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
For the fiscal year ended December 31, 1997
                                       OR
  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                          ACT OF 1934 (NO FEE REQUIRED)
     For the transition period from .......................................
                  to ........................................

                                                          Commission File Number
                                                                        33-36336

                       INTERVEST MORTGAGE ASSOCIATES L.P.
--------------------------------------------------------------------------------
             (Exact name of Registrant as specified in its charter)


             Delaware                               13-3575243
(State or other jurisdiction of                  (I.R.S. Employer
incorporation or organization)                  Identification No.)


               10 Rockefeller Plaza, New York, New York 10020-1903
--------------------------------------------------------------------------------
               (Address of principal executive offices) (Zip Code)


Registrant's telephone number, including area code         (212) 757-7300
                                                   -----------------------------


           Securities Registered Pursuant to Section 12(b) of the Act:

                                      None
                                ----------------
                                (Title of Class)


           Securities Registered Pursuant to Section 12(g) of the Act:

                                      None
                                ----------------
                                (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. YES X NO

Indicate by check mark if disclosure of delinquent  filers  pursuant to item 405
of Regulation SK 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 to this Form 10-K or any amendment to this
Form 10-K (X) .






<PAGE>
<TABLE>
<CAPTION>



                                                     TABLE OF CONTENTS
                                                     -----------------




                                                          PART I


                                                                                                                      Pages
                                                                                                                      -----
<S>                                                                                                                     <C>
Item  1           Description of Business                                                                                3
Item  2           Properties                                                                                             6
Item  3           Legal Proceedings                                                                                      6
Item  4           Submission of Matters to a Vote of Security Holders                                                    6


                                                          PART II


Item  5           Market for the Registrant's Units of Limited Partnership Interest ("Units")                            6
Item  6           Selected Financial Data                                                                                7
Item  7           Management's Discussion and Analysis of Financial Condition and Results of
                     Operations                                                                                          7
Item  7A          Quantitative and Qualitative Disclosures about Market Risk                                             8
Item  8           Financial Statements and Supplementary Data                                                            9
Item  9           Changes in and Disagreements with Accountants on Accounting and Financial
                     Disclosure                                                                                         27



                                                         PART III


Item 10           Directors and Executive Officers of the Registrant                                                    27
Item 11           Executive Compensation                                                                                27
Item 12           Security Ownership of Certain Beneficial Owners and Management                                        27
Item 13           Certain Relationships and Related Transactions                                                        28



                                                          PART IV


Item 14           Exhibits, Financial Statement Schedules and Reports on Form 8-K                                       28

SIGNATURES                                                                                                              29




                  Supplemental Information to be Furnished with Reports Filed Pursuant to Section                       29
                     15(d) of the Act.

</TABLE>


                                        2

<PAGE>




                                     PART I
Item  1.   Description of Business

Organization

The registrant,  Intervest  Mortgage  Associates L.P. (the  "Partnership")  is a
Delaware limited partnership organized in June 1990. The Partnership's principal
executive offices are located at 10 Rockefeller Plaza, Suite 1015, New York, New
York 10020-1903, and its telephone number is 212-757-7300.

The General  Partner is Intervest  Funds  Management  Corporation  (the "General
Partner"),  a Delaware  corporation  which was incorporated in June 1990. All of
the stock of the General  Partner is owned by Lowell S.  Dansker and Lawrence G.
Bergman,  who are also Special Limited Partners of the Partnership.  The General
Partner  manages and controls the affairs of the  Partnership  and has agreed to
pay all Partnership expenses.

During 1991, a public  offering of $10,000,000  of units of limited  partnership
interest was completed. The Partnership's objectives are to invest in mortgages,
which will  preserve  and  protect  the  Partnership's  capital  and provide for
monthly  distribution to unitholders at a floating annual interest rate on their
adjusted  contributions  equal to two  percentage  points over the prime rate of
Chase  Manhattan  Bank of New York,  with a minimum rate of 9 1/2% and a maximum
rate of 15%.

The Partnership  invests in mortgages  secured by  income-producing  properties,
primarily  residential  apartment  buildings.   Mortgages  generally  will  have
maturities  ranging from one to seven years.  Mortgage  investments  may include
first mortgages, junior mortgages and wraparound mortgages.

The term of the partnership expires on December 31, 1999.

Present Business

Proceeds  from the sale of the  $10,000,000  of units were  principally  used to
acquire  mortgages,  which  at  December  31,  1997,  had a  carrying  value  of
$10,682,000.  Funds of the  partnership  not  invested in  mortgages  are mostly
invested in cash equivalents.

For  financial  statement   reporting  purposes,   all  mortgages  sold  to  the
Partnership  by  affiliates  have been  recorded at the  historical  cost of the
affiliate,  adjusted for a discount to reflect an  appropriate  market  interest
rate at the date of acquisition.

Each  of  the  Partnership's  twelve  mortgages  is a  first  mortgage  lien  on
multifamily residential apartment buildings.  Seven of the residential apartment
buildings  are located in New York City,  two are located in suburbs of New York
City, one is located in the State of Connecticut, one is located in the State of
New Jersey and one is located in the State of Pennsylvania.

Future Business Operations

The  Partnership  plans to engage in the real  estate  business,  including  the
acquisition  and  origination  of  additional  mortgages  in  the  future.  Such
additional mortgages may be purchased from affiliates of the Partnership or from
unaffiliated  parties. It is anticipated that such mortgages will be acquired or
originated by reinvesting a substantial part of the proceeds  resulting from the
sale, repayment or prepayment of the present mortgage portfolio.

The Partnership's  mortgage loans will include:  (i) wraparound  mortgage loans;
(ii)  junior  mortgage  loans;  (iii)  interim  mortgage  loans;  and (iv) first
mortgage loans.


                                        3

<PAGE>



The Partnership's  mortgage loans will generally be secured by  income-producing
properties.  In determining whether to make mortgage loans, the Partnership will
analyze relevant real property and financial  factors which may in certain cases
include  such  factors as the  condition  and use of the subject  property,  its
income-producing  capacity and the quality,  experience and  creditworthiness of
the owner of the property.  The Partnership's  mortgage loans will generally not
be personal obligations of the borrower and will not be insured or guaranteed by
governmental agencies or otherwise.

The  Partnership  may  make  both  long-  and  short-term  mortgage  loans.  The
Partnership   anticipates  its  mortgage  loans  will  typically  mature  within
approximately five years.  However,  the Partnership may also invest in mortgage
loans with shorter  maturities and then reinvest the proceeds from such mortgage
loans in additional  mortgage loans. The Partnership  anticipates that generally
its mortgage  loans will  provide for balloon  payments due at the time of their
maturity.

Mortgage Investment Policy

To  the  extent  that  proceeds  from  existing  mortgages  are  available,  the
Partnership  anticipates  that it will  acquire or  originate  senior and junior
mortgages,  primarily on multifamily  residential  properties located in the New
York  metropolitan  area.  Such  mortgages  generally will not be insured by the
Federal Housing  Administration or guaranteed by the Veterans  Administration or
otherwise  guaranteed or insured in any way. The  Partnership  requires that all
mortgaged properties be covered by property insurance in amounts deemed adequate
in the opinion of management.

