1985                Filed as Exhibit 28.2 to
           from GCC as seller to Registrant as             Registrant's Form 10-Q
           buyer.                                          dated August 15, 1985
           
 28.43     Deed dated November 25, 1985 from               Filed as Exhibit 28.1 to
           Gould Inc. to Registrant.                       Registrant's Report on
                                                           Form 8-K dated
                                                           December 9, 1985
           
 28.44     Bill of Sale dated November 25,                 Filed as Exhibit 28.2 to
           1985 from Gould Inc. to Registrant.             Registrant's Report on
                                                           Form 8-K dated
                                                           December 9, 1985
</TABLE>
         

                                      -21-
<PAGE>   23
<TABLE>
<CAPTION>
Exhibit                                                             Method of
  No.        Description                                             Filing
-------      -----------                                            ---------
<S>        <C>                                             <C>
 28.45     Purchase Agreement dated July 25,               Filed as Exhibit 28.3 to
           1985 by Gould Inc., as Seller, with             Registrant's Report on
           JB Properties, as Buyer.                        Form 8-K dated December
                                                           9, 1985
           
 28.46     Warranty Deed dated January 30, 1986            Filed as Exhibit 28.1 to
           among Adventure Restaurant Corporation          Registrant's Report on
           ("Adventure"), Registrant and CPA(R):6.         Form 8-K dated March 4,
                                                           1986
           
 28.47     Warranty Deed dated March 6, 1987               Exhibit 28.47 to Form 10-K
           among Adventure, Registrant and CPA(R):6.       Filed April 17, 1986
           
 28.48     Bill of Sale dated January 30, 1987             Filed as Exhibit 28.2 to
           from Adventure to Registrant and CPA(R):6.      Registrant's Report on
                                                           Form 8-K dated March
                                                           4, 1986
           
 28.49     Bill of Sale dated March 6, 1987                Exhibit 28.49 to Form 10-K
           from Adventure to Registrant and CPA(R):6.      Filed April 17, 1986
           
 28.50     Bill of Sale dated April 3, 1986 from           Filed as Exhibit 28.3 to
           Stanwich to Registrant.                         Registrant's Report on
                                                           Form 8-K dated April 17,
                                                           1986
           
 28.51     Warranty Deed dated April 3, 1986 from          Filed as Exhibit 28.4 to
           Stanwich to Registrant (Frankenmuth,            Registrant's Report on
           MI property).                                   Form 8-K dated April 17,
                                                           1986
           
 28.52     Warranty Deed dated April 3, 1986 from          Filed as Exhibit 28.5 to
           Stanwich to Registrant (Prophetstown,           Registrant's Report on
           IL property).                                   Form 8-K dated April 17,
                                                           1986
           
 28.53     Warranty Deed dated April 3, 1986 from          Filed as Exhibit 28.6 to
           Stanwich to Registrant (McMinnville,            Registrant's Report on
           TN property).                                   Form 8-K dated April 17,
                                                           1986
           
 28.54     Seller/Lessee's Certificate dated               Filed as Exhibit 28.7 to
           April 3, 1986 from Stanwich, as Seller,         Registrant's Report on
           to Registrant, as Purchaser, and                Form 8-K dated April 17,
           Security Pacific, as Lender.                    1986
           
 28.58     Bill of Sale dated December 22, 1987            Filed as Exhibit 28.1 to
           from Stoody to Registrant.                      Registrant's Report on
                                                           Form 8-K dated
                                                           January 7, 1987
           
 28.59     Corporate Warranty Deed made as of December     Filed as Exhibit 28.2 to
           22, 1986 by Stoody, as Grantor, and             Registrant's Report on
           Registrant, as Grantee.                         Form 8-K dated
                                                           January 7, 1987
</TABLE>
         

                                      -22-
<PAGE>   24
<TABLE>
<CAPTION>
Exhibit                                                             Method of
  No.        Description                                             Filing
-------      -----------                                            ---------
<S>        <C>                                             <C>
 28.60     Seller/Lessee's Certificate dated               Filed as Exhibit 28.3 to
           December 22, 1986 from Stoody, as Seller,       Registrant's Report on
           to Registrant, as Purchaser.                    Form 8-K dated
                                                           January 7, 1987
           
 28.61     Indemnification Agreement by and between        Filed as Exhibit 28.4 to
           the Registrant, as Borrower, 1st Source,        Registrant's Report on
           as Lender, and Stoody, as Tenant.               Form 8-K dated
                                                           January 7, 1987
           
 28.62     Agreement of Sale dated December 1, 1987 by     Filed as Exhibit 28.1 to
           and between Registrant, as Seller, and          Registrant's Report on
           Brondy, as Buyer.                               Form 8-K dated
                                                           January 14, 1988
           
 28.63     First Amendment to Agreement of Sale dated      Filed as Exhibit 28.2 to
           December 1, 1987 by and between Registrant,     Registrant's Report on
           as Seller, and Brondy, as Buyer.                Form 8-K dated
                                                           January 14, 1988
           
 28.64     Bill of Sale dated December 31, 1992 from       Filed as Exhibit 28.3 to
           Registrant to Brondy.                           Registrant's Report on
                                                           Form 8-K dated
                                                           January 14, 1988
           
 28.65     Bargain and Sale Deed dated December 30, 1987   Filed as Exhibit 28.4 to
           from Registrant, as party of the first part,    Registrant's Report on
           to Brondy, as party of the second part.         Form 8-K dated
                                                           January 14, 1988
           
 28.66     Warranty Deed dated March 10, 1988 between      Filed as Exhibit 28.66
           Winn-Dixie, as Grantor, and Registrant,         Form 10-K dated
           as Grantee.                                     April 15, 1988
           
 28.67     Bill of Sale dated March 10, 1988 from          Filed as Exhibit 28.67
           Winn-Dixie, as Seller, to Registrant,           Form 10-K dated
           as Purchaser.                                   April 15, 1988
           
 28.68     Seller's Certificate dated March 10, 1988       Filed as Exhibit 28.68
           from Winn-Dixie, as Seller, to Registrant,      Form 10-K dated
           as Purchaser.                                   April 15, 1988
           
 28.69     Prospectus of Registrant                        Filed as Exhibit 28.69
           dated August 2, 1983.                           to Form 10K/A dated
                                                           September 24, 1993
           
 28.70     Supplement dated September 29, 1983             Filed as Exhibit 28.70
           to Prospectus dated August 2, 1983.             to Form 10K/A dated
                                                           September 24, 1993
           
 28.71     Press release dated June 30, 1993               Exhibit 28.1 to Form 8-K
           announcing the suspension of secondary          dated July 12, 1993
           market sales of Limited Partnership Units.
</TABLE>
         

                                      -23-
<PAGE>   25
<TABLE>
<CAPTION>
Exhibit                                                             Method of
  No.        Description                                             Filing
-------      -----------                                            ---------
<S>        <C>                                             <C>
 28.72     Agreement of Limited Partnership of G.I.        Filed as Exhibit 28.1 to
           Plastek Limited Partnership dated September     Registrant's Form 8-K
           8, 1995.                                        dated September 29, 1995
</TABLE>

   (b)  Reports on Form 8-K

            During the quarter ended December 31, 1996 the Registrant was not
required to file any reports on Form 8-K.


                                      -24-
<PAGE>   26
                                   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 5
                        (a California limited partnership)

                        BY:   CAREY CORPORATE PROPERTY, INC.

   04/3/97              BY:    /s/ Claude Fernandez
-------------                 ----------------------------
     Date                     Claude Fernandez
                              Executive Vice President and
                              Chief Administrative Officer
                              (Principal Financial Officer)


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

                  BY:   CAREY CORPORATE PROPERTY, INC.

                        William P. Carey
                        Chairman of the Board
                        and Director
                        (Principal Executive Officer)

                        Francis J. Carey
                        President and Director

                        George E. Stoddard            BY: /s/ George E. Stoddard
                        Chairman of the Investment        ----------------------
                        Committee and Director            George E. Stoddard
                                                          Attorney in fact
                        Dr. Lawrence R. Klein             April 3, 1997
                        Chairman of the Economic Policy
                        Committee and Director

                        Madelon DeVoe Talley
                        Vice Chairman of the Board of
                        Directors and Director

   04/3/97        BY:   /s/ Claude Fernandez
-------------           ----------------------------
     Date               Claude Fernandez
                        Executive Vice President and
                        Chief Administrative Officer
                        (Principal Financial Officer)

   04/3/97        BY:   /s/ Michael D. Roberts
-------------           ----------------------------
     Date               Michael D. Roberts
                        First Vice President and Controller
                        (Principal Accounting Officer)


                                      -25-
<PAGE>   27
                                                         APPENDIX A TO FORM 10-K













                         CORPORATE PROPERTY ASSOCIATES 5
                       (A CALIFORNIA LIMITED PARTNERSHIP)



















                                          1996 ANNUAL REPORT
<PAGE>   28
SELECTED FINANCIAL DATA




(In thousands except per unit amounts)



<TABLE>
<CAPTION>
                                         1992         1993         1994         1995         1996
                                         ----         ----         ----         ----         ----
OPERATING DATA:
<S>                                    <C>          <C>          <C>          <C>          <C>
  Revenues                             $18,195      $18,261      $18,125      $15,768      $13,205

  Net income                             5,857        4,496        5,557        1,913        7,776

    Net income allocated:
    To General Partners                    351          270        1,011          201          463
    To Limited Partners                  5,506        4,226        4,546        1,712        7,314
    Per unit                             48.64        37.34        40.16        15.12        64.61

  Distributions attributable (1):
    To General Partners                    348          350          352          365          244
    To Limited Partners                  5,445        5,489        5,516        7,635        3,816
    Per unit                             48.10        48.49        48.73        67.45(2)     33.71

  Payment of mortgage
    principal (3)                          915          826          725          463          365


BALANCE SHEET DATA:

  Total assets                          95,637       93,950       92,366       72,268       52,652

  Long-term
    obligations (4)                     42,463       34,949       31,310       24,505       10,446
</TABLE>



(1)  Includes distributions attributable to the fourth quarter of each fiscal
     year payable in the following fiscal year less distributions in the first
     fiscal quarter attributable to the prior year.
(2)  1995 distributions include a special distribution of $20 per Limited
     Partnership Unit.
(3)  Represents scheduled mortgage amortization paid.
(4)  Represents mortgage and note payable obligations due after more than one
     year.

