<PAGE>

                                 UNITED STATES
                      SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C. 20549

                                 FORM 10- K/A
                         Amendment No. 1 to 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, 2000
                         -------------------------------------------------------

                                       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  0-20031
                       ---------------------------------------------------------

        American Income Fund I-C, a Massachusetts Limited Partnership
--------------------------------------------------------------------------------
            (Exact name of registrant as specified in its charter)

Massachusetts                               04-3077437
------------------------------------------  ------------------------------------
(State or other jurisdiction of             (IRS Employer
 incorporation or organization)             Identification No.)

88 Broad Street, Sixth Floor, Boston, MA    02110
------------------------------------------  ------------------------------------
(Address of principal executive offices)    (Zip Code)

Registrant's telephone number, including area code   (617) 854-5800
                                                  ------------------------------

Securities registered pursuant to Section 12(b) of the Act    NONE
                                                          ----------------------

         Title of each class        Name of each exchange on which registered
---------------------------------   --------------------------------------------

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

                    803,454.56 Units Representing Limited Partnership Interest
--------------------------------------------------------------------------------
                                (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 S-K is not contained herein, and will not be contained herein,
to the  best  of  registrant's  knowledge,  in  definite  proxy  or  information
statements  incorporated  by  reference  in Part  III of this  Form  10-K or any
amendment to this Form 10-K. [_]

     State the aggregate  market value of the voting stock held by nonaffiliates
of the registrant.  Not  applicable.  Securities are nonvoting for this purpose.
Refer to Item 12 for further information.
<PAGE>

                           AMERICAN INCOME FUND I-C,
                      a Massachusetts Limited Partnership

                                  FORM 10-K/A

                               TABLE OF CONTENTS


                                    PART I

<TABLE>
<CAPTION>
                                                                                        Page
                                                                                        ----
<S>      <C>                                                                              <C>
Item 1.  Business.......................................................................  3

Item 2.  Properties.....................................................................  7

Item 3.  Legal Proceedings..............................................................  7

Item 4.  Submission of Matters to a Vote of Security Holders............................  7

                                    PART II

Item 5.  Market for the Partnership's Securities and Related Security Holder Matters....  8

Item 6.  Selected Financial Data........................................................ 10

Item 7.  Management's Discussion and Analysis of Financial Condition and Results of
         Operations..................................................................... 10

Item 7A. Quantitative and Qualitative Disclosures about Market Risks.................... 18

Item 8.  Financial Statements and Supplementary Data.................................... 19

Item 9.  Changes in and Disagreements with Accountants on Accounting and Financial
         Disclosure..................................................................... 42

                                   PART III

Item 10. Directors and Executive Officers of the Partnership............................ 43

Item 11. Executive Compensation......................................................... 44

Item 12. Security Ownership of Certain Beneficial Owners and Management................. 45

Item 13. Certain Relationships and Related Transactions................................. 46

                                    PART IV

Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K................ 48

</TABLE>

                                       2
<PAGE>

PART I

Item 1.  Business.
-----------------

     (a)  General Development of Business

     AMERICAN INCOME FUND I-C, a Massachusetts Limited Partnership, (the
"Partnership") was organized as a limited partnership under the Massachusetts
Uniform Limited Partnership Act (the "Uniform Act") on March 1, 1991 for the
purpose of acquiring and leasing to third parties a diversified portfolio of
capital equipment. Partners' capital initially consisted of contributions of
$1,000 from the General Partner (AFG Leasing VI Incorporated) and $100 from the
Initial Limited Partner (AFG Assignor Corporation). On May 31, 1991, the
Partnership issued 803,454.56 units of limited partnership interest (the
"Units") to 909 investors. Included in the 803,454.56 units are 7,293.56 bonus
units. The Partnership has one General Partner, AFG Leasing VI Incorporated, a
Massachusetts corporation formed in 1990 and an affiliate of Equis Financial
Group Limited Partnership (formerly known as American Finance Group), a
Massachusetts limited partnership ("EFG" or the "Manager"). The General Partner
is not required to make any other capital contributions except as may be
required under the Uniform Act and Section 6.1(b) of the Amended and Restated
Agreement and Certificate of Limited Partnership (the "Restated Agreement, as
amended", or the "Partnership Agreement").

     (b)  Financial Information About Industry Segments

     The Partnership is engaged in only one operating industry segment:
financial services. Historically, the Partnership has acquired capital equipment
and leased the equipment to creditworthy lessees on a full payout or operating
lease basis. Full payout leases are those in which aggregate undiscounted
noncancellable rents equal or exceed the acquisition cost of the leased
equipment. Operating leases are those in which the aggregate undiscounted
noncancellable rental payments are less than the acquisition cost of the leased
equipment. In the year ended December 31, 2000, the Partnership also entered
into a sales-type lease, described in Note 2 to the financial statements
included in Item 8 herein. Industry segment data is not applicable.

     See "Management's Discussion and Analysis of Financial Condition and
Results of Operations" included in Item 7 herein.

     In connection with a preliminary settlement agreement for a Class Action
Lawsuit described in Note 10 to the financial statements, included in Item 8
herein, the court permitted the Partnership to invest in any new investment,
including but not limited to new equipment or other business activities, subject
to certain limitations. On March 8, 2000, the Partnership loaned $2,780,000 to a
newly formed real estate company, Echelon Residential Holdings LLC ("Echelon
Residential Holdings") to finance the acquisition of real estate assets by that
company. Echelon Residential Holdings, through a wholly owned subsidiary
("Echelon Residential LLC"), used the loan proceeds, along with the loan
proceeds from similar loans by ten affiliated partnerships representing $32
million in the aggregate, to acquire various real estate assets from Echelon
International Corporation, an independent Florida-based real estate company.
Echelon Residential Holding's interest in Echelon Residential LLC is pledged
pursuant to a pledge agreement to the partnerships as collateral for the loans.

     (c)  Narrative Description of Business

     The Partnership was organized to acquire a diversified portfolio of capital
equipment subject to various full payout and operating leases and to lease the
equipment to third parties as income-producing investments. More specifically,
the Partnership's primary investment objectives were to acquire and lease
equipment that would:

     1. Generate quarterly cash distributions;

     2. Preserve and protect Partnership capital; and

     3. Maintain substantial residual value for ultimate sale.

     The Partnership has the additional  objective of providing  certain federal
income tax benefits.

     The Closing Date of the Offering of Units of the Partnership was May 31,
1991. Significant operations commenced coincident with the Partnership's initial
purchase of equipment and the associated lease commitments on May 31, 1991. The
acquisition of the equipment and its associated leases is described in Note 3 to
the financial statements included in Item 8, herein. The Restated Agreement, as
amended, provides that the

                                       3
<PAGE>
 Partnership will terminate no later than December 31, 2002. However, the
Partnership is a Nominal Defendant in a Class Action Lawsuit, the outcome of
which could significantly alter the nature of the Partnership's organization and
its future business operations. The General Partner does not expect that the
Partnership will be dissolved until such time that the Class Action Lawsuit is
settled or adjudicated.

     The Partnership has no employees; however, it is managed pursuant to a
Management Agreement with EFG or one of its affiliates. The Manager's role,
among other things, is to (i) evaluate, select, negotiate, and consummate the
acquisition of equipment, (ii) manage the leasing, re-leasing, financing, and
refinancing of equipment, and (iii) arrange the resale of equipment. The Manager
is compensated for such services as provided for in the Restated Agreement, as
amended, described in Item 13 herein, and in Note 7 to the financial statements
included in Item 8, herein.

     The Partnership's investment in equipment is, and will continue to be,
subject to various risks, including physical deterioration, technological
obsolescence, credit quality and defaults by lessees. A principal business risk
of owning and leasing equipment is the possibility that aggregate lease revenues
and equipment sale proceeds will be insufficient to provide an acceptable rate
of return on invested capital after payment of all debt service costs and
operating expenses. Another risk is that the credit quality of the lease may
deteriorate after a lease is made. In addition, the leasing industry is very
competitive. The Partnership is subject to considerable competition when re-
leasing or selling equipment at the expiration of its lease terms. The
Partnership must compete with lease programs offered directly by manufacturers
and other equipment leasing companies, many of which have greater resources,
including limited partnerships and trusts organized and managed similarly to the
Partnership and including other EFG sponsored partnerships and trusts, which may
seek to re-lease or sell equipment within their own portfolios to the same
customers as the Partnership. In addition, default by a lessee under a lease may
cause equipment to be returned to the Partnership at a time when the General
Partner or the Manager is unable to arrange for the re-lease or sale of such
equipment. This could result in the loss of anticipated revenue.

     The Partnership holds a note receivable from and common stock in Semele
Group Inc. ("Semele"). The note receivable is subject to a number of risks
including, Semele's ability to make loan payments which is dependent upon the
liquidity of Semele and primarily Semele's ability to sell or refinance its
principal real estate asset consisting of an undeveloped 274-acre parcel of land
near Malibu, California. The market value of the Partnership's investment in
Semele common stock has generally declined since the Partnership's initial
investment in 1997. In 1998, the General Partner determined that the decline in
market value of the stock was other-than-temporary and wrote down the
Partnership's investment. Subsequently, the market value of the Semele common
stock has fluctuated. The market value of the stock could decline in the future.
Gary D. Engle, President and Chief Executive Officer of EFG the sole shareholder
of the General Partner is Chairman and Chief Executive Officer of Semele and
James A. Coyne, Executive Vice President of EFG is Semele's President and Chief
Operating Officer. Mr. Engle and Mr. Coyne are both members of the Board of
Directors of, and own significant stock in, Semele.

     The loan made by the Partnership to Echelon Residential Holdings is, and
will continue to be, subject to various risks, including the risk of default by
Echelon Residential Holdings, which could require the Partnership to foreclose
under the pledge agreement on its interests in Echelon Residential LLC. The
ability of Echelon Residential Holdings to make loan payments and the amount the
Partnership may realize after a default would be dependent upon the risks
generally associated with the real estate lending business including, without
limitation, the existence of senior financing or other liens on the properties,
general or local economic conditions, property values, the sale of properties,
interest rates, real estate taxes, other operating expenses, the supply and
demand for properties involved, zoning and environmental laws and regulations,
rent control laws and other governmental rules. A default by Echelon Residential
Holdings could have a material adverse effect on the future cash flow and
operating results of the Partnership.

     The Restated Agreement, as amended, prohibits the Partnership from making
loans to the General Partner or its affiliates. Since the acquisition of the
several parcels of real estate from the owner had to occur prior to the
admission of certain independent third parties as equity owners, Echelon
Residential Holdings and its wholly owned subsidiary, Echelon Residential LLC,
were formed in anticipation of their admission. The General Partner agreed to an
officer of the Manager serving as the initial equity holder of Echelon
Residential Holdings and as an unpaid manager of Echelon Residential Holdings.
The officer made a $185,465 equity investment in Echelon Residential Holdings.
His return on his equity investment is restricted to the same rate of return as
the partnerships realize on their loans. There is a risk that the court may
object to the General Partner's action in structuring the loan in this way since
the officer may be deemed an affiliate and the loans in violation of the
prohibition against loans to affiliates and the court's statement in its order
permitting New Investments that all other provisions of the Partnership
Agreements governing the investment objectives and policies of the

                                       4
<PAGE>

Partnership shall remain in full force and effect. The court may require the
partnerships to restructure or divest the loan.

     The Investment Company Act of 1940 (the "1940 Act") places restrictions on
the capital structure and business activities of companies registered
thereunder. The Partnership has active business operations in the financial
services industry, including equipment leasing, the loan to Echelon Residential
Holdings and its ownership of securities of Semele. The Partnership does not
intend to engage in investment activities in a manner or to an extent that would
require the Partnership to register as an investment company under the 1940 Act.
However, it is possible that the Partnership may unintentionally engage in an
activity or activities that may be construed to fall within the scope of the
1940 Act. The General Partner is engaged in discussions with the staff of the
Securities and Exchange Commission ("SEC") regarding whether or not the
Partnership may be an inadvertent investment company as a consequence of the
above-referenced loan. The General Partner has consulted counsel and believes
that the Partnership is not an investment company. If the Partnership were
determined to be an unregistered investment company, its business would be
adversely affected. The 1940 Act, among other things, prohibits an unregistered
investment company from offering securities for sale or engaging in any business
in interstate commerce and, consequently, leases and contracts entered into by
partnerships that are unregistered investment companies may be voidable. If
necessary, the Partnership intends to avoid being deemed an investment company
by means that may include disposing or acquiring certain assets that it might
not otherwise dispose or acquire.

     On May 11, 2001, the general partners of the Partnerships that are nominal
defendants in the Class Action Lawsuit received a letter dated May 10, 2001 from
the Associate Director and Chief Counsel of the Division of Investment
Management of the SEC informing the general partners that the staff of the
Division believes that American Income Partners V-A Limited Partnership,
American Income Partners V-B Limited Partnership, American Income Partners V-C
Limited Partnership, American Income Partners V-D Limited Partnership, American
Income Fund I-A, American Income Fund I-B, American Income Fund I-E and AIRFUND
II International Limited Partnership (the "Designated Partnerships") are
investment companies as defined in Section 3(a)(1)(C) of the 1940 Act. The SEC
staff noted that Section 7 of the 1940 Act makes it unlawful for an unregistered
investment company, among other things, to offer, sell, purchase or acquire any
security or engage in any business in interstate commerce. Accordingly, Section
7 would prohibit any partnership that is an unregistered investment company from
engaging in any business in interstate commerce, except transactions that are
merely incidental to its dissolution. The SEC staff asked that the general
partners advise them within the next 30 days as to what steps the Designated
Partnerships will take to address their status under the 1940 Act. The SEC staff
asserts that the notes evidencing the loans to Echelon Residential Holdings are
investment securities and the ownership of the notes by said partnerships cause
them to be investment companies and that, in the case of American Income
Partners V-A Limited Partnership and V-B Limited Partnership, they may have
become investment companies when they received the Semele securities as part of
the compensation for the sale of a vessel to Semele in 1997. The general
partners have consulted with counsel who specializes in the 1940 Act and, based
on counsel's advice, do not believe that the Designated Partnerships are
investment companies.

     The letter also stated that the Division is considering whether to commence
an enforcement action with respect to this matter. Noting that the parties to
the Class Action Lawsuit were scheduled to appear before the court in the near
future to consider a proposed settlement, and that the SEC staff believed that
its views, as expressed in the letter, would be relevant to the specific matters
that will be considered by the court at the hearing, the SEC staff submitted the
letter to the court for its consideration.

     On May 15, 2001, Defendants' Counsel filed with the court Defendants'
Status Report pursuant to the court's March 12, 2001 Order. Defendants reported
that, notwithstanding the parties' best efforts, the staff of the SEC has not
completed its review of the solicitation statement in connection with the
proposed settlement of the Class Action Lawsuit. Nonetheless, the Defendants
stated their belief that the parties should continue to pursue the court's final
approval of the proposed settlement. In this regard, the Defendants also have
maintained, on the advice of special 1940 Act counsel that, even if the 1940 Act
applies to the Designated Partnerships, the 1940 Act does not prohibit going
forward with the proposed settlement, as that transaction is merely incidental
to a dissolution of the Partnerships and therefore is not subject to the
prohibitions of Section 7 of the 1940 Act.

     The Defendants also referred to the SEC staff's letter of May 10, 2001
asserting that certain of the partnerships are investment companies and to
special 1940 Act counsel's submissions to the SEC staff setting forth the
reasons why the 1940 Act does not apply to the Designated Partnerships, noting
that counsel had informed the staff of the Division of Investment Management
that, based upon counsel's understanding of the surrounding circumstances and
after an in-depth analysis of the applicable law, if asked, counsel would be
willing to issue an opinion of the firm that none of the partnerships is an
investment company under the 1940 Act. The

                                       5
<PAGE>

Defendants stated their belief that the proposed settlement is still viable and
in the best interests of the parties and that final approval should be pursued.
The Defendants advised the court that they believe that if the court were to
address the issue of whether or not the 1940 Act applies to the partnerships and
the proposed consolidation, it could remove the major obstacle to the settlement
being finally consummated. The Defendants also requested that the court schedule
a hearing to address on a preliminary basis the objection to the proposed
settlement raised in the SEC staff's May 10, 2001 letter.

     Plaintiffs' Counsel also submitted a Plaintiffs' Status Report to the court
on May 15, 2001 in which they reported that the SEC review has not been
concluded and that they notified the Defendants that they would not agree to
continue to stay the further prosecution of the litigation in favor of the
settlement and that they intend to seek court approval to immediately resume
active prosecution of the claims of the Plaintiffs. Plaintiffs' Counsel stated
in the Report that the "[p]laintiffs continue to believe that the settlement is
in the best interests of the Operating Partnership Sub-class. However, since the
SEC has yet to complete its review of the proxy, the Plaintiffs do not believe
that the litigation should continue to be stayed so that the SEC may continue
its regulatory review for an indefinite period of time." Plaintiffs requested a
pre-trial conference to schedule filing of Plaintiffs' motion for class
certification on or before May 29, 2001 and resumption of merits discovery and
discovery related to the class certification motion.

     Apart from the language of the order, the Court has not stated what action
it might order if the SEC's review were not completed by May 15, 2001. If the
Court were to decline to continue the date for the Final Approval Settlement
Hearing and there is no settlement alternative offered by the parties that meets
the Court's approval, the Court may direct that the parties resume the
litigation and abandon the proposed settlement and consolidation.

     Revenue from major individual lessees which accounted for 10% or more of
lease revenue during the years ended December 31, 2000, 1999 and 1998 is
incorporated herein by reference to Note 2 to the financial statements included
in Item 8, herein. Refer to Item 14(a)(3) for lease agreements filed with the
Securities and Exchange Commission.

     EFG is a Massachusetts limited partnership formerly known as American
Finance Group ("AFG"). AFG was established in 1988 as a Massachusetts general
partnership and succeeded American Finance Group, Inc., a Massachusetts
corporation organized in 1980. EFG and its subsidiaries (collectively, the
"Company") are engaged in various aspects of the equipment leasing business,
including EFG's role as Manager or Advisor to the Partnership and several other
direct-participation equipment leasing programs sponsored or co-sponsored by EFG
(the "Other Investment Programs"). The Company arranges to broker or originate
equipment leases, acts as remarketing agent and asset manager, and provides
leasing support services, such as billing, collecting, and asset tracking.

     The general partner of EFG, with a 1% controlling interest, is Equis
Corporation, a Massachusetts corporation owned and controlled entirely by Gary
D. Engle, its President, Chief Executive Officer and sole Director. Equis
Corporation also owns a controlling 1% general partner interest in EFG's 99%
limited partner, GDE Acquisition Limited Partnership ("GDE LP"). Mr. Engle
established Equis Corporation and GDE LP in December 1994 for the sole purpose
of acquiring the business of AFG.

     In January 1996, the Company sold certain assets of AFG relating primarily
to the business of originating new leases, and the name "American Finance
Group," and its acronym to a third party. AFG changed its name to Equis
Financial Group Limited Partnership after the sale was concluded. Pursuant to
terms of the sale agreements, EFG specifically reserved the rights to continue
using the name American Finance Group and its acronym in connection with the
Partnership and the Other Investment Programs and to continue managing all
assets owned by the Partnership and the Other Investment Programs.

     (d) Financial Information About Foreign and Domestic Operations and Export
Sales

     Not applicable.

Item 2.  Properties.
-------------------

     Incorporated herein by reference to Note 3 to the financial statements
included in Item 8.

Item 3.  Legal Proceedings.
--------------------------

     Incorporated herein by reference to Note 10 to the financial statements
included in Item 8.

                                       6
<PAGE>

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

     None.

                                       7
<PAGE>

PART II

Item 5. Market for the Partnership's Securities and Related Security Holder
---------------------------------------------------------------------------
        Matters.
        --------

     (a) Market Information

     There is no public market for the resale of the Units and it is not
anticipated that a public market for resale of the Units will develop.

     (b) Approximate Number of Security Holders

     At December 31, 2000, there were 867 record holders in the Partnership.

     (c) Dividend History and Restrictions

     Historically, the amount of cash distributions to be paid to the Partners
had been determined on a quarterly basis. Each quarter's distribution may have
varied in amount and was made 95% to the Limited Partners and 5% to the General
Partner. Generally, cash distributions were paid within 15 days after the
completion of each calendar quarter.

     The Partnership is a Nominal Defendant in a Class Action Lawsuit described
in Note 10 to the financial statements included in Item 8. The proposed
settlement to that lawsuit, if effected, will materially change the future
organizational structure and business interests of the Partnership, as well as
its cash distribution policies. In addition, commencing with the first quarter
of 2000, the General Partner suspended the payment of quarterly cash
distributions pending final resolution of the Class Action Lawsuit. Accordingly,
future cash distributions are not expected to be paid until the Class Action
Lawsuit is settled or adjudicated.

     In any given year, it is possible that Limited Partners will be allocated
taxable income in excess of distributed cash. This discrepancy between tax
obligations and cash distributions may or may not continue in the future, and
cash may or may not be available for distribution to the Limited Partners
adequate to cover any tax obligation.

     Distributions declared in 2000 and 1999 were as follows:

<TABLE>
<CAPTION>
                                                          General    Limited
                                                Total     Partner    Partners
                                              ---------  ---------  ----------
     <S>                                      <C>        <C>        <C>
     Total 2000 distributions declared....... $      --  $      --  $       --

     Total 1999 distributions declared.......   634,306     31,716     602,590

                                              ---------  ---------  ----------
                      Total.................. $ 634,306  $  31,716  $  602,590
                                              =========  =========  ==========
</TABLE>

     There are no formal restrictions under the Restated Agreement, as amended,
that materially limit the Partnership's ability to pay cash distributions,
except that the General Partner may suspend or limit cash distributions to
ensure that the Partnership maintains sufficient working capital reserves to
cover, among other things, operating costs and potential expenditures, such as
refurbishment costs to remarket equipment upon lease expiration. In addition to
the need for funds in connection with the Class Action Lawsuit, liquidity is
especially important as the Partnership matures and sells equipment, because the
remaining equipment base consists of fewer revenue-producing assets that are
available to cover prospective cash disbursements. Insufficient liquidity could
inhibit the Partnership's ability to sustain its operations or maximize the
realization of proceeds from remarketing its remaining assets.

     In particular, the Partnership must contemplate the potential liquidity
risks associated with its investment in commercial jet aircraft. The management
and remarketing of aircraft can involve, among other things, significant costs
and lengthy remarketing initiatives. Although the Partnership's lessees are
required to maintain the aircraft during the period of lease contract, repair,
maintenance, and/or refurbishment costs at lease expiration can be substantial.
For example, an aircraft that is returned to the Partnership meeting minimum
airworthiness standards, such as flight hours or engine cycles, nonetheless may
require heavy maintenance in order to bring its engines, airframe and other
hardware up to standards that will permit its prospective use in commercial air
transportation.

                                       8
<PAGE>

     At December 31, 2000, the Partnership's equipment portfolio included
ownership interests in four commercial jet aircraft, one of which is a Boeing
737 aircraft. The Boeing 737 aircraft is a Stage 2 aircraft, meaning that it is
prohibited from operating in the United States unless it is retro-fitted with
hush-kits to meet Stage 3 noise regulations promulgated by the Federal Aviation
Administration. During 2000, the aircraft was re-leased to Air Slovakia BWJ,
Ltd. through September 2003. The remaining aircraft in the Partnership's
portfolio already are Stage 3 compliant and have lease terms expiring in April
2001, January 2003, and September 2004, respectively.

