UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                      ------------------------------------
                                    FORM 10-K
                ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934
                      ------------------------------------

   For the fiscal year ended December 31, 1999 Commission file number 1-11059

              AMERICAN INSURED MORTGAGE INVESTORS - SERIES 85, L.P.
             (Exact name of registrant as specified in it's charter)

California                                                   13-3257662
(State or other jurisdiction of                              (I.R.S. Employer
Incorporation or organization)                               Identification No.)

                              11200 Rockville Pike
                            Rockville, Maryland 20852
                                 (301) 816-2300
               (Address, including zip code, and telephone number,
        including area code, of registrant's principal executive offices)

                      ------------------------------------

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

                                                        Name of each exchange on
     Title of each class                                   which registered
----------------------------------                      ------------------------
Depositary Units of Limited                             American Stock Exchange
     Partnership Interest

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

                                      None
                      ------------------------------------

     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, to the
best of registrant's  knowledge,  in definitive proxy or information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]

     As of February 17, 2000, 12,079,514 depositary units of limited partnership
interest were  outstanding and the aggregate  market value of such units held by
non-affiliates of the Registrant on such date was $105,660,748.

                       Documents incorporated by Reference

                                      None


<PAGE>


              AMERICAN INSURED MORTGAGE INVESTORS - SERIES 85, L.P.

                         1999 ANNUAL REPORT ON FORM 10-K

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                                        Page
                                                                                                        ----
                                     PART I
                                     ------
<S>               <C>                                                                                    <C>
Item 1.           Business.........................................................................       4
Item 2.           Properties.......................................................................       5
Item 3.           Legal Proceedings................................................................       5
Item 4.           Submission of Matters to a Vote of Security Holders..............................       5



                                     PART II
                                     -------
Item 5.           Market for Registrant's Securities and Related Security Holder Matters...........       6
Item 6.           Selected Financial Data..........................................................       7
Item 7.           Management's Discussion and Analysis of Financial Condition and
                     Results of Operations.........................................................       7
Item 7A.          Qualitative and Quantitative Disclosures about Market Risk.......................      13
Item 8.           Financial Statements and Supplementary Data......................................      13
Item 9.           Changes in and Disagreements with Accountants on Accounting and
                     Financial Disclosure..........................................................      13



                                    PART III
                                    --------

Item 10.          Directors and Executive Officers of the Registrant...............................      14
Item 11.          Executive Compensation...........................................................      15
Item 12.          Security Ownership of Certain Beneficial Owners and Management...................      15
Item 13.          Certain Relationships and Related Transactions...................................      16



                                     PART IV
                                     -------

Item 14.          Exhibits, Financial Statement Schedules and Reports on Form 8-K..................      17

Signatures        .................................................................................      19
</TABLE>
<PAGE>
                                                                PART I

ITEM 1.    BUSINESS

FORWARD-LOOKING  STATEMENTS.  When used in this Annual Report on Form 10-K,  the
words  "believes,"   "anticipates,"   "expects,"   "contemplates,"  and  similar
expressions  are  intended to identify  forward-looking  statements.  Statements
looking forward in time are included in this Annual Report on Form 10-K pursuant
to the "safe harbor" provision of the Private  Securities  Litigation Reform Act
of 1995. Such statements are subject to certain risks and  uncertainties,  which
could cause actual  results to differ  materially.  Accordingly,  the  following
information contains or may contain forward-looking  statements: (1) information
included  or  incorporated  by  reference  in this  Annual  Report on Form 10-K,
including,  without  limitation,  statements  made  under  Item 7,  Management's
Discussion and Analysis of Financial  Condition and Results of  Operations,  (2)
information  included or  incorporated  by  reference  in future  filings by the
Partnership  with the  Securities  and Exchange  Commission  including,  without
limitation,  statements with respect to growth,  projected  revenues,  earnings,
returns and yields on its portfolio of mortgage  assets,  the impact of interest
rates, costs and business strategies and plans and (3) information  contained in
written  material,  releases and oral statements  issued by or on behalf of, the
Partnership,  including, without limitation,  statements with respect to growth,
projected  revenues,  earnings,  returns and yields on its portfolio of mortgage
assets, the impact of interest rates,  costs and business  strategies and plans.
Factors which may cause actual results to differ materially from those contained
in the forward-looking  statements identified above include, but are not limited
to (i) regulatory and litigation  matters,  (ii) interest rates, (iii) trends in
the economy,  (iv) prepayment of mortgages and (v) defaulted mortgages.  Readers
are cautioned not to place undue reliance on these  forward-looking  statements,
which speak only of the date hereof. The Partnership undertakes no obligation to
publicly   revise  these   forward-looking   statements  to  reflect  events  or
circumstances  occurring  after the date hereof or to reflect the  occurrence of
unanticipated events.