                                      -1-
<PAGE>   29
MANAGEMENT'S DISCUSSION AND ANALYSIS



            Results of Operations

            Net income for the year ended December 31, 1996 increased by
$5,864,000 as compared with the prior year. Such increase was primarily due to
gains realized on the sale of Partnership properties. Income before gains, and
excluding (i) the effects of noncash charges for writedowns of assets to their
estimated net realizable values in both 1996 and 1995 and (ii) nonrecurring
items in 1995 included in other income in the accompanying financial statements,
would have reflected an increase of $683,000.

            The increase in income, as adjusted, was due to decreases in
interest, depreciation, general and administrative and property expenses and was
partially offset by a decrease in lease revenues. The decrease in interest
expense resulted from the combination of (i) satisfying mortgage loans in
connection with property dispositions and (ii) using proceeds from these
property sales to pay off mortgage debt on other Partnership properties which
are still subject to leases. The loans on the properties which remain occupied
were paid off as the loans were scheduled to mature with substantial balloon
payments in 1996 and 1997. The decrease in depreciation expense was solely due
to the disposition of properties resulting in a reduction in the balances of
assets subject to depreciation. The decrease in general and administrative
expense was due to lower state tax and office occupancy expenses in 1996. Prior
to selling the Helena, Montana office building in January 1996, the Partnership
absorbed a portion of the operating expenses for that property. In 1995, such
costs, net of tenant reimbursements, were approximately $82,000. Accordingly,
property expense decreased due to the sale of the Helena property and because of
legal costs incurred in 1995 in connection with a dispute regarding the final
determination for the sales price of a property. The decrease in lease revenues
is entirely due to the sale of properties in 1995 and 1996.

            The 1996 gain on the sale of properties resulted from the sales of
the office building in Helena, Montana, a warehouse facility in Hodgkins,
Illinois leased to GATX Logistics, Inc. ("GATX") and the Holiday Inn in Rapid
City, South Dakota which had been operated by the Partnership. IBM Corporation,
("IBM"), the primary tenant at the Helena property, occupied 40% of the leasable
space at the property with several other tenants occupying the remaining 60% of
the space. The IBM lease was scheduled to expire in April 2003. A renovation, a
significant portion of which had been subsidized by a local utility company, had
just been completed. Management believes that the offer of $4,800,000 reflected
a favorable valuation of the property. If the Partnership were to have continued
to own the property, future market value could have been negatively affected by
the uncertainty as to whether IBM would continue to lease space after the end of
its current lease term. The GATX lease provided annual rents of $1,399,000 and
was scheduled to expire in October 1999 with only one five-year renewal term, at
the option of the lessee. Accordingly, Management believed the value of the
property in the future would have been affected by the uncertainty as to whether
the lease would be renewed in November 1999. As more fully described in Note 12
of the accompanying financial statements, the Partnership had committed in
October 1995 to use its best efforts to sell the Rapid City property. Management
previously concluded that investing an estimated $1,950,000 to upgrade the hotel
to meet the core modernization plan of Holiday Inn and retain the Holiday Inn
affiliation would not provide an adequate return on the additional investment.
On the other hand, revenues and profitability of the Rapid City operation would
be expected to decrease after any change in hotel chain affiliation.

            Earnings from the hotel operations for the year ended December 31,
1996 are not directly comparable to the results of operations for the year ended
December 31, 1995 due to the sale of the Rapid City hotel in October 1996. The
Rapid City hotel contributed 46% of hotel revenue and 58% of hotel earnings in
1996. Management believes that this will be representative of the decreases in
revenue and earnings from the hotel operation in future periods. For the year
ended December 31, 1996, revenues, excluding Rapid City, increased by 4%.
Revenues from all the hotel properties, including Rapid City, are seasonal with
most revenues earned during the second and third quarters. Operating income for
the remaining hotels in Alpena and Petoskey, Michigan increased 7% and 11%,
respectively, for the year ended December 31, 1996 as compared with 1995.
Although the average room rate remained stable at the Alpena hotel, there was a
6% increase in the occupancy rate resulting in both a 5% increase in room
revenue and a 4% increase in food and beverage revenue. There was a 14% increase
in the occupancy rate at the Petoskey hotel; however, the average room rate
decreased 9%. Petoskey also benefited from a decrease in operating expenses. The
decrease in Petoskey room rates was the result of increased competition from
other resorts.

                                      -2-
<PAGE>   30
            Net income for the year ended December 31, 1995 decreased by
$3,526,000 as compared with net income for the year ended December 31, 1994.
Income before gains in 1995 reflected a decrease of $3,016,000 when compared to
1994. Of such decrease, $1,981,000 was the result of noncash writedowns of
assets. The decrease in earnings was also attributable to a decrease in lease
revenues and an increase in general and administrative expenses and was
partially offset by decreases in interest and property expenses and an increase
in other interest income. Of the $2,890,000 decrease in lease revenues,
$2,738,000 was due to the disposition of properties leased to Pace Membership
Warehouse, Inc. ("Pace") and Liberty Fabrics of New York ("Liberty Fabrics") in
1994 and Industrial General Corporation ("IGC") in 1995. In addition, lease
revenues also decreased as the result of lower rentals from GATX. In November
1994 a short-term lease with GATX expired at which time GATX and the Partnership
replaced the short-term lease with a new five-year lease agreement. As
previously described, the property was sold in 1996. The increase in general and
administrative expense was due to an increase in partnership level franchise
taxes and the Partnership's office costs. The increase in office expenses was
due, in part, to nonrecurring costs in connection with the relocation of the
Partnership's offices. The decrease in interest expense was primarily due to the
payoff in 1994 of mortgages on the Pace, Liberty Fabrics and Spreckels
Industries, Inc. ("Spreckels") properties in 1994 and the satisfaction of the
mortgage loan on the IGC properties in 1995. The decrease in property expenses
was due to costs incurred in 1994 in connection with the Partnership's
assessment of its liquidity alternatives which included environmental reviews
and property valuations. Other interest income increased due to higher cash
balances held by the Partnership earlier in the year prior to the payment of a
special distribution to partners of $2,287,000.

            Earnings from the Partnership's hotel operations for 1995 decreased
by 7% as compared with 1994. The occupancy rate at the Petoskey, Michigan hotel
declined to 43% in 1995 from 47% in 1994. As a result of this decrease which was
caused by increased competition from a nearby resort area, the Partnership was
only able to increase the average room rate at Petoskey by 0.6% in 1995. The
occupancy rates at the Alpena, Michigan hotel property remained stable at 55%
and the Partnership was able to increase the average room rate by slightly less
than 5%. The Rapid City hotel's occupancy rate increased by approximately 2% to
57% with an increase in the average room rate of 2.5%. The overall increase in
hotel revenues was entirely offset by an increase of 6% in operating costs.

            A decrease in leasing revenues can be expected as the GATX property,
which was sold in the second quarter of 1996, contributed $381,000 to 1996
revenues. The lease agreement with Rochester Button Company ("RBC") will reduce
annual rentals by $106,000. Management believes that such reduction may enable
RBC to improve its financial position. With the stock warrants granted by RBC,
the Partnership could benefit from any potential improvement in RBC's business
operations. These revenue decreases will not be fully offset by the 1996 rent
increases on the leases with DeVlieg Bullard, Inc. ("DeVlieg") and Penberthy
Products, Inc. totaling $150,000 annually and a short-term lease for the Elyria,
Ohio property which will provide annual rents of $60,000. Rent increases are
scheduled for properties leased to Stoody Deloro Stellite, Inc. ("Stoody") and
Arley Merchandise Corporation ("Arley") in 1997 and Spreckels and Gould, Inc. in
1998.

