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, 1998
                                       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) 218-2800

           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 OF CONTENTS
                                -----------------




                                     PART I


                                                                         Pages
                                                                         -----
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       9
Item  8   Financial Statements and Supplementary Data                     10

Item  9   Changes in and Disagreements with Accountants on Accounting
          and Financial Disclosure                                        30


                                    PART III


Item 10   Directors and Executive Officers of the Registrant              30
Item 11   Executive Compensation                                          30
Item 12   Security Ownership of Certain Beneficial Owners and Management  31
Item 13   Certain Relationships and Related Transactions                  31



                                     PART IV


Item 14   Exhibits, Financial Statement Schedules and Reports on Form 8-K 31

SIGNATURES                                                                32


          Supplemental  Information to be Furnished with Reports Filed
          Pursuant to Section 15(d) of the Act.                           32




<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 212-218-2800.

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. In 1998, an additional private offering of $1,000,000 of
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  $11,000,000  of units were  principally  used to
acquire  mortgages,  which  at  December  31,  1998,  had a  carrying  value  of
$10,734,000.  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  eleven  mortgages  is a  first  mortgage  lien  on
multifamily  residential apartment buildings.  Five of the residential apartment
buildings are located in New York City, three 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.
<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
monthly distributions to the unitholders,  the General Partner has agreed to pay
the Partnership any shortfall.
<PAGE>

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.

<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.

<PAGE>
<TABLE>
<CAPTION>


Item 6.  Selected Financial Data

Income Statement Data
                                                                   Year Ended December 31,
                                                 ---------------------------------------------------------
                                                 1998          1997         1996         1995         1994
                                                 ----          ----         ----         ----         ----
<S>                                           <C>          <C>          <C>          <C>          <C>       
Revenue:
Interest income ...........................   $1,525,000   $1,367,000   $1,218,000   $1,209,000   $1,190,000
Gain on early repayment of
       discounted mortgages ...............        7,000       22,000       47,000        9,000

Other income ..............................        7,000        7,000        2,000       17,000
                                              ----------   ----------   ----------   ----------   ----------
   ........................................   $1,539,000   $1,396,000   $1,267,000   $1,235,000   $1,190,000
Expenses:

General and administrative ................        4,000        5,000        3,000        6,000        5,000
                                              ----------   ----------   ----------   ----------   ----------

Net income ................................   $1,535,000   $1,391,000   $1,264,000   $1,229,000   $1,185,000
                                              ==========   ==========   ==========   ==========   ==========
</TABLE>


Balance Sheet Data

<TABLE>
<CAPTION>

                                                               December 31,
                                        ------------------------------------------------------------
                                        1998          1997          1996          1995          1994
                                        ----          ----          ----          ----          ----
<S>                              <C>           <C>           <C>           <C>           <C>        
Cash and cash equivalents ....   $ 3,445,000   $ 2,087,000   $ 5,730,000   $ 6,566,000   $ 3,726,000
Mortgages receivable .........    10,734,000    10,682,000     6,575,000     5,542,000     7,578,000
Total assets .................    14,355,000    12,952,000    12,386,000    12,177,000    11,418,000
Partner's Capital ............    11,187,000    10,249,000    10,104,000    10,045,000    10,039,000
</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%.

<PAGE>

Results of Operations:

Year ended December 31, 1998 and 1997

For the year ended December 31, 1998 interest  income was $1,525,000 as compared
to $1,367,000 for the same period a year ago. The increase of $158,000  resulted
mainly from an increase in mortgages  receivable,  offset in part by decrease in
interest rates on certain mortgages.

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.

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,  1998,  five of the eleven  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.

<PAGE>

Year 2000 Readiness Disclosure

The Year 2000 issue is the result of computer programs, which were written using
two digits rather than four digits to define the  applicable  year. As a result,
such  programs  may  recognize a date using "00" as the year 1900 instead of the
year 2000, which could result in system failures or miscalculations.

Intervest  Mortgage  Associates  L.P.  (the  "Company"),  as discussed in note A
"Organization and Business" of the notes to financial  statements,  is a limited
partnership  whose  primary  purpose  is  investing  in  mortgages  on  improved
income-producing  real  properties  until  December 31, 1999,  at which time the
partnership  will dissolve in accordance with the provisions of the partnership.
As a result, the Year 2000 issue will not be of concern to the partnership since
no operations are expected beyond December 31, 1999. In addition, all activities
concerning the dissolution  and liquidation of the partnership  will either have
been completed  prior to December 31, 1999 or will involve  activities  that are
not computer sensitive.