Development and Description of Business
---------------------------------------
     Information  concerning the business of American Insured Mortgage Investors
-  Series  85,  L.P.  (the  "Partnership")  is  contained  in Part  II,  Item 7,
Management's  Discussion  and  Analysis of  Financial  Condition  and Results of
Operations and in Notes 1, 5, 6, 7 and 8 of the Notes to Financial Statements of
the  Partnership  (filed  in  response  to  Item 8  hereof),  all of  which  are
incorporated by reference herein . See also Schedule  IV-Mortgage  Loans on Real
Estate, for the table of the Insured Mortgages (as defined below) invested in by
the  Partnership  as of  December  31,  1999,  which is hereby  incorporated  by
reference herein.

Employees
---------
     The  Partnership  has no  employees.  The  business of the  Partnership  is
managed  by  CRIIMI,  Inc.  (the  "General  Partner"),  while its  portfolio  of
mortgages is managed by AIM Acquisition Partners,  L.P. (the "Advisor") pursuant
to an advisory  agreement (the "Advisory  Agreement").  The General Partner is a
wholly-owned subsidiary of CRIIMI MAE Inc. ("CRIIMI MAE").

     The general  partner of the Advisor is AIM  Acquisition  Corporation  ("AIM
Acquisition")  and the  limited  partners  include,  but are not limited to, AIM
Acquisition,   The  Goldman  Sachs  Group,   L.P.,   Sun  America   Investments,
Inc.(successor  to Broad,  Inc.) and CRI/AIM  Investment, L.P.,  an affiliate of
CRIIMI MAE. AIM Acquisition is a Delaware corporation that is primarily owned by
Sun America Investments, Inc. and The Goldman Sachs Group, L.P.

     Under the  Advisory  Agreement,  the Advisor  will  render  services to the
Partnership,  including but not limited to, the management of the  Partnership's
portfolio of mortgages and the disposition of the Partnership's mortgages.  Such
services  will be subject to the review and  ultimate  authority  of the General
Partner.  However, the General Partner is required to receive the consent of the
Advisor prior to taking certain significant  actions,  including but not limited
to the  disposition of mortgages,  any transaction or agreement with the General
Partner,  or its  affiliates,  or any material  change as to policies  regarding
distributions  or  reserves of the  Partnership.  The  Advisor is  permitted  to
delegate the performance of services  pursuant to a sub-advisory  agreement (the
"Sub-Advisory Agreement").  The delegation of such services will not relieve the
Advisor of its obligation to perform such services.  CRIIMI MAE Services Limited
Partnership  ("CMSLP"),  an affiliate of CRIIMI MAE,  manages the  Partnership's
portfolio,  pursuant to the Sub-Advisory Agreement. The general partner of CMSLP
is CRIIMI MAE Services, Inc., an affiliate of CRIIMI MAE.


Competition
-----------
     In disposing of mortgage investments, the Partnership competes with private
investors,  mortgage  banking  companies,  mortgage  brokers,  state  and  local
government agencies, lending institutions, trust funds, pension funds, and other
entities,  some with similar  objectives to those of the Partnership and some of
which are or may be  affiliates of the  Partnership,  its General  Partner,  the
Advisor, CMSLP or their respective  affiliates.  Some of these entities may have
substantially  greater capital  resources and experience in disposing of Federal
Housing Administration ("FHA") insured mortgages than the Partnership.