            Interest expense will decrease due to the satisfaction of mortgage
debt of $18,562,000 in connection with property sales and paying balloon
payments on high interest rate mortgage loans. The only mortgage loans
outstanding are the mortgage loan collateralized by the properties leased to
Arley and bond financings on the Alpena and Petoskey hotel properties which are
cross-collateralized by eight other Partnership properties. As discussed below,
the Arley loan is in default. Interest expense on these loans and the note
payable to an affiliate should be approximately $1,460,000 in 1997 as compared
with interest expense of $2,075,000 in 1996. Annual cash flow increased by
$740,000 from the payoff of mortgage loans on properties which remain occupied.
Cash flow from the GATX and Rapid City properties after payment of mortgage debt
service in 1996 was $465,000. Cash flow will also benefit if Partnership
receives distributions from its investment in a limited partnership, GI Plastek
Limited Partnership. As the limited partnership is a start-up operation, the
Partnership does not expect to receive distributions in the coming year.

            Because of the net and long-term nature of the Partnership's leases,
inflation and changing prices have not unfavorably affected the Partnership's
revenues and net income. Except for the Penn Virginia Corporation ("Penn
Virginia") lease, all of the Partnership's net leases have provisions providing
for rent increases based on formulas indexed to increases in the Consumer Price
Index ("CPI") and may include caps on such CPI increases, sales overrides or
scheduled mandatory increases which could increase operating revenues in the
future. Future rent increases may be affected by changes in the method of the
calculation of

                                      -3-
<PAGE>   31
the CPI. Although there are indications that there may be legislation which
considers changes to the CPI methodology, the Partnership cannot predict the
outcome of proposed changes relating to the CPI formula. As the rate of
inflation has been moderate in recent years, the Partnership believes that hotel
operations may not be significantly impacted by changing prices. Management
believes that reasonable increases in costs may be partially or entirely passed
through by increases in room rates.


            Financial Condition

            Other than the two hotel properties operated by the Partnership, all
of the Partnership's properties are leased to corporate tenants under net leases
which generally require tenants to pay all operating expenses relating to the
leased properties. The Partnership depends on relatively stable operating cash
flow from its net leases and operating properties to meet operating expenses,
service its debt, fund distributions and maintain adequate cash reserves. The
Partnership maintains a working capital reserve to fund major outlays such as
capital improvements on its properties and balloon debt payments. Such
expenditures may also be funded from additional borrowing on the Partnership's
real estate portfolio. The Partnership's cash and cash equivalents were
$5,238,000 at December 31, 1996.

            As a real estate limited partnership, the Partnership has
distributed, since its inception, a substantial portion of its cash flow to its
partners. The Partnership's current strategy has been to utilize its cash flow
from operations and its cash reserves to pay quarterly distributions and meet
scheduled principal payment installments on its mortgage debt service With the
disposition of the Rapid City hotel, use of cash reserves to fund necessary
capital improvements is expected to decrease. Based on an evaluation of cash
flow, the distribution rate was reduced in April 1996 to bring distributions
more in line with cash flow from operations. In 1995, excluding a $2,287,000
special distribution, quarterly distributions exceeded operating cash flow by
more than $1,000,000. Since the reduction in April 1996, the distribution rate
has increased each quarter. During 1996, cash provided from operations of
$5,606,000 was sufficient to fund quarterly distributions to partners of
$4,457,000 and pay scheduled principal payments of $365,000 on the Partnership's
mortgage debt. During the five-year period ended December 31, 1996,
distributions to partners exceeded reported earnings in each year except 1996.
Management gives primary consideration to projections of the Partnership's cash
flow provided from operations and/or investing activities as well as current
cash balances and commitments for the use of such cash in determining
distributions.

            The Partnership's investing activities during 1996 included $172,000
of costs incurred in connection with the completion of renovations necessary to
bring the Alpena and Petoskey hotels in compliance with the Holiday Inn hotel
modernization plan and replacement of furniture, fixture and equipment ("FF&E")
at the hotels. Alpena and Petoskey maintain a reserve of $85,000 for on-going
FF&E purchases. The Partnership realized proceeds of $18,592,000 on property
sales in 1996.

            The Partnership's financing activities primarily consisted of paying
quarterly distributions to partners and meeting scheduled principal payment
installments on its mortgage debt. The Partnership used $18,562,000 to satisfy
mortgage loans. As a result, the leverage of the Partnership's properties has
decreased substantially which provides the Partnership with increased borrowing
potential and flexibility in structuring any new financing. The Partnership,
however, is not currently seeking to borrow additional funds. The $4,755,000
mortgage loan on the Arley properties is currently in default and the
Partnership has entered into discussions with the lender for the purpose of
restructuring the loan. There is no assurance that any agreement will be reached
with the lender. As the Arley loan is a nonrecourse mortgage loan, the lender's
sole recourse is to the properties collateralized by such mortgage debt and an
assignment of the Arley lease to the lender. If the Partnership is unable to
reach an agreement with the lender, the Partnership's alternatives include, but
are not limited to, seeking to refinance the mortgage on the Arley property with
another lender or structuring alternative financing using the flexibility
created by the overall reduction in the Partnership's leverage over the past
several years.

                                      -4-
<PAGE>   32
            Stoody has an option to purchase its lease property in December 1997
at a purchase price of the greater of $3,000,000 or fair market value. The
Stoody property is not encumbered by mortgage debt and provides for annual rent
of $393,000. If Stoody does not exercise its option, the lease term will
continue until 2010. The initial term of the Partnership's lease with Penn
Virginia ends in 1999, and Penn Virginia has not indicated whether it will
exercise its option to renew the lease. Annual cash flow from the Penn Virginia
property is $499,000.

            In 1994, the Partnership voluntarily conducted Phase II reviews of
certain of its properties based on the results of the Phase I environmental
reviews conducted in 1993. The Partnership believes, based on the results of
such reviews, that its leased 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 its tenants of such findings and of their
obligations, if any, to perform any required remediation.

            All of the Partnership's properties are subject to environmental
statutes and regulations regarding the discharge of hazardous materials and any
related remediation obligations. Except for the two hotel properties, all of the
properties are currently net leased to corporate tenants. The Partnership
normally structures its leases to require tenants to comply with all laws. In
addition, substantially all of the Partnership's net leases include
indemnification provisions which require tenants to indemnify the Partnership
from all liabilities and losses related to their operations at the leased
properties. If the Partnership undertakes to clean up or remediate any of its
leased properties, the General Partners believe that in most cases the
Partnership will be entitled to full reimbursement from tenants for such costs.
Further, in the event that the Partnership either is responsible or becomes
responsible for such costs because of a tenant's failure to fulfill its
obligations the General Partners believe that the ultimate resolution of the
aforementioned environmental matters will not have a material adverse effect on
the Partnership's financial condition, liquidity or results of operations.

            The General Partners are continuing to investigate ways to provide
liquidity for limited partners on a tax-effective basis.

                                      -5-
<PAGE>   33
                        REPORT of INDEPENDENT ACCOUNTANTS



To the Partners of
  Corporate Property Associates 5:



            We have audited the accompanying balance sheets of Corporate
Property Associates 5 (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 22 to 25 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 5 (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 21, 1997

                                      -6-
<PAGE>   34
                         CORPORATE PROPERTY ASSOCIATES 5
                        (a California limited partnership)

                                  BALANCE SHEETS

                           December 31, 1995 and 1996

<TABLE>
<CAPTION>
                                                                 1995              1996
                                                                 ----              ----
     ASSETS:
<S>                                                         <C>                <C>
Real estate leased to others:
  Accounted for under the
    operating method:
      Land                                                  $  4,722,767       $  3,960,767
      Buildings                                               34,271,786         22,753,408
                                                            ------------       ------------
                                                              38,994,553         26,714,175
      Accumulated depreciation                                12,371,727          9,111,827
                                                            ------------       ------------
                                                              26,622,826         17,602,348
  Net investment in direct financing leases                   19,352,938         19,298,726
                                                            ------------       ------------
      Real estate leased to others                            45,975,764         36,901,074
Operating real estate, net of accumulated depreciation
  of $4,265,218 in 1995 and $4,637,421 in 1996                 7,735,809          7,463,300
Real estate held for sale                                     10,388,398
Cash and cash equivalents                                      2,300,682          5,237,995
Funds in escrow                                                2,977,622            575,051
Other assets, net of accumulated amortization of
  $130,589 and reserve for uncollected
  rent of $165,164 in 1995                                     2,890,127          2,474,117
                                                            ------------       ------------
         Total assets                                       $ 72,268,402       $ 52,651,537
                                                            ============       ============

     LIABILITIES:

Mortgage notes payable                                      $ 36,065,145       $ 14,283,940
Note payable to affiliate                                      1,151,000          1,151,000
Accrued interest payable                                         170,877             45,707
Accounts payable and accrued expenses                            572,267            433,842
Accounts payable to affiliates                                   144,553            111,526
Deferred gains, net of accumulated amortization of
  $245,788 in 1995 and $180,278 in 1996                        1,366,593            901,390
Other liabilities                                              1,051,904            658,542
                                                            ------------       ------------
         Total liabilities                                    40,522,339         17,585,947
                                                            ------------       ------------
Commitments and contingencies

     PARTNERS' CAPITAL:

General Partners                                                (262,961)           (67,666)
Limited Partners (113,200 Limited Partnership
  Units issued and outstanding)                               32,009,024         35,133,256
                                                            ------------       ------------
         Total partners' capital                              31,746,063         35,065,590
                                                            ------------       ------------
         Total liabilities and
         partners' capital                                  $ 72,268,402       $ 52,651,537
                                                            ============       ============
</TABLE>