     In October 2000, the Partnership and certain of its affiliates executed a
conditional sales agreement with Royal Aviation Inc. for the sale of the
Partnership's interest a Boeing 737-2H4 aircraft. The sale of the aircraft has
been recorded by the Partnership as a sales-type lease, with a lease term
expiring in January 2002. The title to the aircraft transfers to Royal Aviation
Inc. at the expiration of the lease term.

     Cash distributions consist of Distributable Cash From Operations and
Distributable Cash From Sales or Refinancings.

     "Distributable Cash From Operations" means the net cash provided by the
Partnership's normal operations after general expenses and current liabilities
of the Partnership are paid, reduced by any reserves for working capital and
contingent liabilities to be funded from such cash, to the extent deemed
reasonable by the General Partner, and increased by any portion of such reserves
deemed by the General Partner not to be required for Partnership operations and
reduced by all accrued and unpaid Equipment Management Fees and, after Payout,
further reduced by all accrued and unpaid Subordinated Remarketing Fees.
Distributable Cash From Operations does not include any Distributable Cash From
Sales or Refinancings.

     "Distributable Cash From Sales or Refinancings" means Cash From Sales or
Refinancings as reduced by (i)(a) amounts realized from any loss or destruction
of equipment which the General Partner determines shall be reinvested in similar
equipment for the remainder of the original lease term of the lost or destroyed
equipment, or in isolated instances, in other equipment, if the General Partner
determines that investment of such proceeds will significantly improve the
diversity of the Partnership's equipment portfolio, and subject in either case
to satisfaction of all existing indebtedness secured by such equipment to the
extent deemed necessary or appropriate by the General Partner, or (b) the
proceeds from the sale of an interest in equipment pursuant to any agreement
governing a joint venture which the General Partner determines will be invested
in additional equipment or interests in equipment and which ultimately are so
reinvested and (ii) any accrued and unpaid Equipment Management Fees and, after
Payout, any accrued and unpaid Subordinated Remarketing Fees.

     "Cash From Sales or Refinancings" means cash received by the Partnership
from sale or refinancing transactions, as reduced by (i)(a) all debts and
liabilities of the Partnership required to be paid as a result of sale or
refinancing transactions, whether or not then due and payable (including any
liabilities on an item of equipment sold which are not assumed by the buyer and
any remarketing fees required to be paid to persons not affiliated with the
General Partner, but not including any Subordinated Remarketing Fees whether or
not then due and payable) and (b) general expenses and current liabilities of
the Partnership (other than any portion of the Equipment Management Fee which is
required to be accrued and the Subordinated Remarketing Fee) and (c) any
reserves for working capital and contingent liabilities funded from such cash to
the extent deemed reasonable by the General Partner and (ii) increased by any
portion of such reserves deemed by the General Partner not to be required for
Partnership operations. In the event the Partnership accepts a note in
connection with any sale or refinancing transaction, all payments subsequently
received in cash by the Partnership with respect to such note shall be included
in Cash From Sales or Refinancings, regardless of the treatment of such payments
by the Partnership for tax or accounting purposes. If the Partnership receives
purchase money obligations in payment for equipment sold, which are secured by
liens on such equipment, the amount of such obligations shall not be included in
Cash From Sales or Refinancings until the obligations are fully satisfied.

     "Payout" is defined as the first time when the aggregate amount of all
distributions to the Limited Partners of Distributable Cash From Operations and
Distributable Cash From Sales or Refinancings equals the aggregate amount of the
Limited Partners' original capital contributions plus a cumulative annual
distribution of 11% (compounded quarterly and calculated beginning with the last
day of the month of the Partnership's Closing Date) on their aggregate
unreturned capital contributions. For purposes of this definition, capital
contributions shall be deemed to have been returned only to the extent that
distributions of cash to the Limited Partners exceed the amount required to
satisfy the cumulative annual distribution of 11% (compounded quarterly) on the
Limited Partners' aggregate unreturned capital contributions, such calculation
to be based on the aggregate unreturned capital contributions outstanding on the
first day of each fiscal quarter.

                                       9
<PAGE>

Item 6.  Selected Financial Data.
---------------------------------

     The following data should be read in conjunction with Item 7, "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the financial statements included in Item 8 herein.

     For each of the five years in the period ended December 31, 2000:

<TABLE>
<CAPTION>
    Summary of Operations                   2000         1999        1998         1997         1996
    ---------------------               ------------ ------------ -----------  -----------  -----------
<S>                                     <C>          <C>          <C>          <C>          <C>
Operating and sales-type lease
        revenue...................      $ 1,397,964  $ 2,174,523  $ 2,463,373  $ 4,068,381  $ 4,130,156

Interest Income...................      $   169,999  $   258,113  $   195,264  $    86,836  $   117,337

Net (loss) income.................      $   (26,556) $ 1,190,252  $   623,010  $ 1,574,944  $   552,157

Per Unit:
     Net (loss) income............      $     (0.03) $      1.41  $      0.74  $      1.86  $      0.65

     Cash distributions declared..      $        --  $      0.75  $      0.75  $      0.94  $      1.38

      Financial Position
      ------------------
Total assets......................      $10,740,475  $11,182,585  $11,565,735  $12,142,868  $13,848,889

Total long-term obligations.......      $ 2,056,682  $ 2,363,628  $ 3,459,289  $ 4,401,753  $ 6,547,519

Partners' capital.................      $ 8,114,953  $ 8,181,956  $ 7,592,086  $ 7,488,561  $ 6,821,321
</TABLE>

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

              Year ended December 31, 2000 compared to the year
         ended December 31, 1999 and the year ended December 31, 1999
                 compared to the year ended December 31, 1998


     Certain statements in this Form 10-K of the Partnership that are not
historical fact constitute "forward-looking statements" within the meaning of
the Private Securities Litigation Reform Act of 1995 and are subject to a
variety of risks and uncertainties. There are a number of factors that could
cause actual results to differ materially from those expressed in any forward-
looking statements made herein. These factors include, but are not limited to,
the outcome of the Class Action Lawsuit described in Note 10 to the financial
statements included in Item 8 herein, the remarketing of the Partnership's
equipment, and the performance of the Partnership's non-equipment assets.

Overview
--------

     The Partnership was organized in 1991 as a direct-participation equipment
leasing program to acquire a diversified portfolio of capital equipment subject
to lease agreements with third parties. Presently, the Partnership is a Nominal
Defendant in a Class Action Lawsuit, the outcome of which could significantly
alter the nature of the Partnership's organization and its future business
operations. See Note 10 to the financial statements included in Item 8 herein.
Pursuant to the Restated Agreement, as amended, the Partnership is scheduled to
be dissolved by December 31, 2002. However, the General Partner does not expect
that the Partnership will be dissolved until such time that the Class Action
Lawsuit is settled or adjudicated.

     The 1940 Act places restrictions on the capital structure and business
activities of companies registered thereunder. The Partnership has active
business operations in the financial services industry, including equipment
leasing, the loan to Echelon Residential Holdings and its ownership of
securities of Semele. The Partnership does not intend to engage in investment
activities in a manner or to an extent that would require the Partnership to

                                       10
<PAGE>

register as an investment company under the 1940 Act. However, it is possible
that the Partnership may unintentionally engage in an activity or activities
that may be construed to fall within the scope of the Act. The General Partner
is engaged in discussions with the staff of the Securities and Exchange
Commission ("SEC") regarding whether or not the Partnership may be an
inadvertent investment company as a consequence of the above-referenced loan.
The General Partner has consulted counsel and believes that the Partnership is
not an investment company. If the Partnership were determined to be an
unregistered investment company, its business would be adversely affected. The
1940 Act, among other things, prohibits an unregistered investment company from
offering securities for sale or engaging in any business in interstate commerce
and, consequently, leases and contracts entered into by partnerships that are
unregistered investment companies may be voidable. If necessary, the Partnership
intends to avoid being deemed an investment company by means that may include
disposing or acquiring certain assets that it might not otherwise dispose or
acquire.

     On May 11, 2001, the general partners of the Partnerships that are nominal
defendants in the Class Action Lawsuit received a letter dated May 10, 2001 from
the Associate Director and Chief Counsel of the Division of Investment
Management of the SEC informing the general partners that the staff of the
Division believes that American Income Partners V-A Limited Partnership,
American Income Partners V-B Limited Partnership, American Income Partners V-C
Limited Partnership, American Income Partners V-D Limited Partnership, American
Income Fund I-A, American Income Fund I-B, American Income Fund I-E and AIRFUND
II International Limited Partnership (the "Designated Partnerships") are
investment companies as defined in Section 3(a)(1)(C) of the 1940 Act. The SEC
staff noted that Section 7 of the 1940 Act makes it unlawful for an unregistered
investment company, among other things, to offer, sell, purchase or acquire any
security or engage in any business in interstate commerce. Accordingly, Section
7 would prohibit any partnership that is an unregistered investment company from
engaging in any business in interstate commerce, except transactions that are
merely incidental to its dissolution. The SEC staff asked that the general
partners advise them within the next 30 days as to what steps the Designated
Partnerships will take to address their status under the 1940 Act. The SEC staff
asserts that the notes evidencing the loans to Echelon Residential Holdings are
investment securities and the ownership of the notes by said partnerships cause
them to be investment companies and that, in the case of American Income
Partners V-A Limited Partnership and V-B Limited Partnership, they may have
become investment companies when they received the Semele securities as part of
the compensation for the sale of a vessel to Semele in 1997. The general
partners have consulted with counsel who specializes in the 1940 Act and, based
on counsel's advice, do not believe that the Designated Partnerships are
investment companies.

     The letter also stated that the Division is considering whether to commence
an enforcement action with respect to this matter. Noting that the parties to
the Class Action Lawsuit were scheduled to appear before the court in the near
future to consider a proposed settlement, and that the SEC staff believed that
its views, as expressed in the letter, would be relevant to the specific matters
that will be considered by the court at the hearing, the SEC staff submitted the
letter to the court for its consideration.

     On May 15, 2001, Defendants' Counsel filed with the court Defendants'
Status Report pursuant to the court's March 12, 2001 Order. Defendants reported
that, notwithstanding the parties' best efforts, the staff of the SEC has not
completed its review of the solicitation statement in connection with the
proposed settlement of the Class Action Lawsuit. Nonetheless, the Defendants
stated their belief that the parties should continue to pursue the court's final
approval of the proposed settlement. In this regard, the Defendants also have
maintained, on the advice of special 1940 Act counsel that, even if the 1940 Act
applies to Designated Partnerships, the 1940 Act does not prohibit going forward
with the proposed settlement, as that transaction is merely incidental to a
dissolution of the Partnerships and therefore is not subject to the prohibitions
of Section 7 of the 1940 Act.

     The Defendants also referred to the SEC staff's letter of May 10, 2001
asserting that certain of the partnerships are investment companies and to
special 1940 Act counsel's submissions to the SEC staff setting forth the
reasons why the 1940 Act does not apply to the Designated Partnerships, noting
that counsel had informed the staff of the Division of Investment Management
that, based upon counsel's understanding of the surrounding circumstances and
after an in-depth analysis of the applicable law, if asked, counsel would be
willing to issue an opinion of the firm that none of the partnerships is an
investment company under the 1940 Act. The Defendants stated their belief that
the proposed settlement is still viable and in the best interests of the parties
and that final approval should be pursued. The Defendants advised the court that
they believe that if the court were to address the issue of whether or not the
1940 Act applies to the partnerships and the proposed consolidation, it could
remove the major obstacle to the settlement being finally consummated. The
Defendants also requested that the court schedule a hearing to address on a
preliminary basis the objection to the proposed settlement raised in the SEC
staff's May 10, 2001 letter.

                                       11
<PAGE>

     Plaintiffs' Counsel also submitted a Plaintiffs' Status Report to the court
on May 15, 2001 in which they reported that the SEC review has not been
concluded and that they notified the Defendants that they would not agree to
continue to stay the further prosecution of the litigation in favor of the
settlement and that they intend to seek court approval to immediately resume
active prosecution of the claims of the Plaintiffs. Plaintiffs' Counsel stated
in the Report that the "[p]laintiffs continue to believe that the settlement is
in the best interests of the Operating Partnership Sub-class. However, since the
SEC has yet to complete its review of the proxy, the Plaintiffs do not believe
that the litigation should continue to be stayed so that the SEC may continue
its regulatory review for an indefinite period of time." Plaintiffs requested a
pre-trial conference to schedule filing of Plaintiffs' motion for class
certification on or before May 29, 2001 and resumption of merits discovery and
discovery related to the class certification motion.

     Apart from the language of the order, the Court has not stated what action
it might order if the SEC's review were not completed by May 15, 2001. If the
Court were to decline to continue the date for the Final Approval Settlement
Hearing and there is no settlement alternative offered by the parties that meets
the Court's approval, the Court may direct that the parties resume the
litigation and abandon the proposed settlement and consolidation.

Results of Operations
---------------------

     For the year ended December 31, 2000, the Partnership recognized operating
lease revenue of $1,395,237 compared to $2,174,523 and $2,463,373 for the years
ended December 31, 1999 and 1998, respectively. The decrease in operating lease
revenue from 1999 to 2000 resulted primarily from the expiration of lease terms
related to the Partnership's interest in three Boeing 737-2H4 aircraft and a
McDonnell Douglas aircraft. See below for a detailed discussion of the variances
in operating lease revenues related to the aircraft between 1999 and 2000. The
decrease in operating lease revenue from 1998 to 1999 resulted from lease term
expirations and equipment sales. The amount of operating lease revenue in the
near term will increase due to the re-lease of the McDonnell Douglas MD-82
aircraft and one of the Boeing 737-2H4 aircraft in September 2000. Subsequently,
operating lease revenue is expected to decline due to lease term expirations and
equipment sales. See discussion below related to the Partnership's sales-type
lease revenue for the year ended December 31, 2000.

     The Partnership's equipment portfolio includes certain assets in which the
Partnership holds a proportionate ownership interest. In such cases, the
remaining interests are owned by an affiliated equipment leasing program
sponsored by Equis Financial Group Limited Partnership ("EFG"). Proportionate
equipment ownership enabled the Partnership to further diversify its equipment
portfolio at inception by participating in the ownership of selected assets,
thereby reducing the general levels of risk which could have resulted from a
concentration in any single equipment type, industry or lessee. The Partnership
and each affiliate individually report, in proportion to their respective
ownership interests, their respective shares of assets, liabilities, revenues,
and expenses associated with the equipment.

     The lease terms related to the three Boeing 737-2H4 aircraft, in which the
Partnership held a proportionate interest, expired on December 31, 1999 and the
aircraft were stored pending their remarketing. In July 2000, one of the Boeing
737-2H4 aircraft was sold resulting in $279,825 of proceeds to the Partnerships
and a net gain, for financial statement purposes, of $47,179 for the
Partnership's proportional interest in the aircraft. In September 2000, a second
Boeing 737-2H4 aircraft was re-leased with a lease term expiring in September
2003. Under the terms of this re-lease agreement, the Partnership will receive
rents of $387,432 over the term of the lease. The Partnership entered into a
conditional sales agreement to sell its interest in the remaining Boeing 737-2H4
aircraft as described below.

     The lease term associated with a McDonnell Douglas MD-82 aircraft, in which
the Partnership holds an ownership interest, expired in January 2000. The
aircraft was re-leased in September 2000 to Aerovias de Mexico S.A. de C.V.,
with a lease term expiring in September 2004. Under the terms of this re-lease
agreement, the Partnership will receive rents of $940,224 over the term of the
lease.

     Interest income for the year ended December 31, 2000 was $169,999 compared
to $258,113 and $195,264 for the years ended December 31, 1999 and 1998,
respectively. Interest income is generated principally from temporary investment
of rental receipts and equipment sale proceeds in short-term instruments. The
amount of future interest income is expected to fluctuate as a result of
changing interest rates and the amount of cash available for investment, among
other factors. Interest income included $45,973 in each of 2000, 1999, and 1998,
earned on a note receivable from Semele (see Note 6 to the accompanying
financial statements included in Item 8). The note receivable from Semele is
scheduled to mature in April 2003. On March 8, 2000, the Partnership utilized
$2,780,000 of available cash for a loan to Echelon Residential Holdings. The
loan is presented in the accompanying financial statements in accordance with
the guidance set forth in the Third Notice to Practitioners

                                       12
<PAGE>

by the American Institute of Certified Public Accountants in February 1986
entitled "ADC Arrangements", and therefore the Partnership does not recognize
interest income related to this loan. (See further discussion included in Note 4
to the financial statements included in Item 8 herein).

     In October 2000, the Partnership and certain of its affiliates executed a
conditional sales agreement with Royal Aviation Inc. for the sale of the
Partnership's interest in a Boeing 737-2H4 aircraft. The title to the aircraft
transfers to Royal Aviation Inc., at the expiration of the lease term. The sale
of the aircraft has been recorded by the Partnership as a sales-type lease, with
a lease term expiring in January 2002. For the year ended December 31, 2000, the
Partnership recorded a net gain on sale of equipment, for financial statement
purposes, of $100,122 for the Partnership's proportional interest in the
aircraft and recognized sales-type lease revenue of $2,727.

     During the year ended December 31, 2000, the Partnership sold other
equipment having a net book value of $3,390 to existing lessees and third
parties. The sales resulted in a net gain, for financial reporting purposes, of
$64,532.

     During the year ended December 31, 1999, the Partnership sold equipment
having a net book value of $1,804 to existing lessees and third parties. These
sales resulted in a net gain, for financial statement purposes, of $508,592
compared to a net gain in 1998 of $119,724 on equipment having a net book value
of $15,660.

     It cannot be determined whether future sales of equipment will result in a
net gain or a net loss to the Partnership, as such transactions will be
dependent upon the condition and type of equipment being sold and its
marketability at the time of sale. In addition, the amount of gain or loss
reported for financial statement purposes is partly a function of the amount of
accumulated depreciation associated with the equipment being sold.

     The ultimate realization of residual value for any type of equipment is
dependent upon many factors, including EFG's ability to sell and re-lease
equipment. Changing market conditions, industry trends, technological advances,
and many other events can converge to enhance or detract from asset values at
any given time. EFG attempts to monitor these changes in order to identify
opportunities which may be advantageous to the Partnership and which will
maximize total cash returns for each asset.

     The total economic value realized for each asset is comprised of all
primary lease term revenue generated from that asset, together with its residual
value. The latter consists of cash proceeds realized upon the asset's sale in
addition to all other cash receipts obtained from renting the asset on a re-
lease, renewal or month-to-month basis. The Partnership classifies such residual
rental payments as lease revenue. Consequently, the amount of gain or loss
reported in the financial statements is not necessarily indicative of the total
residual value the Partnership achieved from leasing the equipment.

     Depreciation expense was $629,430, $956,631, and $1,083,372 for the years
ended December 31, 2000, 1999 and 1998, respectively. For financial reporting
purposes, to the extent that an asset is held on primary lease term, the
Partnership depreciates the difference between (i) the cost of the asset and
(ii) the estimated residual value of the asset at the date of primary lease
expiration on a straight-line basis over such term. For the purposes of this
policy, estimated residual values represent estimates of equipment values at the
date of primary lease expiration. To the extent that equipment is held beyond
its primary lease term, the Partnership continues to depreciate the remaining
net book value of the asset on a straight-line basis over the asset's remaining
economic life.

     Interest expense was $220,695, $222,725, and $318,530 for the years ended
December 31, 2000, 1999, and 1998, respectively. Interest expense in near term
will increase as a result of the Partnership's debt refinancing in February
2001. (See Note 12 to the financial statements included in Item 8.)
Subsequently, interest expense will decline as the principal balance of notes
payable is reduced through the application of rent receipts to outstanding debt.
See additional discussion below regarding the refinancing of the debt in 2001.

     Management fees were $66,733, $101,040, and $113,260 for the years ended
December 31, 2000, 1999, and 1998, respectively. Management fees are based on 5%
of gross lease revenue generated by operating leases and 2% of gross lease
revenue generated by full payout leases.

     Write-down of investment securities-affiliate was $185,281 for the year
ended December 31, 1998. The General Partner determined that the decline in
market value of its Semele common stock was other-than-temporary. As a result,
the Partnership wrote down the cost of the Semele common stock from $15 per
share to $4.125 per share (the quoted price of Semele stock on NASDAQ at
December 31, 1998). See further discussion below.

                                       13
<PAGE>

     Operating expenses were $678,482, $470,580, and $454,908 for the years
ended December 31, 2000, 1999 and 1998, respectively. The primary reason for the
increase in operating expenses from 1999 to 2000 is storage, remarketing and
maintenance costs associated with the Partnership's aircraft. In 2000 and 1999,
the Partnership accrued approximately $119,000 and $160,000, respectively, for
the reconfiguration costs and completion of a D-Check incurred to facilitate the
remarketing of the McDonnell Douglas MD-82 aircraft released in September 2000.
In 2000, the Partnership also accrued approximately $160,000 for a required D-
check for a second McDonnell Douglas MD-82 aircraft. Operating expenses in 2000,
1999, and 1998 also included approximately $41,000, $50,000 and $298,000,
respectively, related to the Class Action Lawsuit described in Note 10 to the
financial statements included in Item 8. Other operating expenses consist
principally of professional service costs, such as audit and other legal fees,
as well as printing, distribution and other remarketing expenses.

     For the year ended December 31, 2000, the Partnership's share of losses in
Echelon Residential Holdings was $211,012. The loss is reflected on the
Statement of Operations as "Partnership's share of unconsolidated real estate
venture's loss." See further discussion below.

Liquidity and Capital Resources and Discussion of Cash Flows
------------------------------------------------------------

     The Partnership by its nature is a limited life entity. The Partnership's
principal operating activities derive from asset rental transactions.
Accordingly, the Partnership's principal source of cash from operations is
provided by the collection of periodic rents. These cash inflows are used to
satisfy debt service obligations associated with leveraged leases, and to pay
management fees and operating costs. Operating activities generated net cash
inflows of $685,507, $1,946,817, and $2,165,077 for the years ended December 31,
2000, 1999 and 1998 respectively. Future renewal, re-lease and equipment sale
activities will cause a decline in the Partnership's lease revenues and
corresponding sources of operating cash. Overall, expenses associated with
rental activities, such as management fees, and net cash flow from operating
activities will also continue to decline as the Partnership experiences a higher
frequency of remarketing events. The Partnership, however, may continue to incur
significant costs to facilitate the successful remarketing of its aircraft in
the future. The amount of future interest income is expected to fluctuate as a
result of changing interest rates and the level of cash available for
investment, among other factors.

     Cash realized from asset disposal transactions is reported under investing
activities on the accompanying Statement of Cash Flows. During 2000, the
Partnership realized net proceeds of $347,747, compared to $510,396 and $135,384
in 1999 and 1998, respectively. Future inflows of cash from asset disposals will
vary in timing and amount and will be influenced by many factors including, but
not limited to, the frequency and timing of lease expirations, the type of
equipment being sold, its condition and age, and future market conditions.

     At December 31, 2000, the Partnership was due aggregate future minimum
lease payments of $2,426,713 from contractual operating and sales-type lease
agreements (see Note 2 to the financial statements included in Item 8), a
portion of which will be used to amortize the principal balance of notes payable
of $2,056,682 (see Note 8 to the financial statements included in Item 8). At
the expiration of the individual primary and renewal lease terms underlying the
Partnership's future minimum lease payments, the Partnership will sell the
equipment or enter re-lease or renewal agreements when considered advantageous
by the General Partner and EFG. Such future remarketing activities will result
in the realization of additional cash inflows in the form of equipment sale
proceeds or rents from renewals and re-leases, the timing and extent of which
cannot be predicted with certainty. This is because the timing and extent of
remarketing events often is dependent upon the needs and interests of the
existing lessees. Some lessees may choose to renew their lease contracts, while
others may elect to return the equipment. In the latter instances, the equipment
could be re-leased to another lessee or sold to a third party.