Item 7A. Quantitative and Qualitative Disclosures about Market Risk

Not Applicable

<PAGE>


Item  8.  Financial Statements and Supplementary Data

<TABLE>
<CAPTION>

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

<S>                                                                                        <C>
Report of Independent Auditors                                                             12

Balance Sheets as of December 31, 1998 and 1997                                            13

Statements of Operations for the years ended December 31, 1998, 1997 and 1996              14

Statements of Partners' Capital for the years ended December 31, 1998, 1997 and 1996       15

Statements of Cash Flows for the years ended December 31, 1998, 1997 and 1996              16

Notes to Financial Statements                                                              17

Schedule IV -- Mortgage Loans on Real Estate -- December 31, 1998                          21
</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.


<PAGE>

<TABLE>
<CAPTION>

INTERVEST FUNDS MANAGEMENT CORPORATION:                                              Pages

<S>                                                                                   <C>
Report of Independent Auditors                                                        23

Balance Sheets as of December 31, 1998 and 1997                                       24

Statements of Operations for the years ended December 31, 1998, 1997 and 1996         25

Statements of Cash Flows for the years ended December 31, 1998, 1997 and 1996         26

Notes to Financial Statements                                                         27
</TABLE>




<PAGE>
INDEPENDENT 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, 1998 and 1997 and the
related  statements of operations,  partners' capital and cash flows for each of
the years in the  three-year  period ended  December  31, 1998.  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, 1998 and 1997, and the results of its operations and its cash
flows for each of the years in the three-year  period ended December 31, 1998 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.

The Partnership  terminates on December 31, 1999,  unless  terminated  sooner in
accordance with the provisions of the partnership agreement.



Richard A. Eisner & Company, LLP

New York, New York
February 2, 1999

<PAGE>


Balance Sheets

                                             December 31,
                                             ------------
                                          1998          1997
                                          ----          ----
ASSETS
Cash and cash equivalents             $ 3,445,000   $ 2,087,000
Mortgages receivable, including
  due from affiliates of $1,300,000
  in 1998 and 1997 (Note D)            10,734,000    10,682,000
Interest receivable                       176,000       183,000
                                      -----------   -----------
                                      $14,355,000   $12,952,000
                                      ===========   ===========

LIABILITIES AND PARTNERS' CAPITAL
Distributions payable (Note G)        $ 2,830,000   $ 2,366,000
Escrow deposits payable                   313,000       295,000
Deferred fee income                        25,000        42,000
                                      -----------   -----------

   Total liabilities                    3,168,000     2,703,000

Partners' capital (Note C)             11,187,000    10,249,000
                                      -----------   -----------
                                      $14,355,000   $12,952,000
                                      ===========   ===========
<PAGE>


Statements of Operations

                                                  Year Ended December 31,
                                                  -----------------------
                                             1998          1997        1996
                                             ----          ----        ----
Revenue:
  Interest income, includes
   $132,000, $136,000 and $241,000
   in 1998, 1997 and 1996,
   respectively, from affiliates (Note H)  $1,525,000   $1,367,000   $1,218,000
  Gain on early repayment of
   discounted mortgages (Note D)                7,000       22,000       47,000
  Other income                                  7,000        7,000        2,000
                                           ----------   ----------   ----------
                                            1,539,000    1,396,000    1,267,000
Expenses:
  General and administrative
                                                4,000        5,000        3,000
                                           ----------   ----------   ----------
Net income                                 $1,535,000   $1,391,000   $1,264,000
                                           ==========   ==========   ==========

<PAGE>

<TABLE>
<CAPTION>

Statements of Partners' Capital

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

<S>                <C>             <C>             <C>             <C>             <C>         
Balances - January 1, 1996         $ 10,045,000    $     43,200    $      1,800    $ 10,000,000
Partnership expenses paid by the
  general partner (Note E)                3,000           3,000
Net income                            1,264,000          55,400             600       1,208,000
Distributions (Note F)               (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 E)                5,000           5,000
Net income                            1,391,000         138,600           1,400       1,251,000
Distributions (Note F)               (1,251,000)                                     (1,251,000)
                                   ------------    ------------    ------------    ------------