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

                                      -7-
<PAGE>   35
                         CORPORATE PROPERTY ASSOCIATES 5
                       (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                                     $ 5,606,618      $ 4,642,686      $ 3,225,129
  Interest income from direct financing leases        5,805,643        3,879,125        3,409,166
  Other interest income                                 117,325          307,951          210,913
  Revenue of hotel operations                         6,595,570        6,768,268        6,359,758
  Other income                                                           170,107
                                                    -----------      -----------      -----------
                                                     18,125,156       15,768,137       13,204,966
                                                    -----------      -----------      -----------
Expenses:
  Interest                                            4,534,425        3,495,872        2,075,230
  Depreciation                                        2,181,422        2,065,781        1,331,028
  General and administrative                            571,189          841,920          460,948
  Property expenses                                   1,516,194          810,581          579,189
  Amortization                                           63,932           33,599           13,301
  Writedown to net realizable value                                    1,980,550        1,300,000
  Operating expense of hotel operations               4,959,699        5,241,370        4,952,959
                                                    -----------      -----------      -----------
                                                     13,826,861       14,469,673       10,712,655
                                                    -----------      -----------      -----------

    Income before gains on sale                       4,298,295        1,298,464        2,492,311

  Gains on sale of real estate, net                   1,140,891          614,234        5,284,165
                                                    -----------      -----------      -----------

    Net income                                      $ 5,439,186      $ 1,912,698      $ 7,776,476
                                                    ===========      ===========      ===========

Net income allocated to:
  Individual General Partner                        $   171,409      $    52,520      $   119,855
                                                    ===========      ===========      ===========

  Corporate General Partner                         $   832,262      $   148,208      $   342,857
                                                    ===========      ===========      ===========

  Limited Partners                                  $ 4,435,515      $ 1,711,970      $ 7,313,764
                                                    ===========      ===========      ===========

Net income per Limited
  Partnership Unit
  (113,200 Units outstanding)                       $     39.18      $     15.12      $     64.61
                                                    ===========      ===========      ===========
</TABLE>

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

                                      -8-
<PAGE>   36
                         CORPORATE PROPERTY ASSOCIATES 5
                       (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      $ 38,311,475       $  (746,920)      $ 39,058,395       $ 345

Distributions                     (5,862,314)         (351,738)        (5,510,576)        (49)

Net income, 1994                   5,439,186         1,003,671          4,435,515          39
                                ------------       -----------       ------------       -----

Balance, December 31, 1994        37,888,347           (94,987)        37,983,334         335

Distributions                     (8,054,982)         (368,702)        (7,686,280)        (68)

Net income, 1995                   1,912,698           200,728          1,711,970          15
                                ------------       -----------       ------------       -----

Balance, December 31, 1995        31,746,063          (262,961)        32,009,024         282

Distributions                     (4,456,949)         (267,417)        (4,189,532)        (37)

Net income, 1996                   7,776,476           462,712          7,313,764          65
                                ------------       -----------       ------------       -----

Balance, December 31, 1996      $ 35,065,590       $   (67,666)      $ 35,133,256       $ 310
                                ============       ===========       ============       =====
</TABLE>

(a)  Based on 113,200 Units issued and outstanding during all periods.

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

                                      -9-
<PAGE>   37
                         CORPORATE PROPERTY ASSOCIATES 5
                       (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                                                 $  5,439,186       $  1,912,698       $  7,776,476
   Adjustments to reconcile net income to net
     cash provided by operating activities:
     Depreciation and amortization                               2,245,354          2,099,380          1,344,329
     Amortization of deferred gains                                (71,609)           (71,678)           (64,974)
     Cash receipts on operating and financing
       leases greater than straight-line adjustments and
       amortization of unearned income                               8,388             13,162             54,212
     Writedown to net realizable value                                              1,980,550          1,300,000
     Net gain on sale of real estate                            (1,140,891)          (614,234)        (5,284,165)
     Net change in operating assets and liabilities               (187,595)          (631,808)           480,432
                                                              ------------       ------------       ------------
        Net cash provided by operating
          activities                                             6,292,833          4,688,070          5,606,310
                                                              ------------       ------------       ------------
Cash flows from investing activities:
   Issuance of note receivable                                    (188,910)
   Additional capitalized costs                                   (407,538)        (1,078,951)          (172,447)
   Proceeds on sale and transfer of real estate                 16,939,000          3,387,362         18,592,329
   Purchase of limited partnership interests                                       (1,750,175)
                                                              ------------       ------------       ------------
        Net cash provided by investing activities               16,342,552            558,236         18,419,882
                                                              ------------       ------------       ------------

Cash flows from financing activities:
   Distributions to partners                                    (5,862,314)        (8,054,982)        (4,456,949)
   Release of escrow funds in
     connection with mortgage prepayment                                                               2,295,000
   Prepayments of mortgage payable                             (10,413,985)        (2,200,000)       (18,561,812)
   Payments on mortgage principal                                 (725,239)          (463,487)          (365,118)
   Partial prepayment of note payable to affiliate                                   (144,000)
   Deferred financing costs                                         (1,247)           (10,000)
                                                              ------------       ------------       ------------
        Net cash used in financing activities                  (17,002,785)       (10,872,469)       (21,088,879)
                                                              ------------       ------------       ------------

        Net increase (decrease) in cash and
          cash equivalents                                       5,632,600         (5,626,163)         2,937,313

Cash and cash equivalents, beginning of year                     2,294,245          7,926,845          2,300,682
                                                              ------------       ------------       ------------

        Cash and cash equivalents, end of year                $  7,926,845       $  2,300,682       $  5,237,995
                                                              ============       ============       ============
</TABLE>

Supplemental Schedule of noncash investing and financing activity:

   In connection with the sales of properties, purchasers assumed a mortgage
   loan obligation of $2,854,275 and accrued interest thereon of $12,049 in 1996
   and a mortgage loan obligation of $720,401 and accrued interest thereon of
   $5,780 in 1995 in lieu of paying cash.

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

                                      -10-
<PAGE>   38
                         CORPORATE PROPERTY ASSOCIATES 5
                       (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 5 (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 - Under this method, real estate is recorded at
               cost, revenue is recognized as rentals are earned and expenses
               (including depreciation) are charged to operations as incurred.
               When scheduled rents vary during the lease term, income is
               recognized on a straight-line basis so as to produce a constant
               periodic rent.

        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.

      Operating Real Estate:

        Land, buildings and personal property are carried at cost. Major
           renewals and improvements are capitalized to the property accounts,
           while replacements, maintenance and repairs which do not improve or
           extend the lives of the respective assets are expensed currently.


      Real Estate Held for Sale:

        Real estate held for sale is accounted for at the lower of cost or fair
           value less cost of sale.

                                   Continued

                                      -11-
<PAGE>   39
                         CORPORATE PROPERTY ASSOCIATES 5
                       (a California limited partnership)

                    NOTES to FINANCIAL STATEMENTS, Continued


      Depreciation:

        Depreciation is being computed using the straight-line method over the
           estimated useful lives of components of the particular properties,
           which range from 5 to 30 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 at December 31, 1995 and 1996 were held in the
           custody of three financial institutions.




      Other Assets and Liabilities:

        Included in other assets are deferred charges incurred in connection
           with mortgage note financings and refinancings and an investment in a
           limited partnership. Deferred charges are amortized on a
           straight-line basis over the terms of the mortgages. The
           Partnership's 17.5% investment in an unaffiliated limited partnership
           is accounted for under the cost method, i.e., income is recorded
           based on distributions received from net accumulated earnings.
           Included in other liabilities is deferred rental income for the
           aggregate difference on an operating method lease between scheduled
           rents which vary during the lease term and rent recognized on a
           straight-line basis.

      Deferred Gains:

        Deferred gains consist of assets acquired in excess of liabilities
           assumed in connection with acquiring the operations of a hotel
           property in Rapid City, South Dakota and certain funds received in
           connection with the two loan refinancings. The deferred gain from the
           refinancings is being amortized on a straight-line basis over 24
           years. The deferred gain on acquisition had been amortized on a
           straight-line basis on a 20-year schedule until sale of the property
           in October 1996, at which time the remaining unamortized gain was
           recognized.

      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.

      Reclassifications:

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

 2.  Partnership Agreement:

        The Partnership was organized on April 12, 1983 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. All the Units were sold prior to December 21, 1983, at
           which time the offering terminated. The Partnership will terminate on

                                   Continued

                                      -12-
<PAGE>   40
                         CORPORATE PROPERTY ASSOCIATES 5
                       (a California limited partnership)

                    NOTES to FINANCIAL STATEMENTS, Continued

          December 31, 2005, 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 6% (1% to
           the Individual General Partner, William P. Carey, and 5% to the
           Corporate General Partner, Carey Corporate Property, Inc.) and the
           Limited Partners are allocated 94% of the profits and losses, except
           as described below, as well as distributions of Distributable Cash
           From Operations, as defined. 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 after the limited partners receive 100%
           of their initial investment from the proceeds of asset sales and a
           cumulative annual return of 6% since the inception of the
           Partnership. The General Partners interest in such preferred return
           amounts to approximately $1,423,000 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.