     In connection with a preliminary settlement agreement for a Class Action
Lawsuit described in Note 10 to the financial statements included in Item 8, the
court permitted the Partnership to invest in any new investment, including but
not limited to new equipment or other business activities, subject to certain
limitations. On March 8, 2000, the Partnership loaned $2,780,000 to a newly
formed real estate company, Echelon Residential Holdings, to finance the
acquisition of real estate assets by that company. Echelon Residential Holdings,
through a wholly owned subsidiary ("Echelon Residential LLC"), used the loan
proceeds, along with the loan proceeds from similar loans by ten affiliated
partnerships representing $32 million in the aggregate, to acquire various real
estate assets from Echelon International Corporation, an independent Florida-
based real estate company. Echelon Residential Holding's interest in Echelon
Residential LLC is pledged pursuant to a pledge agreement to the partnerships as
collateral for the loans. The loan has a term of 30 months maturing on September
8, 2002 and bears interest at the annual rate of 14% for the first 24 months and
18% for the final six months. Interest accrues and compounds monthly and is
payable at maturity.

                                       14
<PAGE>

     As discussed in Note 4 to the Partnership's financial statements included
in Item 8, the loan is considered to be an investment in a real estate venture
for accounting purposes. In accordance with the provisions of Statement of
Position No. 78-9, "Accounting for Investments in Real Estate Ventures", the
Partnership reports its share of income or loss of Echelon Residential Holdings
under the equity method of accounting.

     The loan made by the Partnership to Echelon Residential Holdings is, and
will continue to be, subject to various risks, including the risk of default by
Echelon Residential Holdings, which could require the Partnership to foreclose
under the pledge agreement on its interests in Echelon Residential LLC. The
ability of Echelon Residential Holdings to make loan payments and the amount the
Partnership may realize after a default would be dependent upon the risks
generally associated with the real estate lending business including, without
limitation, the existence of senior financing or other liens on the properties,
general or local economic conditions, property values, the sale of properties,
interest rates, real estate taxes, other operating expenses, the supply and
demand for properties involved, zoning and environmental laws and regulations,
rent control laws and other governmental rules. A default by Echelon Residential
Holdings could have a material adverse effect on the future cash flow and
operating results of the Partnership.

     The Restated Agreement, as amended, prohibits the Partnership from making
loans to the General Partner or its affiliates. Since the acquisition of the
several parcels of real estate from the owner had to occur prior to the
admission of certain independent third parties as equity owners, Echelon
Residential Holdings and its wholly owned subsidiary, Echelon Residential LLC,
were formed in anticipation of their admission. The General Partner agreed to an
officer of the Manager serving as the initial equity holder of Echelon
Residential Holdings and as an unpaid manager of Echelon Residential Holdings.
The officer made a $185,465 equity investment in Echelon Residential Holdings.
His return on his equity investment is restricted to the same rate of return as
the partnerships realize on their loans. There is a risk that the court may
object to the general partner's action in structuring the loan in this way since
the officer may be deemed an affiliate and the loans in violation of the
prohibition against loans to affiliates and the court's statement in its order
permitting New Investments that all other provisions of the Partnership
Agreements governing the investment objectives and policies of the Partnership
shall remain in full force and effect. The court may require the partnerships to
restructure or divest the loan.

     As a result of an exchange in 1997, the Partnership is the owner of 20,876
shares of Semele common stock and holds a beneficial interest in a note from
Semele (the "Semele Note") of $459,729. The Semele Note bears an annual interest
rate of 10% and is scheduled to mature in April 2003. The note also requires
mandatory principal reductions, if and to the extent that net proceeds are
received by Semele from the sale or refinancing of its principal real estate
asset consisting of an undeveloped 274-acre parcel of land near Malibu,
California.

     The exchange in 1997 involved the sale by five partnerships and certain
other affiliates of their beneficial interests in three cargo vessels to Semele
in exchange for cash, Semele common stock and the Semele Note. At the time of
the transaction, Semele was a public company unaffiliated with the general
partners and the partnerships. Subsequently, as part of the exchange
transaction, Semele solicited the consent of its shareholders to, among other
things, engage EFG to provide administrative services and to elect certain
affiliates of EFG and the general partners as members of the board of directors.
At that point, Semele became affiliated with EFG and the general partners. The
maturity date of the Semele Note has been extended. Since the Semele Note was
received as consideration for the sale of the cargo vessels to an unaffiliated
party and the extension of the maturity of the Semele Note is documented in an
amendment to the existing Semele Note and not as a new loan, the general
partners of the owner partnerships do not consider the Semele Note to be within
the prohibition in the Partnership Agreements against loans to or from the
General Partner and its affiliates. Nonetheless, the extension of the maturity
date might be construed to be the making of a loan to an affiliate of the
General Partner in violation of the Partnership Agreements of the owner
partnerships and to be a violation of the court's order with respect to New
Investments that all other provisions of the Partnership Agreements shall remain
in full force and effect.

     In accordance with Statement of Financial Accounting Standards No. 115,
"Accounting for Certain Investments in Debt and Equity Securities", marketable
equity securities classified as available-for-sale are carried at fair value.
During the year ended December 31, 1998, the Partnership decreased the carrying
value of its investment in Semele common stock to $4.125 per share (the quoted
price of the Semele stock on NASDAQ at December 31, 1998) resulting in an
unrealized loss in 1998 of $70,460. This loss was reported as a component of
comprehensive income, included in the Statement of Changes in Partners' Capital.
At December 31, 1998, the General Partner determined that the decline in market
value of the Semele common stock was other-than-

                                       15
<PAGE>

temporary. As a result, the Partnership wrote down the cost of the Semele common
stock to $4.125 per share for a total realized loss of $185,281 in 1998.

     During the year ended December 31, 1999, the Partnership increased the
carrying value of its investment in Semele common stock to $5.75 per share (the
quoted price of the Semele stock on NASDAQ Small Cap market at December 31,
1999), resulting in an unrealized gain of $33,924. During the year ended
December 31, 2000, the Partnership decreased the carrying value of its
investment in Semele common stock to $3.8125 per share (the quoted price of the
Semele stock on NASDAQ Small Cap market nearest December 31, 2000), resulting in
an unrealized loss of $40,447. The gain in 1999 and loss in 2000 were reported
as component of comprehensive income and loss, respectively, included in the
Statement of Changes in Partners' Capital.

     The Semele Note and the Semele common stock are subject to a number of
risks including, Semele's ability to make loan payments which is dependent upon
the liquidity of Semele and primarily Semele's ability to sell or refinance its
principal real estate asset consisting of an undeveloped 274-acre parcel of land
near Malibu, California. The market value of the Partnership's investment in
Semele common stock has generally declined since the Partnership's initial
investment in 1997. In 1998, the General Partner determined that the decline in
market value of the stock was other-than-temporary and wrote down the
Partnership's investment. Subsequently, the market value of the Semele common
stock has fluctuated. The market value of the stock could decline in the future.
Gary D. Engle, President and Chief Executive Officer of EFG, the sole
shareholder of the General Partner and is Chairman and Chief Executive Officer
of Semele and James A. Coyne, Executive Vice President of EFG is Semele's
President and Chief Operating Officer. Mr. Engle and Mr. Coyne are both members
of the Board of Directors of, and own significant stock in, Semele.

     The Partnership obtained long-term financing in connection with certain
equipment leases. The origination of such indebtedness and the subsequent
repayments of principal are reported as components of financing activities on
the accompanying Statement of Cash Flow. Each note payable is recourse only to
the specific equipment financed and to the minimum rental payments contracted to
be received during the debt amortization period (which period generally
coincides with the lease rental term). As rental payments are collected, a
portion or all of the rental payment is used to repay the associated
indebtedness. In the near term, the amount of cash used to repay debt
obligations will increase due to the refinancing discussed below. Subsequently
the amount of cash used will decline as the principal balance of notes payable
is reduced through the collection and application of rents. The Partnership had
a balloon payment obligation of $106,516 due at the expiration of the lease term
related to an aircraft leased Finnair OY aircraft. This indebtedness was due to
mature in 2001. In addition, the Partnership also had a balloon obligation of
$560,358 which matured in August 2000. The Partnership paid interest-only on
this debt through 2000 and in February 2001, the Partnership and certain
affiliated investment programs refinanced this indebtedness and repaid the
outstanding indebtedness related to the Finnair OY aircraft. See Note 12 -
Subsequent Event to the financial statements included in Item 8, regarding this
refinancing.

     In February 2000, the Partnership and certain affiliated investment
programs (collectively, the "Programs") refinanced the indebtedness, which
matured in January 2000 associated with a McDonnell Douglas MD-82 aircraft
released in September 2000. In addition to refinancing the existing indebtedness
of $3,370,000, the Programs received additional debt proceeds of $1,350,000
required to perform a D-Check on the aircraft. The Partnership received $160,856
from such proceeds. The note had a fluctuating interest rate based on LIBOR plus
a margin with interest payments due monthly. The Partnership's aggregate share
of the refinanced and new indebtedness was $560,358, which matured in August
2000. The Partnership paid interest-only on the debt throughout 2000. In
February 2001, the Programs refinanced the outstanding indebtedness and accrued
interest related to this aircraft. In addition to refinancing the Programs'
total existing indebtedness and accrued interest of $4,758,845, the Programs
received additional debt proceeds of $3,400,177. The Partnership's aggregate
share of the refinanced and new indebtedness was $968,639 including $564,970
used to repay the existing indebtedness on the refinanced aircraft. The
Partnership used a portion of its share of the additional proceeds of $403,669
to repay the outstanding balance of the indebtedness and accrued interest
related to the aircraft on lease to Finnair OY of $104,590 and certain aircraft
reconfiguration costs that the Partnership had accrued at December 31, 2000. The
new indebtedness bears a fixed interest rate of 7.65%, principal is amortized
monthly and the Partnership has a balloon payment obligation at the expiration
of the lease term of $323,027 in September 2004.

     There are no formal restrictions under the Restated Agreement, as amended,
that materially limit the Partnership's ability to pay cash distributions,
except that the General Partner may suspend or limit cash distributions to
ensure that the Partnership maintains sufficient working capital reserves to
cover, among other things, operating costs and potential expenditures, such as
refurbishment costs to remarket equipment upon lease expiration. In addition to
the need for funds in connection with the Class Action Lawsuit, liquidity is
especially important as the Partnership matures and sells equipment, because the
remaining equipment base consists of
                                       16
<PAGE>

fewer revenue-producing assets that are available to cover prospective cash
disbursements. Insufficient liquidity could inhibit the Partnership's ability to
sustain its operations or maximize the realization of proceeds from remarketing
its remaining assets. In particular, the Partnership must contemplate the
potential liquidity risks associated with its investment in commercial jet
aircraft. The management and remarketing of aircraft can involve, among other
things, significant costs and lengthy remarketing initiatives. Although the
Partnership's lessees are required to maintain the aircraft during the period of
lease contract, repair, maintenance, and/or refurbishment costs at lease
expiration can be substantial. For example, an aircraft that is returned to the
Partnership meeting minimum airworthiness standards, such as flight hours or
engine cycles, nonetheless may require heavy maintenance in order to bring its
engines, airframe and other hardware up to standards that will permit its
prospective use in commercial air transportation.

     At December 31, 2000, the Partnership's equipment portfolio included
ownership interests in four commercial jet aircraft, one of which is a Boeing
737 aircraft. The Boeing 737 aircraft is a Stage 2 aircraft, meaning that it is
prohibited from operating in the United States unless it is retro-fitted with
hush-kits to meet Stage 3 noise regulations promulgated by the Federal Aviation
Administration. During 2000, this aircraft was re-leased to Air Slovakia BWJ,
Ltd., through September 2003. The remaining three aircraft in the Partnership's
portfolio already are Stage 3 compliant and have lease terms expiring in April
2001, January 2003, and September 2004, respectively.

     Cash distributions to the General and Limited Partners had been declared
and generally paid within fifteen days following the end of each calendar
quarter. The payment of such distributions is presented as components of
financing activities on the accompanying Statement of Cash Flows. No cash
distributions were declared for the year ended December 31, 2000, however, the
fourth quarter 1999 cash distribution of $158,577 was paid in January 2000. In
any given year, it is possible that Limited Partners will be allocated taxable
income in excess of distributed cash. This discrepancy between tax obligations
and cash distributions may or may not continue in the future, and cash may or
may not be available for distribution to the Limited Partners adequate to cover
any tax obligation.

     Cash distributions paid to the Limited Partners consist of both a return of
and a return on capital. Cash distributions do not represent and are not
indicative of yield on investment. Actual yield on investment cannot be
determined with any certainty until conclusion of the Partnership and will be
dependent upon the collection of all future contracted rents, the generation of
renewal and/or re-lease rents, the residual value realized for each asset at its
disposal date and the performance of the Partnership's non-equipment assets.

     The Partnership's capital account balances for federal income tax and for
financial reporting purposes are different primarily due to differing treatments
of income and expense items for income tax purposes in comparison to financial
reporting purposes (generally referred to as permanent or timing differences;
see Note 9 to the financial statements included in Item 8). For instance,
selling commissions and organization and offering costs pertaining to
syndication of the Partnership's limited partnership units are not deductible
for federal income tax purposes, but are recorded as a reduction of partners'
capital for financial reporting purposes. Therefore, such differences are
permanent differences between capital accounts for financial reporting and
federal income tax purposes. Other differences between the bases of capital
accounts for federal income tax and financial reporting purposes occur due to
timing differences. Such items consist of the cumulative difference between
income or loss for tax purposes and financial statement income or loss and the
treatment of unrealized gains or losses on investment securities for book and
tax purposes. The principal components of the cumulative difference between
financial statement income or loss and tax income or loss results from different
depreciation policies for book and tax purposes and different treatments for
book and tax purposes related to the real estate venture.

     For financial reporting purposes, the General Partner has accumulated a
capital deficit at December 31, 2000. This is the result of aggregate cash
distributions to the General Partner being in excess of its capital contribution
of $1,000 and its allocation of financial statement net income or loss.
Ultimately, the existence of a capital deficit for the General Partner for
financial reporting purposes is not indicative of any further capital
obligations to the Partnership by the General Partner. The Restated Agreement,
as amended, requires that upon the dissolution of the Partnership, the General
Partner will be required to contribute to the Partnership an amount equal to any
negative balance which may exist in the General Partner's tax capital account.
At December 31, 2000, the General Partner had a positive tax capital account
balance.

     The outcome of the Class Action Lawsuit described in Note 10 to the
financial statements included in Item 8 herein will be the principal factor in
determining the future of the Partnership's operations. The proposed settlement
to that lawsuit, if effected, will materially change the future organizational
structure and business interests of the Partnership, as well as its cash
distribution policies. In addition, commencing with the first quarter

                                       17
<PAGE>

of 2000, the General Partner suspended the payment of quarterly cash
distributions pending final resolution of the Class Action Lawsuit. Accordingly,
future cash distributions are not expected to be paid until the Class Action
Lawsuit is settled or adjudicated.

Item 7A.  Quantitative and Qualitative Disclosures about Market Risks.
----------------------------------------------------------------------

     The Partnership's  financial statements include financial  instruments that
are exposed to interest rate risks.

     The Partnership's exposure to market risk for changes in interest rates at
December 31, 2000 related primarily to certain of the Partnership's notes
payable for which the interest rates are based on the London Interbank Offering
Rate ("LIBOR"). However, subsequent to December 31, 2000, the Partnership
refinanced one of its variable rate notes payable with an instrument bearing a
fixed rate of interest. After considering the refinancing, the Partnership had
one note payable with a variable rate of interest. The effect of a 100 basis
point increase in the interest rate on this note payable would not have a
material effect on the Partnership's financial statements.

     The Partnership's acquisition, development and construction loan to Echelon
Residential Holdings matures on September 8, 2002 and earns interest at a fixed
annual rate of 14% for the first 24 months and a fixed annual rate of 18% for
the last 6 months of the loan. Investments earning a fixed rate of interest may
have their fair market value adversely impacted due to a rise in interest rates.
The effect of interest rate fluctuations on the Partnership in 2000 was not
material.

                                       18
<PAGE>

Item 8.  Financial Statements and Supplementary Data.
----------------------------------------------------

         Financial Statements:

               Report of Independent Auditors............................  20

               Statement of Financial Position
               at December 31, 2000 and 1999.............................  21

               Statement of Operations
               For the years ended December 31, 2000, 1999 and 1998......  22

               Statement of Changes in Partners' Capital
               for the years ended December 31, 2000, 1999 and 1998......  23

               Statement of Cash Flows
               for the years ended December 31, 2000, 1999 and 1998......  24

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

                                       19
<PAGE>

                        Report of Independent Auditors

To the Partners of American Income Fund I-C,
a Massachusetts Limited Partnership:

We have audited the accompanying statements of financial position of American
Income Fund I-C, a Massachusetts Limited Partnership, as of December 31, 2000
and 1999, and the related statements of operations, changes in partners'
capital, and cash flows for each of the three years in the period ended December
31, 2000. These financial statements are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these financial
statements based on our audits. The consolidated financial statements of Echelon
Residential Holdings LLC, (a limited liability company to which the Partnership
has loaned $2,780,000), have been audited by other auditors whose report has
been furnished to us; insofar as our opinion on the financial statements relates
to data included for Echelon Residential Holdings LLC, it is based solely on
their report.

We conducted our audits in accordance with auditing standards generally accepted
in the United States. 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 and the report of other auditors
provide a reasonable basis for our opinion.

In our opinion, based on our audits and the report of other auditors, the
financial statements referred to above present fairly, in all material respects,
the financial position of American Income Fund I-C, a Massachusetts Limited
Partnership at December 31, 2000 and 1999, and the results of its operations and
its cash flows for each of the three years in the period ended December 31,
2000, in conformity with accounting principles generally accepted in the United
States.



                                                        /S/ ERNST & YOUNG LLP

Tampa, Florida
March 30, 2001,
except for the last 7 paragraphs of Note 12, as to which the date is
May 15, 2001

                                       20
<PAGE>

                           AMERICAN INCOME FUND I-C,
                      a Massachusetts Limited Partnership

                        STATEMENT OF FINANCIAL POSITION
                          December 31, 2000 and 1999

<TABLE>
<CAPTION>
                                                                     2000               1999
                                                                -------------       ------------
<S>                                                             <C>                 <C>
ASSETS
Cash and cash equivalents....................................   $   1,758,608       $  3,970,877
Rents receivable.............................................         162,064             92,215
Accounts receivable - other..................................          39,178                 --
Accounts receivable - affiliate..............................          93,661            133,950
Investment in real estate venture............................       2,568,988                 --
Net investment in sales-type lease...........................         263,060
Note receivable - affiliate..................................         459,729            459,729
Investment securities - affiliate - at fair market value.....          79,590            120,037
Equipment at cost, net of accumulated
    depreciation of $5,593,629 and $7,486,725
    at December 31, 2000 and 1999, respectively..............       5,315,597          6,405,777
                                                                -------------       ------------
        Total assets.........................................   $  10,740,475       $ 11,182,585
                                                                =============       ============



LIABILITIES AND PARTNERS' CAPITAL
Notes payable................................................   $   2,056,682       $  2,363,628
Accrued interest.............................................          10,135             16,416
Accrued liabilities..........................................         496,938            386,918
Accrued liabilities - affiliate..............................          23,742             17,783
Deferred rental income.......................................          38,025             57,307
Cash distributions payable to partners.......................              --            158,577
                                                                -------------       ------------
        Total liabilities....................................       2,625,522          3,000,629
                                                                -------------       ------------
Partners' capital (deficit):
    General Partner..........................................        (476,792)          (473,442)
    Limited Partnership Interests
    (803,454.56 Units; initial purchase price of $25 each)...       8,591,745          8,655,398
                                                                -------------       ------------
        Total partners' capital..............................       8,114,953          8,181,956
                                                                -------------       ------------
        Total liabilities and partners' capital..............   $  10,740,475       $ 11,182,585
                                                                =============       ============
</TABLE>

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

                                       21
<PAGE>

                            AMERICAN INCOME FUND I-C,
                       a Massachusetts Limited Partnership

                             STATEMENT OF OPERATIONS
              For the years ended December 31, 2000, 1999 and 1998

<TABLE>
<CAPTION>

                                                        2000         1999           1998
                                                     ----------   -----------   -----------
<S>                                                  <C>          <C>           <C>
Income:
 Operating lease revenue........................     $1,395,237   $ 2,174,523   $ 2,463,373
 Sales-type lease revenue.......................          2,727            --            --
 Interest income................................        124,026       212,140       149,291
 Interest income - affiliate....................         45,973        45,973        45,973
 Gain on sale of equipment......................        211,833       508,592       119,724
                                                     ----------   -----------   -----------
     Total income...............................      1,779,796     2,941,228     2,778,361
                                                     ----------   -----------   -----------


Expenses:
 Depreciation....................................       629,430       956,631     1,083,372
 Interest expense................................       220,695       222,725       318,530
 Equipment management fees - affiliate...........        66,733       101,040       113,260
 Write-down of investment securities - affiliate.            --            --       185,281
 Operating expenses - affiliate..................       678,482       470,580       454,908
 Partnership's share of unconsolidated
   real estate venture's loss....................       211,012            --            --
                                                     ----------   -----------   -----------
     Total expenses..............................     1,806,352     1,750,976     2,155,351
                                                     ----------   -----------   -----------

Net (loss) income................................    $  (26,556)  $ 1,190,252   $   623,010
                                                     ===========  ===========   ===========


Net (loss) income
      per limited partnership unit...............    $    (0.03)  $      1.41   $      0.74
                                                     ==========   ===========   ===========
Cash distributions declared
     per limited partnership unit................    $       --   $      0.75   $      0.75
                                                     ==========   ===========   ===========
</TABLE>



  The accompanying notes are an integral parts of these financial statements.