Balances - December 31, 1997         10,249,000         245,200           3,800      10,000,000
Cash contributions (Note C)           1,000,000                                       1,000,000
Partnership expenses paid by the
  general partner (Note E)                4,000           4,000
Net income                            1,535,000         223,900           2,100       1,309,000
Distributions (Note F)               (1,601,000)       (290,500)         (1,500)     (1,309,000)
                                   ------------    ------------    ------------    ------------
Balances - December 31, 1998       $ 11,187,000    $    182,600    $      4,400    $ 11,000,000
                                   ============    ============    ============    ============
</TABLE>



<PAGE>


<TABLE>
<CAPTION>
Statements of Cash Flows

                                                                             Year Ended December 31,
                                                                             -----------------------
                                                                      1998           1997             1996
                                                                      ----           ----             ----
<S>                                                             <C>             <C>             <C>         
Cash flows from operating activities:
  Net income                                                    $  1,535,000    $  1,391,000    $  1,264,000
  Adjustments to reconcile net income to net cash provided by
   operating activities:
     Amortization of discount on mortgages receivable                (82,000)        (61,000)        (17,000)
     Gain on early repayment of discounted mortgages                  (7,000)        (22,000)        (47,000)
     Expenses paid by general partner                                  4,000           5,000           3,000
     Changes in:
      Interest receivable                                              7,000        (102,000)        (12,000)
      Deferred fee income                                            (17,000)         34,000         (19,000)
                                                                ------------    ------------    ------------

        Net cash provided by operating activities                  1,440,000       1,245,000       1,172,000
                                                                ------------    ------------    ------------

Cash flows from investing activities:
  Collection of mortgages receivable                               2,603,000       2,441,000       9,118,000
  Mortgages receivable acquired                                   (2,566,000)     (6,465,000)    (10,087,000)
  Increase (decrease) in escrow deposits payable                      18,000         122,000        (194,000)
                                                                ------------    ------------    ------------

        Net cash provided by (used in) investing activities           55,000      (3,902,000)     (1,163,000)
                                                                ------------    ------------    ------------

Cash flows from financing activities:
  Partners' capital contributions                                  1,000,000
  Partners' distributions                                         (1,137,000)       (986,000)       (845,000)
                                                                ------------    ------------    ------------

        Net cash used in financing activities                       (137,000)       (986,000)       (845,000)
                                                                ------------    ------------    ------------

Net increase (decrease) in cash and cash equivalents               1,358,000      (3,643,000)       (836,000)
Cash and cash equivalents at beginning of the year                 2,087,000       5,730,000       6,566,000
                                                                ------------    ------------    ------------

Cash and cash equivalents at end of the year                    $  3,445,000    $  2,087,000    $  5,730,000
                                                                ============    ============    ============
</TABLE>



<PAGE>


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 terminate on
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.

 [5]   Concentration of credit risk:

       The  Partnership  places  its  temporary  cash  investments  with  higher
       credit-quality financial institutions,  and in governmental  obligations.
       Such investments are generally in excess of the FDIC insurance limit. The
       Partnership has not experienced any losses from such investments.

<PAGE>


Note B - Significant Accounting Policies  (continued)

 [5]   Concentration of credit risk:  (continued)

       The  Partnership's   mortgage  portfolio  is  composed  predominantly  of
       mortgages on  multi-family  residential  properties  in the New York City
       area,  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, although there can be no assurances, that this will continue.
       The rental housing market in New York City has remained stable.


Note C - Offering of Partnership Interest

On September 24, 1998,  the  Partnership  completed the private  placement of an
additional  100 units of limited  partnership  interest  at $10,000 per unit for
aggregate proceeds totaling $1,000,000.  The new unitholders are entitled to the
same return on their  investment as the then existing  unitholders,  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).


Note D - Mortgages Receivable

Mortgages receivable consist of first mortgages on residential properties.

Interest  rates on mortgages  range from 9 1/4% to 15%.  Certain  mortgages have
been discounted utilizing rates ranging from 11% to 16 3/4%.

During 1998 and 1997,  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.

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


              Year Ending
              December 31,
              ------------
                  1999    $7,690,000
                  2000     1,702,000
                  2001        84,000
                  2002        87,000
                  2003        92,000
Thereafter                 1,158,000
                         -----------
                          10,813,000
Less unearned discount        79,000
                         -----------
                         $10,734,000
                         ===========


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, 1998 and 1997, no allowance for losses was
required.