In addition,  prior to funding any mortgage,  the Partnership will obtain a real
property appraisal prepared by an independent MAI appraiser and a mortgagee's or
owner's title insurance  policy or commitment as to the priority of the mortgage
or the condition of title.  The General  Partner will  generally rely on its own
independent analysis and not exclusively on appraisals in determining whether or
not to make a particular  mortgage loan.  The principal  amount of each mortgage
made by the Partnership  will not exceed,  when added to the amount of any other
mortgages  on  the  underlying  property,  85%  of the  appraised  value  of the
underlying property.

An  independent  advisor has been retained to issue letters of opinion that each
proposed mortgage to an affiliated borrower is fair and at least as favorable to
the Partnership as a loan to an unaffiliated borrower in similar circumstances.

Temporary Investment by Affiliates on Behalf of the Partnership

An affiliate of the  Partnership may make a mortgage loan or purchase a mortgage
in its own  name  and  temporarily  hold  such  investment  for the  purpose  of
facilitating the making of an investment of the  Partnership,  provided that any
such  investment  is acquired by the  Partnership  at a cost no greater than the
cost of such  investment to the affiliate plus carrying costs and provided there
is no other benefit to the affiliate arising out of such transaction.

Certain Characteristics of the Partnership's Mortgage Investments

Mortgages  typically  provide for  periodic  payments  of interest  and, in some
cases,  principal during the term of the mortgage,  with the remaining principal
balance and any accrued  interest due at the maturity date. The mortgages  owned
by the Partnership provide for monthly payments of interest and balloon payments
at  maturity,  which  means  that a  substantial  part  or  all of the  original
principal  of the  mortgage  is due in one lump sum  payment  at  maturity.  The
property on which the mortgage is a lien provides the security for the mortgage.
If the net revenue from the property is not  sufficient to make all debt service
payments due on mortgages on the property,  or if at maturity or the due date of
any balloon  payment the owner of the property  fails to raise the funds to make
the payment (by refinancing, sale or otherwise), the Partnership could sustain a
loss on its  investment  in the  mortgage.  To the extent that the aggregate net
revenues from the Partnership's mortgage investments are insufficient to pay the

                                        4

<PAGE>



monthly distributions to the unitholders,  the General Partner has agreed to pay
the Partnership any shortfall.

With  respect  to  any  wraparound  mortgages  which  may be  originated  by the
Partnership in the future,  such wraparound  mortgages are generally  negotiated
and  structured on an individual,  case by case basis,  and may be structured to
include any or all of the following provisions:

      (i) The  Partnership  may lend money to a real property owner who would be
obligated  to  repay  the  senior  underlying  mortgage  debt as well as the new
wraparound indebtedness owed to the Partnership.

      (ii)  The  Partnership  may  legally  assume  the  obligation  to make the
payments due on the senior underlying mortgage debt.

      (iii) The real  property  owner-debtor  may agree to make  payments to the
Partnership in satisfaction of both the senior underlying  mortgage debt and the
new wraparound indebtedness owed to the Partnership.

      (iv) The Partnership may receive a mortgage on the real property to secure
repayment of the total amount of indebtedness  (wraparound  indebtedness and the
senior underlying mortgage indebtedness).

The mortgages owned by the Partnership are first mortgages. In all cases, in the
opinion  of   management,   the  current  value  of  the   underlying   property
collateralizing  the  mortgage  loan is in  excess of the  stated  amount of the
mortgage loan. Therefore, in the opinion of management of the Partnership,  each
property  on which a mortgage  owned by the  Partnership  is a lien  constitutes
adequate collateral for the related mortgage loan. Accordingly, in the event the
owner of a property  fails to make  required debt service  payments,  management
believes that, based upon current value,  upon a foreclosure of the mortgage and
sale of the  property,  the  Partnership  would  recover its entire  investment.
However,  there can be no  assurance  that the current  value of the  underlying
property will be maintained.

Loan Loss Experience

For financial reporting purposes, the Partnership considers a loan as delinquent
or  non-performing  when  it is  contractually  past  due 90  days or more as to
principal or interest payments. To date, the Partnership has not experienced any
defaults or delinquencies in its mortgage portfolio.  The Partnership  evaluates
its portfolio of mortgage loans on an individual basis,  comparing the amount at
which the investment is carried to its estimated net realizable value. Since the
Partnership has not experienced any defaults or delinquencies,  no allowance for
loan losses is presently maintained.

Tax Accounting Treatment of Payments Received on Mortgages

The  Partnership  derives  substantially  all of its cash flow from debt service
payments  which  it  receives  on  mortgages  owned  by it.  The tax  accounting
treatment of such debt service payments, as income or return of capital, depends
on the particular  mortgage.  In the case of mortgages  which pay interest only,
the entire debt service payment prior to maturity received by the Partnership is
treated as income and the  repayment  of  principal  is  generally  considered a
return of  capital.  In the case of  mortgages  which  include  amortization  of
principal in the debt service payment  received by the  Partnership,  the amount
representing  amortization  of  principal  is  generally  treated as a return of
capital for tax accounting purposes.

Financial Accounting Treatment of Payments Received on Mortgages

For financial reporting  purposes,  the Partnership's basis in certain mortgages
is less than the face amount  outstanding.  This  difference is  attributable to
discounts  recorded by the  Partnership  to reflect a market rate of interest at
the date the loans were  acquired.  These  discounts  will be amortized over the
lives of the mortgages.



                                        5

<PAGE>






Effect of Government Regulation

Investment  in  mortgages  on  real  properties  presently  may be  impacted  by
government regulation in several ways.  Residential properties may be subject to
rent control and rent  stabilization  laws. As a  consequence,  the owner of the
property may be restricted in its ability to raise the rents on  apartments.  If
real estate  taxes,  fuel costs and  maintenance  of and repairs to the property
were to increase  substantially,  and such increases are not offset by increases
in rental income,  the ability of the owner of the property to make the payments
due on the mortgage as and when they are due might be adversely affected.

Laws  and   regulations   relating  to  asbestos   have  been  adopted  in  many
jurisdictions,  including New York City, which require that whenever any work is
undertaken in a property in an area in which  asbestos is present,  the asbestos
must be removed or encapsulated  in accordance  with such  applicable  local and
federal laws and regulations.  The cost of asbestos removal or encapsulation may
be  substantial,  and if there were not sufficient  cash flow from the property,
after debt service on mortgages, to fund the required work, and the owner of the
property fails to fund such work from other  sources,  the value of the property
could be adversely affected,  with consequent impairment of the security for the
mortgage.