                                       22
<PAGE>

                           AMERICAN INCOME FUND I-C,
                       a Massachusetts Limited Partnership

                    STATEMENT OF CHANGES IN PARTNERS' CAPITAL
             For the years ended December 31, 2000, 1999 and 1998

<TABLE>
<CAPTION>
                                                     General
                                                     Partner              Limited Partners
                                                                   -----------------------------
                                                      Amount          Units             Amount             Total
                                                     ----------    -----------        -----------       -----------
<S>                                                  <C>           <C>                <C>               <C>
Balance at December 31, 1997......................    $(508,111)    803,454.56         $7,996,672        $7,488,561

 Net income - 1998................................       31,151             --            591,859           623,010
 Unrealized loss on investment
      securities - affiliate......................       (3,523)            --            (66,937)          (70,460)
 Less: Reclassification adjustment for write-
      down of investment securities - affiliate           9,264             --            176,017           185,281
                                                     ----------    -----------        -----------       -----------
 Comprehensive income.............................       36,892             --            700,939           737,831
                                                     ----------    -----------        -----------       -----------
 Cash distributions declared......................      (31,716)            --           (602,590)         (634,306)
                                                     ----------    -----------        -----------       -----------

Balance at December 31, 1998......................     (502,935)    803,454.56          8,095,021         7,592,086

   Net income - 1999..............................       59,513             --          1,130,739         1,190,252
   Unrealized gain on investment
        securities - affiliate....................        1,696             --             32,228            33,924
                                                     ----------    -----------        -----------       -----------
   Comprehensive income...........................       61,209             --          1,162,967         1,224,176
                                                     ----------    -----------        -----------       -----------
   Cash distributions declared....................      (31,716)            --           (602,590)         (634,306)
                                                     -----------   -----------        -----------       -----------

Balance at December 31, 1999......................     (473,442)    803,454.56           8,655,398        8,181,956

   Net loss - 2000................................       (1,328)            --             (25,228)         (26,556)
   Unrealized loss on investment
        securities - affiliate....................       (2,022)            --             (38,425)         (40,447)
                                                     ----------    -----------      --------------      -----------
   Comprehensive loss.............................       (3,350)            --             (63,653)         (67,003)
                                                     ----------    -----------      --------------      -----------

Balance at December 31, 2000......................    $(476,792)    803,454.56          $8,591,745        $8,114,953
                                                     ==========    ===========      ==============      ============
</TABLE>

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

                                       23

<PAGE>

                           AMERICAN INCOME FUND I-C,
                      a Massachusetts Limited Partnership

                            STATEMENT OF CASH FLOWS
             For the years ended December 31, 2000, 1999 and 1998


<TABLE>
<CAPTION>
                                                                                         2000            1999            1998
                                                                                     ------------   -------------   --------------
<S>                                                                                  <C>            <C>             <C>
Cash flows provided by (used in) operating activities:
Net (loss) income...............................................................     $    (26,556)  $   1,190,252   $     623,010
Adjustments to reconcile net (loss) income to net cash
     provided by operating activities:
         Depreciation...........................................................          629,430         956,631       1,083,372
         Sales-type lease revenue...............................................           (2,727)             --              --
         Gain on sale of equipment..............................................         (211,833)       (508,592)       (119,724)
         Write-down of investment securities - affiliate........................               --              --         185,281
         Partnership's share of unconsolidated real estate
             venture's loss.....................................................          211,012              --              --
Changes in assets and liabilities:
     Decrease (increase) in:
         Rents receivable.......................................................          (69,849)        269,068        (114,406)
         Accounts receivable - affiliate........................................           40,289         (83,183)        245,738
         Accounts receivable - other............................................          (39,178)             --              --
         Collections on net investment in sales-type lease......................           64,503              --              --
     Increase (decrease) in:
         Accrued interest.......................................................           (6,281)        (10,204)         (3,848)
         Accrued liabilities....................................................          110,020         127,418         250,300
         Accrued liabilities - affiliate........................................            5,959           3,032         (14,174)
         Deferred rental income.................................................          (19,282)          2,395          29,528
                                                                                     ------------   -------------   -------------
                  Net cash provided by operating activities.....................          685,507       1,946,817       2,165,077
                                                                                     ------------   -------------   -------------
Cash flows (used in) provided by investing activities:
     Proceeds from equipment sales..............................................          347,747         510,396         135,384
     Investment in real estate venture..........................................       (2,780,000)             --              --
                                                                                     ------------   -------------   -------------
                  Net cash (used in) provided by investing activities...........       (2,432,253)        510,396         135,384
                                                                                     ------------   -------------   -------------
Cash flows used in financing activities:
     Proceeds from notes payable................................................          160,856              --              --
     Principal payments - notes payable.........................................         (467,802)      1,095,661)       (942,464)
     Distributions paid.........................................................         (158,577)       (634,306)       (634,306)
                                                                                     ------------   -------------   -------------
                   Net cash used in financing activities........................         (465,523)      1,729,967)     (1,576,770)
                                                                                     ------------   -------------   -------------

Net (decrease) increase in cash and cash equivalents............................        2,212,269)        727,246         723,691
Cash and cash equivalents at beginning of year..................................        3,970,877       3,243,631       2,519,940
                                                                                     ------------   -------------   -------------
Cash and cash equivalents at end of year........................................     $  1,758,608   $   3,970,877   $   3,243,631
                                                                                     ============   =============   =============

Supplemental disclosure of cash flow information:
     Cash paid during the year for interest.....................................     $    226,976   $     232,929   $     322,378
                                                                                     ============   =============   =============

Supplemental disclosure of non-cash investing and financing activities:
     Equipment sold on sales-type lease.........................................     $    324,836   $           -   $           -
                                                                                     ============   =============   =============
</TABLE>

  See Note 6 to the financial statements regarding the Partnership's carrying
                value of its investment securities - affiliate.


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

                                       24
<PAGE>

                           AMERICAN INCOME FUND I-C,
                      a Massachusetts Limited Partnership
                       Notes to the Financial Statements

                               December 31, 2000


NOTE 1 - ORGANIZATION AND PARTNERSHIP MATTERS
---------------------------------------------

     American Income Fund I-C, a Massachusetts Limited Partnership (the
"Partnership") was organized as a limited partnership under the Massachusetts
Uniform Limited Partnership Act (the "Uniform Act") on March 1, 1991, for the
purpose of acquiring and leasing to third parties a diversified portfolio of
capital equipment. Partners' capital initially consisted of contributions of
$1,000 from the General Partner (AFG Leasing VI Incorporated) and $100 from the
Initial Limited Partner (AFG Assignor Corporation). On May 31, 1991, the
Partnership issued 803,454.56 units of limited partnership interests (the
"Units") to 909 investors. Included in the 803,454.56 units were 7,293.56 bonus
units. The Partnership's General Partner, AFG Leasing VI Incorporated, is a
Massachusetts corporation formed in 1990 and an affiliate of Equis Financial
Group Limited Partnership (formerly known as American Finance Group), a
Massachusetts limited partnership ("EFG"). The General Partner is not required
to make any other capital contributions except as may be required under the
Uniform Act and Section 6.1(b) of the Amended and Restated Agreement and
Certificate of Limited Partnership (the "Restated Agreement, as amended").

     Significant operations commenced on May 31, 1991 when the Partnership made
its initial equipment acquisition. Pursuant to the Restated Agreement, as
amended, Distributable Cash From Operations and Distributable Cash From Sales or
Refinancings will be allocated 95% to the Limited Partners and 5% to the General
Partner.

     Under the terms of a Management Agreement between the Partnership and EFG,
management services are provided by EFG to the Partnership at fees, which the
General Partner believes to be competitive, for similar services (see Note 7).

     EFG is a Massachusetts limited partnership formerly known as American
Finance Group ("AFG"). AFG was established in 1988 as a Massachusetts general
partnership and succeeded American Finance Group, Inc., a Massachusetts
corporation organized in 1980. EFG and its subsidiaries (collectively, the
"Company") are engaged in various aspects of the equipment leasing business,
including EFG's role as Manager or Advisor to the Partnership and several other
direct-participation equipment leasing programs sponsored or co-sponsored by EFG
(the "Other Investment Programs"). The Company arranges to broker or originate
equipment leases, acts as remarketing agent and asset manager, and provides
leasing support services, such as billing, collecting, and asset tracking.

     The general partner of EFG, with a 1% controlling interest, is Equis
Corporation, a Massachusetts corporation owned and controlled entirely by Gary
D. Engle, its President, Chief Executive Officer and sole Director. Equis
Corporation also owns a controlling 1% general partner interest in EFG's 99%
limited partner, GDE Acquisition Limited Partnership ("GDE LP"). Equis
Corporation and GDE LP were established in December 1994 by Mr. Engle for the
sole purpose of acquiring the business of AFG.

     In January 1996, the Company sold certain assets of AFG relating primarily
to the business of originating new leases, and the name "American Finance
Group," and its acronym to a third party. AFG changed its name to Equis
Financial Group Limited Partnership after the sale was concluded. Pursuant to
terms of the sale agreements, EFG specifically reserved the rights to continue
using the name American Finance Group and its acronym in connection with the
Partnership and the Other Investment Programs and to continue managing all
assets owned by the Partnership and the Other Investment Programs.

                                       25
<PAGE>

                           AMERICAN INCOME FUND I-C,
                      a Massachusetts Limited Partnership
                       Notes to the Financial Statements

                                  (Continued)


NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
---------------------------------------------------

Cash
----

     The Partnership considers liquid investment instruments purchased with a
maturity of three months or less to be cash equivalents. From time to time, the
Partnership invests excess cash with large institutional banks in federal agency
discount notes and repurchase agreements with overnight maturities. Under the
terms of the agreements, title to the underlying securities passes to the
Partnership. The securities underlying the agreements are book entry securities.
At December 31, 2000, the Partnership had $1,640,624 invested in federal agency
discount notes, repurchase agreements secured by U.S. Treasury Bills or
interests in U.S. Government securities, or other highly liquid overnight
investments.

Revenue Recognition
-------------------

     Effective January 1, 2000, the Partnership adopted the provisions of
Securities Exchange Commission Staff Accounting Bulletin No. 101, "Revenue
Recognition in Financial Statements" ("SAB No. 101"). SAB No. 101 provides
guidance for the recognition, presentation and disclosure of revenue in
financial statements. The adoption of SAB No. 101 had no impact on the
Partnership's financial statements.

     Rents are payable to the Partnership monthly, quarterly or semi-annually
and no significant amounts are calculated on factors other than the passage of
time. The majority of the leases are accounted for as operating leases and are
noncancellable. Rents received prior to their due dates are deferred. In certain
instances, the Partnership may enter renewal or re-lease agreements which expire
beyond the Partnership's anticipated dissolution date. This circumstance is not
expected to prevent the orderly wind-up of the Partnership's business activities
as the General Partner and EFG would seek to sell the then-remaining equipment
assets either to the lessee or to a third party, taking into consideration the
amount of future noncancellable rental payments associated with the attendant
lease agreements. See also Note 10 regarding the Class Action Lawsuit. Future
minimum rents from operating leases of $2,147,150 are due as follows:

     For the year ending December 31,  2001......    $   871,884
                                       2002......        797,389
                                       2003......        321,166
                                       2004......        156,711
                                                     -----------
                                       Total......   $ 2,147,150
                                                     ===========

Future minimum rents for operating leases does not include the operating leases
for which the lease payments are based on the usage of the equipment leased.

     Lease payments for the sales-type lease are due monthly and the related
revenue is recognized by a method which produces a constant periodic rate of
return on the outstanding investment in the lease. Future minimum lease payments
for the sales-type lease of $279,563 are due in the year ending December 31,
2001. Unearned income is recognized as sales-type lease revenue over the lease
term using the interest method.

                                       26
<PAGE>

                           AMERICAN INCOME FUND I-C,
                      a Massachusetts Limited Partnership
                       Notes to the Financial Statements

                                  (Continued)


     Revenue from major individual lessees which accounted for 10% or more of
lease revenue during the years ended December 31, 2000, 1999 and 1998 are as
follows:

                                           2000          1999            1998
                                        ---------      --------       ---------

Reno Air, Inc........................   $384,605       $370,352       $ 375,103
Finnair OY...........................   $277,316       $507,521       $ 511,496
General Motors Corporation...........   $210,245       $327,579       $ 329,924
Southwest Airlines, Inc..............   $     --       $416,708       $ 413,280
Trans Ocean Container Corporation....   $     --       $     --       $ 279,106

Use of Estimates
----------------

     The preparation of the financial statements in conformity with generally
accepted accounting principles requires the use of estimates and assumptions
that affect the amounts reported in the financial statements and accompanying
notes. Actual results could differ from those estimates.

Equipment on Lease
------------------

     All equipment was acquired from EFG, one of its Affiliates or from third-
party sellers. Equipment Cost means the actual cost paid by the Partnership to
acquire the equipment, including acquisition fees. Where equipment was acquired
from EFG or an Affiliate, Equipment Cost reflects the actual price paid for the
equipment by EFG or the Affiliate plus all actual costs incurred by EFG or the
Affiliate while carrying the equipment, including all liens and encumbrances,
less the amount of all primary term rents earned by EFG or the Affiliate prior
to selling the equipment. Where the seller of the equipment was a third party,
Equipment Cost reflects the seller's invoice price.

Depreciation
------------

     The Partnership's depreciation policy is intended to allocate the cost of
equipment over the period during which it produces economic benefit. The
principal period of economic benefit is considered to correspond to each asset's
primary lease term, which term generally represents the period of greatest
revenue potential for each asset. Accordingly, to the extent that an asset is
held on primary lease term, the Partnership depreciates the difference between
(i) the cost of the asset and (ii) the estimated residual value of the asset on
a straight-line basis over such term. For purposes of this policy, estimated
residual values represent estimates of equipment values at the date of primary
lease expiration. To the extent that an asset is held beyond its primary lease
term, the Partnership continues to depreciate the remaining net book value of
the asset on a straight-line basis over the asset's remaining economic life.
Periodically, the General Partner evaluates the net carrying value of equipment
to determine whether it exceeds estimated net realizable value. Adjustments to
reduce the net carrying value of equipment are recorded in those instances where
estimated net realizable value is considered to be less than net carrying value.

     The ultimate realization of residual value for any type of equipment is
dependent upon many factors, including EFG's ability to sell and re-lease
equipment. Changing market conditions, industry trends, technological advances,
and many other events can converge to enhance or detract from asset values at
any given time.

Remarketing and Maintenance Expenses
------------------------------------

     The Partnership expenses storage and remarketing costs associated with
aircraft and other equipment under lease as incurred.

                                       27
<PAGE>

                           AMERICAN INCOME FUND I-C,
                      a Massachusetts Limited Partnership
                       Notes to the Financial Statements

                                  (Continued)


     Generally, the costs of scheduled inspections and repairs and routine
maintenance for aircraft and other equipment under lease are the responsibility
of the lessee. For aircraft under lease, scheduled airframe inspections and
repairs, such as "D checks", are generally the responsibility of the lessee. In
certain situations, the Partnership may be responsible for reimbursing the
lessee for a portion of such costs paid by the lessee prior to the redelivery
date (i.e., the expiration of the lease term) or may be entitled to receive
additional payments from the lessee based on the terms and conditions set forth
in the lease arrangement which considers, among other things, the amount of time
remaining until the next scheduled maintenance event. The Partnership records
the amount payable or receivable, with a corresponding charge or credit to
operations.

Investment Securities - Affiliate - At Fair Market Value
--------------------------------------------------------

     The Partnership's investment in Semele Group Inc. ("Semele") is considered
to be available-for-sale and as such is carried at fair value with unrealized
gains and losses reported as components of partners' capital. Other-than-
temporary declines in market value are recorded as write-down of investment in
the Statement of Operations (see Note 6). Unrealized gains or losses on the
Partnership's available-for-sale securities are required to be included in
comprehensive income or loss.

Real Estate Loan
----------------

     The Partnership accounts for the loan to a real estate company using the
guidance set forth in the Third Notice to Practitioners by the American
Institute of Certified Public Accountants ("AICPA") in February 1986 entitled
"ADC Arrangements" (the "Third Notice"). The Partnership has evaluated this loan
and has determined that real estate accounting is appropriate. This
determination affects the Partnership's balance sheet classification of the loan
and the recognition of revenues derived therefrom. The Third Notice was issued
to address those real estate acquisition, development and construction
arrangements where a lender has virtually the same risk and potential rewards as
those of owners or joint ventures. Emerging Issues Task Force ("EITF") 86-21,
"Application of the AICPA Notice to Practitioners regarding Acquisition,
Development and Construction Arrangements to Acquisition of an Operating
Property" expanded the applicability of the Third Notice to entities other than
financial institutions.

     Based on the applicability of the Third Notice, EITF 86-21 and
consideration of the economic substance of the transaction, the loan is
considered to be an investment in a real estate venture for accounting purposes.
In accordance with the provisions of Statement of Position No. 78-9, "Accounting
for Investments in Real Estate Ventures", the Partnership reports its share of
income or loss of the real estate company under the equity method of accounting.

     The Partnership took into consideration the following characteristics of
the loan in determining that the loan should be accounted for as an investment
in a real estate venture: (i) the Partnership and the 10 affiliated partnerships
who made the loans collectively have provided substantially all of the necessary
funds to acquire the underlying properties without taking title to such
properties, (ii) by virtue of a pledged security interest in the wholly owned
subsidiary of the borrower that holds title to the properties, the Partnership's
loan is secured only by the underlying properties, (iii) the borrower will only
repay the Partnership at maturity, including all interest accrued on the loan
through maturity, (iv) it is expected that the borrower can only repay the loan
through sales of undeveloped and developed property; and (v) the structure of
the loan (i.e. no payments due until maturity) makes it unlikely that the
property will be taken in foreclosure as a result of delinquency. See Note 4 for
additional discussion.


Net Investment in Sales-Type Lease
----------------------------------

     For leases that qualify as sales-type leases, the Partnership recognizes
profit or loss at lease inception to the extent the fair value of the property
leased differs from the carrying value. For balance sheet purposes, the
aggregate lease payments receivable are recorded on the balance sheet net of
unearned income, representing

                                       28
<PAGE>

                           AMERICAN INCOME FUND I-C,
                      a Massachusetts Limited Partnership
                       Notes to the Financial Statements

                                  (Continued)


interest, as net investment in sales-type lease. Unearned income is recognized
as sales-type lease revenue over the lease term using the interest method.

Impairment of Long-Lived Assets
-------------------------------

     The carrying value of long-lived assets, including equipment and the real
estate loan, will be reviewed for impairment whenever events or changes in
circumstances indicate that the recorded value cannot be recovered from
undiscounted future cash flows.

Accrued Liabilities - Affiliate
-------------------------------

     Unpaid operating expenses paid by EFG on behalf of the Partnership and
accrued but unpaid administrative charges and management fees are reported as
Accrued Liabilities - Affiliate (see Note 7).

Contingencies
-------------

     It is the Partnership's policy to recognize a liability for goods and
services during the period when the goods or services are received. To the
extent that the Partnership has a contingent liability, meaning generally a
liability the payment of which is subject to the outcome of a future event, the
Partnership recognizes a liability in accordance with Statement of Financial
Accounting Standards No. 5 "Accounting for Contingencies" ("SFAS No. 5"). SFAS
No. 5 requires the recognition of contingent liabilities when the amount of
liability can be reasonably estimated and the liability is probable.

     The Partnership is a Nominal Defendant in a Class Action Lawsuit. In 1998,
a settlement proposal to resolve that litigation was negotiated and remains
pending (see Note 10). The Partnership's estimated exposure for costs
anticipated to be incurred in pursuing the settlement proposal is approximately
$389,000 consisting principally of legal fees and other professional service
costs. These costs are expected to be incurred regardless of whether the
proposed settlement ultimately is effected and, therefore, the Partnership
expensed approximately $298,000 of these costs in 1998 following the Court's
approval of the settlement plan. The cost estimate is subject to change and is
monitored by the General Partner based upon the progress of the settlement
proposal and other pertinent information. As a result, the Partnership expensed
additional amounts of $41,000 and $50,000 for such costs during 2000 and 1999,
respectively. See notes 10 and 12 for additional discussions.

     The Investment Company Act of 1940 (the "1940 Act") places restrictions on
the capital structure and business activities of companies registered
thereunder. The Partnership has active business operations in the financial
services industry, including equipment leasing, the loan to Echelon Residential
Holdings LLC ("Echelon Residential Holdings") and its ownership of securities of
Semele. The Partnership does not intend to engage in investment activities in a
manner or to an extent that would require the Partnership to register as an
investment company under the 1940 Act. However, it is possible that the
Partnership may unintentionally engage in an activity or activities that may be
construed to fall within the scope of the 1940 Act. The General Partner is
engaged in discussions with the staff of the Securities and Exchange Commission
("SEC") regarding whether or not the Partnership may be an inadvertent
investment company as a consequence of the above-referenced loan. The General
Partner has consulted counsel and believes that the Partnership is not an
investment company. If the Partnership were determined to be an unregistered
investment company, its business would be adversely affected. The 1940 Act,
among other things, prohibits an unregistered investment company from offering
securities for sale or engaging in any business in interstate commerce and,
consequently, leases and contracts entered into by partnerships that are
unregistered investment companies may be voidable. If necessary, the Partnership
intends to avoid being deemed an investment company by disposing or acquiring
certain assets that it might not otherwise dispose or acquire.

                                       29
<PAGE>

                           AMERICAN INCOME FUND I-C,
                      a Massachusetts Limited Partnership
                       Notes to the Financial Statements

                                  (Continued)


Allocation of Profits and Losses
--------------------------------

     For financial statement purposes, net income or loss is allocated to each
Partner according to their respective ownership percentages (95% to the Limited
Partners and 5% to the General Partner). See Note 9 for allocation of income or
loss for income tax purposes.

Accumulated Other Comprehensive Income (Loss)
---------------------------------------------

Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive
Income," effective in 1998, requires the disclosure of comprehensive income
(loss) to reflect changes in partners' capital that result from transactions and
economic events from nonowner sources. Accumulated other comprehensive income
(loss) for the years ended December 31, 2000, 1999 and 1998 primarily represents
the Partnership's unrealized gains (losses) on the investment in Semele:

<TABLE>
<CAPTION>
                                                                 2000         1999         1998
                                                               ---------    ---------   -----------
<S>                                                            <C>          <C>         <C>
Beginning balance..........................................    $  33,924    $      --   $  (114,821)
Adjustments primarily related to the Partnership's
  investment in Semele.....................................      (40,447)      33,924       114,821
                                                               ---------    ---------   -----------
Ending balance.............................................    $  (6,523)   $  33,924   $        --
                                                               =========    =========   ===========
</TABLE>

Net Income (Loss) and Cash Distributions Per Unit
-------------------------------------------------

     Net income (loss) and cash distributions per Unit are based on 803,454.56
Units outstanding during each of the three years in the period ended December
31, 2000 and computed after allocation of the General Partner's 5% share of net
income (loss) and cash distributions.

Provision for Income Taxes
--------------------------

     No provision or benefit from income taxes is included in the accompanying
financial statements. The Partners are responsible for reporting their
proportionate shares of the Partnership's taxable income or loss and other tax
attributes on their separate tax returns.

NOTE 3 - EQUIPMENT
------------------

     The following is a summary of equipment owned by the Partnership at
December 31, 2000. Remaining Lease Term (Months), as used below, represents the
number of months remaining from December 31, 2000 under contracted lease terms
and is presented as a range when more than one lease agreement is contained in
the stated equipment category. A Remaining Lease Term equal to zero reflects
equipment either held for sale or re-lease or being leased on a month-to-month
basis. In the opinion EFG, the acquisition cost of the equipment did not exceed
its fair market value.

<TABLE>
<CAPTION>
                                                       Remaining
                                                       Lease Term      Equipment
                    Equipment Type                      (Months)        at Cost          Location
------------------------------------------------     -------------   ------------    ----------------
<S>                                                  <C>             <C>             <C>
Aircraft.........................................    4-44            $  6,918,159    NV/Foreign
Trailers/intermodal containers...................   24-30               1,963,408    CA/OK
Materials handling...............................    0-12               1,878,790    CA /IA/IL/MI/MN/MO/
                                                                                     NY/OH/OR/TX/Foreign
Motor vehicles...................................       0                  97,400    MI
Communications...................................       0                  51,469    TX
                                                                     ------------
</TABLE>

                                       30
<PAGE>

                           AMERICAN INCOME FUND I-C,
                      a Massachusetts Limited Partnership
                       Notes to the Financial Statements

                                  (Continued)




<TABLE>
<CAPTION>
<S>                                                                  <C>
     Total equipment cost........................                      10,909,226
     Accumulated depreciation....................                      (5,593,629)
                                                                     ------------
     Equipment, net of accumulated depreciation..                    $  5,315,597
                                                                     ============
</TABLE>

     In certain cases, the cost of the Partnership's equipment represents a
proportionate ownership interest. The remaining interests are owned by EFG or an
affiliated equipment leasing program sponsored by EFG. The Partnership and each
affiliate individually report, in proportion to their respective ownership
interests, their respective shares of assets, liabilities, revenues, and
expenses associated with the equipment. Proportionate equipment ownership
enabled the Partnership to further diversify its equipment portfolio at
inception by participating in the ownership of selected assets, thereby reducing
the general levels of risk which could have resulted from a concentration in any
single equipment type, industry or lessee. At December 31, 2000, the
Partnership's equipment portfolio included equipment having a proportionate
original cost of $8,881,573, representing approximately 88% of total equipment
cost.