        In accordance with the Agreement, the General Partners, due to having
           negative capital balances at the beginning of each year, were
           allocated a portion of the 1994, 1995 and 1996 gains on sale of
           property as well as the related tax gain in order to reduce their
           negative balances. The Partnership paid a special distribution in
           1995 of proceeds from a property sale which distribution was
           allocated 1% to the Individual General Partner and 99% to the Limited
           Partners in accordance with the Agreement.

3.   Transactions with Related Parties:

        The Partnership holds a 65% interest as tenants-in-common in hotel
           properties in Alpena and Petoskey, Michigan with Corporate Property
           Associates 6 ("CPA(R):6"), an affiliate which owns the remaining 35%
           interest. The Partnership accounts for its interest in the Alpena and
           Petoskey properties on a proportional basis.

        Under the Agreement, W.P. Carey & Co., Inc. ("W.P. Carey") and other
           affiliates are also 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 to the
           operation of the Partnership.

          Property management fee and general and administrative expense
           reimbursements are summarized as follows:

<TABLE>
<CAPTION>
                                                1994        1995        1996
                                                ----        ----        ----
<S>                                           <C>         <C>         <C>
            Property management fee           $156,947    $116,825    $ 76,763
            General and administrative
               expense reimbursements          178,840     117,584     113,288
                                              --------    --------    --------
                                              $335,787    $234,409    $190,051
                                              ========    ========    ========
</TABLE>

        During 1994, 1995 and 1996, fees aggregating $339,112, $180,242 and
           $91,265 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 mortgage loans on the Alpena and Petoskey properties consist of
           tax-exempt bond obligations of $7,330,000 for each property of which
           the Partnership's share of each is $4,764,500. The bonds are also
           collateralized by mortgage and/or lease assignments on eight other
           Partnership properties. In the event of default, the bondholders have
           recourse to the Partnership's collateral

                                   Continued

                                      -13-
<PAGE>   41
                         CORPORATE PROPERTY ASSOCIATES 5
                       (a California limited partnership)

                    NOTES to FINANCIAL STATEMENTS, Continued

           to the full extent of the outstanding balance of the bonds including
           the portion of the obligation applicable to CPA(R)6. In connection
           with restructuring the bond obligation in 1992, the Partnership
           received cash and other consideration from CPA(R)6.

        The Partnership is a participant in an agreement with W.P. Carey and
           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 $76,426, $182,843 and $83,533,
           respectively. Net expenses in 1995 included certain nonrecurring
           items.

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

    A.  Real Estate Leased to Others:

        Scheduled future minimum rents, exclusive of renewals, under
           noncancellable operating leases amount to approximately $2,850,000 in
           1997, $2,822,000 in 1998, $2,647,000 in 1999, $1,077,000 in both of
           the years 2000 and 2001, and aggregate approximately $16,650,000
           through 2010.

        Contingent rents were approximately $106,000, $5,000 and $6,000 in 1994,
           1995 and 1996, respectively.

    B.  Operating Real Estate:

        Operating real estate, at cost, is summarized as follows:

<TABLE>
<CAPTION>
                                                             December 31,
                                                        ----------------------
                                                        1995              1996
                                                        ----              ----
<S>                                                 <C>              <C>
            Land                                    $   479,050      $   479,050
            Buildings                                 9,603,750        9,603,750
            Personal property                         1,918,227        2,017,921
                                                    -----------      -----------
                                                     12,001,027       12,100,721
                Less: Accumulated depreciation        4,265,218        4,637,421
                                                    -----------      -----------
                                                    $ 7,735,809      $ 7,463,300
                                                    ===========      ===========
</TABLE>

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                 $34,887,327      $32,483,668
            Unguaranteed residual value                        17,495,677       17,495,677
                                                              -----------      -----------
                                                               52,383,004       49,979,345
                Less: Unearned income                          33,030,066       30,680,619
                                                              -----------      -----------
                                                              $19,352,938      $19,298,726
                                                              ===========      ===========
</TABLE>

        Scheduled future minimum rents, exclusive of renewals, under
           noncancellable financing leases amount to approximately $2,585,000 in
           each of the years from 1997 to 2001 and aggregate approximately
           $32,484,000 through 2017.

                                   Continued

                                      -14-
<PAGE>   42
                         CORPORATE PROPERTY ASSOCIATES 5
                       (a California limited partnership)

                    NOTES to FINANCIAL STATEMENTS, Continued



        Contingent rents were approximately $995,000, $758,000 and $776,000 in
           1994, 1995 and 1996, respectively.

 6.  Mortgage Notes Payable and Note Payable to Affiliate:

     A. Mortgage Notes Payable

        The Partnership's mortgage notes payable are limited recourse
           obligations and are collateralized by lease assignments and by real
           property with a carrying amount of approximately $32,914,000, before
           accumulated depreciation (also see Note 3). As of December 31, 1996,
           mortgage notes payable bear interest at rates varying from 6.6% to
           10% per annum and mature from 1997 to 2015.

      Scheduled principal payments during each of the next five years following
           December 31, 1996 and thereafter, including a mortgage loan subject
           to acceleration, are as follows:

<TABLE>
<CAPTION>
          Year Ending December 31,
          ------------------------
<S>         <C>                                <C>
            1997                               $ 4,988,940
            1998                                   253,500
            1999                                   266,500
            2000                                   286,000
            2001                                   312,000
            Thereafter                           8,177,000
                                               -----------
               Total                           $14,283,940
                                               ===========
</TABLE>

     B. Note Payable to Affiliate:
        A note payable to CPA(R):6 of $1,151,000 provides for payments of
           interest only at a rate of 13.48% per annum through August 1, 1999,
           at which time the interest rate will reset to the Applicable Federal
           Rate (as defined in the Internal Revenue Code of 1986). The note,
           which is a recourse obligation of the Partnership, matures on May 1,
           2012, at which time a balloon payment for any unpaid principal is
           due. The note may be prepaid in part or whole at any time.

        Interest paid on mortgage notes payable and the note payable to
           affiliate was $4,642,849, $3,554,413 and $2,254,150 in 1994, 1995 and
           1996, respectively.


 7.  Distributions to Partners:

        Distributions declared and paid to partners are summarized as follows:

<TABLE>
<CAPTION>
                                                                                    Limited
       Year Ending            Distributions Paid to   Distributions Paid to      Partners' Per
       December 31,             General Partners        Limited Partners           Unit Amount
       ------------             ----------------        ----------------           -----------
<S>                                 <C>                    <C>                       <C>
         1994                       $351,738               $5,510,576                $48.68
         1995:
      Quarterly distributions       $345,833               $5,422,280                $47.90
      Special distribution            22,869                2,264,000                 20.00
                                    --------               ----------                ------
         Total 1995                 $368,702               $7,686,280                $67.90
                                    ========               ==========                ======
         1996                       $267,417               $4,189,532                $37.01
                                    ========               ==========                ======
</TABLE>

        Distributions of $61,056 to the General Partners and $956,540 to the
           Limited Partners for the quarter ended December 31, 1996 were
           declared and paid in January 1997.

                                   Continued

                                      -15-
<PAGE>   43
                         CORPORATE PROPERTY ASSOCIATES 5
                       (a California limited partnership)

                    NOTES to FINANCIAL STATEMENTS, Continued


 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                  $  5,439,186       $ 1,912,698       $  7,776,476
Excess tax depreciation                                (2,979,063)       (2,399,357)        (1,980,182)
Writedowns of assets                                                      1,980,550          1,300,000
Difference in gains or losses on
  dispositions of property                              8,776,856          (157,203)         3,475,585
Other                                                    (351,394)          284,878           (544,552)
                                                     ------------       -----------       ------------
  Income reported for Federal
     income tax purposes                             $ 10,885,585       $ 1,621,566       $ 10,027,327
                                                     ============       ===========       ============
</TABLE>

9.   Industry Segment Information:

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

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

<TABLE>
<CAPTION>
                                                1994                %         1995                %        1996          %
                                                ----               ---        ----               ---       ----         ---
<S>                                        <C>                    <C>     <C>                   <C>     <C>            <C>
    Gould, Inc.                            $ 1,125,000             10%    $1,132,500             13%    $1,215,000      18%
    Spreckels Industries, Inc.                 880,264              8      1,020,717             12      1,020,717      15
    DeVlieg Bullard, Inc.                      830,984              7        830,984             10        912,864      14
    Arley Merchandise
      Corporation                              600,000              5        600,000              7        600,000       9
    Exide Electronics
      Corporation                              485,726              4        528,926              6        572,130       9
    Penn Virginia Corporation                  498,750              5        498,750              6        498,750       8
    Stoody Deloro Stellite, Inc.               380,325              3        404,719              5        390,068       6
    GATX Logistics, Inc.                     1,834,350             16      1,398,600             16        380,730       6
    Harcourt General Corporation               233,750              2        233,750              3        233,750       4
    Rochester Button Company                   204,743              2        199,968              2        225,706       3
    Penberthy Products, Inc.                   182,529              2        182,529              2        200,514       3
    Winn Dixie Stores, Inc.                    191,534              2        191,534              2        191,534       3
    Sunds Defibrator Woodhandling, Inc.
      (formerly FMP/Rauma Company)             124,430              1        131,033              2        144,239       2
    Other                                      146,342              1        212,383              2         31,602
    IBM Corporation                            318,097              3        318,097              4         16,691
    Industrial General Corporation           1,385,643             12        637,321              8
    Pace Membership Warehouse, Inc.            601,718              5
    Liberty Fabrics of New York              1,388,076             12
                                           -----------            ---     ----------            ---     ---------      ---
                                           $11,412,261            100%    $8,521,811            100%    $6,634,295     100%
                                           ===========            ====    ==========            ====    ==========     ====
</TABLE>