     CRIIMI MAE and its affiliates also may serve as general partners,  sponsors
or managers of real estate limited partnerships,  REITs or other entities in the
future. The Partnership may attempt to dispose of mortgages at or about the same
time that  CRIIMI  MAE,  one or more of the other "AIM  Funds"  (defined  as the
Partnership,  American Insured Mortgage  Investors ("AIM 84"),  American Insured
Mortgage  Investors  L.P. - Series 86 ("AIM 86") and American  Insured  Mortgage
Investors  L.P. - Series 88 ("AIM  88")),  and/or  other  entities  sponsored or
managed by CRIIMI MAE or its affiliates, are attempting to dispose of mortgages.
As a result of market  conditions that could limit  dispositions,  CMSLP and its
affiliates  could be faced with  conflicts  of  interest  in  determining  which
mortgages would be disposed of. Both CMSLP and the General Partner, however, are
subject to their  fiduciary  duties in evaluating the  appropriate  action to be
taken when faced with such conflicts.


ITEM 2.    PROPERTIES

     Although the  Partnership  does not own the  underlying  real  estate,  the
mortgages  underlying the  Partnership's  mortgage  investments are non-recourse
first liens on the respective multifamily residential developments or retirement
homes.

ITEM 3.    LEGAL PROCEEDINGS

     There are no  material  legal  proceedings  to which the  Partnership  is a
party.


ITEM 4.    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     No matters were submitted to the security holders to be voted on during the
fourth quarter of 1999.

<PAGE>
                                    PART II


ITEM 5.    MARKET FOR REGISTRANT'S SECURITIES AND RELATED SECURITY
           HOLDER MATTERS

Principal Market and Market Price for Units and Distributions
-------------------------------------------------------------
     Since April 8, 1992, the Limited Partnership Units ("Units") have traded on
the American Stock Exchange ("AMEX") with a trading symbol of "AII."

     The high and low trade  prices  for the Units as  reported  on AMEX and the
distributions, as applicable, for each quarterly period in 1999 and 1998 were as
follows:

<TABLE>
<CAPTION>                                                                                     Amount of
                                                                 1999                        Distribution
     Quarter Ended                                     High              Low                  Per Unit
   ---------------------                             ---------         ---------             ------------
   <S>                                               <C>               <C>                   <C>
   March 31                                          $ 12 5/8          $ 11 3/8              $       0.40 (1)(2)
   June 30                                             11 3/4            10 9/16                     0.65 (3)
   September 30                                        11                10 7/16                     0.22
   December 31                                         10 7/8             8                          1.82(4)
                                                                                             ------------
                                                                                             $       3.09
                                                                                             ============

                                                                                              Amount of
                                                                 1998                        Distribution
    Quarter Ended                                      High              Low                  Per Unit
   ---------------------                             ---------         ---------             ------------
   <S>                                               <C>               <C>                   <C>
   March 31                                          $ 14 1/2          $ 13 9/16             $       1.07 (5)
   June 30                                             13 3/4            12 7/8                      0.58 (6)
   September 30                                        13 3/4            12 13/16                    0.53 (7)
   December 31                                         13 5/8            11 5/8                      1.27 (8)
                                                                                             ------------
                                                                                             $       3.45
                                                                                             ============
   </TABLE>

     The following disposition proceeds are included in the distributions listed
above:

<TABLE><CAPTION>
                                                                             Type of       NetProceeds
       Complex Name(s)                                                     Disposition      Per Unit
-------------------------------------------------------------------------  -----------     -----------
<S>                                                                        <C>                <C>
(1)    Gamel & Gamel Apartments                                            Prepayment         $0.06
(2)    Debenture from Portervillage I Apartments *                         Assignment          0.10
(3)    Nassau Apartments, Walnut Apartments, Kings Villa/ Discovery
       Commons, and Quail Creek Apartments                                 Prepayment          0.41
(4)    Huntington Apartments, Bowling Brook, Section 1, Lincoln Green,
       Ridgecrest Timbers, Holden Court Apartments, and Lakeside           Prepayment          1.60
       Apartments
(5)    Spanish Trace Apartments                                            Prepayment          0.77
(6)    Isle of Pines Village Apartments, Emerald Green Apartments, and
       Stoney Brook Apartments                                             Prepayment          0.31
(7)    Amador Residential, Continental Village, and Bentgrass Hills        Prepayment          0.27
       Apartments
(8)    Northdale Commons, Cedar Bluff, and Wayland Health Center           Prepayment          1.00
</TABLE>