     Certain of the equipment and related lease payment streams were used to
secure term loans with third-party lenders. The preceding summary of equipment
includes leveraged equipment having an original cost of approximately $6,218,000
and a net book value of approximately $4,498,000 at December 31, 2000 (see Note
8).

     Generally, the costs associated with maintaining, insuring and operating
the Partnership's equipment are incurred by the respective lessees pursuant to
terms specified in their individual lease agreements with the Partnership.

     As equipment is sold to third parties, or otherwise disposed of, the
Partnership recognizes a gain or loss equal to the difference between the net
book value of the equipment at the time of sale or disposition and the proceeds
realized upon sale or disposition. The ultimate realization of estimated
residual value in the equipment is dependent upon, among other things, EFG's
ability to maximize proceeds from selling or re-leasing the equipment upon the
expiration of the primary lease terms. At December 31, 2000, all of the
Partnership's equipment was subject to contracted leases or being leased on a
month to month basis.

NOTE 4 - INVESTMENT IN REAL ESTATE VENTURE
------------------------------------------

     On March 8, 2000, the Partnership and 10 affiliated partnerships (the
"Exchange Partnerships") collectively loaned $32 million to Echelon Residential
Holdings LLC ("Echelon Residential Holdings"), a newly formed real estate
company. Echelon Residential Holdings is owned by several investors, including
James A. Coyne, Executive Vice President of EFG. In addition, certain affiliates
of the General Partner made loans to Echelon Residential Holdings in their
individual capacities.

     In the Class Action Lawsuit, there is a risk that the court may object to
the General Partner's action in structuring the loan in this way since the
officer may be deemed an affiliate and the loans in violation of the prohibition
against loans to affiliates and the court's statement in its order permitting
New Investments that all other provisions of the Partnership Agreements
governing the investment objectives and policies of the Partnership shall remain
in full force and effect. The court may require the partnerships to restructure
or divest the loan.

     The Partnership's loan is $2,780,000. Echelon Residential Holdings, through
a wholly-owned subsidiary (Echelon Residential LLC), used the loan proceeds to
acquire various real estate assets from Echelon International Corporation, a
Florida-based real estate company. The loan has a term of 30 months, maturing on
September 8, 2002, and an annual interest rate of 14% for the first 24 months
and 18% for the final six months. Interest accrues and compounds monthly and is
payable at maturity. In connection with the transaction, Echelon Residential
Holdings has pledged a security interest in all of its right, title and interest
in and to its membership interests in Echelon Residential LLC to the Exchange
Partnerships as collateral.

                                       31
<PAGE>

                           AMERICAN INCOME FUND I-C,
                      a Massachusetts Limited Partnership
                       Notes to the Financial Statements

                                  (Continued)



     The loan is presented in accordance with the guidance for ADC Arrangements
as described in Note 2, Real Estate Loans, in the Partnership's financial
statements as of and for the year December 31, 2000. The loan is accounted as an
investment in real estate venture and is presented net of the Partnership's
share of losses in Echelon Residential Holdings. The Partnership is allocated
its proportionate share of the unconsolidated real estate venture's net loss,
adjusted for interest on ADC arrangements based on the balance of its ADC
arrangements in relation to the real estate venture's total equity and notes
payable, including the ADC arrangements. For the period ended December 31, 2000,
the Partnership's share of losses in Echelon Residential Holdings was $211,012
and is reflected on the Statement of Operations as "Partnership's share of
unconsolidated real estate venture's loss."

     The Partnership took into consideration the following characteristics of
the loan in determining that the loan should be accounted for as an investment
in a real estate venture: (i) the Partnership and the 10 affiliated partnerships
who made the loans collectively have provided substantially all of the necessary
funds to acquire the underlying properties without taking title to such
properties, (ii) by virtue of a pledged security interest in the wholly owned
subsidiary of the borrower that holds title to the properties, the Partnership's
loan is secured only by the underlying properties, (iii) the borrower will only
repay the Partnership at maturity, including all interest accrued on the loan
through maturity, (iv) it is expected that the borrower can only repay the loan
through sales of undeveloped and developed property; and (v) the structure of
the loan (i.e. no payments due until maturity) makes it unlikely that the
property will be taken in foreclosure as a result of delinquency.

     The summarized financial information for Echelon Residential Holdings as of
December 31, 2000 and for the period March 8, 2000 (commencement of operations)
through December 31, 2000 is as follows:

          Total assets................................ $  68,580,891
          Total liabilities........................... $  70,183,162
          Minority interest........................... $   2,257,367
          Total deficit .............................. $  (3,859,638)

          Total revenues.............................. $   5,230,212
          Total expenses, minority interest
            and equity in loss of unconsolidated
            joint venture............................. $  11,936,238
          Net loss.................................... $  (6,706,026)

NOTE 5 - NET INVESTMENT IN SALES-TYPE LEASE
-------------------------------------------

     The Partnership's net investment in a sales-type lease is the result of the
conditional sale of the Partnership's proportionate interest in a Boeing 737
aircraft executed in October 2000. The title to the aircraft transfers to Royal
Aviation Inc., at the expiration of the lease term. The sale of the aircraft has
been recorded by the Partnership as a sales-type lease, with a lease term
expiring in January 2002. For the year ended December 31, 2000, the Partnership
recorded a net gain on sale of equipment, for financial statement purposes, of
$100,122 for the Partnership's proportional interest in the aircraft and
recognized sales-type lease revenue of $2,727. The net book value of equipment
sold on a sales-type lease totaled $324,836, which was a non-cash transaction.
The components of the net investment in the sales-type lease are as follows:

Total minimum lease payments to be received............  $ 279,563
Less:  Unearned income.................................     16,503
                                                         ---------
                            Total......................  $ 263,060
                                                         =========

     Unearned income is being amortized to revenue over the lease term, expiring
in January 2002.

                                       32
<PAGE>

                           AMERICAN INCOME FUND I-C,
                      a Massachusetts Limited Partnership
                       Notes to the Financial Statements

                                  (Continued)


NOTE 6 - INVESTMENT SECURITIES - AFFILIATE AND NOTE RECEIVABLE - AFFILIATE
--------------------------------------------------------------------------

     As a result of an exchange transaction in 1997, the Partnership is the
beneficial owner of 20,876 shares of Semele common stock. The Partnership also
received a beneficial interest in a note receivable from Semele ("the Semele
Note") of $459,729 in connection with the exchange.

     The exchange in 1997 involved the sale by five partnerships and certain
other affiliates of their beneficial interests in three cargo vessels to Semele
in exchange for cash, Semele common stock and the Semele Note. At the time of
the transaction, Semele was a public company unaffiliated with the general
partners and the partnerships. Subsequently, as part of the exchange
transaction, Semele solicited the consent of its shareholders to, among other
things, engage EFG to provide administrative services and to elect certain
affiliates of EFG and the general partners as members of the board of directors.
At that point, Semele became affiliated with EFG and the general partners. The
maturity date of the Semele Note has been extended. Since the Semele Note was
received as consideration for the sale of the cargo vessels to an unaffiliated
party and the extension of the maturity of the Semele Note is documented in an
amendment to the existing Semele Note and not as a new loan, the general
partners of the owner partnerships do not consider the Semele Note to be within
the prohibition in the Partnership Agreements against loans to or from the
General Partner and its affiliates. Nonetheless, the extension of the maturity
date might be construed to be the making of a loan to an affiliate of the
General Partner in violation of the Partnership Agreements of the owner
partnerships and to be a violation of the court's order with respect to New
Investments that all other provisions of the Partnership Agreements shall remain
in full force and effect.

     In accordance with the Financial Accounting Standard Board's Statement No.
115, Accounting for Certain Investments in Debt and Equity Securities,
marketable equity securities classified as available-for-sale are required to be
carried at fair value. During the year ended December 31, 1998, the Partnership
decreased the carrying value of its investment in Semele common stock to $4.125
per share (the quoted price of the Semele stock on NASDAQ at December 31, 1998)
resulting in an unrealized loss in 1998 of $70,460. This loss was reported as a
component of comprehensive income, included in Statement of Changes in Partners'
Capital. At December 31, 1998, the General Partner determined that the decline
in market value of the Semele common stock was other-than-temporary. As a
result, the Partnership wrote down the cost of the Semele common stock to $4.125
per share for a total realized loss of $185,281 in 1998.

     During the year ended December 31, 1999, the Partnership increased the
carrying value of its investment in Semele common stock to $5.75 per share (the
quoted price of the Semele stock on NASDAQ SmallCap market at December 31,
1999), resulting in an unrealized gain of $33,924. During the year ended
December 31, 2000, the Partnership decreased the carrying value of its
investment in Semele common stock to $3.8125 per share (the quoted price of the
Semele stock on NASDAQ Small Cap market nearest December 31, 2000), resulting in
an unrealized loss of $40,447. The gain in 1999 and loss in 2000 were reported
as components of comprehensive income and loss, respectively, included in the
Statement of Changes in Partners' Capital.

     The Semele Note bears an annual interest rate of 10% and is scheduled to
mature in April 2003. The note requires mandatory principal reductions, if and
to the extent that net proceeds are received by Semele from the sale or
refinancing of its principal real estate asset consisting of an undeveloped 274-
acre parcel of land near Malibu, California. The Partnership recognized interest
income related to the Semele Note of $45,973 in each of the years ended December
31, 2000, 1999 and 1998.

NOTE 7 - RELATED PARTY TRANSACTIONS
-----------------------------------

     All operating expenses incurred by the Partnership are paid by EFG on
behalf of the Partnership and EFG is reimbursed at its actual cost for such
expenditures. Fees and other costs incurred during the years ended December 31,
2000, 1999 and 1998, which were paid or accrued by the Partnership to EFG or its
Affiliates, are as follows:

                                       33
<PAGE>

                           AMERICAN INCOME FUND I-C,
                      a Massachusetts Limited Partnership
                       Notes to the Financial Statements

                                  (Continued)

<TABLE>
<CAPTION>

                                                                    2000          1999         1998
                                                                 ----------   -----------   ----------
<S>                                                              <C>          <C>           <C>
Equipment management fees..................................      $   66,733   $   101,040   $  113,260
Administrative charges.....................................         149,638       124,602       68,052
Reimbursable operating expenses due to third parties.......         528,844       345,978      386,856
                                                                 ----------   -----------   ----------
                               Total.......................      $  745,215   $   571,620   $  568,168
                                                                 ==========   ===========   ==========
</TABLE>

     As provided under the terms of the Management Agreement, EFG is compensated
for its services to the Partnership. Such services include acquisition and
management of equipment. For acquisition services, EFG was compensated by an
amount equal to 2.23% of Equipment Base Price paid by the Partnership. For
management services, EFG is compensated by an amount equal to 5% of gross
operating lease rental revenue and 2% of gross full payout lease rental revenue
received by the Partnership. Both acquisition and management fees are subject to
certain limitations defined in the Management Agreement.

     Administrative charges represent amounts owed to E FG, pursuant to Section
9.4(c) of the Restated Agreement, as amended, for persons employed by EFG who
are engaged in providing administrative services to the Partnership.
Reimbursable operating expenses due to third parties represent costs paid by EFG
on behalf of the Partnership, which are reimbursed to EFG at actual cost.

     All equipment was purchased from EFG, one of its Affiliates or from third-
party sellers. The Partnership's Purchase Price is determined by the method
described in Note 2, Equipment on Lease.

     All rents and proceeds from the sale of equipment are paid directly to
either EFG or to a lender. EFG temporarily deposits collected funds in a
separate interest-bearing escrow account prior to remittance to the Partnership.
At December 31, 2000, the Partnership was owed $93,661 by EFG for such funds and
the interest thereon. These funds were remitted to the Partnership in January
2001.

     Certain affiliates of the General Partner own Units in the Partnership as
follows:

      ----------------------------------------   -------------------------------
                                                 Number of    Percent of Total
      Affiliate                                  Units Owned  Outstanding Units
      ----------------------------------------   -----------  ------------------

      Atlantic Acquisition Limited Partnership        16,536           2.06%
      ----------------------------------------    ----------  ------------------

      Old North Capital Limited Partnership       124,065.23          15.44%
      ----------------------------------------    ----------  ------------------

     Atlantic Acquisition Limited Partnership ("AALP") and Old North Capital
Limited Partnership ("ONC") are both Massachusetts limited partnerships formed
in 1995. The general partners of AALP and ONC are controlled by Gary D. Engle.
EFG owns limited partnership interests, representing substantially all of the
economic benefit, in AALP and the limited partnership interests of ONC are owned
by Semele. Gary D. Engle is Chairman and Chief Executive Officer of Semele,
President and Chief Executive Officer of EFG and sole shareholder and Director
of EFG's general partner. James A. Coyne, Executive Vice President of EFG, is
Semele's President and Chief Operating Officer. Mr. Engle and Mr. Coyne are both
members of the Board of Directors of, and own significant stock in, Semele.

NOTE 8 - NOTES PAYABLE
----------------------

     Notes payable at December 31, 2000 consisted of installment notes of
$2,056,682 payable to banks and institutional lenders. The installment notes
bear an interest rate of either 8.225% or a fluctuating interest rate based on
LIBOR (approximately 6.7% at December 31, 2000) plus a margin. All of the
installment notes are non-recourse and are collateralized by the equipment and
assignment of the related lease payments. The Partnership

                                   34
<PAGE>

                           AMERICAN INCOME FUND I-C
                      a Massachusetts Limited Partnership
                       Notes to the Financial Statements

                                  (Continued)


has a $679,276 balloon payment obligation to be paid at the expiration of the
lease term related to aircraft leased by Reno Air, Inc. in January 2003. The
Partnership also had a balloon payment obligation due at the expiration of the
lease term related to an aircraft leased to Finnair OY. The Finnair indebtedness
was due to mature in 2001. In addition, the Partnership had a balloon obligation
of $560,358 which matured in August 2000. The Partnership paid interest-only on
this debt through 2000 and in February 2001, the Partnership and certain
affiliated investment programs refinanced this indebtedness and repaid the
outstanding indebtedness related to the Finnair OY aircraft. See Note 12 -
Subsequent Event, regarding this refinancing.

     Management believes that the carrying amount of notes payable approximates
fair value at December 31, 2000 based on its experience and understanding of the
market for instruments with similar terms.

     The annual maturities of the installment notes payable at December 31,
2000, reflecting the maturity of the notes in consideration of the February 2001
refinancing discussed above, are as follows:

     For the year ending December 31,        2001.........  $       381,990
                                             2002.........          471,475
                                             2003.........          794,086
                                             2004.........          409,131
                                                            ---------------
                                             Total.........  $    2,056,682
                                                            ===============

NOTE 9 - INCOME TAXES
---------------------

     The Partnership is not a taxable entity for federal income tax purposes.
Accordingly, no provision for income taxes has been recorded in the accounts of
the Partnership.

     For financial statement purposes, the Partnership allocates net income or
loss to each class of partner according to their respective ownership
percentages (95% to the Limited Partners and 5% to the General Partner). This
convention differs from the income or loss allocation requirements for income
tax and Dissolution Event purposes as delineated in the Restated Agreement, as
amended. For income tax purposes, the Partnership allocates net income or net
loss in accordance with the provisions of such agreement. The Restated
Agreement, as amended, requires that upon dissolution of the Partnership, the
General Partner will be required to contribute to the Partnership an amount
equal to any negative balance which may exist in the General Partner's tax
capital account. At December 31, 2000, the General Partner had a positive tax
capital account balance.

     The following is a reconciliation between net income reported for financial
statement and federal income tax reporting purposes for the years ended December
31, 2000, 1999 and 1998:

                                                2000         1999       1998
                                             ----------  ----------  ---------

Net (loss) income........................... $ (26,556)  $1,190,252  $ 623,010

     Financial statement depreciation
       less than  tax depreciation..........  (163,393)    (606,172)  (741,889)
     Deferred rental income.................   (19,282)       2,395     29,528
     Interest income - real estate venture..   339,490           --         --
     Partnership's share of unconsolidated
       real estate venture's loss...........   211,012           --         --
     Other..................................  (616,472)       5,435    193,981
                                             ---------    ---------  ---------
Net (loss) income for federal income tax
  reporting purposes.......................  $(275,201)   $ 591,910  $ 104,630
                                             =========    =========  =========

                                       35
<PAGE>

                           AMERICAN INCOME FUND I-C
                      a Massachusetts Limited Partnership
                       Notes to the Financial Statements

                                  (Continued)


     The principal component of "Other" consists of the difference between the
tax and financial statement gain or loss on equipment disposals.

     The following is a reconciliation between partners' capital reported for
financial statement and federal income tax reporting purposes for the years
ended December 31, 2000 and 1999:

<TABLE>
<CAPTION>
                                                                                 2000               1999
                                                                             -----------       ------------
<S>                                                                          <C>               <C>
Partners' capital.........................................................   $ 8,114,953       $  8,181,956

     Add back selling commissions and organization
       and offering costs.................................................     2,234,203          2,234,203

     Unrealized loss/ (gain) on investment securities - affiliate.........         6,523            (33,924)

     Cumulative difference between federal income tax
       and financial statement income (loss)..............................    (2,719,622)        (2,470,977)
                                                                             -----------       ------------
Partners' capital for federal income tax reporting purposes...............   $ 7,636,057       $  7,911,258
                                                                             ===========       ============
</TABLE>

     Unrealized loss/(gain) on investment securities and cumulative difference
between federal income tax and financial statement income (loss) represent
timing differences.

NOTE 10 - LEGAL PROCEEDINGS
---------------------------

     In January 1998, certain plaintiffs (the "Plaintiffs") filed a class and
derivative action, captioned Leonard Rosenblum, et al. v. Equis Financial Group
                             --------------------------------------------------
Limited Partnership, et al., in the United States District Court for the
--------------------------
Southern District of Florida (the "Court") on behalf of a proposed class of
investors in 28 equipment leasing programs sponsored by EFG, including the
Partnership (collectively, the "Nominal Defendants"), against EFG and a number
of its affiliates, including the General Partner, as defendants (collectively,
the "Defendants"). Certain of the Plaintiffs, on or about June 24, 1997, had
filed an earlier derivative action, captioned Leonard Rosenblum, et al. v. Equis
                                              ----------------------------------
Financial Group Limited Partnership, et al., in the Superior Court of the
------------------------------------------
Commonwealth of Massachusetts on behalf of the Nominal Defendants against the
Defendants. Both actions are referred to herein collectively as the "Class
Action Lawsuit".

     The Plaintiffs have asserted, among other things, claims against the
Defendants on behalf of the Nominal Defendants for violations of the Securities
Exchange Act of 1934, common law fraud, breach of contract, breach of fiduciary
duty, and violations of the partnership or trust agreements that govern each of
the Nominal Defendants. The Defendants have denied, and continue to deny, that
any of them have committed or threatened to commit any violations of law or
breached any fiduciary duties to the Plaintiffs or the Nominal Defendants.

     On July 16, 1998, counsel for the Defendants and the Plaintiffs executed a
Stipulation of Settlement setting forth terms pursuant to which a settlement of
the Class Action Lawsuit is intended to be achieved and which, among other
things, is expected to reduce the burdens and expenses attendant to continuing
litigation. The Stipulation of Settlement was preliminarily approved by the
Court on August 20, 1998 when the Court issued its "Order Preliminarily
Approving Settlement, Conditionally Certifying Settlement Class and Providing
for Notice of, and Hearing on, the Proposed Settlement" (the "August 20 Order").

     On March 12, 1999, counsel for the Plaintiffs and the Defendants entered
into an amended stipulation of settlement (the "Amended Stipulation") which was
filed with the Court on March 12, 1999. The Amended Stipulation was
preliminarily approved by the Court by its "Modified Order Preliminarily
Approving Settlement, Conditionally Certifying Settlement Class and Providing
For Notice of, and Hearing On, the Proposed Settlement"

                                       36
<PAGE>

                           AMERICAN INCOME FUND I-C
                      a Massachusetts Limited Partnership
                       Notes to the Financial Statements

                                  (Continued)


dated March 22, 1999 (the "March 22 Order"). The Amended Stipulation, among
other things, divided the Class Action Lawsuit into two separate sub-classes
that could be settled individually. On May 26, 1999, the Court issued an Order
and Final Judgment approving settlement of one of the sub-classes. Settlement of
the second sub-class, involving the Partnership and 10 affiliated partnerships
(collectively referred to as the "Exchange Partnerships"), remains pending due,
in part, to the complexity of the proposed settlement pertaining to this class.

     In February 2000, counsel for the Plaintiffs and the Defendants entered
into a second amended stipulation of settlement (the "Second Amended
Stipulation") which modified certain of the settlement terms contained in the
Amended Stipulation. The Second Amended Stipulation was preliminarily approved
by the Court by its "Second Modified Order Preliminarily Approving Settlement,
Conditionally Certifying Settlement Class and Providing For Notice of, and
Hearing On, the Proposed Settlement" dated March 6, 2000 (the "March 2000
Order"). Prior to issuing a final order approving the settlement of the second
sub-class involving the Partnership, the Court will hold a fairness hearing that
will be open to all interested parties and permit any party to object to the
settlement. The investors of the Partnership and all other plaintiff sub-class
members will receive a Notice of Settlement and other information pertinent to
the settlement of their claims that will be mailed to them in advance of the
fairness hearing.

     The settlement of the second sub-class is premised on the consolidation of
the Exchange Partnerships' net assets (the "Consolidation"), subject to certain
conditions, into a single successor company ("Newco"). Under the proposed
Consolidation, the partners of the Exchange Partnerships would receive both
common stock in Newco and a cash distribution; and thereupon the Exchange
Partnerships would be dissolved. In addition, EFG would contribute certain
management contracts, operations personnel, and business opportunities to Newco
and cancel its current management contracts with all of the Exchange
Partnerships. Newco would operate principally as a finance company and would use
its best efforts to list its shares on the NASDAQ National Market or another
national exchange or market as soon after the Consolidation as Newco deems that
market conditions and its business operations are suitable for listing its
shares and Newco has satisfied all necessary regulatory and listing
requirements. The potential benefits and risks of the Consolidation will be
presented in a Solicitation Statement that will be mailed to all of the partners
of the Exchange Partnerships as soon as the associated regulatory review process
is completed and at least 60 days prior to the fairness hearing. A preliminary
Solicitation Statement was filed with the Securities and Exchange Commission on
August 24, 1998 and remains pending. Class members will be notified of the
actual fairness hearing date when it is confirmed.