                                   Continued

                                      -16-
<PAGE>   44
                         CORPORATE PROPERTY ASSOCIATES 5
                       (a California limited partnership)

                    NOTES to FINANCIAL STATEMENTS, Continued




        The Partnership's share of the operating results for the three hotel
           properties are as follows:


<TABLE>
<CAPTION>
                                       1994            1995            1996
                                       ----            ----            ----
<S>                                <C>             <C>             <C>
       Revenues                    $ 6,595,570     $ 6,768,268     $ 6,359,758
       Fees to hotel management
         company                      (131,911)       (143,498)       (134,872)
       Other operating expenses     (4,827,788)     (5,097,872)     (4,818,087)
                                   -----------     -----------     -----------
       Hotel operating income      $ 1,635,871     $ 1,526,898     $ 1,406,799
                                   ===========     ===========     ===========
</TABLE>

10.  Rochester Button Company:

        In June 1992, the Partnership and Rochester Button Company ("RBC")
           entered into restructuring and lease modification agreements for
           properties leased by RBC in South Boston and Kenbridge, Virginia.
           Under the restructuring agreement, the Partnership agreed to exchange
           a $300,000 subordinated promissory note from RBC for 300 shares of
           preferred stock ($1,000 par value, 5%). In January 1994, the
           Partnership agreed to lend $250,000 to RBC at an annual interest rate
           of 9% evidenced by a subordinated promissory note. In 1995, the
           Partnership incurred a charge of $288,910 in writing off the note
           receivable and preferred stock as a result of RBC experiencing
           financial difficulties and its inability to pay dividends and debt
           service installments in a timely manner. The Partnership had
           previously written down the investment in the preferred stock. In
           addition, the Partnership incurred charges on uncollected rents of
           $165,164 and $235,314 for the years ended December 31, 1995 and 1996,
           respectively.

        On December 30, 1996, the Partnership entered into a new lease agreement
           with RBC and agreed to forgive all previously uncollected rents. The
           lease amendment provides for a reduction of annual rent from $286,000
           to $180,000. Additionally, RBC granted the Partnership warrants which
           are exercisable at any time prior to December 31, 2006, to purchase
           up to 273.5 shares of RBC common stock, representing 40% of the
           outstanding common stock of RBC, at an exercise price of $18.28 per
           share prior to December 31, 2006.

        The South Boston and Kenbridge properties are pledged as collateral for
           $400,000 of bond financings issued to RBC by industrial development
           authorities.

                                   Continued

                                      -17-
<PAGE>   45
                         CORPORATE PROPERTY ASSOCIATES 5
                       (a California limited partnership)

                    NOTES to FINANCIAL STATEMENTS, Continued

11.  Funds in Escrow:

        Funds in escrow at December 31, 1995 and 1996 consist of reserves and
           escrow funds for the hotel properties and related mortgage debt.

<TABLE>
<CAPTION>
                                                                   December 31,
                                                             1995              1996
                                                             ----              ----
<S>                                                       <C>                <C>
               Security reserve on Rapid City
                 property                                 $1,895,000
               Debt service escrow account and bond
                 reserves on Alpena and Petoskey
                 properties                                  412,100          $490,100
               Hotel furniture, fixture
                 and equipment reserves                      270,522            84,951
               Special escrow accounts
                 on Rapid City hotel property                400,000
                                                          ----------         ---------
                                                          $2,977,622         $ 575,051
                                                          ==========         =========
</TABLE>

12.  Gains and Losses on the Sale of Real Estate:

     Pace Membership Warehouse, Inc.:

     On November 10, 1994, Pace Membership Warehouse, Inc. ("Pace"),
           purchased its leased property in Tampa, Florida from the Partnership
           for $7,000,000. A portion of the Partnership's proceeds from the sale
           was used to satisfy the remaining $3,290,437 mortgage balance on the
           Tampa property. In connection with the sale, the Partnership
           recognized a gain of $2,027,891.

     Industrial General Corp.:

        In August 1985, the Partnership purchased from and net leased to
           Industrial General Corporation ("IGC") and certain of its
           wholly-owned subsidiaries, seven properties located in Elyria and
           Bellville, Ohio; Forrest City and Bald Knob, Arkansas; Carthage, New
           York; and Newburyport, Massachusetts. Subsequent to the purchase, the
           Partnership agreed to exchange the Saginaw property for an expansion
           of the Newburyport facility, severed the Carthage property from the
           lease and entered into a lease with FMP/Rauma Company ("FMP"). In
           December 1994, the Partnership sold the Forrest City property for
           $650,000 and recognized a loss of $887,000.

        In July 1995, IGC filed a voluntary petition of bankruptcy under Chapter
           11 of the United States Bankruptcy Code. In connection with an asset
           acquisition of the plastics division of IGC, on September 14, 1995,
           the Partnership entered into a series of transactions which resulted
           in the termination of the IGC lease, the sale of the Bald Knob,
           Bellville and Newburyport properties and the full satisfaction of the
           mortgage loan obligation collateralized by all of the IGC properties
           and the FMP property which had been scheduled to mature on September
           1, 1995. In connection with the sale of the Bald Knob property to
           IGC, the Partnership received cash of $987,362 and IGC, with the
           consent of the mortgage lender, assumed a mortgage obligation from
           the Partnership of $720,401 and accrued interest thereon of $5,780.
           Additionally, IGC agreed to pay an additional $200,000 in
           installments to the Partnership of which $185,000 had been received
           as of December 31, 1996. The Bellville and Newburyport properties
           were sold for $2,400,000 in cash to G.I. Plastek Industrial
           Properties Limited Partnership ("Plastek Properties"), an affiliate
           of G.I. Plastek Limited Partnership ("Plastek") which acquired the
           assets of the IGC plastics division.

                                   Continued

                                      -18-
<PAGE>   46
                         CORPORATE PROPERTY ASSOCIATES 5
                       (a California limited partnership)

                    NOTES to FINANCIAL STATEMENTS, Continued



          The Partnership used $2,200,000 of the proceeds to pay off the
           remaining balance on the matured mortgage loan obligation on the IGC
           and FMP properties. In connection with the sale of the three
           properties, the Partnership realized a loss of $1,719,828.

        The Partnership also purchased limited partnership interests in Plastek.
           The Partnership made capital contributions of $175 and $1,750,000 for
           Class A and Class B limited partnership interests, respectively. The
           Class A interest provides for a 17.5% participation in the profits
           and losses of Plastek after payment of preferred returns to Class B
           interests. Class B interests are entitled to a cumulative preferred
           return of 10% on their contributions; however, it does not
           participate in nor receive other allocations of any gains or losses
           of Plastek. The Class B interest is redeemable on September 8, 2000.
           As of December 31, 1996, the Partnership has not received any
           distributions.

        The Partnership retains ownership of the Elyria property. In 1995, based
           on the appraised value of the property and the costs that would need
           to be incurred to prepare the property for sale or lease after IGC
           vacated, the Partnership wrote off the value of the property and
           recognized a charge of $691,640. The Elyria property is presently
           leased to InnoTech Industries, Inc. through April 1998 for an annual
           rental of $60,000.

      Liberty Fabrics of New York:

        In January 1984, the Partnership purchased properties in Gordonsville,
           Virginia and in North Bergen, New Jersey and entered into a net lease
           with Liberty Fabrics of New York ("Liberty"). In December 1993,
           Liberty notified the Partnership of its intention to exercise its
           purchase option on the properties. Pursuant to the lease, the
           purchase price would be the greater of $7,000,000, the Partnership's
           purchase price for the property, or fair market value as encumbered
           by the lease.

        On December 29, 1994, the Partnership and Liberty terminated the lease
           and agreed that the properties would be transferred to Liberty for
           $9,359,000, subject to a final determination of the fair value of the
           property. Liberty would have the right within 30 days of the
           determination to rescind the transfer, in which case all proceeds
           would be returned to Liberty, title of the properties transferred
           back to the Partnership and Liberty would pay all rents in arrears
           for the period from the initial transfer of title if the fair market
           value was determined to be greater than $9,359,000. The final
           determination was made with no adjustment made to the fair market
           value thereby completing the sale. As a result, the Partnership
           recognized a gain of $2,334,062 in 1995 on the sale of the
           properties.

     Rapid City Hotel:

        In 1985, the Partnership purchased a hotel in Rapid City, South Dakota,
           which it operated as a Holiday Inn, with $6,800,000 of tax-exempt
           bonds which were supported by a letter of credit issued by a third
           party. In September 1994, the Partnership was advised by Holiday Inn
           that it would need to upgrade the hotel's physical plant by January
           1997 in order to meet the requirements of a modernization plan
           adopted by Holiday Inn or surrender its Holiday Inn license. As the
           cost of such upgrade was estimated to be $1,925,000, Management
           concluded that such additional investment would not justify
           compliance with the modernization plan. Although Management was
           considering an affiliation with another national hotel chain,
           earnings were expected to decline after any change in affiliation.