Laws  regulating  the  storage,  disposal  and  clean up of  hazardous  or toxic
substances at real  property  have been adopted at the federal,  state and local
levels.  Such  laws  may  impose  a lien on the real  property  superior  to any
mortgages on the property. In the event such a lien were imposed on any property
which serves as security for a mortgage owned by the  Partnership,  the security
for such mortgage could be impaired.

Item  2.  Properties

None.

Item  3.  Legal Proceedings

The Partnership is not engaged in any litigation,  nor does it presently know of
any  threatened  or  pending  litigation  in which it is  contemplated  that the
Partnership will be made a party.


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

None.


                                     PART II

Item 5.  Market  for the  Registrant's  Units of  Limited  Partnership  Interest
         ("Units")

There is no established trading market for the Units.









                                        6

<PAGE>
<TABLE>
<CAPTION>


Item 6.  Selected Financial Data

Income Statement Data
                                                                                Year Ended December 31,
                                                           1997          1996            1995          1994           1993
                                                       -----------   ------------   ------------  -------------- ---------
Revenue:

<S>                                                     <C>            <C>             <C>            <C>           <C>
   Interest income..................................    $1,367,000     $1,218,000      $1,209,000     $1,190,000    $1,130,000
   Gain on early repayment of
          discounted mortgages.....................         22,000         47,000           9,000

   Other income....................................          7,000          2,000          17,000
                                                       -----------    -----------     -----------

   .................................................    $1,396,000     $1,267,000      $1,235,000     $1,190,000    $1,130,000

Expenses:

   General and administrative......................          5,000          3,000           6,000          5,000         5,000
                                                      ------------   ------------    ------------   ------------  ------------

   Net income...........................................$1,391,000     $1,264,000      $1,229,000     $1,185,000    $1,125,000
                                                        ==========     ==========      ==========     ==========    ==========


Balance Sheet Data


                                                                                           December 31,
                                                      --------------------------------------------------------------------
                                                           1997          1996           1995            1994          1993
                                                      ------------  -------------   ------------    ------------  --------
<S>                                                      <C>           <C>             <C>            <C>           <C>
Cash and cash equivalents.............................   $2,087,000   $ 5,730,000     $ 6,566,000    $ 3,726,000   $ 1,002,000
Mortgages receivable...................................  10,682,000     6,575,000       5,542,000      7,578,000    10,195,000
Total assets...........................................  12,952,000    12,386,000      12,177,000     11,418,000    11,289,000
Partner's Capital......................................  10,249,000    10,104,000      10,045,000     10,039,000    10,190,000

</TABLE>

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

Liquidity and Capital Resources:

The  Partnership  is  engaged  in  the  real  estate  business,   including  the
originating  and purchase of real estate  mortgage  loans,  consisting  of first
mortgages,  junior mortgages,  wraparound  mortgages and interim mortgage loans.
The  Partnership's  current  investment  policy  emphasizes  the  investment  in
mortgage loans on income producing properties. The majority of the Partnership's
loans are expected to mature within approximately five years.

The  Partnership's  liquidity  is managed to ensure  that  sufficient  funds are
available to preserve and protect the  Partnership's  capital and to provide for
monthly  distributions  to unitholders at a floating  annual rate based on their
adjusted  capital  contributions  equal to two percentage  points over the prime
rate of Chase  Manhattan  Bank,  New York  with a  minimum  rate of 9 1/2% and a
maximum of 15%.




                                        7

<PAGE>



Results of Operations:

Year ended December 31, 1997 and 1996

For the year ended December 31, 1997 interest  income was $1,367,000 as compared
to $1,218,000 for the same period a year ago. The increase of $149,000  resulted
mainly from an increase in mortgages receivable.

Year ended December 31, 1996 and 1995

For the year ended December 31, 1996 interest  income was $1,218,000 as compared
to  $1,209,000  for the same period a year ago. The increase of $9,000  resulted
mainly from an increase in mortgages  receivable in the fourth quarter 1996, and
offset in part by a decrease in interest rate subsequent to July 1995.

Since the  Partnership  is engaged in the real estate  business,  its results of
operations are affected by general  economic trends in real estate  markets,  as
well as by trends in the  general  economy and the  movement of interest  rates.
Since the properties underlying the Partnership's  mortgages are concentrated in
the New York City area,  the  economic  condition  in that area can also have an
impact on the Partnership's operations.

The rental housing  market in New York City remains  stable and the  Partnership
expects that such properties will continue to appreciate in value with little or
no  reduction  in  occupancy  rates.  The  Partnership's  mortgage  portfolio is
composed predominantly of mortgages on multi-family residential properties, most
of which are subject to applicable rent control and rent stabilization  statutes
and  regulations.  In both cases,  any increases in rent are subject to specific
limitations.  As such,  properties of the nature of those  constituting the most
significant portion of the Partnership's  mortgage portfolio are not affected by
the  general  movement  of real  estate  values  in the  same  manner  as  other
income-producing properties.

Impact of Inflation:

Inflation  has not had an  effect  on the  Partnership's  objectives  of  making
monthly  distributions to unitholders  from interest  received from its mortgage
portfolio.  Since  certain  mortgages  bear  interest  at a fixed  rate,  rising
interest  rates as a result of inflation may require the  Partnership to rely on
the  guarantee  of the General  Partner to pay to the  Partnership  a sufficient
amount to make the monthly distributions to the unitholders.

Business:

The  Partnership  is engaged in the real estate  business  and has  historically
invested  primarily in real estate  mortgage  loans secured by income  producing
real property.  It is anticipated that a substantial  portion of the loans to be
made by the Partnership  will be loans with terms of  approximately  five years.
Such  transactions  typically  require an  understanding  of the underlying real
estate  transaction  and rapid  processing and funding as a principal  basis for
competing in the making of these  loans.  The  Partnership  does not finance new
construction.

At December  31,  1997,  seven of the twelve  Partnership  loans were secured by
properties located in the greater New York metropolitan area.

Competition:

The Company  competes for  acceptable  investments  with real estate  investment
trusts,  commercial banks,  insurance companies,  savings and loan associations,
pension funds and mortgage banking firms,  many of which have greater  resources
with which to compete for desirable mortgage loans.

Item 7A. Quatitative and Qualitative Disclosures about Market Risk

Not Applicable

                                        8

<PAGE>

<TABLE>
<CAPTION>

Item  8.  Financial Statements and Supplementary Data


INTERVEST MORTGAGE ASSOCIATES L.P.:                                                                                        Page
-----------------------------------                                                                                        ----

<S>                                                                                                                          <C>
   Report of Independent Auditors .................................................................................          11

   Balance Sheets as of December 31, 1997 and 1996.................................................................          12

   Statements of Operations for the years ended December 31, 1997, 1996 and 1995...................................          13

   Statements of Partners' Capital for the years ended December 31, 1997, 1996 and 1995............................          14

   Statements of Cash Flows for the years ended December 31, 1997, 1996 and 1995...................................          15

   Notes to Financial Statements...................................................................................          16

   Schedule IV -- Mortgage Loans on Real Estate -- December 31, 1997...............................................          19

</TABLE>

Other financial  statement  schedules and  inapplicable  periods with respect to
schedules listed above are omitted because the conditions requiring their filing
do not exist or the  information  required  thereby is included in the financial
statements filed, including the notes thereto.