     One of the principal objectives of the Consolidation is to create a company
that would have the potential to generate more value for the benefit of existing
limited partners than other alternatives, including continuing the Partnership's
customary business operations until all of its assets are disposed in the
ordinary course of business. To facilitate the realization of this objective,
the Amended Stipulation provided, among other things, that commencing March 22,
1999, the Exchange Partnerships could collectively invest up to 40% of the total
aggregate net asset values of all of the Exchange Partnerships in any
investment, including additional equipment and other business activities that
the general partners of the Exchange Partnerships and EFG reasonably believed to
be consistent with the anticipated business interests and objectives of Newco,
subject to certain limitations. The Second Amended Stipulation, among other
things, quantified the 40% limitation using a whole dollar amount of $32 million
in the aggregate.

     On March 8, 2000, the Exchange Partnerships collectively made a $32 million
loan as permitted by the Second Amended Stipulation approved by the Court. The
Partnership's portion of the aggregate loan is $2,780,000. The loan consists of
a term loan to Echelon Residential Holdings, a newly-formed real estate company
that is owned by several independent investors and, in his individual capacity,
James A. Coyne, Executive Vice President of EFG. In addition, certain affiliates
of the General Partner made loans to Echelon Residential Holdings in their
individual capacities. Echelon Residential Holdings, through a wholly owned
subsidiary ("Echelon Residential LLC"), used the loan proceeds, along with the
loan proceeds from similar loans by ten affiliated partnerships representing $32
million in the aggregate, to acquire various real estate assets from Echelon
International Corporation, an independent Florida-based real estate company. The
loan has a term of 30

                                       37
<PAGE>

                           AMERICAN INCOME FUND I-C
                      a Massachusetts Limited Partnership
                       Notes to the Financial Statements

                                  (Continued)


months maturing on September 8, 2002 and bears interest at the annual rate of
14% for the first 24 months and 18% for the final six months of the term.
Interest accrues and compounds monthly but is not payable until maturity.
Echelon Residential Holdings has pledged its membership interests in Echelon
Residential LLC to the Exchange Partnerships as collateral for the loan.

     In the absence of the Court's authorization to enter into new investment
activities, the Partnership's Restated Agreement, as amended, would not permit
such activities without the approval of limited partners owning a majority of
the Partnership's outstanding Units. Consistent with the Amended Stipulation,
the Second Amended Stipulation provides terms for unwinding any new investment
transactions in the event that the Consolidation is not effected or the
Partnership objects to its participation in the Consolidation.

     The Second Amended Stipulation, as well as the Amended Stipulation and the
original Stipulation of Settlement, prescribe certain conditions necessary to
effect a final settlement, including providing the partners of the Exchange
Partnerships with the opportunity to object to the participation of their
partnership in the Consolidation. Assuming the proposed settlement is effected
according to present terms, the Partnership's share of legal fees and expenses
related to the Class Action Lawsuit and the Consolidation is estimated to be
approximately $389,000, of which approximately $298,000 was expensed by the
Partnership in 1998 and additional amounts of approximately $41,000 and $50,000
were expensed in 2000 and 1999, respectively.

     While the Court's August 20 Order enjoined certain class members, including
all of the partners of the Partnership, from transferring, selling, assigning,
giving, pledging, hypothecating, or otherwise disposing of any Units pending the
Court's final determination of whether the settlement should be approved, the
March 22 Order permitted the partners to transfer Units to family members or as
a result of the divorce, disability or death of the partner. No other transfers
are permitted pending the Court's final determination of whether the settlement
should be approved. The provision of the August 20 Order which enjoined the
General Partners of the Exchange Partnerships from, among other things,
recording any transfers not in accordance with the Court's order remains
effective.

     On March 12, 2001, after a status conference and hearing, the Court issued
an order that required the parties, no later than May 15, 2001, to advise the
Court on (a) whether the SEC has completed its review of the solicitation
statement and related materials submitted to the SEC in connection with the
proposed settlement, and (b) whether parties request the Court to schedule a
hearing for final approval of the proposed settlement or are withdrawing the
proposed settlement from judicial consideration and resuming the litigation of
the Plaintiffs' claims. The Court also directed the parties to use their best
efforts to assist the SEC so that its regulatory review may be completed on or
before May 15, 2001. The Court continued the Final Approval Settlement Hearing
until a date to be scheduled in July 2001 after receipt from the parties of a
request to schedule a hearing. There are a number of issues to be resolved with
the staff of the SEC before the staff's review of the solicitation materials is
completed. See note 12 for update of status of proceedings.

                                       38
<PAGE>

                           AMERICAN INCOME FUND I-C
                      a Massachusetts Limited Partnership
                       Notes to the Financial Statements

                                  (Continued)


NOTE 11 - QUARTERLY RESULTS OF OPERATIONS (Unaudited)
-----------------------------------------------------

     The following is a summary of the quarterly results of operations for the
years ended December 31, 2000 and 1999:
<TABLE>
<CAPTION>

                                                 Three Months Ended
                                 --------------------------------------------------

                                 March 31,   June 30,   September 30,  December 31,   Total
                                 ---------   --------   -------------  ------------   -----
              2000
              ----
<S>                              <C>         <C>        <C>            <C>            <C>
Total operating and sales -type
lease revenue..................  $ 360,598   $ 393,989  $ 272,050      $ 371,327      $1,397,964
Net income (loss)..............     84,179     138,570   (192,513)       (56,792)        (26,556)
Net income (loss) per
  limited partnership  unit....       0.10        0.16      (0.23)         (0.06)          (0.03)

              1999
              ----
Total lease revenue............  $ 527,086   $ 641,254  $ 507,999      $ 498,184      $2,174,523
Net income.....................    283,217     650,096    251,151          5,788       1,190,252
Net income per
  limited partnership unit.....       0.33        0.77       0.30           0.01            1.41
</TABLE>

     The Partnership's net income in the three months ended June 30, 1999 is
primarily the result of the sale of equipment, resulting in a net gain, for
financial statement purposes of approximately $509,000.

NOTE 12 - SUBSEQUENT EVENTS
---------------------------

     In February 2001, the Partnership and certain affiliated investment
programs (collectively "the Programs") refinanced the outstanding indebtedness
and accrued interest related to an aircraft on lease to Aerovias de Mexico, S.A.
de C.V. In addition to refinancing the Programs' total existing indebtedness and
accrued interest of $4,758,845, the Programs received additional debt proceeds
of $3,400,177. The Partnership's aggregate share of the refinanced and new
indebtedness was $968,639 including $564,970 used to repay the existing
indebtedness on the refinanced aircraft. The Partnership used a portion of its
share of the additional proceeds of $403,669 to repay the outstanding balance of
the indebtedness and accrued interest related to the aircraft on lease to
Finnair OY of $104,590 and certain aircraft reconfiguration costs that the
Partnership had accrued at December 31, 2000. The new indebtedness bears a fixed
interest rate of 7.65%, principal is amortized monthly and the Partnership has a
balloon payment obligation at the expiration of the lease term of $323,027 in
September 2004.

     On May 11, 2001, the general partners of the Partnerships that are nominal
defendants in the Class Action Lawsuit received a letter dated May 10, 2001 from
the Associate Director and Chief Counsel of the Division of Investment
Management of the SEC informing the general partners that the staff of the
Division believes that American Income Partners V-A Limited Partnership,
American Income Partners V-B Limited Partnership, American Income Partners V-C
Limited Partnership, American Income Partners V-D Limited Partnership, American
Income Fund I-A, American Income Fund I-B, American Income Fund I-E and AIRFUND
II International Limited Partnership (the "Designated Partnerships") are
investment companies as defined in Section 3(a)(1)(C) of the 1940 Act. The SEC
staff noted that Section 7 of the 1940 Act makes it unlawful for an unregistered
investment company, among other things, to offer, sell, purchase, or acquire any
security or engage in any business in interstate commerce. Accordingly, Section
7 would prohibit any partnership that is an unregistered investment company from
engaging in any business in interstate commerce, except transactions that are
merely incidental to its dissolution. The SEC staff asked that the general
partners advise them within the next 30 days as to what steps the Designated
Partnerships will take to address their status under the 1940 Act. The SEC staff
asserts that

                                       39
<PAGE>

                           AMERICAN INCOME FUND I-C
                      a Massachusetts Limited Partnership
                       Notes to the Financial Statements

                                  (Continued)


the notes evidencing the loans to Echelon Residential Holdings are investment
securities and the ownership of the notes by said partnerships cause them to be
investment companies and that, in the case of American Income Partners V-A
Limited Partnership and V-B Limited Partnership, they may have become investment
companies when they received the Semele securities as part of the compensation
for the sale of a vessel to Semele in 1997. The general partners have consulted
with counsel who specializes in the 1940 Act and, based on counsel's advise, do
not believe that the Designated Partnerships are investment companies.

     The letter also stated that the Division is considering whether to commence
enforcement action with respect to this matter. Noting that the parties to the
Class Action Lawsuit were scheduled to appear before the court in the near
future to consider a proposed settlement, and that the SEC staff believed that
its views, as expressed in the letter, would be relevant to the specific matters
that will be considered by the court at the hearing, the SEC staff submitted the
letter to the court for its consideration.

     On May 15, 2001, Defendants' Counsel filed with the court Defendants'
Status Report pursuant to the court's March 12, 2001 Order. Defendants reported
that, notwithstanding the parties' best efforts, the staff of the SEC has not
completed its review of the solicitation statement in connection with the
proposed settlement of the Class Action Lawsuit. Nonetheless, the Defendants
stated their belief that the parties should continue to pursue the court's final
approval of the proposed settlement. In this regard, the Defendants also have
maintained, on the advice of special 1940 Act counsel that, even if the 1940 Act
applies to the Designated Partnerships, the 1940 Act does not prohibit going
forward with the proposed settlement, as that transaction is merely incidental
to a dissolution of the Partnerships and therefore is not subject to the
prohibitions of Section 7 of the 1940 Act.

     The Defendants also referred to the SEC staff's letter of May 10, 2001
asserting that certain of the partnerships are investment companies and to
special 1940 Act counsel's submissions to the SEC staff setting forth the
reasons why the 1940 Act does not apply to the Designated Partnerships, noting
that counsel had informed the staff of the Division of Investment Management
that, based upon counsel's understanding of the surrounding circumstances and
after an in-depth analysis of the applicable law, if asked, counsel would be
willing to issue an opinion of the firm that none of the partnerships is an
investment company under the 1940 Act. The Defendants stated their belief that
the proposed settlement is still viable and in the best interests of the parties
and that final approval should be pursued. The Defendants advised the court that
they believe that if the court were to address the issue of whether or not the
1940 Act applies to the partnerships and the proposed consolidation, it could
remove the major obstacle to the settlement being finally consummated. The
Defendants also requested that the court schedule a hearing to address on a
preliminary basis the objection to the proposed settlement raised in the staff's
May 10, 2001 letter.

     Plaintiffs' Counsel also submitted a Plaintiffs' Status Report to the court
on May 15, 2001 in which they reported that the SEC review has not been
concluded and that they notified the Defendants that they would not agree to
continue to stay the further prosecution of the litigation in favor of the
settlement and that they intend to seek court approval to immediately resume
active prosecution of the claims of the Plaintiffs. Plaintiffs' Counsel stated
in the Report that the "[p]laintiffs continue to believe that the settlement is
in the best interests of the Operating Partnership Sub-class. However, since the
SEC has yet to complete its review of the proxy, the Plaintiffs do not believe
that the litigation should continue to be stayed so that the SEC may continue
its regulatory review for an indefinite period of time." Plaintiffs requested a
pre-trial conference to schedule filing of Plaintiffs' motion for class
certification on or before May 29, 2001 and resumption of merits discovery and
discovery related to the class certification motion.

     Apart from the language of the order, the Court has not stated what action
it might order if the SEC's review were not completed by May 15, 2001. If the
Court were to decline to continue the date for the Final Approval Settlement
Hearing and there is no settlement alternative offered by the parties that meets
the Court's approval, the Court may direct that the parties resume the
litigation and abandon the proposed settlement and consolidation.

                                       40
<PAGE>

                           AMERICAN INCOME FUND I-C
                      a Massachusetts Limited Partnership
                       Notes to the Financial Statements

                                  (Continued)


     Accordingly, there can be no assurance that settlement of the sub-class
involving the Exchange Partnerships will receive final Court approval and be
effected. There also can be no assurance that all or any of the Exchange
Partnerships will participate in the Consolidation because if limited partners
owning more than one-third of the outstanding Units of a partnership object to
the Consolidation, then that partnership will be excluded from the
Consolidation. Notwithstanding the extent of delays experienced thus far in
achieving a final settlement of the Class Action Lawsuit with respect to the
Exchange Partnerships, the General Partner and its affiliates, in consultation
with counsel, continue to feel that there is a reasonable basis to believe that
a final settlement of the sub-class involving the Exchange Partnerships
ultimately will be achieved. However, in the absence of a final settlement
approved by the Court, the Defendants intend to defend vigorously against the
claims asserted in the Class Action Lawsuit. Neither the General Partner nor its
affiliates can predict with any degree of certainty the cost of continuing
litigation to the Partnership or the ultimate outcome.

                                       41
<PAGE>

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

     None.

                                       42
<PAGE>

PART III

Item  10.  Directors and Executive Officers of the Partnership.
---------------------------------------------------------------

     (a-b) Identification of Directors and Executive Officers

     The Partnership has no Directors or Officers. As indicated in Item 1 of
this report, AFG Leasing VI Incorporated is the sole General Partner of the
Partnership. Under the Restated Agreement, as amended, the General Partner is
solely responsible for the operation of the Partnership's properties. The
Limited Partners have no right to participate in the control of the
Partnership's general operations, but they do have certain voting rights, as
described in Item 12 herein. The names, titles and ages of the Directors and
Executive Officers of the General Partner as of March 15, 2001 are as follows:

DIRECTORS AND EXECUTIVE OFFICERS OF THE GENERAL PARTNER (See Item 13)
---------------------------------------------------------------------

<TABLE>
<CAPTION>
        Name                             Title                       Age      Term
------------------------   -----------------------------------      -----  -----------
<S>                        <C>                                      <C>    <C>
Geoffrey A. MacDonald      Chairman of EFG and President                     Until a
                           and a Director of the General                    successor
                           Partner                                    52     is duly
                                                                             elected
                                                                               and
                                                                            qualified
Gary D. Engle              President and Chief Executive
                           Officer of EFG                             52

Michael J. Butterfield     Executive Vice President and Chief
                           Operating Officer of EFG and Treasurer
                           of the General Partner                     41

Gail D. Ofgant             Senior Vice President, Lease Operations
                           of EFG and Senior Vice President of
                           the General Partner                        35
</TABLE>


     (c) Identification of Certain Significant Persons

     None.

     (d) Family Relationship

     No family relationship exists among any of the foregoing Partners,
Directors or Executive Officers.

     (e) Business Experience

        Mr. MacDonald, age 52, is Chairman of EFG and has been President of the
General Partner since 1990 and a Director of the General Partner since 1990. Mr.
McDonald was a co-founder of EFG's predecessor, American Finance Group, which
was established in 1980. Mr. MacDonald is a member of the Board of Managers of
Echelon Development Holdings LLC and President of American Finance Group
Securities Corporation. Prior to co-founding American Finance Group, Mr.
MacDonald held various positions in the equipment leasing industry and the
ethical pharmaceutical industry with Eli Lilly & Company. Mr. MacDonald holds an
M.B.A. from Boston College and a B.A. degree from the University of
Massachusetts (Amherst).

     Mr. Engle, age 52, is President and Chief Executive Officer of EFG, sole
shareholder and Director of its general partner, Equis Corporation, and a Vice
President and Director of several of EFG's subsidiaries and affiliates. Mr.
Engle is President of AFG Realty Corporation. Mr. Engle is also Chairman and
Chief Executive Officer of Semele Group Inc. ("Semele") and a member of the
Board of Managers of Echelon Development Holdings LLC. Mr. Engle controls the
general partners of Atlantic Acquisition Limited Partnership ("AALP") and Old
North Capital Limited Partnership ("ONC"). Mr. Engle joined EFG in 1990 as an
Executive Vice President and acquired control of EFG and its subsidiaries in
December 1994. Mr. Engle co-founded Cobb Partners Development, Inc., a real
estate and mortgage banking company, where he was a principal from 1987 to 1989.
From 1980 to 1987, Mr. Engle was Senior Vice President and Chief Financial
Officer of Arvida Disney Company, a

                                       43
<PAGE>

large-scale community development organization owned by Walt Disney Company.
Prior to 1980, Mr. Engle served in various management consulting and
institutional brokerage capacities. Mr. Engle has an M.B.A. degree from Harvard
University and a B.S. degree from the University of Massachusetts (Amherst).

     Mr. Butterfield, age 41, is Executive Vice President and Chief Operating
Officer of EFG and has served as Vice President and Treasurer of the General
Partner since 1996. Mr. Butterfield also serves as Vice President and Treasurer
of subsidiaries and affiliates of EFG. Mr. Butterfield is also Chief Financial
Officer of Semele and Vice President, Finance and Clerk of Equis/Echelon
Management Corporation, the manager of Echelon Residential LLC. Mr. Butterfield
joined EFG in June 1992 and became a Vice President in 1996 and Executive Vice
President and Chief Operating Officer in 2000. Prior to joining EFG, Mr.
Butterfield was an audit manager with Ernst & Young LLP, which he joined in
1987. Mr. Butterfield was also employed in public accounting and industry
positions in New Zealand and London (UK) prior to coming to the United States in
1987. Mr. Butterfield attained his Associate Chartered Accountant (A.C.A.)
professional qualification in New Zealand and has completed his C.P.A.
requirements in the United States. Mr. Butterfield holds a Bachelor of Commerce
degree from the University of Otago, Dunedin, New Zealand.

     Ms. Ofgant, age 35, is Senior Vice President, Lease Operations of EFG and
has served as Senior Vice President of the General Partner since 1998. Ms.
Ofgant also serves as Senior Vice President for certain EFG's affiliates,
including the General Partner. Ms. Ofgant is Senior Vice President and Assistant
Clerk of Equis/Echelon Management Corporation, the manager of Echelon
Residential LLC. Ms. Ofgant joined EFG in July 1989 and held various positions
with the company before becoming Senior Vice President in 1998. From 1987 to
1989, Ms. Ofgant was employed by Security Pacific National Trust Company. Ms.
Ofgant holds a B.S. degree from Providence College.

     (f) Involvement in Certain Legal Proceedings

     None.

     (g) Promoters and Control Persons

     Not applicable.

Item 11.  Executive Compensation.
---------------------------------

     (a) Cash Compensation

     Currently, the Partnership has no employees. However, under the terms of
the Restated Agreement, as amended, the Partnership is obligated to pay all
costs of personnel employed full or part-time by the Partnership, including
officers or employees of the General Partner or its Affiliates. There is no plan
at the present time to make any officers or employees of the General Partner or
its Affiliates employees of the Partnership. The Partnership has not paid and
does not propose to pay any options, warrants or rights to the officers or
employees of the General Partner or its Affiliates.

     (b) Compensation Pursuant to Plans

     None.

     (c) Other Compensation

     Although the Partnership has no employees, as discussed in Item 11(a),
pursuant to Section 9.4(c) of the Restated Agreement, as amended, the
Partnership incurs a monthly charge for personnel costs of the Manager for
persons engaged in providing administrative services to the Partnership. A
description of the remuneration paid by the Partnership to the Manager for such
services is included in Item 13 herein and in Note 7 to the financial statements
included in Item 8, herein.

     (d) Stock Options and Stock Appreciation Rights.

     Not applicable.

                                       44
<PAGE>

     (e) Long-Term Incentive Plan Awards Table.

     Not applicable.

     (f) Defined Benefit or Actuarial Plan Disclosure.

     Not applicable.

     (g) Compensation of Directors

     None.

     (h) Termination of Employment and Change of Control Arrangement

     There exists no remuneration plan or arrangement with the General Partner
or its Affiliates which results or may result from their resignation, retirement
or any other termination.


Item 12. Security Ownership of Certain Beneficial Owners and Management.
------------------------------------------------------------------------

     By virtue of its organization as a limited partnership, the Partnership has
outstanding no securities possessing traditional voting rights. However, as
provided in Section 10.2(a) of the Restated Agreement, as amended (subject to
Sections 10.2(b) and 10.3), a majority interest of the Limited Partners has
voting rights with respect to:

        1.    Amendment of the Restated Agreement;

        2.    Termination of the Partnership;

        3.    Removal of the General Partner; and

        4.    Approval or disapproval of the sale of all, or substantially all,
              of the assets of the Partnership (except in the orderly
              liquidation of the Partnership upon its termination and
              dissolution).

     As of March 15, 2001, the following person or group owns beneficially more
than 5% of the Partnership's 803,454.56 outstanding Units:

<TABLE>
<CAPTION>
                                   Name and                             Amount            Percent
       Title                      Address of                        of Beneficial           of
     of Class                   Beneficial Owner                      Ownership            Class
-------------------   -------------------------------------         ---------------      ---------
<S>                   <C>                                           <C>                  <C>
Units Representing    Old North Capital Limited Partnership
Limited Partnership   88 Broad Street                              124,065.23 Units       15.44%
Interests             Boston, MA 02110
</TABLE>

     The general partner of Old North Capital Limited Partnership ("ONC") is a
Massachusetts limited partnership formed in 1995. The general partner of ONC is
controlled by Gary D. Engle and the limited partnership interests in ONC are
owned by Semele. Gary D. Engle is Chairman and Chief Executive Officer of
Semele. James A. Coyne, Executive Vice President of EFG, is Semele's President
and Chief Operating Officer. Mr. Engle and Mr. Coyne are both members of the
Board of Directors of, and own significant stock in, Semele. See Items 10 and 13
of this report.

     The ownership and organization of EFG is described in Item 1 of this
report.

Item 13. Certain Relationships and Related Transactions.
--------------------------------------------------------

     The General Partner of the Partnership is AFG Leasing VI Incorporated, an
affiliate of EFG.

     (a) Transactions with Management and Others

                                       45
<PAGE>

     All operating expenses incurred by the Partnership are paid by EFG on
behalf of the Partnership and EFG is reimbursed at its actual cost for such
expenditures. Fees and other costs incurred during the years ended December 31,
2000, 1999 and 1998, which were paid or accrued by the Partnership to EFG or its
Affiliates, are as follows:

<TABLE>
<CAPTION>
                                       2000      1999     1998
                                     --------  -------- --------
<S>                                  <C>       <C>      <C>
Equipment management fees........... $ 66,733  $101,040 $113,260
Administrative charges..............  149,638   124,602   68,052
Reimbursable operating expenses
   due to third parties.............  528,844   345,978  386,856
                                     --------  -------- --------

                     Total.......... $745,215  $571,620 $586,168
                                     ========  ======== ========
</TABLE>

     As provided under the terms of the Management Agreement, EFG is compensated
for its services to the Partnership. Such services include acquisition and
management of equipment. For acquisition services, EFG was compensated by an
amount equal to 2.23% of Equipment Base Price paid by the Partnership. For
management services, EFG is compensated by an amount equal to 5% of gross
operating lease rental revenue and 2% of gross full payout lease rental revenue
received by the Partnership. Both acquisition and management fees are subject to
certain limitations defined in the Management Agreement.

     Administrative charges represent amounts owed to EFG, pursuant to Section
9.4(c) of the Restated Agreement, as amended, for persons employed by EFG who
are engaged in providing administrative services to the Partnership.
Reimbursable operating expenses due to third parties represent costs paid by EFG
on behalf of the Partnership which are reimbursed to EFG at actual cost.