<PAGE>


Note E - 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 1998 and 1997 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, 1998 and
       1997, the audited  financial  statements of the general  partner showed a
       net  worth  availability  of  $1,192,000  and  $1,256,000,  respectively,
       including notes  receivable  from  stockholders of the general partner in
       the amount of $1,000,000.

 [6]   Upon termination of the Partnership,  the general partner shall liquidate
       the  Partnership  assets and  distribute  the proceeds  therefrom as more
       fully described in the partnership agreement.


Note F - 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 the
       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 the
       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 the special limited partners.


Note G - 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%.


<PAGE>


Note H - Related Parties

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.

Intervest  Securities  Corporation,  an affiliate  of the Company,  acted as the
underwriter in the  Partnership's  1998 private  placement of units and received
commissions and fees aggregating $30,000 in connection therewith.


Note I - 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 J - 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.


<PAGE>
<TABLE>
<CAPTION>
INTERVEST MORTGAGE ASSOCIATES L. P.
SCHEDULE IV - MORTGAGE LOANS ON REAL ESTATE
DECEMBER 31, 1998
 
 
                                                      Effective  Actual      Final                                  Original Face
                                                      Interest  Interest    Maturity                         Prior   Amount of   
                                Description             Rate      Rate        Date     Periodic Payment Term Lien    Mortgages   
 
                    Residential First Mortgages,
                     Rental Apartment Buildings:
<S>                                                      <C>       <C>      <C>                <C>                  <C>        
3220 STEUBEN AVE       Bronx, New York                   10.00     10.00    07/01/12           (E)                     $800,000   
741-743 NINTH AVE      New York, New York                11.60     10.00    03/01/05           (C)                      950,000   
650 MAIN STREET        New Rochelle, New York            10.00     10.00    10/01/99           (D)                    1,300,000   
565-573 West 175th St  New York, New York                   13        12 (B)11/06/99           (E)                    1,350,000   
                                                                                                                                  
147 West Merrick Road  Freeport, New York                12.50     12.50 (B)11/05/98(A)        (E)                      575,000   
108 THIRD AVENUE       New York, New York                 9.75      9.75 (B)09/17/99           (E)                      850,000   
903-5-11 ASYLUM AVe    Hartford, Connecticut             12.50     12.50 (B)04/10/99           (E)                      975,000   
855-857 NINTH AVENUE   New York, New York                13.50     13.50    04/15/99           (D)                    1,050,000   
One Park Place         Peekskill, New York               10.00      9.50 (B)03/18/00           (E)                    1,250,000   
                                                                                                                                  
BLANKET MORTGAGE       Philadelphia, Pennsylvania        16.65     14.50 (B)01/17/99           (E)                    1,550,000   
591 SUMMIT AVENUE      Jersey City, New Jersey           14.00     12.50 (B)10/06/00           (E)                      500,000   
                                                                                                                                  
 
                                                                                                              $0    $11,150,000  
</TABLE>
 
 
 
(A) This mortgage was subsequently paid off on 1/21/1999.
(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.
 
                                       21

          (b)--The  aggregate  cost of mortgage loans on real estate for federal
          income tax purposes approximates $2,882,000 at December 31, 1990.
 
<PAGE>

<TABLE>
<CAPTION>

INTERVEST MORTGAGE ASSOCIATES L. P.
SCHEDULE IV - MORTGAGE LOANS ON REAL ESTATE
DECEMBER 31, 1998
 
 
                                                      Carrying
                                                      Amount of
                                Description           Mortgages    Prepayment Penalty/Other F
 
                    Residential First Mortgages,
                     Rental Apartment Buildings:
<S>                                                <C>           <C>             
3220 STEUBEN AVE       Bronx, New York             $  786,000              (F)
741-743 NINTH AVE      New York, New York              755,000   1% fee if prior to 3/2/200
650 MAIN STREET        New Rochelle, New York        1,300,000              (G)
565-573 West 175th St  New York, New York            1,328,000   Not prepayable prior to 5/
                                                                    then one month's interes
147 West Merrick Road  Freeport, New York              550,000   one month's interest
108 THIRD AVENUE       New York, New York              843,000   one month's interest
903-5-11 ASYLUM AVe    Hartford, Connecticut           961,000   one month's interest
855-857 NINTH AVENUE   New York, New York            1,050,000   1% fee if prior to 3/15/19
One Park Place         Peekskill, New York           1,231,000   Not prepayable prior to 10
                                                                    then 1% fee.
BLANKET MORTGAGE       Philadelphia, Pennsylvania    1,473,000   one month's interest
591 SUMMIT AVENUE      Jersey City, New Jersey         457,000   not prepayable prior to 01
                                                                    then one month's interes
 
                                                   $10,734,000
 
</TABLE>
 
 
(A) This mortgage was subsequently paid off on 1/21/1999.
(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.
 