                                        9

<PAGE>

<TABLE>
<CAPTION>


INTERVEST FUNDS MANAGEMENT CORPORATION:                                                                                   Pages
---------------------------------------                                                                                   -----

<S>                                                                                                                          <C>
   Report of Independent Auditors .................................................................................          21

   Balance Sheets as of December 31, 1997 and 1996.................................................................          22

   Statements of Operations for the years ended December 31, 1997, 1996 and 1995...................................          23

   Statements of Cash Flows for the years ended December 31, 1997, 1996 and 1995...................................          24

   Notes to Financial Statements...................................................................................          25

</TABLE>


                                       10

<PAGE>
                                                Richard A. Eisner & Company, LLP
--------------------------------------------------------------------------------
                                                     Accountants and Consultants

RAE


AUDITORS' REPORT

To the Partners
Intervest Mortgage Associates L.P.
New York, New York


We have audited the accompanying balance sheets of Intervest Mortgage Associates
L.P. (a Delaware  limited  partnership) as of December 31, 1997 and 1996 and the
related  statements of operations,  partners' capital and cash flows for each of
the years in the  three-year  period ended  December  31, 1997.  Our audits also
included  the  financial  statement  schedule  referred  to in the Index at Item
14(a). These financial statements and related schedule are the responsibility of
the Company's  management.  Our responsibility is to express an opinion on these
financial statements and related 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 audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements enumerated above present fairly, in all
material respects,  the financial position of Intervest Mortgage Associates L.P.
as of December 31, 1997 and 1996, and the results of its operations and its cash
flows for each of the three  years in the  period  ended  December  31,  1997 in
conformity with generally accepted accounting  principles.  Also, in our opinion
the  schedule  referred  to above,  when  considered  in  relation  to the basic
financial  statements  taken  as a  whole,  presents  fairly,  in  all  material
respects, the information set forth therein.






New York, New York
January 23, 1998


<PAGE>
INTERVEST MORTGAGE ASSOCIATES L.P.

Balance Sheets

                                                   December 31,
                                          ---------------------------
                                              1997            1996
                                              ----            ----

ASSETS
Cash and cash equivalents                 $ 2,087,000    $ 5,730,000
Mortgages receivable, including
due from affiliates of $1,300,000
in 1997 and 1996 (Note C)                  10,682,000      6,575,000
Interest receivable                           183,000         81,000
                                          -----------    -----------
                                          $12,952,000    $12,386,000
                                          ===========    ===========


LIABILITIES AND PARTNERS' CAPITAL
Distributions payable (Note F)            $ 2,366,000    $ 2,101,000
Escrow deposits payable                       295,000        173,000
Deferred fee income                            42,000          8,000
                                          -----------    -----------
Total liabilities                           2,703,000      2,282,000
Partners' capital                          10,249,000     10,104,000
                                          -----------    -----------
                                          $12,952,000    $12,386,000
                                          ===========    ===========

                                       12
<PAGE>
INTERVEST MORTGAGE ASSOCIATES L.P.


Statements of Operations
<TABLE>
<CAPTION>

                                                                      Year Ended December 31,
                                                                 --------------------------------
                                                                 1997          1996          1995
                                                                 ----          ----          ----
<S>                                                        <C>           <C>           <C>
Revenue:
Interest income, includes $136,000, $241,000 and $294,000
from affiliates (Note G)                                   $1,367,000    $1,218,000    $1,209,000
Gain on early repayment of discounted mortgages (Note C)       22,000        47,000         9,000
Other income                                                    7,000         2,000        17,000
                                                           ----------    ----------    ----------
                                                            1,396,000     1,267,000     1,235,000
Expenses:
General and administrative                                      5,000         3,000         6,000
                                                           ----------    ----------    ----------
Net income                                                 $1,391,000    $1,264,000    $1,229,000
                                                           ==========    ==========    ==========
</TABLE>


                                       13
<PAGE>
<TABLE>
<CAPTION>
INTERVEST MORTGAGE ASSOCIATES L.P.


Statements of Partners' Capital

                                                                        Special         Limited
                                                         General        Limited         Partners
                                        Total            Partner        Partners     (Unitholders)
                                        -----            -------        --------     -------------

<S>                                 <C>              <C>             <C>              <C>
Balances - January 1, 1995          $ 10,039,000     $     37,200    $      1,800     $ 10,000,000
Partnership expenses paid by the
general partner (Note D)                   6,000            6,000
Net income                             1,229,000                                         1,229,000
Distributions (Note E)
                                      (1,229,000)                                       (1,229,000)
                                    ------------     ------------    ------------     ------------
Balances - December 31, 1995          10,045,000           43,200           1,800       10,000,000
Partnership expenses paid by the
general partner (Note D)                   3,000            3,000
Net income                             1,264,000           55,400             600        1,208,000
Distributions (Note E)
                                      (1,208,000)                                       (1,208,000)
                                    ------------     ------------    ------------     ------------
Balances - December 31, 1996          10,104,000
                                                          101,600           2,400       10,000,000
Partnership expenses paid by the
general partner (Note D)                   5,000            5,000
Net income                             1,391,000          138,600           1,400        1,251,000
Distributions (Note E)
                                      (1,251,000)                                       (1,251,000)
                                    ------------     ------------    ------------     ------------
Balances - December 31, 1997        $ 10,249,000     $    245,200    $      3,800     $ 10,000,000
                                    ============     ============    ============     ============
</TABLE>

                                       14
<PAGE>
INTERVEST MORTGAGE ASSOCIATES L.P.

<TABLE>
<CAPTION>

Statements of Cash Flows

                                                                                            Year Ended
                                                                                           December 31,
                                                                              --------------------------------------
                                                                              1997             1996             1995
                                                                              ----             ----             ----

<S>                                                                    <C>             <C>              <C>
Cash flows from operating activities:
Net income                                                            $  1,391,000     $  1,264,000     $  1,229,000
Adjustments to reconcile net income to net cash provided
by operating activities:
     Amortization of discount on mortgages receivable                      (61,000)         (17,000)         (18,000)
Gain on early repayment of discounted mortgages                            (22,000)         (47,000)          (9,000)
Expenses paid by general partner                                             5,000            3,000            6,000
Changes in:
     Interest receivable                                                  (102,000)         (12,000)          45,000
Deferred fee income                                                         34,000          (19,000)          26,000
                                                                        ----------       ----------        ---------

Net cash provided by operating activities                                1,245,000        1,172,000        1,279,000
                                                                        ----------       ----------        ---------