     All equipment was purchased from EFG, one of its affiliates or from third-
party sellers. The Partnership's acquisition cost was determined by the method
described in Note 2 to the financial statements included in Item 8, herein.

     As a result of an exchange in 1997, the Partnership is the beneficial owner
of 20,876 shares of Semele common stock and holds a beneficial interest in a
note from Semele (the "Semele Note") of $459,729. The Semele Note matures in
April 2003 and bears an annual interest rate of 10% with mandatory principal
reductions prior to maturity, if and to the extent that net proceeds are
received by Semele from the sale or refinancing of its principal real estate
asset consisting of an undeveloped 274-acre parcel of land near Malibu,
California. For further discussion, see Note 6, "Investment Securities -
Affiliate and Note Receivable - Affiliate to the financial statements included
in Item 8 herein and Item 10.

      The exchange in 1997 involved the sale by five partnerships and certain
other affiliates of their beneficial interests in three cargo vessels to Semele
in exchange for cash, Semele common stock and the Semele Note. At the time of
the transaction, Semele was a public company unaffiliated with the general
partners and the partnerships. Subsequently, as part of the exchange
transaction, Semele solicited the consent of its shareholders to, among other
things, engage EFG to provide administrative services and to elect certain
affiliates of EFG and the general partners as members of the board of directors.
At that point, Semele became affiliated with EFG and the general partners. The
maturity date of the Semele Note has been extended. Since the Semele Note was
received as consideration for the sale of the cargo vessels to an unaffiliated
party and the extension of the maturity of the Semele Note is documented in an
amendment to the existing Semele Note and not as a new loan, the general
partners of the owner partnerships do not consider the Semele Note to be within
the prohibition in the Partnership Agreements against loans to or from the
General Partner and its affiliates. Nonetheless, the extension of the maturity
date might be construed to be the making of a loan to an affiliate of the
General Partner in violation of the Partnership Agreements of the owner
partnerships and to be a violation of the court's order with respect to New
Investments that all other provisions of the Partnership Agreements shall remain
in full force and effect.

     All rents and proceeds from the sale of equipment are paid directly to
either EFG or to a lender. EFG temporarily deposits collected funds in a
separate interest-bearing escrow account prior to remittance to the Partnership.
At December 31, 2000, the Partnership was owed $93,661 by EFG for such funds and
the interest thereon. These funds were remitted to the Partnership in January
2001.

    Certain affiliates of the General Partner own Units in the Partnership as
follows:

                                       46
<PAGE>

<TABLE>
<CAPTION>
         -----------------------------------------------------------------------
                                                   Number of   Percent of Total
                            Affiliate             Units Owned  Outstanding Units
         -----------------------------------------------------------------------
         <S>                                      <C>          <C>
         Atlantic Acquisition Limited Partnership       16,536            2.06%
         -----------------------------------------------------------------------
         Old North Capital Limited Partnership      124,065.23           15.44%
         -----------------------------------------------------------------------
</TABLE>

     Atlantic Acquisition Limited Partnership ("AALP") and Old North Capital
Limited Partnership ("ONC") are both Massachusetts limited partnerships formed
in 1995. The general partners of AALP and ONC are controlled by Gary D. Engle.
EFG owns limited partnership interests, representing substantially all of the
economic benefit, in AALP and the limited partnership interests of ONC are owned
by Semele. Gary D. Engle is Chairman and Chief Executive Officer of Semele,
President and Chief Executive Officer of EFG and sole shareholder and Director
of EFG's general partner. James A. Coyne, Executive Vice President of EFG, is
Semele's President and Chief Operating Officer. Mr. Engle and Mr. Coyne are both
members of the Board of Directors of, and own significant stock in, Semele.

     The discussions of the loan to Echelon Residential Holdings in Items 1(b)
and 1(c) above are incorporated herein by reference.

     (b) Certain Business Relationships

     None.

     (c) Indebtedness of Management to the Partnership

     None.

     (d) Transactions with Promoters

     Not applicable.

                                       47
<PAGE>

PART IV

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

 (a) Documents filed as part of this report:

     (2)     Financial Statement Schedules:

             None required.

     (3)     Exhibits:

             Except as set forth below, all Exhibits to Form 10-K/A, as set
             forth in Item 601 of Regulation S-K, are not applicable.

             A list of exhibits filed or incorporated by reference is as
follows:

Exhibit
Number
------

 2.1    Plaintiffs' and Defendants' Joint Motion to Modify Order Preliminarily
        Approving Settlement, Conditionally Certifying Settlement Class and
        Providing for Notice of, and Hearing on, the Proposed Settlement was
        filed in the Registrant's Annual Report on Form 10-K/A for the year
        ended December 31, 1998 as Exhibit 2.1 and is incorporated herein by
        reference.

 2.2    Plaintiffs' and Defendants' Joint Memorandum in Support of Joint Motion
        to Modify Order Preliminarily Approving Settlement, Conditionally
        Certifying Settlement Class and Providing for Notice of, and Hearing on,
        the Proposed Settlement was filed in the Registrant's Annual Report on
        Form 10-K/A for the year ended December 31, 1998 as Exhibit 2.2 and is
        incorporated herein by reference.

 2.3    Order Preliminarily Approving Settlement, Conditionally Certifying
        Settlement Class and Providing for Notice of, and Hearing on, the
        Proposed Settlement (August 20, 1998) was filed in the Registrant's
        Annual Report on Form 10-K/A for the year ended December 31, 1998 as
        Exhibit 2.3 and is incorporated herein by reference.

 2.4    Modified Order Preliminarily Approving Settlement, Conditionally
        Certifying Settlement Class and Providing for Notice of, and Hearing on,
        the Proposed Settlement (March 22, 1999) was filed in the Registrant's
        Annual Report on Form 10-K/A for the year ended December 31, 1998 as
        Exhibit 2.4 and is incorporated herein by reference.

 2.5    Plaintiffs' and Defendants' Joint Memorandum in Support of Joint Motion
        to Further Modify Order Preliminarily Approving Settlement,
        Conditionally Certifying Settlement Class and Providing for Notice of,
        and Hearing on, the Proposed Settlement was filed in the Registrant's
        Annual Report on Form 10-K for the year ended December 31, 1999 as
        Exhibit 2.5 and is incorporated herein by reference.

 2.6    Second Modified Order Preliminarily Approving Settlement, Conditionally
        Certifying Settlement Class and Providing for Notice of, and Hearing on,
        the Proposed Settlement (March 5, 2000) was filed in the Registrant's
        Annual Report on Form 10-K for the year ended December 31, 1999 as
        Exhibit 2.6 and is incorporated herein by reference.

 2.7    Proposed Order Granting Joint Motion to Continue Final Approval
        Settlement Hearing (March 13, 2001) was filed in the Registrant's Annual
        Report on Form 10-K for the year ended December 31, 2000 and is
        incorporated herein by reference.

                                       48
<PAGE>

Exhibit
Number
------

  4       Amended and Restated Agreement and Certificate of Limited Partnership
          included as Exhibit A to the Prospectus, which was included in
          Registration Statement on Form S-1 (No. 33-35148) and is incorporated
          herein by reference.

  10.1    Promissory Note in the principal amount of $2,780,000 dated March 8,
          2000 between the Registrant, as lender, and Echelon Residential
          Holdings LLC, as borrower, was filed in the Registrant's Annual Report
          on Form 10-K for the year ended December 31, 1999 as Exhibit 10.1 and
          is incorporated herein by reference.

  10.2    Pledge Agreement dated March 8, 2000 between Echelon Residential
          Holdings LLC (Pledgor) and American Income Partners V-A Limited
          Partnership, as Agent for itself and the Registrant, was filed in the
          Registrant's Annual Report on Form 10-K for the year ended December
          31, 1999 as Exhibit 10.2 and is incorporated herein by reference.

  10.3    Promissory Note from Semele Group Inc. (formerly known as Banyan
          Strategic Land Fund II), dated May 31, 1997 was filed as in the
          Registrant's Annual Report on Form 10-K for the year ended December
          31, 2000 and is incorporated herein by reference.

  10.4    The First Allonge to Promissory Note from Semele Group Inc. (formerly
          known as Banyan Strategic Land Fund II), dated March 21, 2000 was
          filed as in the Registrant's Annual Report on Form 10-K for the year
          ended December 31,2000 and is incorporated herein by reference.

  10.5    The Second Allonge to Promissory Note from Semele Group Inc. (formerly
          known as Banyan Strategic Land Fund II), dated March 12, 2001 was
          filed as in the Registrant's Annual Report on Form 10-K for the year
          ended December 31, 2000 and is incorporated herein by reference.

  99 (a)  Lease agreement with General Motors Corporation was filed in the
          Registrant's Annual Report on Form 10-K for the year ended December
          31, 1996 as Exhibit 99 (d) and is incorporated herein by reference.

  99 (b)  Lease agreement with Southwest Airlines, Inc. was filed in the
          Registrant's Annual Report on Form 10-K for the year ended December
          31, 1996 as Exhibit 99 (e) and is incorporated herein by reference.

  99 (c)  Lease agreement with Southwest Airlines, Inc. was filed in the
          Registrant's Annual Report on Form 10-K for the year ended December
          31, 1996 as Exhibit 99 (f) and is incorporated herein by reference.

  99 (d)  Lease agreement with Southwest Airlines, Inc. was filed in the
          Registrant's Annual Report on Form 10-K for the year ended December
          31, 1996 as Exhibit 99 (g) and is incorporated herein by reference.

  99 (e)  Lease agreement with Finnair OY was filed in the Registrant's Annual
          Report on Form 10-K for the year ended December 31, 1997 as Exhibit 99
          (h) and is incorporated herein by reference.

  99 (f)  Lease agreement with Finnair OY was filed in the Registrant's Annual
          Report on Form 10-K for the year ended December 31, 1997 as Exhibit 99
          (i) and is incorporated herein by reference.

  99 (g)  Lease agreement with Reno Air, Inc. was filed in the Registrant's
          Annual Report on Form 10-K for the year ended December 31, 1998 as
          Exhibit 99 (i) and is incorporated herein by reference.

                                       49
<PAGE>

Exhibit
Number
------

  99 (h)  Lease agreement with Trans Ocean Container Corporation, Inc. was filed
          in the Registrant's Annual Report on Form 10-K for the year ended
          December 31, 1998 as Exhibit 99 (j) and is incorporated herein by
          reference.

  99 (i)  Aircraft Conditional Sale agreement with Royal Aviation Inc. was filed
          in the Registrant's Annual Report on Form 10-K for the year ended
          December 31, 2000 and is incorporated herein by reference.

  99 (j)  Lease agreement with Air Slovakia BWJ, Ltd. was filed in the
          Registrant's Annual Report on Form 10-K for the year ended December
          31, 2000 and is incorporated herein by reference.

  99 (k)  Lease agreement with Aerovias de Mexico S.A. de C.V. was filed in the
          Registrant's Annual Report on Form 10-K for the year ended December
          31, 2000 and is incorporated herein by reference.

(b) Reports on Form 8-K

      None.

(c) Other Exhibits

      None.

(d) Financial Statement Schedules:

    Consolidated Financial Statements for Echelon Residential Holdings LLC as of
    December 31, 2000 and for the Period March 8, 2000 (Date of Inception)
    through December 31, 2000 and Independent Auditors' Report.

                                       50
<PAGE>

                                   SIGNATURES

     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.


         AMERICAN INCOME FUND I-C, a Massachusetts Limited Partnership


                       By: AFG Leasing VI Incorporated,
                       a Massachusetts corporation and the
                       General Partner of the Registrant.


By: /s/ Geoffrey A. MacDonald            By: /s/ Gary D. Engle
   --------------------------------         ---------------------------------
Geoffrey A. MacDonald                    Gary D. Engle
Chairman of EFG and                      President and Chief Executive
President and Director                   Officer of EFG, the sole stockholder
of the General Partner                   of the General Partner
                                         (Principal Executive Officer)






Date: May 30, 2001                       Date: May 30, 2001
     ------------------------------           -------------------------------




By: /s/ Michael J. Butterfield
   --------------------------------
Michael J. Butterfield
Executive Vice President and Chief
Operating Officer of EFG and Treasurer
of the General Partner
(Principal Financial and Accounting Officer)


Date: May 30, 2001
     ------------------------------

                                       51
<PAGE>

                                                                  SCHEDULE 14(d)

ECHELON RESIDENTIAL HOLDINGS LLC

CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2000
AND FOR THE PERIOD MARCH 8, 2000 (DATE OF INCEPTION)
THROUGH DECEMBER 31, 2000
AND INDEPENDENT AUDITORS' REPORT


INDEPENDENT AUDITORS' REPORT

To the Members of
Echelon Residential Holdings LLC:

We have audited the accompanying consolidated balance sheet of Echelon
Residential Holdings LLC, a Delaware limited liability company ("the Company")
as of December 31, 2000 and the related consolidated statement of operations,
members' equity (deficiency) and cash flows for the period March 8, 2000 (date
of inception) through December 31, 2000. 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 audit.

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

In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of the Company as of December 31,
2000, and the results of its operations and its cash flows for the period March
8, 2000 (date of inception) through December 31, 2000 in conformity with
accounting principles generally accepted in the United States of America.

/s/ DELOITTE & TOUCHE LLP



Tampa, Florida
March 23, 2001
<PAGE>

ECHELON RESIDENTIAL HOLDINGS LLC

CONSOLIDATED BALANCE SHEET
DECEMBER 31, 2000
-------------------------------------------------------------------------------

<TABLE>
<S>                                                                <C>
ASSETS

REAL ESTATE - Net (Notes 1 and 2)                                  $ 61,092,202

CASH AND CASH EQUIVALENTS (Note 1)                                    3,789,198

RESTRICTED CASH (Note 1)                                                  8,703

RESTRICTED INVESTMENTS (Note 1)                                       2,155,160

ACCOUNTS RECEIVABLE - Affiliates (Note 7)                               115,521

PREPAID EXPENSES AND OTHER LONG-TERM ASSETS                              69,417

CORPORATE EQUIPMENT - Net of accumulated depreciation of $57,733        286,784

INVESTMENT IN UNCONSOLIDATED JOINT VENTURE (Note 3)                   1,063,906
                                                                   ------------

TOTAL ASSETS                                                       $ 68,580,891
                                                                   ============

LIABILITIES AND MEMBERS' EQUITY

LIABILITIES:

  Accounts payable                                                 $     10,984
  Contractor payable                                                  1,752,830
  Accounts payable - Affiliates (Note 7)                                114,180
  Accrued expenses                                                      797,832
  Retainage payable                                                   1,125,865
  Security deposits                                                       8,625
  Interest payable                                                    4,385,805
  Construction loans (Note 4)                                        26,837,740
  Other long-term liabilities                                           109,411
  Notes payable (Note 5)                                             35,039,890
                                                                   ------------

           Total liabilities                                         70,183,162

COMMITMENTS & CONTINGENCIES (Notes 4 and 9)

MINORITY INTEREST (Note 6)                                            2,257,367

MEMBERS' EQUITY (DEFICIENCY) (Note 1)                                (3,859,638)
                                                                   ------------

TOTAL LIABILITIES AND MEMBERS' EQUITY                              $ 68,580,891
                                                                   ============
</TABLE>

See notes to consolidated financial statements

                                      - 2 -
<PAGE>

ECHELON RESIDENTIAL HOLDINGS LLC

CONSOLIDATED STATEMENT OF OPERATIONS
PERIOD MARCH 8, 2000 (DATE OF INCEPTION) THROUGH DECEMBER 31, 2000
--------------------------------------------------------------------------------

<TABLE>
<S>                                                         <C>
SALES AND REVENUES:
  Real estate operations:
    Rental revenues                                          $    230,834
    Management fees                                               695,162
    Developer fees                                                985,141
  Sale of development property                                  3,104,532
  Investment income                                               191,543
  Other income                                                     23,000
                                                             ------------

           Total sales and revenues                             5,230,212
                                                             ------------

EXPENSES:
  Rental and other operations                                     558,561
  Cost of development property sold                             3,317,880
  Write-down of land held for development or sale                 635,437
  Depreciation expense                                            148,861
  Interest expense on long-term debt - net of amounts
           capitalized of $606,990                              4,460,345
  General and administrative expenses                           2,937,514
                                                             ------------

           Total expenses                                      12,058,598
                                                             ------------

EQUITY IN LOSS OF UNCONSOLIDATED JOINT VENTURE                   (148,023)

MINORITY INTEREST                                                 270,383
                                                             ------------

NET LOSS                                                     $ (6,706,026)
                                                             ============
</TABLE>

See notes to consolidated financial statements.

                                     - 3 -
<PAGE>

ECHELON RESIDENTIAL HOLDINGS LLC

CONSOLIDATED STATEMENT OF CASH FLOWS
PERIOD MARCH 8, 2000 (DATE OF INCEPTION) THROUGH DECEMBER 31, 2000
--------------------------------------------------------------------------------

<TABLE>
<S>                                                                     <C>
CASH FLOW PROVIDED BY (USED IN) OPERATING ACTIVITIES:
  Net loss                                                              $ (6,706,026)
  Adjustment to reconcile net loss to cash provided by
     (used in) operating activities:
      Depreciation                                                           148,861
      Loss on sale of development property                                   213,348
      Minority interest                                                     (270,383)
      Equity in loss of unconsolidated joint venture                         148,023
      Write-down of land held for development or sale                        635,437
      Changes in working capital:
        Accounts payable, accrued expenses and other liabilities          (4,343,190)
        Interest payable                                                   4,385,805
        Other working capital changes                                        311,588
                                                                        ------------

          Net cash used in operating activities                           (5,476,537)
                                                                        ------------

CASH FLOW PROVIDED BY (USED IN) INVESTING ACTIVITIES:
  Increase in restricted cash and restricted investments                  (2,163,863)
  Net proceeds from sale of development property                           3,104,532
  Payments related to construction in progress                           (29,601,108)
                                                                        ------------

           Net cash used in investing activities                         (28,660,439)
                                                                        ------------

CASH FLOW PROVIDED BY (USED IN) FINANCING ACTIVITIES:
  Issuance of notes payable                                                6,244,000
  Repayment of notes payable                                              (5,474,000)
  Proceeds from construction loans                                        26,585,765
  Members' capital contributions                                           2,651,162
                                                                        ------------

           Net cash provided by financing activities                      30,006,927
                                                                        ------------

NET DECREASE IN CASH AND CASH EQUIVALENTS                                 (4,130,049)

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD                             7,919,247
                                                                        ------------

CASH AND CASH EQUIVALENTS, END OF PERIOD                                $  3,789,198
                                                                        ============

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
  Cash paid during the period for:
    Interest                                                            $    681,530
                                                                        ============
</TABLE>

See notes to consolidated financial statements.

                                     - 4 -
<PAGE>

ECHELON RESIDENTIAL HOLDINGS LLC

CONSOLIDATED STATEMENT OF MEMBERS' EQUITY (DEFICIENCY)
PERIOD MARCH 8, 2000 (DATE OF INCEPTION) THROUGH DECEMBER 31, 2000
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                          INITIAL          PARTICIPATING
                                          MEMBERS             MEMBERS              TOTAL
                                        -----------        -------------        -----------
<S>                                     <C>                <C>                  <C>
BALANCE AT MARCH 8, 2000                $   195,226         $      --           $   195,226

  Members' capital contributions               --             2,651,162           2,651,162

  Net loss                               (5,600,020)         (1,106,006)         (6,706,026)
                                        -----------         -----------         -----------

BALANCE AT DECEMBER 31, 2000            $(5,404,794)        $ 1,545,156         $(3,859,638)
                                        ===========         ===========         ===========
</TABLE>

See notes to consolidated financial statements.

                                     - 5 -
<PAGE>

ECHELON RESIDENTIAL HOLDINGS LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
PERIOD MARCH 8, 2000 (DATE OF INCEPTION) THROUGH DECEMBER 31, 2000
--------------------------------------------------------------------------------

1.    SUMMARY OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES

      BACKGROUND - On March 7, 2000, EIN Acquisition Corporation ("EIN
      Acquisition") closed on a Tender Offer ("Tender Offer") for all of the
      outstanding shares of Echelon International Corporation ("Echelon") for a
      cash price of $34.00 per share. Immediately after the close of the Tender
      Offer, EIN Acquisition merged into Echelon (the "Merger"), with Echelon
      being the surviving entity.

      In conjunction with the Tender Offer, Echelon had entered into various
      contracts to sell or convey various real estate assets and investments in
      two real estate joint ventures to third parties. Subsequent to the Merger
      on March 8, 2000, Echelon closed on existing contracts to sell or convey
      its real estate assets and investments in two real estate joint ventures.
      Specific real estate assets and investments in two real estate joint
      ventures were sold to Echelon Residential LLC ("Echelon Residential"), a
      wholly owned limited liability subsidiary of Echelon Residential Holdings
      LLC ("Echelon Residential Holdings" or the "Company"). Echelon Residential
      will own, manage, and develop or sell these purchased multi-family
      residential properties.

      The acquisition of the assets by Echelon Residential was accounted for as
      an asset purchase under Accounting Principles Board Opinion No. 16 ("APB
      No. 16"). In accordance with APB No. 16, Echelon Residential allocated the
      total purchase price to the assets acquired and liabilities assumed based
      on the estimated fair market values at the date of acquisition. Since the
      purchase price of the business was less than the fair market value of the
      net assets acquired, the credit excess was allocated on a pro-rata basis
      to the real estate, corporate equipment and the investment in an
      unconsolidated joint venture. There are no contingencies or other matters
      that could materially affect the allocation of the purchase cost. The
      results of operations of the acquired real estate assets and investments
      in two real estate joint ventures are included in the consolidated results
      of Echelon Residential Holdings from the acquisition date.

      The Company's summarized consolidated balance sheet, reflecting the above
      acquisition of assets, as of March 8, 2000 is as follows:

      ASSETS:

        Real estate                                       $34,164,672
        Cash and cash equivalents                           7,919,247
        Investment in unconsolidated joint venture          1,211,929
        Other assets                                          832,417
                                                          -----------

      Total assets                                        $44,128,265
                                                          ===========

      LIABILITIES AND MEMBERS' EQUITY:

        Accounts payable and other liabilities            $ 6,883,424
        Construction loans                                    251,975
        Notes payable                                      34,269,890
                                                          -----------

      Total liabilities                                    41,405,289
      Minority interest                                     2,527,750
      Members' equity                                         195,226
                                                          -----------

      Total liabilities and members' equity               $44,128,265
                                                          ===========

      The Company's fiscal year end is December 31.

                                     - 6 -
<PAGE>

      DESCRIPTION OF BUSINESS - Echelon Residential Holdings was formed on
      February 29, 2000, under the laws of the state of Delaware and operates in
      one industry segment: owning, leasing, developing, and managing real
      estate. There were no activities of Echelon Residential Holdings from
      February 29, 2000 through March 8, 2000. The Company is governed by its
      Amended and Restated Limited Liability Company Agreement ("the Agreement")
      dated June 23, 2000. At March 8, 2000, members' equity included capital
      contributions from the initial members of the Company, James A. Coyne and
      Charles E. Cobb, Jr. ("Initial Members"), who made collective capital
      contributions of $195,226. On June 23, 2000, the participating members,
      Darryl A. LeClair and Susan G. Johnson ("Participating Members") made
      capital contributions totaling $2,651,162. The collective Participating
      Members' capital contributions are comprised of Participating A Capital of
      $2,591,093, Participating B Capital of $45,052 and additional capital
      contributions of $15,017.