                                   Continued

                                      -19-
<PAGE>   47
                         CORPORATE PROPERTY ASSOCIATES 5
                       (a California limited partnership)

                    NOTES to FINANCIAL STATEMENTS, Continued



        In 1995, under an agreement with the issuer of the letter of credit
           supporting the $6,800,000 tax-exempt mortgage bond on the Rapid City
           property, the Partnership agreed to use its best efforts to sell the
           hotel property in exchange for an extension of the letter of credit
           from October 1995 to October 1997. Annual cash flow from the hotel
           (hotel earnings, adjusted for depreciation and amortization, less
           debt service on the tax-exempt bonds) for 1995, the last full year of
           operations, was $305,000. In 1995, the Partnership reevaluated the
           net realizable value of the property and recognized a noncash charge
           of $1,000,000 on the writedown. In the second quarter of 1996, the
           Partnership charged an additional $1,300,000 as a writedown to net
           realizable value to an amount Management believed would approximate
           the proceeds from a sale.

        On October 1, 1996, the Partnership sold the property and the operating
           assets and liabilities of the hotel for $4,105,000. The Partnership
           recognized a gain of $784,618 on the sale. The bond was paid off by
           utilizing the net proceeds from the sale, $302,000 of cash and
           various escrow accounts which had been held by the bond trustee or
           issuer of the letter of credit. The gain includes the recognition of
           the release of unamortized deferred gains relating to the acquisition
           of the hotel operation in 1991 from the former lessee.

     Helena, Montana Office Building :

        In May 1985, the Partnership purchased an office building in Helena,
           Montana and was assigned an existing net lease with IBM Corporation
           ("IBM") as lessee. In 1992, the lease with IBM and the mortgage loan
           on the property were modified at which time IBM reduced its occupancy
           from 100% to 40% of the leasable space. The Partnership subsequently
           leased the remaining space to various other tenants.

        On January 19, 1996, the Partnership sold the property for $4,800,000
           including the purchaser's assumption of the existing mortgage loan on
           the property. Net of closing costs, the Partnership received cash
           proceeds of $1,741,261, assigned the mortgage loan obligation of
           $2,854,275 and accrued interest thereon of $12,049 to the purchaser
           and recognized a gain of $90,356 on the sale.

     GATX Logistics, Inc.:

        In June 1985, the Partnership purchased a warehouse property in
           Hodgkins, Illinois leased to General Motors Corporation ("GM"). In
           November 1993, GM terminated its lease and the Partnership entered
           into a short-term lease with GATX Logistics, Inc.("GATX").
           Subsequently, in November 1994, GATX and the Partnership entered into
           a new lease which provided for a five-year term and a renewal term of
           five years at GATX's option.

        On April 9, 1996, the Partnership sold the Hodgkins property for
           $13,200,000 and assigned the GATX lease, as lessor, to the purchaser.
           Net of costs and amounts necessary to pay the remaining $3,208,526
           balance on the property's mortgage loan, the Partnership received
           cash proceeds of $9,428,270 and recognized a gain on sale of
           $4,409,191.

                                   Continued

                                      -20-
<PAGE>   48
                         CORPORATE PROPERTY ASSOCIATES 5
                       (a California limited partnership)

                    NOTES to FINANCIAL STATEMENTS, Continued


13.  Environmental Matters:

        All of the Partnership's properties, other than the hotel 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. The costs for remediation,
           which are expected to be performed and paid by the affected tenant,
           are not expected to be material. 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 leased
           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 surface spills from
           facility activities and leakage from underground storage tanks. 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.

14.  Disclosure on 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 estimates that the fair value of mortgage notes payable
           approximates $13,914,000 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.

        The carrying amount of the Partnership's limited partnership investment
           in Plastek, which interest was purchased in September 1995 and which
           is accounted for under the cost method, approximates fair value.

                                      -21-
<PAGE>   49
                         CORPORATE PROPERTY ASSOCIATES 5
                       (a California limited partnership)

              SCHEDULE OF REAL ESTATE AND ACCUMULATED DEPRECIATION

                             as of December 31, 1996



<TABLE>
<CAPTION>
                                                           Initial Cost to Partnership              Costs
                                                           ---------------------------            Capitalized       Decrease
                                                                                  Personal       Subsequent to       in Net
      Description                     Encumbrances       Land        Buildings    Property      Acquisition (a)   Investment (b)
      -----------                     ------------       ----        ---------    --------      ---------------   --------------
<S>                                    <C>            <C>          <C>            <C>           <C>                 <C>
Operating method:
 Manufacturing facilities
  leased to Arley
  Merchandise Corporation              $4,754,940    $  256,000    $ 7,544,000                  $    8,555
 Manufacturing and office
  leased to Penn
  Virginia Corporation                                  453,192      3,246,808                       3,112
 Land leased to
  Exide Electronics
  Corporation                                         1,170,000
 Motion picture theater leased
  to Harcourt General
  Corporation                                           243,000      1,927,000                      25,424
 Office and research facility
  leased to Gould, Inc.                               1,422,000      8,418,500                      34,587
 Retail store leased to
  Winn Dixie Stores, Inc.                               414,700      1,525,872                      21,425
 Office/Manufacturing leased
  to Inno Tech Industries, Inc.                         122,884        568,756                                      $(691,640)
                                       ----------    ----------    -----------                  ----------          ---------
                                       $4,754,940    $4,081,776    $23,230,936                  $   93,103          $(691,640)
                                       ==========    ==========    ===========                  ----------          ---------

Operating real estate (e):
 Hotel properties located in
  Alpena, Michigan                     $4,764,500     $ 136,500    $ 4,905,875    $482,625      $  629,009
  Petoskey, Michigan                    4,764,500       342,550      4,684,875     497,575         421,712
                                       ----------     ---------    -----------    --------      ----------
                                       $9,529,000     $ 479,050    $ 9,590,750    $980,200      $1,050,721
                                       ==========     =========    ===========    ========      ==========



<CAPTION>
                                                                                                                   Life on which
                                       Gross Amount at which Carried                                               Depreciation in
                                          at Close of Period  (c)(d)                                                    Latest
                                       -----------------------------                                                  Statement
                                                         Personal                   Accumulated                       of Income
      Description                    Land      Buildings  Property        Total    Depreciation(d)  Date Acquired     is Computed
      -----------                    ----      ---------  --------        -----    ---------------  -------------     -----------
<S>                              <C>         <C>          <C>         <C>             <C>           <C>                  <C>
Operating method:
 Manufacturing facilities
  leased to Arley
  Merchandise Corporation        $  256,000  $ 7,552,555               $7,808,555     $2,391,593    July 13, 1984        30 YRS.
 Manufacturing and office
  leased to Penn
  Virginia Corporation              453,192    3,249,920                3,703,112      2,391,080    August 7, 1984       5-30 YRS.
 Land leased to
  Exide Electronics
  Corporation                     1,170,000                             1,170,000                   June 20, 1985
 Motion picture theater leased
  to Harcourt General
  Corporation                       243,000    1,952,424                2,195,424        745,715    July 17, 1985        30 YRS.
 Office and research facility
  leased to Gould, Inc.           1,423,875    8,451,212                9,875,087      3,125,698    November 25, 1985    30 YRS.
 Retail store leased to
  Winn Dixie Stores, Inc.           414,700    1,547,297                1,961,997        457,741    March 17, 1988       30 YRS.
 Office/Manufacturing leased
  to Inno Tech Industries, Inc.                                                                     August 30, 1995      N/A
                                 ----------  -----------              -----------     ----------
                                 $3,960,767  $22,753,408              $26,714,175     $9,111,827
                                 ==========  ===========              ===========     ==========

Operating real estate (e):
 Hotel properties located in
  Alpena, Michigan               $  136,500  $ 4,912,375  $1,105,134  $ 6,154,009     $2,335,883    March 6, 1987        7-30 YRS.
  Petoskey, Michigan                342,550    4,691,375     912,787    5,946,712      2,301,538    January 30, 1987     7-30 YRS.
                                 ----------  -----------  ----------  -----------     ----------
                                 $  479,050  $ 9,603,750  $2,017,921  $12,100,721     $4,637,421
                                 ==========  ===========  ==========  ===========     ==========
</TABLE>

See accompanying notes to Schedule.