Cash flows from investing activities:
Collection of mortgages receivable                                       2,441,000        9,118,000        3,884,000
       Mortgages receivable acquired                                    (6,465,000)     (10,087,000)      (1,821,000)
       Increase (decrease) in escrow deposits payable                      122,000         (194,000)         303,000
                                                                        ----------       ----------        ---------

               Net cash (used in) provided by investing activities      (3,902,000)      (1,163,000)       2,366,000
                                                                        ----------       ----------        ---------

Cash flows from financing activities:
     Partners' distributions                                              (986,000)        (845,000)        (805,000)
                                                                        ----------       ----------        ---------

Net (decrease) increase in cash and cash equivalents                    (3,643,000)        (836,000)       2,840,000
Cash and cash equivalents at beginning of the year                       5,730,000        6,566,000        3,726,000
                                                                        ----------       ----------        ---------

Cash and cash equivalents at end of the year                           $ 2,087,000     $  5,730,000     $  6,566,000
                                                                       ===========     ============     ============
</TABLE>

                                       15
<PAGE>
                       INTERVEST MORTGAGE ASSOCIATES L.P.
                         Notes to Financial Statements

Note A - Organization and Business

Intervest  Mortgage   Associates  L.P.,  a  Delaware  limited  partnership  (the
"Partnership"),  was formed for the primary purpose of investing in mortgages on
improved  income-producing real properties.  The Partnership will continue until
December 31, 1999, unless terminated sooner in accordance with the provisions of
the partnership agreement.

The special limited partners, Lowell S. Dansker and Lawrence G. Bergman each own
50% of the common stock of Intervest Funds Management  Corporation,  the general
partner.


Note B - Significant Accounting Policies

[1]      Cash equivalents:

The  Partnership  considers  all highly  liquid  instruments  purchased  with an
original maturity of three months or less to be cash equivalents.

[2]      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  at the date of the
financial statements and the reported amounts of revenue and expenses during the
reported period. Actual results could differ from those estimates.

[3]      Mortgage loans:

Loans are stated at their outstanding  principal  balances,  net of any deferred
fees or costs on originated loans and unamortized  discounts on purchased loans.
Interest  income is accrued  on the  unpaid  principal  balance.  Discounts  are
amortized to income over the life of the related  receivables using the constant
interest method.  Loan origination fees net of certain direct  origination costs
are deferred and recognized as an adjustment of the yield of the related loans.

[4]      Allowance for losses:

An allowance  for loss related to loans that are impaired is based on discounted
cash flows using the loan's initial effective interest rate or the fair value of
the collateral. Management's periodic evaluation of the need for, or adequacy of
the allowance is based on the  Company's  past loan loss  experience,  known and
inherent  risks  in the  portfolio,  adverse  situations  that  may  affect  the
borrower's  ability  to repay  (including  the timing of future  payments),  the
estimated value of the underlying  collateral and other relevant  factors.  This
evaluation is inherently  subjective as it requires material estimates including
the  amounts  and timing of future  cash flows  expected  to be  received on any
impaired loans that may be susceptible to significant change.


Note C - Mortgages Receivable

Mortgages receivable consist of first mortgages on residential properties.

Interest rates on mortgages  range from 10% to 15 1/2%.  Certain  mortgages have
been discounted utilizing rates ranging from 11% to 16 3/4%.

During 1997 and 1996,  mortgages were paid in full prior to their maturity date.
This resulted in the recognition of a gain,  which represents the balance of the
unamortized discount applicable to these mortgages.

                                       16
<PAGE>
                       INTERVEST MORTGAGE ASSOCIATES L.P.
                         Notes to Financial Statements


Note C - Mortgages Receivable (continued)

Annual  maturities  of  mortgages  receivable  during  the next  five  years are
summarized as follows:

Year EndingDecember 31,
                  1998                   $ 4,942,000
                  1999                     3,941,000
                  2000                       512,000
                  2001                        84,000
                  2002                        87,000
               Thereafter                  1,250,000
                                         -----------
                                          10,816,000
               Less unearned discount        134,000
                                         -----------
                                         $10,682,000
                                         ===========
The  Partnership  evaluates  its  portfolio of mortgage  loans on an  individual
basis,  comparing the amount at which the investment is carried to its estimated
net realizable value. At December 31, 1997 and 1996, no allowance for losses was
required.


Note D - Duties and Obligations of the General Partner

As more fully  described in the partnership  agreement,  the General Partner has
agreed, among other things, to:

[1]      Manage and control the business of the Partnership;

[2]      Pay all  organization  costs and operating  expenses of the Partnership
         and the  expenses in  connection  with the public  offering.  Operating
         expenses  for  1997 and  1996  have  been  reflected  in the  financial
         statements of the Partnership;

[3]      Pay to the Partnership any shortfall with respect to cash distributions
         due to unitholders;

[4]      Repurchase  each year, on a  noncumulative  basis,  a maximum of 10% of
         units  outstanding  as of  January 1 of each year if  requested  by the
         unitholders; and

[5]      Maintain a net worth of at least 10% of the  adjusted  contribution  of
         the  unitholders,  but in no event less than $500,000.  At December 31,
         1997 and 1996, the audited financial  statements of the general partner
         showed  a  net  worth  of  $1,256,000  and  $1,134,000,   respectively,
         including notes receivable from stockholders of $1,000,000.


Note E - Allocation of Income, Losses and Distributions

As more  fully  described  in the  partnership  agreement,  income,  losses  and
distributions are to be allocated as follows:

[1]      Net income and operating cash distributions, first to unitholders in an
         amount equal to their  investment  return (equal to 2% above prime rate
         of Chase  Manhattan  Bank,  subject  to a minimum  rate of 9 1/2% and a
         maximum  rate of 15% per annum) and then to the general  partner  (99%)
         and special limited partners (1%).

                                       17
<PAGE>
                       INTERVEST MORTGAGE ASSOCIATES L.P.
                         Notes to Financial Statements


Note E - Allocation of Income, Losses and Distributions (continued)

[2]      Net loss, other than from a disposition, as defined, 99% to the general
         partner and 1% to the special limited partners.

[3]      Net loss from a  disposition,  to  unitholders  to the  extent of their
         positive  capital account  balances and then to the general partner and
         special limited partners.

[4]      Disposition proceeds will generally be distributed to unitholders until
         each has received an amount equal to his original  invested capital and
         then to the general partner and special limited partners.


Note F - Distribution Accrual Plan

Under the partnership  agreement,  unitholders can elect to have the Partnership
retain  distributions  they are entitled to receive.  Such retained amounts will
earn interest at Chase Manhattan Bank's prime rate,  compounded monthly,  with a
floor of 9 1/2% and a ceiling of 15%.


Note G - Related Parties

[1]      During  1995,  the  Partnership  received  payments of mortgages in the
         amount of $2,000,000 due from affiliates.

[2]      Under the terms of the  partnership  agreement,  the  Partnership  will
         invest in mortgages on improved  income-producing real properties owned
         by either unaffiliated or affiliated  borrowers.  If the property owner
         is an  affiliated  entity,  certain  conditions  must be met before the
         investment can be made by the Partnership.