      Subsequent to the initial capital contributions above, the Agreement was
      executed and includes a provision whereby the members have no further
      obligation to contribute additional amounts of capital to the Company. If
      the Company requires additional funds, the Board of Managers is to notify
      the members. Each member has the right to contribute a pro rata share of
      such additional funds, based on the relative equity contributions made by
      each member. In addition, the liability of the members of the Company is
      limited to the members' total capital contributions.

      In accordance with the Agreement, the Participating Members earn a
      cumulative compounding annual return on their unreturned capital (as
      defined), at a per annum rate equal to 14% for Participating A capital and
      15% for Participating B capital, commencing on June 23, 2000. Preferred
      returns will be paid to the Participating Members in accordance with the
      terms of the Agreement. Payout of preferred returns (if any) is contingent
      upon the cumulative performance of the Company. See Note 9 - COMMITMENTS
      AND CONTINGENCIES.

      Per the Agreement, the Company is to distribute its cash flow (if any)
      periodically, but not less frequently than quarterly. The losses and
      profits of the Company are generally allocated to the members as follows:

            a)    losses are generally allocable 77.9% to members other than
                  Participating Members and 22.1% to Participating Members, and

            b)    profits are generally allocated the same way except for a
                  priority income allocation to the Participating Members to
                  cover priority cash distributions made on their Participating
                  Capital.

      PRINCIPLES OF CONSOLIDATION - The accompanying consolidated financial
      statements include the accounts of Echelon Residential Holdings, its
      wholly owned subsidiary and a 60% interest in a joint venture. All
      intercompany balances have been eliminated. Investments for which the
      Company has a 20% to 50% ownership interest are accounted for using the
      equity method.

      The Company has recorded a minority interest in the Company's consolidated
      financial statements to reflect the ownership of its partner in the joint
      venture.

      ESTIMATES - The preparation of financial statements in conformity with
      accounting principles generally accepted in the United States of America
      requires management to make estimates and assumptions that affect the
      amount of assets and liabilities and disclosure of contingent assets and
      liabilities at the date of the financial statements and the amounts of
      revenues and expenses during the reported period. Actual results could
      differ from those estimates. Significant estimates include the
      recoverability of real estate held for sale.

      CASH AND CASH EQUIVALENTS - Cash and cash equivalents include cash on
      hand, demand deposits, and short-term investments with original maturities
      of three months or less.

                                     - 7 -
<PAGE>

      RESTRICTED CASH - Restricted cash represents security deposits at
      multi-family residential communities held in separate noninterest-bearing
      depository accounts.

      RESTRICTED INVESTMENTS - Restricted investments represent certificates of
      deposit with maturities greater than three months. These investments are
      held by financial institutions that require such deposits in support of
      standby letters of credit.

      REAL ESTATE - Real estate additions are recorded at cost. Interest and
      real estate taxes incurred during construction periods are capitalized and
      depreciated on the same basis as the related assets. Costs directly
      related to the acquisition, development or improvement of real estate, and
      certain indirect development costs have also been capitalized.
      Depreciation is calculated on a straight-line basis over the estimated
      lives of the assets as follows:

                                                                  ESTIMATED
                                                                USEFUL LIVES

      Buildings                                                    35 years
      Furniture, fixtures, and equipment                         3-10 years

      IMPAIRMENT OF LONG-LIVED ASSETS - The carrying value of long-lived assets,
      including property and equipment, will be reviewed for impairment whenever
      events or changes in circumstances indicate that the recorded value cannot
      be recovered from undiscounted future cash flows.

      REVENUE RECOGNITION - The Company recognizes revenue on the sale of real
      estate properties when title has passed to the buyer and all contingencies
      have been removed. Rental revenues, management fees and developer fees are
      recognized when earned.

      INCOME TAXES - Under the provisions of the Internal Revenue Code and
      applicable state laws, the Company is not directly subject to income
      taxes; the results of its operations are included in the tax returns of
      its members.

      NEW ACCOUNTING PRONOUNCEMENTS - SFAS No. 133, ACCOUNTING FOR DERIVATIVE
      INSTRUMENTS AND HEDGING ACTIVITIES, is effective for all fiscal years
      beginning after June 15, 2000. SFAS No. 133, as amended, establishes
      accounting and reporting standards for derivative instruments and hedging
      activities. Under SFAS No. 133, certain contracts that were not formerly
      considered derivatives may now meet the definition of a derivative. The
      Company adopted SFAS No. 133 effective January 1, 2001. There was no
      impact on the Company's financial position, results of operations or
      liquidity resulting from the adoption of SFAS No. 133.

      Effective March 8, 2000 (date of inception), the Company adopted the
      provisions of Securities Exchange Commission Staff Accounting Bulletin
      101, "Revenue Recognition in Financial Statements" ("SAB No. 101"). SAB
      No. 101 provides guidance for the recognition, presentation and disclosure
      of revenue in financial statements. The adoption of SAB No. 101 had no
      impact on the Company's financial statements.

                                     - 8 -
<PAGE>

      RECLASSIFICATIONS - Certain amounts previously reported in the March 8,
      2000 consolidated balance sheet have been reclassified to conform to the
      December 31, 2000 presentation.

2.    REAL ESTATE - NET

      As of December 31, 2000, real estate consists of the following:

<TABLE>
<S>                                                               <C>
      Land and land improvements held for development or sale     $ 15,676,581
                                                                  ------------

      Real estate under development:

        Land and land improvements                                   8,302,770
        Construction in progress                                    14,694,874
                                                                  ------------

                                                                    22,997,644
                                                                  ------------

      Income producing real estate:

        Land and land improvements                                   2,303,890
        Buildings and improvements                                  19,720,463
        Equipment and other                                            484,752
        Accumulated depreciation                                       (91,128)
                                                                  ------------

                                                                    22,417,977
                                                                  ------------

                                                                  $ 61,092,202
                                                                  ============
</TABLE>

      For the period March 8, 2000 (date of inception) through December 31,
      2000, the Company recorded a write-down of land held for development or
      sale of $635,437 in the consolidated statement of operations. Land held
      for development or sale was determined to have been impaired because the
      estimated cash flows are less than the carrying value of the two parcels
      of land. The estimated fair value of these two parcels of land was based
      on letters of intent from third-party purchasers, dated October 2000 and
      December 2000, to purchase the two parcels of land.

      As of December 31, 2000, the Company's land and land improvements held for
      development or sale includes five parcels of improved and unimproved land
      for the development of multi-family residential communities. The land is
      located in urban areas in Memphis, Tennessee; Dallas, Texas; Denver,
      Colorado and Colorado Springs, Colorado.

      As of December 31, 2000, real estate under development includes the
      following three multi-family residential communities:

<TABLE>
<CAPTION>
                                                                               CONSTRUCTION      ACTUAL/ESTIMATED
                                                        RENTABLE     LAND      COMMENCEMENT      DATE FIRST UNITS
      PROJECT NAME                       LOCATION        UNITS     ACREAGE         DATE              AVAILABLE
      ------------                     -----------      --------   -------     ------------      ----------------
      <S>                              <C>              <C>       <C>          <C>               <C>
      ECHELON AT THE BALLPARK          Memphis, TN        385         5           Q1 2000             Q1 2001
      ECHELON AT LAKESIDE               Plano, TX         181         12          Q3 1999             Q3 2000
      ECHELON AT UPTOWN                Orlando, FL        244         3           Q2 2001             Q2 2002
</TABLE>

      As discussed in Note 6, INVESTMENT IN CONSOLIDATED JOINT VENTURE
      PARTNERSHIP, ECHELON AT LAKESIDE commenced operations during the period
      March 8, 2000 (date of inception) through December 31, 2000 and portions
      of the project remained under construction as of December 31, 2000.

      As of December 31, 2000, real estate includes $606,990 of interest
      capitalized during the period March 8, 2000 (date of inception) through
      December 31, 2000.

                                     - 9 -
<PAGE>

3.    INVESTMENT IN UNCONSOLIDATED JOINT VENTURE

      In July 1999, Fannie Mae's American Communities Fund agreed to invest with
      a wholly owned subsidiary of Echelon in the development of ECHELON AT
      CHENEY PLACE, a 303-unit multi-family residential community currently
      under construction in downtown Orlando, Florida. Echelon's 20% interest in
      the joint venture was purchased by Echelon Residential, in conjunction
      with the real estate assets purchased as discussed in Note 1, SUMMARY OF
      BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES. The Company accounts for its
      investment in the joint venture under the equity method. Concurrent with
      the execution of the joint venture agreement with Fannie Mae's American
      Communities Fund, the joint venture executed an agreement with Wachovia
      Bank, N.A. for a $21,500,000 loan to fund the construction of ECHELON AT
      CHENEY PLACE. The loan is guaranteed by Echelon Residential.

      Construction of ECHELON AT CHENEY PLACE began in late July 1999 and
      construction continued on portions of the project through December 31,
      2000. For the period March 8, 2000 (date of inception) through December
      31, 2000, the Company recorded its share of losses for ECHELON AT CHENEY
      PLACE, from the initial operations of the project, as a reduction of the
      investment in unconsolidated joint venture. As of December 31, 2000, total
      capital expenditures and construction loan draws for the project were
      $24,834,193 and $18,408,921, respectively. Through December 31, 2000, the
      Company's capital contributions to the joint venture totaled $1,386,000.
      The total of net losses and purchase price adjustment allocated to the
      investment in unconsolidated joint venture is $322,094.

4.    CONSTRUCTION LOANS

      As of December 31, 2000, the Company's construction loans outstanding are
      as follows:

      Bank of America                                              $ 17,614,845
      First Union National Bank of Florida                            9,222,895
                                                                   ------------

                                                                   $ 26,837,740
                                                                   ============

      The Company has a $20,000,000 construction loan with Bank of America to
      fund the construction of ECHELON AT LAKESIDE. The loan is guaranteed by
      Echelon Residential. The interest rate is LIBOR plus 1.85% (8.4875% as of
      December 31, 2000), and the loan matures in September 2002. As of December
      31, 2000, the Company has made $17,614,845 of construction draws on this
      loan. See further discussion of the development of ECHELON AT LAKESIDE
      included in Note 6, INVESTMENT IN CONSOLIDATED JOINT VENTURE PARTNERSHIP.
      Accrued interest on the Bank of America construction loan is $125,685 as
      of December 31, 2000.

      The Company has a $26,075,000 construction loan with First Union National
      Bank of Florida to fund the construction of ECHELON AT THE BALLPARK, a
      385-unit multi-family residential community currently under construction
      in downtown Memphis, Tennessee. The loan is guaranteed by Echelon
      Residential. The interest rate is LIBOR plus 1.65% (8.2125% as of December
      31, 2000) with monthly interest payments required through the term of the
      loan, which expires on June 2002. As of December 31, 2000, the Company has
      made construction draws of $9,222,895. Accrued interest on the First Union
      National Bank construction loan is $8,258 as of December 31, 2000.

      The Company's significant financial covenants include minimum net worth
      and liquidity requirements. As of December 31, 2000, the Company was in
      compliance with all financial covenants contained in its debt agreements.

      In the opinion of management, the carrying value of the Company's
      construction loans approximates their fair value based on management's
      estimates for similar issues, giving consideration to quality,

                                     - 10 -
<PAGE>

      interest rates, maturity and other significant characteristics. Although
      management is not aware of any factors that would significantly affect the
      estimated fair value of the construction loans, the amounts have not been
      comprehensively revalued for purposes of these consolidated financial
      statements since December 31, 2000 and current estimates of fair value may
      differ significantly.

      See Note 10, SUBSEQUENT EVENT, for discussion of a construction loan
      executed for the construction of ECHELON AT UPTOWN, in February 2001.

5.    NOTES PAYABLE

      As of December 31, 2000, notes payable outstanding are as follows:

<TABLE>
      <S>                                                                  <C>
      American Income Partners V-A Limited Partnership                     $ 2,160,000
      American Income Partners V-B Limited Partnership                       5,700,000
      American Income Partners V-C Limited Partnership                       2,390,000
      American Income Partners V-D Limited Partnership                       2,730,000
      American Income Fund I-A, a Massachusetts Limited Partnership          1,650,000
      American Income Fund I-B, a Massachusetts Limited Partnership          1,310,000
      American Income Fund I-C, a Massachusetts Limited Partnership          2,780,000
      American Income Fund I-D, a Massachusetts Limited Partnership          3,050,000
      American Income Fund I-E, a Massachusetts Limited Partnership          4,790,000
      AIRFUND International Limited Partnership                              1,800,000
      AIRFUND II International Limited Partnership                           3,640,000
                                                                           -----------
      Subtotal                                                              32,000,000

      Series A Note                                                          1,684,211
      Series B Notes                                                           585,679
      Note payable - Echelon Development Holdings LLC                          770,000
                                                                           -----------

                                                                           $35,039,890
                                                                           ===========
</TABLE>

      On March 8, 2000, the Company executed $32,000,000 in notes payable with
      11 partnerships. The Company contributed the proceeds from the notes
      payable to Echelon Residential to acquire various real estate assets from
      Echelon, as discussed in Note 1, SUMMARY OF BUSINESS AND SIGNIFICANT
      ACCOUNTING POLICIES. These partnerships are managed by their general
      partners who have engaged Equis Financial Group ("EFG") as the
      partnerships' manager. Mr. James A. Coyne is Executive Vice President of
      EFG and is an equity investor in the Company. Mr. Coyne, in his individual
      capacity, is the only equity investor in the Company related to EFG. These
      notes payable have a term of 30 months, maturing on September 8, 2002, and
      an annual interest rate of 14% for the first 24 months and 18% for the
      final six months. No principal payments are required prior to the
      scheduled maturity. Interest accrues and compounds monthly and is payable
      at maturity. Accrued interest on these notes is $3,907,798 as of December
      31, 2000. The Company has assigned and pledged a security interest in all
      of its rights, title, and interest in its membership interests in Echelon
      Residential to the 11 partnerships as collateral.

      On March 8, 2000, the Company executed a Series A Note with Cobb Partners
      Limited. The Series A Note has a term of 30 months, maturing on September
      8, 2002, and an annual interest rate of 14% for the first 24 months and
      18% for the final six months. No principal payments are required prior to
      the scheduled maturity. Accrued interest on the Series A Note is $205,674
      as of December 31, 2000. Interest accrues and compounds monthly and is
      payable at maturity. The Company also executed

                                     - 11 -
<PAGE>

      Series B Notes with several individuals, who are employees or investors of
      EFG. The Series B Notes have an annual interest rate of 15% and mature on
      June 30, 2004. No principal payments are required prior to the scheduled
      maturity. Interest accrues and compounds monthly and is payable at
      maturity. The Series B Notes are subordinated to the $32,000,000 notes
      payable and the Series A Note. Accrued interest on the Series B Notes is
      $76,920 as of December 31, 2000.

      On December 29, 2000, the Company executed a $770,000 note payable to
      Echelon Development Holdings LLC ("Echelon Development Holdings"). The
      note payable has a term of 24 months, maturing on December 29, 2002, and
      an annual interest rate of 10%. Interest accrues and compounds daily and
      is payable on December 31st of each year the note payable is outstanding.
      The Company repaid the note, plus interest of $6,751, on January 30, 2001.

      In the opinion of management, the carrying value of the Company's notes
      payable approximates the fair value based on management's estimates for
      similar issues, giving consideration to quality, interest rates, maturity
      and other significant characteristics.

6.    INVESTMENT IN CONSOLIDATED JOINT VENTURE PARTNERSHIP

      In September 1999, a wholly owned subsidiary of Echelon entered into a
      joint venture agreement with Turner Heritage Investments, Ltd. ("Turner")
      for the development of ECHELON AT LAKESIDE, a 181-unit multi-family
      residential community currently under construction in Plano, Texas, which
      is near Dallas. Echelon's 60% interest in the joint venture was purchased
      by Echelon Residential, in conjunction with the transaction discussed in
      Note 1, SUMMARY OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES.
      Construction of ECHELON AT LAKESIDE began in October 1999 and continued on
      portions of the project through December 31, 2000. As of December 31,
      2000, total capital expenditures for the project were $23,927,413.

      Through December 31, 2000, the Company's capital contributions totaled
      $2,592,000 and Turner contributed land valued at $2,592,000 to the joint
      venture. The Company's interest represents a controlling interest, and
      accordingly, for financial reporting purposes, the assets, liabilities,
      retained deficit, and current period results of operations of the joint
      venture for the period March 8, 2000 (date of inception) through December
      31, 2000, are included in the Company's consolidated financial statements,
      and Turner's partnership interest in the joint venture has been recorded
      as a minority interest. See further discussion of debt financing for
      ECHELON AT LAKESIDE included in Note 4, CONSTRUCTION LOANS.

7.    RELATED PARTY TRANSACTIONS

      In conjunction with the purchase of Echelon's interest in the joint
      venture formed for the development of ECHELON AT LAKESIDE, Echelon
      Residential also assumed the development agreement, an asset management
      agreement and a property management and leasing agreement with Lakeside
      Baywater Enterprises Limited Partnership, the joint venture partnership.
      In accordance with the development agreement, Echelon Residential has been
      engaged as the developer for ECHELON AT LAKESIDE and receives a
      development fee, payable in arrears, in monthly installments of $44,371.
      In accordance with the asset management agreement, Echelon Residential
      receives a monthly asset management fee, computed in arrears, equal to 1%
      of the ECHELON AT LAKESIDE monthly gross income. Under the terms of the
      property management and leasing agreement, Echelon Residential also
      receives a monthly management fee, computed in arrears, equal to 4% of the
      ECHELON AT LAKESIDE monthly gross income.

                                     - 12 -
<PAGE>

      For the period March 8, 2000 (date of inception) through December 31,
      2000, Echelon Residential recognized $388,212 in development, asset
      management, and property management revenues from ECHELON AT LAKESIDE.

      In conjunction with the purchase of Echelon's interest in the joint
      venture formed for the development of ECHELON AT CHENEY PLACE, Echelon
      Residential also assumed agreements which include the payment of a
      development fee, a property management and leasing agreement and an
      incentive management fee with Cheney Place LLC, the joint venture
      partnership. In accordance with these agreements, Echelon Residential has
      been engaged as the developer for ECHELON AT CHENEY PLACE and receives a
      monthly development fee equal to 5% of the hard construction costs
      incurred during the month. Echelon Residential is also the property
      manager and leasing agent for the property and will receive a monthly
      management fee, computed in arrears, equal to $7,500 per month for two
      months prior to the opening of the clubhouse. For the next nine months
      thereafter, Echelon Residential will receive the greater of a) 3% of the
      effective monthly gross income or b) 3% of the effective monthly gross
      income that would be collected if 75% of ECHELON AT CHENEY PLACE were
      occupied at rents equaling the average pro forma base rent. Thereafter,
      the monthly management fee will be calculated as 3% of the effective
      monthly gross income of ECHELON AT CHENEY PLACE. The incentive management
      fee is equal to 2% of ECHELON AT CHENEY PLACE'S effective gross income, as
      defined. For the period March 8, 2000 (date of inception) through December
      31, 2000, Echelon Residential recognized $392,695 in development, property
      management and incentive management fee revenues from ECHELON AT CHENEY
      PLACE.

      Echelon Property Management LLC, a wholly owned subsidiary of Echelon
      Residential, has contracted to manage several operating multi-family
      residential communities currently leased by Echelon Commercial LLC
      ("Echelon Commercial"), a wholly owned limited liability subsidiary of
      Echelon Development LLC. Echelon Development LLC is a wholly owned limited
      liability subsidiary of Echelon Development Holdings LLC. Several of the
      equity investors in Echelon Residential Holdings are also equity investors
      in Echelon Development Holdings LLC. For the period March 8, 2000 (date of
      inception) through December 31, 2000, Echelon Residential recognized
      $587,908 in property management revenues from the management of
      multi-family properties leased by Echelon Commercial.

      As of December 31, 2000, the Company had accounts receivable balances of
      $51,880 due from Echelon Commercial LLC, $19,455 due from ECHELON AT
      CHENEY PLACE and $44,186 from other related parties. These amounts were
      repaid by the end of February 2001.

8.    RETIREMENT PLAN

      Echelon Residential is the sponsor of the Echelon 401(k) Savings Plan
      ("Savings Plan") under Section 401(k) of the Internal Revenue Service Code
      (the "Code"), to which participants may contribute a percentage of their
      pay up to limits established by the Code. The Company may make
      discretionary contributions to the Savings Plan. The Company did not
      contribute to the Savings Plan during the period March 8, 2000 (date of
      inception) through December 31, 2000. As of January 1, 2001, the Company
      initiated an option in the Savings Plan to include a mandatory matching
      contribution from the Company.

9.    COMMITMENTS AND CONTINGENCIES

      As of December 31, 2000, two multi-family residential communities were
      under construction and had remaining commitments of $12,985,656 with
      construction contractors.

      On December 29, 2000, the Company executed a $5,000,000 revolving
      promissory note with Echelon Development Holdings. The revolving
      promissory note has a term of 24 months, maturing on December 29, 2002,
      and an annual interest rate of 10%. Interest accrues and compounds daily
      and is

                                     - 13 -
<PAGE>

      payable on December 31st of each year the note is outstanding. As of
      December 31, 2000, there were no amounts outstanding on the revolving
      promissory note.

      As discussed in Note 1, SUMMARY OF BUSINESS AND SIGNIFICANT ACCOUNTING
      POLICIES, the Company maintains preferred return accounts for the
      Participating Members. As of December 31, 2000, the preferred return
      balances for Participating A and B Capital were $198,597 and $3,709,
      respectively. These amounts have not been paid and therefore, have not
      been reflected as a reduction of Participating A and B Capital in the
      December 31, 2000 consolidated financial statements.

      The joint venture formed for the development of ECHELON AT LAKESIDE
      maintains preferred return accounts for the limited partners, Echelon LP,
      a wholly owned limited liability subsidiary of Echelon Residential, and
      Turner. The payment of any preferred returns to Echelon LP would be
      eliminated upon consolidation. As of December 31, 2000, the preferred
      return balance for Turner was $312,669. This amount has not been paid and
      therefore, has not been reflected as a reduction of member's equity in the
      December 31, 2000 consolidated financial statements.

10.   SUBSEQUENT EVENT

      In February 2001, the Company closed on a $18,600,000 loan from SouthTrust
      Bank for the construction financing of ECHELON AT UPTOWN, a 244-unit
      multi-family residential community to be developed in downtown Orlando,
      Florida. The interest rate is LIBOR plus 1.75% with monthly interest
      payments required over the 36-month initial term of the loan. The loan is
      guaranteed by Echelon Residential and construction is expected to commence
      in the second quarter of 2001.

                                    - 14 -
<PAGE>

11.   QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)

      The following is a summary of the quarterly results of operations for the
      period March 8, 2000 (date of inception) through December 31, 2000:

<TABLE>
<CAPTION>

                                        PERIOD                           THREE MONTHS ENDED
                                       MARCH 8 -     ----------------------------------------------------------
                                       MARCH 31,       JUNE 30,      SEPTEMBER 30,   DECEMBER 31,      TOTAL
                                      ----------     ------------    -------------  -------------  ------------
      <S>                             <C>            <C>            <C>             <C>            <C>
      Total revenues............      $ 147,078      $   758,673     $   659,867    $ 3,664,594    $ 5,230,212
      Net loss..................      $(328,623)     $(1,359,326)    $(1,855,757)   $(3,162,320)   $(6,706,026)
</TABLE>

                                     ******

                                     - 15 -