                                      -22-
<PAGE>   50
                         CORPORATE PROPERTY ASSOCIATES 5
                       (a California limited partnership)

              SCHEDULE OF REAL ESTATE AND ACCUMULATED DEPRECIATION

                             as of December 31, 1996


<TABLE>
<CAPTION>
                                                                                               Gross Amount
                                                                 Cost                          at which
                                          Initial Cost to    Capitalized     Decrease in       Carried
                                            Partnership     Subsequent to        Net           at Close of
      Description       Encumbrances   Land     Buildings   Acquisition (a)  Investment (b)    Period  (c)     Date Acquired
      -----------       ------------   ----     ---------   ---------------  --------------    ------  ---     -------------
<S>                     <C>       <C>          <C>               <C>           <C>            <C>            <C>
Direct financing method:
 Manufacturing facility
  to Spreckels
  Industries, Inc.                $  444,730   $ 5,055,270                                    $ 5,500,000    December 30, 1983
 Manufacturing facility
  leased to Rochester
  Button Company, Inc.                86,663     2,815,596       $ 4,429       $(1,003,639)     1,903,049    April 11, 1984
 Office and research
  facility leased to
  Exide Electronics
  Corporation                                    2,030,000         1,500                        2,031,500    June 20, 1985
 Manufacturing
  facilities leased to
  DeVlieg Bullard, Inc.              310,032     4,782,667                                      5,092,699    April 3, 1986
 Manufacturing
  facilities leased to
  Penberthy Products, Inc.            48,968     1,028,333                                      1,077,301    April 3, 1986
 Manufacturing
  facilities leased
  to Stoody Company                  200,000     2,800,000                                      3,000,000    December 22, 1986
 Manufacturing
  facilities leased
  to Sunds Defibrator
  Woodhandling, Inc.                  24,750       669,427                                        694,177    August 30, 1985
                                  ----------   -----------       -------       -----------    -----------
                                  $1,115,143   $19,181,293       $ 5,929       $(1,003,639)   $19,298,726
                                  ==========   ===========       =======       ===========    ===========
</TABLE>

See accompanying notes to Schedule.

                                      -23-
<PAGE>   51
                         CORPORATE PROPERTY ASSOCIATES 5
                       (a California limited partnership)

          NOTES TO SCHEDULE OF REAL ESTATE AND ACCUMULATED DEPRECIATION



     (a) Consists of additional costs capitalized and acquisition costs,
         including legal fees, appraisal fees, title costs and other related
         professional fees, property acquired in connection with acquiring hotel
         assets and purchases of equipment for hotel operations.

     (b) The decrease in net investment is due to the amortization of unearned
         income producing constant periodic rate on the net investment in direct
         financing leases, which is less than lease payments received and the
         writedown of properties to net realizable value.

     (c) At December 31, 1996, the aggregate cost of real estate owned for
         Federal income tax purposes is $58,715,975.

     (d)
                     Reconciliation of Real Estate Accounted
                         for Under the Operating Method

<TABLE>
<CAPTION>
                                             December 31,
                                          ------------------
                                          1995          1996
                                          ----          ----
<S>                                  <C>            <C>
      Balance at beginning
         of year                     $45,541,835    $38,994,553

      Additions                          403,126

      Sale of property                              (12,280,378)

      Reclassification to
         real estate held for sale    (6,950,408)
                                     -----------    -----------
      Balance at close of
         year                        $38,994,553    $26,714,175
                                     ===========    ===========
</TABLE>


                   Reconciliation of Accumulated Depreciation

<TABLE>
<CAPTION>
                                             December 31,
                                          ------------------
                                          1995          1996
                                          ----          ----
<S>                                  <C>            <C>
      Balance at beginning
         of year                     $13,182,621    $12,371,727


      Depreciation expense             1,359,240        840,660

      Sale of property                               (4,100,560)

     Reclassification to
         real estate held for sale    (2,170,134)
                                     -----------    -----------
      Balance at close of year       $12,371,727    $ 9,111,827
                                     ===========    ===========
</TABLE>

                                      -24-
<PAGE>   52
                         CORPORATE PROPERTY ASSOCIATES 5
                       (a California limited partnership)

                NOTES TO SCHEDULE OF REAL ESTATE AND ACCUMULATED
                             DEPRECIATION- Continued





(e)                              Reconciliation of Operating Real Estate

<TABLE>
<CAPTION>
                                                December 31,
                                             ------------------
                                             1995          1996
                                             ----          ----
<S>                                      <C>            <C>
      Balance at beginning of year       $21,768,149    $12,001,027

      Disposals

      Additions                              675,825         99,694

      Reclassification to real estate
         held for sale                    (9,442,947)

      Writedown to net
         realizable value                 (1,000,000)
                                         -----------    -----------
      Balance at close of year
                                         $12,001,027    $12,100,721
                                         ===========    ===========
</TABLE>



                              Reconciliation of Accumulated Depreciation for
                                          Operating Real Estate

<TABLE>
<CAPTION>
                                                 December 31,
                                              -------------------
                                              1995           1996
                                              ----           ----
<S>                                      <C>             <C>
      Balance at beginning of year       $ 7,393,500     $4,265,218

      Reclassification to real estate
         held for sale                    (3,834,823)      (118,166)

      Depreciation expense                   706,541        490,368
                                         -----------     ----------

      Balance at close of year           $ 4,265,218    $ 4,637,420
                                         ===========    ===========
</TABLE>

                                      -25-
<PAGE>   53
PROPERTIES
--------------------------------------------------------------------------------


<TABLE>
<CAPTION>
     LEASE                                                          TYPE OF OWNERSHIP
    OBLIGOR            TYPE OF PROPERTY         LOCATION                 INTEREST
    -------            ----------------         --------            -----------------
<S>                    <C>                      <C>                 <C>
SPRECKELS INDUSTRIES   Manufacturing and        Forrest City,       Ownership of land
INC.                   Office Facility          Arkansas            and building

ARLEY MERCHANDISE      Manufacturing            Columbia and        Ownership of land
CORPORATION            Facilities -             Sumter, South       and buildings (1)
                       2 locations              Carolina

ROCHESTER BUTTON       Manufacturing            Kenbridge,          Ownership of land
COMPANY                Facilities -             South Boston,       and buildings (2)
                       2 locations              Virginia

PENN VIRGINIA          Office and               Duffield,           Ownership of land
CORPORATION            Manufacturing            Virginia            and building (3)
                       Facilities -             Cuyahoga Falls,
                       3 locations              Ohio and
                                                Broomall,
                                                Pennsylvania

(4)                    Hotels                   Petoskey and        Ownership of 65%
                                                Alpena,             interest in land
                                                Michigan            and buildings (1)

EXIDE ELECTRONICS      Office and               Raleigh,            Ownership of land
CORPORATION            Research Facility        North Carolina      and building

HARCOURT GENERAL       Movie Theatre            Canton,             Ownership of land
CORPORATION                                     Michigan            and building (3)

INNO TECH INDUSTRIES,  Office, and              Elyria,             Ownership of land
INC.                   Manufacturing            Ohio                and building
                       Facility


GOULD, INC.            Manufacturing and        Oxnard,             Ownership of land
                       Research Facility        California          and building


DEVLIEG BULLARD, INC.  Manufacturing            Frankenmuth,        Ownership of land
                       Facilities -             Michigan            and buildings (3)
                       2 locations              McMinnville,
                                                Tennessee


PENBERTHY              Manufacturing            Prophetsown,        Ownership of land
PRODUCTS, INC.         Facility                 Illinois            and building (3)


STOODY DELORO          Manufacturing            Goshen,             Ownership of land
STELLITE, INC.         Facility                 Indiana             and building
</TABLE>

                                      -26-
<PAGE>   54
<TABLE>
<CAPTION>
     LEASE                                                          TYPE OF OWNERSHIP
    OBLIGOR            TYPE OF PROPERTY         LOCATION                 INTEREST
    -------            ----------------         --------            -----------------
<S>                    <C>                      <C>                 <C>
WINN-DIXIE             Supermarket              Montgomery,         Ownership of land
STORES, INC.                                    Alabama             and buildings (3)


SUNDS DEFIBRATOR
WOODHANDLING, INC.
(formerly FMP/RAUMA,   Manufacturing            Carthage,           Ownership of land
      CO.)             Facility                 New York            and buildings
</TABLE>














(1)  These properties are encumbered by mortgage notes payable.
(2)  These properties are subject to a mortgage as collateral for loans issued
     by unaffiliated parties to the lessee.
(3)  These properties are encumbered by mortgages and/or lease assignments in
     connection with mortgage notes payable on other of the Partnership's
     properties.
(4)  The Partnership operates a hotel business at these properties.

                                      -27-
<PAGE>   55
MARKET FOR THE PARTNERSHIP'S EQUITY AND RELATED
         UNITHOLDER MATTERS
--------------------------------------------------------------------------------



            Except for limited or sporadic transactions, there is no established
public trading market for the Limited Partnership Units of the Partnership. As
of December 31, 1996, there were 3,577 holders of record of the Limited
Partnership Units of the Partnership.

            In accordance with the requirements of the Partnership's Amended
Agreement of Limited Partnership (the "Agreement") the Corporate General Partner
expects to continue to make quarterly distributions of Distributable Cash From
Operations, as defined, in the Agreement. The following table shows the
frequency and amount of distributions paid per Unit since 1993:


<TABLE>
<CAPTION>
                              Cash Distributions Paid Per Unit
                              1994        1995        1996
                              ----        ----        ----
<S>                           <C>         <C>         <C>
            First quarter     $12.15      $12.20      $11.75
            Second quarter     12.16       32.21 (a)    8.40
            Third quarter      12.18       11.74        8.42
            Fourth quarter     12.19       11.75        8.44
                              ------      ------      ------
                              $48.68      $67.90      $37.01
                              ======      ======      ======
</TABLE>


(a)  Includes a special distribution of $20 per Unit.



REPORT ON FORM 10-K
--------------------------------------------------------------------------------



            The Corporate General Partner will supply to any owner of Limited
Partnership Units, upon written request and without charge, a copy of the Annual
Report on Form 10-K for the year ended December 31, 1996 as filed with the
Securities and Exchange Commission.

                                      -28-