Note H - Income Taxes

The Partnership  will not be required to provide for, or pay, any federal income
taxes.  Income tax  liabilities  and/or  benefits that arise from its operations
will be passed  directly to the  individual  partners.  The  Partnership  may be
subject to state and local taxes in jurisdictions in which it operates.


Note I - Unit Repurchase Rights

Beginning  January 1, 1999, or at an earlier date, in the event the  Partnership
is to be  terminated,  the General  Partner  will have the right to purchase all
Units from the unitholders.

                                       18
<PAGE>

<TABLE>
<CAPTION>
                    INTERVEST MORTGAGE ASSOCIATES L. P.
                    SCHEDULE IV--MORTGAGE LOANS ON REAL ESTATE
                    DECEMBER 31, 1997

                                 EFFECTIVE    ACTUAL         FINAL
                                 INTEREST    INTEREST      MATURITY
         DESCRIPTION               RATE        RATE          DATE     PERIODIC PAYMENT TERMS
------------------------------   ---------   ---------     ---------  -----------------------
<S>                                <C>         <C>   <C>  <C>        <C>
RESIDENTIAL FIRST MORTGAGES,
RENTAL APARTMENT BUILDINGS:
BRONX, NEW YORK                    13.00       13.00 (A)  07/01/12   INTEREST ONLY MONTHLY
NEW YORK, NEW YORK                 14.30       12.50 (B)  04/21/98             (E)
NEW YORK, NEW YORK                 11.60       10.00      03/01/05             (C)
NEW ROCHELLE, NEW YORK             10.50       10.50 (B)  10/01/99             (D)
FREEPORT, NEW YORK                 13.83       12.50 (B)  11/05/98             (E)

BRONX, NEW YORK                    16.50       15.00 (B)  03/31/98             (E)
NEW YORK, NEW YORK                 16.40       14.50 (B)  09/17/98             (E)
HARTFORD, CONNECTICUT              14.50       12.50 (B)  10/10/98             (E)

NEW YORK, NEW YORK                 13.50       13.50      04/15/99             (D)
PHILADELPHIA, PENNSYLVANIA         16.65       14.50 (B)  01/17/99             (E)

NEW YORK, NEW YORK                 14.00       12.50 (B)  11/28/98             (E)

JERSEY CITY, NEW JERSEY            14.00       12.50 (B)  10/06/00             (E)



(A) INTEREST PAYMENTS ARE FIXED.  INTEREST RATE SHWON IS APPROXIMATE.
(B) INTEREST AT FLUCTUATING RATE BASED ON BANK PRIME RATE.
(C) INTEREST MONTHLY, ADDITIONAL PRINCIPAL PAYMENT DUE ON EVERY MARCH 1.
(D) INTEREST MONTHLY, PRINCIPAL AT MATURITY.
(E) PRINCIPAL AND INTEREST MONTHLY.
(F) NOT PREPAYALE.
(G) NO PREPAYMENT PENALTY.
(H) NO MORTGAGE LOAN IS DELINQUENT AS TO PRINCIPAL AND/OR INTEREST.
</TABLE>
<TABLE>
<CAPTION>
                    INTERVEST MORTGAGE ASSOCIATES L. P.
                    SCHEDULE IV--MORTGAGE LOANS ON REAL ESTATE
                    DECEMBER 31, 1997
                                           ORIGINAL
                                             FACE       CARRYING
                                  PRIOR    AMOUNT OF    AMOUNT OF
         DESCRIPTION               LIEN    MORTGAGES    MORTGAGES            PREPAYMENT PENALTY
------------------------------   ------- ------------ ------------  -----------------------------------
<S>                                       <C>            <C>       <C>
RESIDENTIAL FIRST MORTGAGES,
RENTAL APARTMENT BUILDINGS:
BRONX, NEW YORK                            $800,000     $800,000                   (F)
NEW YORK, NEW YORK                        1,000,000      983,000   ONE MONTH'S INTEREST
NEW YORK, NEW YORK                          950,000      798,000   1% FEE IF PRIOR TO 3/2/2004.
NEW ROCHELLE, NEW YORK                    1,300,000    1,300,000                   (G)
FREEPORT, NEW YORK                          575,000      562,000   NOT PREPAYABLE PRIOR TO 06/05/1998;
                                                                   THEN ONE MONTH'S INTEREST.
BRONX, NEW YORK                             670,000      521,000                 1% FEE
NEW YORK, NEW YORK                          850,000      839,000   ONE MONTH'S INTEREST
HARTFORD, CONNECTICUT                       975,000      960,000   NOT PREPAYABLE PRIOR TO 07/10/1998;
                                                                   THEN ONE MONTH'S INTEREST.
NEW YORK, NEW YORK                        1,050,000    1,050,000   AFTER 3/15/1999, 1% FEE NOT NEEDED.
PHILADELPHIA, PENNSYLVANIA                1,550,000    1,504,000   NOT PREPAYABLE PRIOR TO 04/17/1998;
                                                                   THEN ONE MONTH'S INTEREST.
NEW YORK, NEW YORK                          890,000      879,000   NOT PREPAYABLE PRIOR TO 03/28/1998;
                                                                   THEN ONE MONTH'S INTEREST.
JERSEY CITY, NEW JERSEY                     500,000      486,000   NOT PREPAYABLE PRIOR TO 01/06/1999;
                               ------- ------------ ------------   THEN ONE MONTH'S INTEREST.
                                    $0  $11,110,000  $10,682,000
                               ======= ============ ============
(A) INTEREST PAYMENTS ARE FIXED.  INTEREST RATE SHWON IS APPROXIMATE.
(B) INTEREST AT FLUCTUATING RATE BASED ON BANK PRIME RATE.
(C) INTEREST MONTHLY, ADDITIONAL PRINCIPAL PAYMENT DUE ON EVERY MARCH 1.
(D) INTEREST MONTHLY, PRINCIPAL AT MATURITY.
(E) PRINCIPAL AND INTEREST MONTHLY.
(F) NOT PREPAYALE.
(G) NO PREPAYMENT PENALTY.
(H) NO MORTGAGE LOAN IS DELINQUENT AS TO PRINCIPAL AND/OR INTEREST.
</TABLE>
                                       19
<PAGE>


SCHEDULE IV--MORTGAGES LOANS ON REAL ESTATE--continued




The following summary reconciles mortgages receivable at their carrying values:


                                             Year Ended December 31
                                             ______________________

                                          1997            1996          1995
                                      ____________    ____________  ____________

Balance at beginning of period         $ 6,575,000    $ 5,542,000    $ 7,578,000

Additions during period:
  Mortgages acquired                     6,465,000     10,087,000      1,821,000
                                       -----------    -----------    -----------
                                        13,040,000     15,629,000      9,399,000
Deductions during period:
  Collections of principal, net
    of amortization of discounts         2,358,000      9,054,000      3,857,000
                                       -----------    -----------    -----------
         BALANCE AT CLOSE OF PERIOD    $10,682,000    $ 6,575,000    $ 5,542,000
                                       ===========    ===========    ===========














                                       20

<PAGE>


AUDITORS' REPORT

Board of Directors
Intervest Funds Management Corporation
New York, New York


We have audited the  accompanying  balance sheets of Intervest Funds  Management
Corporation  as of December  31, 1997 and 1996,  and the related  statements  of
operations and cash flows for each of the years in the  three-year  period ended
December 31, 1997.  These  financial  statements are the  responsibility  of the
Company's  management.  Our  responsibility  is to  express  an opinion on these
financial statements based on our audits.