                                       21

          (b)--The  aggregate  cost of mortgage loans on real estate for federal
          income tax purposes approximates $2,882,000 at December 31, 1990.
 

<PAGE>

SCHEDULE IV   MORTGAGES LOANS ON REAL ESTATE   Continued




The following summary reconciles mortgages receivable at their carrying values:

                                                Year Ended December 31
                                          ----------------------------------
                                          1998           1997           1996
                                          ----           ----           ----

Balance at beginning of period ....   $10,682,000   $ 6,575,000   $ 5,542,000

Additions during period:
   Mortgages acquired .............     2,566,000     6,465,000    10,087,000
                                      -----------   -----------   -----------
                                       13,248,000    13,040,000    15,629,000

Deductions during period:
   Collections of principal, net of
   Amortization of discounts ......     2,514,000     2,358,000     9,054,000
                                      -----------   -----------   -----------
   BALANCE AT CLOSE OF PERIOD .....   $10,734,000   $10,682,000   $ 6,575,000
                                      ===========   ===========   ===========


<PAGE>


INDEPENDENT AUDITORS' REPORT

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


We have audited the  accompanying  balance sheets of Intervest Funds  Management
Corporation  as of December  31, 1998 and 1997,  and the related  statements  of
operations and cash flows for each of the years in the  three-year  period ended
December 31, 1998.  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, 1998 and 1997, and the results of its operations
and its cash flows for each of the years in the three-year period ended December
31, 1998 in conformity with generally accepted accounting principles.



Richard A. Eisner & Company, LLP

New York, New York
February 2, 1999

<PAGE>


Balance Sheets



                                                          December 31,
                                                          ------------
                                                      1998           1997
                                                      ----           ----
ASSETS
Cash and cash equivalents                         $     7,000    $    11,000
Investment in partnership (Notes A, B and C)          183,000        245,000
Prepaid taxes                                           2,000
                                                  -----------    -----------
                                                  $   192,000    $   256,000
                                                  ===========    ===========

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                          1,817,980      1,907,980
Accumulated deficit                                  (626,000)      (652,000)
                                                  -----------    -----------
   Total                                            1,192,000      1,256,000

Less notes receivable - stockholders (Note C)       1,000,000      1,000,000
                                                  -----------    -----------

                                                  $   192,000    $   256,000
                                                  ===========    ===========



<PAGE>


<TABLE>
<CAPTION>
Statements of Operations

                                                       Year Ended December 31,
                                                       -----------------------
                                                   1998         1997         1996
                                                   ----         ----         ----
<S>                                            <C>          <C>          <C>       
Revenue:
  Interest income                              $   2,000    $   1,000    $   1,000
Expenses:
  General and administrative (Notes C and E)     149,000        3,000        3,000
  Partnership private placement expenses          44,000
                                               ---------    ---------    --------- 
Operating loss                                  (191,000)      (2,000)      (2,000)
Equity in income of partnership                  224,000      138,000       56,000
State and city taxes (Note B[2])                  (7,000)     (14,000)      (5,000)
                                               ---------    ---------    --------- 
Net income                                        26,000      122,000       49,000
Accumulated deficit at beginning of year        (652,000)    (774,000)    (823,000)
                                               ---------    ---------    --------- 
Accumulated deficit at end of year             $(626,000)   $(652,000)   $(774,000)
                                               =========    =========    ========= 
</TABLE>

<PAGE>
<TABLE>
<CAPTION>


Statements of Cash Flows
                                                                   Year Ended December 31,
                                                                   -----------------------
                                                               1998          1997         1996
                                                               ----          ----         ----
<S>                                                         <C>          <C>          <C>      
Cash flows from operating activities:
  Net income                                                $  26,000    $ 122,000    $  49,000
  Adjustments to reconcile net income to net cash used in
   operating activities:
     Equity in income of partnership                         (224,000)    (138,000)     (56,000)
     Changes in:

      Prepaid taxes                                            (2,000)                    5,000
                                                            ---------    ---------    ---------

      Net cash used in operating activities                  (200,000)     (16,000)      (2,000)
                                                            ---------    ---------    ---------

Cash flows from investing activities:
  Sale of units of limited partnership                                                   30,000
  Distribution from partnership                               290,000
  Expenses paid on behalf of partnership                       (4,000)      (5,000)      (3,000)
                                                            ---------    ---------    ---------

      Net cash provided by (used in) investing activities     286,000       (5,000)      27,000
                                                            ---------    ---------    ---------

Cash flows from financing activities:
  Distributions to stockholders                               (90,000)
                                                            ---------    ---------    ---------

Net (decrease) increase in cash and cash equivalents           (4,000)     (21,000)      25,000
Cash and cash equivalents at beginning of the year             11,000       32,000        7,000
                                                            ---------    ---------    ---------

Cash and cash equivalents at end of year                    $   7,000    $  11,000    $  32,000
                                                            =========    =========    =========

Supplemental disclosure of cash flow information:
  Cash paid for taxes during the year                       $   7,900    $  13,233    $       0
</TABLE>


<PAGE>


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. In prior years,
the Partnership sold 1,000 units of limited partnership  interest at $10,000 per
unit and in 1998,  the  Partnership  sold an  additional  100  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 Partnership will continue until December 31, 1999,  unless terminated sooner
in accordance with the provisions of the partnership agreement.

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;


<PAGE>


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 the 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 the
       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 the special limited partners.

The following are condensed financial statement information of the Partnership:


                                  December 31,
                                  ------------
                                 1998          1997
                                 ----          ----
Total assets              $14,355,000   $12,952,000
Total liabilities           3,168,000     2,703,000
                          -----------   -----------
Partners' capital         $11,187,000   $10,249,000
                          ===========   ===========

                            Year Ended December 31,
                            -----------------------
                                 1998          1997
                                 ----          ----
Revenue                   $ 1,539,000   $ 1,396,000
Expenses                        4,000         5,000
                          -----------   -----------
Net income                $ 1,535,000   $ 1,391,000
                          ===========   ===========


<PAGE>


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.


Note E - Consulting Fees

Pursuant to an oral agreement,  the Company agreed to pay a bonus of $100,000 in
1998 plus $5,000 per month commencing April 1998 for consulting  services,  to a
relative of the stockholders of the Company.


<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: 212-218-2800).

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

Lowell S. Dansker, age 48, 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 54,  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.

<PAGE>

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.

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

Lowell S. Dansker..........          10 shares                    50.0%
10 Rockefeller Plaza, #1015
New York, New York 10020

Lawrence G. Bergman........          10 shares                    50.0%
10 Rockefeller Plaza, #1015
New York, New York 10020

Item 13.  Certain Relationships and Related Transactions

None

                                     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)         No reports on Form 8-K were filed during the last quarter of the
            period covered by this report.

(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.


<PAGE>


                                   SIGNATURES


PURSUANT to the  requirements of Section 13 or 15(d) of the Securities  Exchange
Act of 1934,  the  Registrant  has duly  caused  this 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     , 1999                      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
---------------------              (Principal Executive Officer)
Lowell S. Dansker       
Dated:  March     , 1999


                                   Executive Vice President,
                                   Co-Chairman, Secretary
/S/ Lawrence G. Bergman            and Director of Intervest
-----------------------            Funds Management Corporation
Lawrence G. Bergman                (Principal Operating Officer)
Dated:  March     , 1999        




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.





<PAGE>





                                   SIGNATURES


PURSUANT to the  requirements of Section 13 or 15(d) of the Securities  Exchange
Act of 1934,  the  Registrant  has duly  caused  this 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     , 1999        By: 
                                    -------------------
                                    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
                                   Management Corporation
--------------------------         (Principal Executive Officer)
Lowell S. Dansker                  
Dated:  March     , 1999


                                   Executive Vice President,
                                   Co-Chairman, Secretary
                                   and Director of Intervest
--------------------------         Funds Management Corporation
Lawrence G. Bergman                (Principal Operating Officer)
Dated:  March     , 1999                




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.