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

In our opinion, the financial statements enumerated above present fairly, in all
material  respects,   the  financial  position  of  Intervest  Funds  Management
Corporation  as of December 31, 1997 and 1996, and the results of its operations
and its cash flows for each of the three years in the period ended  December 31,
1997 in conformity with generally accepted accounting principles.



Richard A. Eisner & Company, LLP

New York, New York
January 23, 1998


<PAGE>
                     INTERVEST FUNDS MANAGEMENT CORPORATION

Balance Sheets

                                                            December 31,
                                                   ----------------------------
                                                          1997            1996
                                                          ----            ----
ASSETS
Cash and cash equivalents                          $    11,000     $    32,000
Investment in partnership (Notes A, B and C)           245,000         102,000
                                                   -----------     -----------
                                                   $   256,000     $   134,000
                                                   ===========     ===========
Commitments and contingent liabilities (Note C)

STOCKHOLDERS' EQUITY
Common stock, no par value; authorized
3,000 shares; issued and outstanding 20 shares     $        20     $        20
Additional paid-in capital                           1,907,980       1,907,980
Deficit                                               (652,000)       (774,000)
                                                   -----------     -----------
Total stockholders' equity                           1,256,000       1,134,000
Less notes receivable - stockholders (Note C)        1,000,000       1,000,000
                                                   -----------     -----------
                                                   $   256,000     $   134,000
                                                   ===========     ===========

                                       22
<PAGE>
                     INTERVEST FUNDS MANAGEMENT CORPORATION

Statements of Operations
<TABLE>
<CAPTION>

                                                            Year Ended
                                                            December 31,
                                                   --------------------------------
                                                   1997          1996          1995
                                                   ----          ----          ----
<S>                                           <C>           <C>           <C>
Revenue:
Interest income                               $   1,000     $   1,000     $   1,000
                                              ---------     ---------     ---------
Expenses:
General
and administrative                                3,000         3,000         3,000
Payment to partnership (Note C)                                              14,000
                                              ---------     ---------     ---------
                                                  3,000         3,000        17,000
                                              ---------     ---------     ---------
Operating loss                                   (2,000)       (2,000)      (16,000)
Equity in income of partnership                 138,000        56,000
State and city (taxes) benefit (Note B[2])      (14,000)       (5,000)        1,000
                                              ---------     ---------     ---------
Net income (loss)                               122,000        49,000       (15,000)
Deficit at beginning of period                 (774,000)     (823,000)     (808,000)
                                              ---------     ---------     ---------
Deficit at end of period                      $(652,000)    $(774,000)    $(823,000)
                                              =========     =========     =========

</TABLE>
                                       23
<PAGE>
                     INTERVEST FUNDS MANAGEMENT CORPORATION

<TABLE>
<CAPTION>

Statements of Cash Flows

                                                                        Year Ended
                                                                       December 31,
                                                         --------------------------------------
                                                              1997          1996          1995
                                                              ----          ----          ----
<S>                                                      <C>           <C>           <C>
Cash flows from operating activities:
Net income (loss)                                        $ 122,000     $  49,000     $ (15,000)
Adjustments to reconcile
net income (loss) to net cash used in
operating activities:
Equity in income of partnership                           (138,000)      (56,000)
Changes in:
Prepaid taxes                                                              5,000        (4,000)
                                                         ---------     ---------     ---------
Net cash used in operating activities                      (16,000)       (2,000)      (19,000)
                                                         ---------     ---------     ---------
Cash flows from investing activities:
Purchase of units of limited partnership                                               (30,000)
Sale of units of limited partnership                                      30,000
Expenses paid on behalf of partnership                      (5,000)       (3,000)       (6,000)
                                                         ---------     ---------     ---------
Net cash (used in) provided by investing activities         (5,000)       27,000       (36,000)
                                                         ---------     ---------     ---------
Cash flows from financing activities:
Capital contributions                                                                   15,000
                                                                                     ---------
Net (decrease) increase in cash and cash equivalents       (21,000)       25,000       (40,000)
Cash and cash equivalents at beginning of the period        32,000         7,000        47,000
                                                         ---------     ---------     ---------
Cash and cash equivalents at end of period               $  11,000     $  32,000     $   7,000
                                                         =========     =========     =========
</TABLE>

                                       24
<PAGE>
                     INTERVEST FUNDS MANAGEMENT CORPORATION
                         Notes to Financial Statements

Note A - Organization

Intervest Funds Management Corporation (the "Company"),  a Delaware corporation,
was formed by Lowell S. Dansker and Lawrence G. Bergman, who each own 50% of the
Company's  issued and  outstanding  common  shares.  The  Company is the general
partner  and  its  stockholders  are  special  limited  partners  in  a  limited
partnership, Intervest Mortgage Associates L.P. (the "Partnership").


Note B - Significant Accounting Policies

[1]  Cash equivalents:

     The Company  considers  all highly  liquid  instruments  purchased  with an
     original maturity of three months or less to be cash equivalents.

[2]  Income taxes:

     The  Company  has  elected to be treated as an S  corporation  for  federal
     income tax purposes and for state and local jurisdictions which permit such
     election.   As  a  result,  income  is  generally  taxed  directly  to  the
     stockholders for such purposes.

[3]  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 at
     the date of the financial  statements  and the reported  amounts of revenue
     and expenses during the reported  period.  Actual results could differ from
     those estimates.

[4]  Investment in partnership:

     The Company  records its  investment  in the  Partnership  under the equity
     method whereby  increases are made for the Company's share of undistributed
     earnings and decreases are made for the Company's  share of losses from the
     Partnership.


Note C - The Partnership

The  Partnership  invests  in  mortgages  on  improved   income-producing   real
properties owned by either unaffiliated or affiliated borrowers. The Partnership
has sold 1,000 units of limited  partnership  interest at $10,000 per unit. Each
unitholder is generally entitled to a return on his investment equal to 2% above
the prime rate of Chase Manhattan Bank subject to a minimum rate of 9 1/2% and a
maximum rate of 15% per annum.

The Company, as general partner, has agreed, among other things to:

[1]  Manage and control the business of the Partnership;

[2]  Pay all operating costs of the Partnership;

[3]  Pay to the Partnership any shortfall with respect to cash distributions due
     to the unitholders described above;

                                       25

<PAGE>
                     INTERVEST FUNDS MANAGEMENT CORPORATION
                         Notes to Financial Statements

Note C - The Partnership (continued)

[4]  Repurchase  each year on a  noncumulative  basis, a maximum of 10% of units
     outstanding  as of January 1 of each year if requested by the  unitholders,
     and

[5]  Maintain a net worth of at least 10% of the  adjusted  contribution  of the
     unitholders,  but in no event less than  $500,000.  Notes  receivable  were
     contributed  to capital by the  stockholders  to maintain a net worth of at
     least 10% of the adjusted  contribution of the unitholders.  The notes will
     become interest-bearing at a defined rate only for the period from the date
     payment is demanded by the Company until such payment is made.

In  addition,  the Company has paid all  organization  costs and expenses of the
Partnership  in  connection  with the sale of the units of  limited  partnership
interest.

As more  fully  described  in the  partnership  agreement,  income,  losses  and
distributions are to be allocated as follows:

[1]  Net income and operating  cash  distributions,  first to  unitholders in an
     amount  equal to their  investment  return and then to the general  partner
     (99%) and special limited partners (1%).

[2]  Net loss,  other than from a  disposition,  as defined,  99% to the general
     partner and 1% to the special limited partners.

[3]  Net loss from a disposition, to unitholders to the extent of their positive
     capital  account  balances  and then to the  general  partner  and  special
     limited partners.

[4]  Disposition  proceeds will generally be  distributed  to unitholders  until
     each has received an amount equal to his original invested capital and then
     to the general partner and special limited partners.

The following are condensed financial statements of the Partnership:

                                                  December 31,
                                         --------------------------
                                             1997           1996
                                             ----           ----

Total assets                             $12,952,000    $12,386,000
Total liabilities                          2,703,000      2,282,000
                                         -----------    -----------
Partners' capital                        $10,249,000    $10,104,000
                                         ===========    ===========


                                                  December 31,
                                         --------------------------
                                             1997           1996
                                             ----           ----

Revenue                                  $ 1,396,000    $ 1,267,000
Expenses                                       5,000          3,000
                                         -----------    -----------
Net income                               $ 1,391,000    $ 1,264,000
                                         ===========    ===========

Note D - Unit Repurchase Rights

Beginning January 1, 1999 or at an earlier date, in the event the Partnership is
to be terminated, the Company will have the right to purchase all units from the
unitholders.

                                       26
<PAGE>

Item  9.  Changes  in and  Disagreements  with  Accountants  on  Accounting  and
          Financial Disclosure

None



                                    PART III

Item 10.  Directors and Executive Officers of the Registrant

The General Partner of the Partnership,  Intervest Funds Management Corporation,
is wholly owned by Lowell S. Dansker and Lawrence G.  Bergman.  The  Partnership
will be managed by the General  Partner,  which was  incorporated in Delaware on
June 13, 1990. It has an office located at 10 Rockefeller  Plaza,  New York, New
York 10020-1903 (telephone: 212-757-7300).

The current  directors  and  executive  officers  of the General  Partner are as
follows:

Lowell S. Dansker, age 47, serves as a Director,  and as Co-Chairman,  President
and Treasurer of the General Partner. Mr. Dansker received a Bachelor of Science
in Business Administration from Babson College, a law degree from the University
of Akron  School of Law, and is admitted to practice as an attorney in New York,
Ohio, Florida and the District of Columbia.

Lawrence G. Bergman,  age 53,  serves as a Director,  and as  Co-Chairman,  Vice
President and Secretary of the General Partner.  Mr. Bergman received a Bachelor
of Science degree and a Master of Engineering  (Electrical)  degree from Cornell
University,  and a Master of Science in  Engineering  and a Ph.D degree from The
Johns Hopkins University.

For more than the past  fifteen  years,  Mr.  Dansker and Mr.  Bergman have been
actively  involved in the  ownership  and operation of real estate and mortgages
primarily  through  100%  family  owned  partnerships,  corporations  and family
trusts.

Mr. Bergman, his wife, Mr. Dansker and Mr. Dansker's father are the sole owners,
partners and trustees,  respectively, of such family corporations,  partnerships
and trusts. Mr. Dansker and Mrs. Bergman are brother and sister.

Item 11.  Executive Compensation

No  compensation  of any kind is paid to or accrued by the  Partnership  for any
executive officer or director of the General Partner.

Item 12.  Security Ownership of Certain Beneficial Owners and Management

The following  table sets forth  information  concerning the ownership of common
stock of the General Partner.


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                                              Amount of
Name and Address of Beneficial Owner   Beneficial Ownership   Percent of Class
------------------------------------   --------------------   ----------------

   Lowell S. Dansker....................     10 shares           50.0%
   360 West 55th Street,
   New York, New York 10019

   Lawrence G. Bergman...................    10 shares           50.0%
   201 East 62nd Street
   New York, New York 10021


Item 13.  Certain Relationships and Related Transactions

During 1995,  the  partnership  received  payments of mortgages in the amount of
$2,000,000 due from affiliates.


                                     PART IV


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

(a)   (1) Financial Statements:

          See Item 8 "Financial Statements and Supplementary Data"

(a)   (2) Financial Statement Schedules:

          See Item 8 "Financial Statements and Supplementary Data"

(a)   (3) Exhibits:

      4   Certificate of Limited Partnership and Certificate of Amendment
          to Certificate of Limited Partnership. (1)

  10.1    Form of Escrow Agreement. (1)

  10.2    Form of Independent Advisor Agreement. (1)

      25  Power of Attorney. (1)

      27  Financial Data Schedule

(b)       Reports on Form 8-K

          None

(1)       Incorporated by reference to Registrant's Registration Statement as
          amended on Form S-11 (File No. 33-36336), declared effective on
          November 20, 1990.


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                                   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.

                                   INTERVEST MORTGAGE ASSOCIATES L.P.
                                By:INTERVEST FUNDS MANAGEMENT CORPORATION
                                                          General Partner



Dated:  March 26, 1998             By:    /S/ Lawrence G. Bergman
                                              -----------------------
                                              Lawrence G. Bergman
                                              Executive Vice President



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.

Signatures
                                        President, Co-Chairman,
                                        Treasurer and Director
                                        of Intervest Funds
/S/ Lowell S. Dansker                   Management Corporation
Lowell S. Dansker                       (Principal Executive Officer)
Dated:  March 26, 1998


                                        Executive Vice President,
                                        Co-Chairman, Secretary
/S/ Lawrence G. Bergman                 and Director of Intervest
Lawrence G. Bergman                     Funds Management Corporation
Dated:  March 26, 1998                  (Principal Operating Officer)




Supplemental Information to be Furnished with Reports Filled Pursuant to Section
15(d) of the Act by Registrants Which Have Not Registered Securities Pursuant to
Section 12 of the Act:


The annual report to Unitholders has not as yet been distributed.

When the annual report has been distributed to the Unitholders, four copies will
be sent to the Commission.




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