*    During the first quarter of 1998, the  assignment  proceeds of the mortgage
     on  Portervillage  I  Apartments  were  received  in  the  form  of a  9.5%
     debenture.  The debenture,  with a face value of $2,296,098,  was issued to
     the Partnership,  with interest payable semi-annually on January 1 and July
     1. In January  1999,  net  proceeds  of  approximately  $2.3  million  were
     received  upon  redemption  of these  debentures.  Since  the  mortgage  on
     Portervillage  I Apartments was owned 50% by the  Partnership and 50% by an
     affiliate of the Partnership,  American  Insured  Mortgage  Investors ("AIM
     84"),  approximately $1.1 million of the debenture proceeds was paid to AIM
     84.

     There are no material legal restrictions upon the Partnership's  present or
future ability to make  distributions  in accordance  with the provisions of the
partnership agreement.


                                               Approximate Number of Unitholders
        Title of Class                              as of December 31, 1999
---------------------------                    ---------------------------------
Depositary Units of Limited
     Partnership Interest                                 10,900



ITEM 6.    SELECTED FINANCIAL DATA
           (Dollars in thousands, except per Unit amounts)

<TABLE><CAPTION>
                                                                For the Years Ended December 31,
                                               1999          1998          1997          1996          1995
                                             --------      --------      --------      --------      --------
<S>                                          <C>           <C>            <C>          <C>           <C>
Income                                       $ 12,230      $ 14,744      $ 16,761      $ 17,943      $ 18,589
Net gains on mortgage
  dispositions/modifications                      857         1,403           908           522            36

Net earnings                                   11,225        13,893        15,137        15,789        15,903

Net earnings per Limited
  Partnership Unit - Basic (1)                 $ 0.89        $ 1.11        $ 1.20        $ 1.26        $ 1.27

Distributions per Limited
  Partnership Unit (1)(2)                      $ 3.09        $ 3.45        $ 2.76        $ 2.25        $ 1.54


                                                                    As of December 31,
                                              1999          1998          1997          1996          1995
                                            ---------     ---------     ---------     ---------     ---------
<S>                                         <C>           <C>           <C>           <C>           <C>
Total assets                                $ 143,470     $ 170,970     $ 203,450     $ 215,951     $ 225,691

Partners' equity                              120,445       153,543       187,682       204,687       220,681

(1)  Calculated based upon the weighted average number of Units outstanding.
(2)  Includes  distributions  due the Unitholders for the  Partnership's  fiscal
     years ended December 31, 1999,  1998,  1997, 1996 and 1995, which were paid
     subsequent  to year  end.  See  Notes  7 and 8 of the  Notes  to  Financial
     Statements.
</TABLE>

     The selected  income data presented  above for the years ended December 31,
1999,  1998 and 1997,  and the balance  sheet data as of  December  31, 1999 and
1998,  are derived from and are  qualified  by  reference  to the  Partnership's
financial  statements which have been included  elsewhere in this Form 10-K. The
income data for the years ended December 31, 1996 and 1995 and the balance sheet
data as of December 31, 1997,  1996 and 1995 are derived from audited  financial
statements  not  included  in  this  Form  10-K.  This  data  should  be read in
conjunction with the Financial Statements and the Notes thereto.


ITEM 7.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
           AND RESULTS OF OPERATIONS

General
-------
     The  following  discussion  and analysis  contains  statements  that may be
considered  forward  looking.  These  statements  contain  a number of risks and
uncertainties  as  discussed  herein  and in Item 1 of this Form 10-K that could
cause actual results to differ materially.

     American Insured Mortgage  Investors - Series 85, L.P. (the  "Partnership")
was formed under the Uniform Limited  Partnership Act of the State of California
on June 26, 1984. During the period from March 8, 1985 (the initial closing date
of the Partnership's  public offering) through January 27, 1986 (the termination
date of the  offering),  the  Partnership,  pursuant  to its public  offering of
12,079,389  Depository Units of limited partnership  interest ("Units") raised a
total of  $241,587,780  in gross  proceeds.  In  addition,  the initial  limited
partner  contributed  $2,500 to the capital of the  Partnership and received 125
units of limited partnership interest in exchange therefor.

     CRIIMI,  Inc. (the "General Partner") holds a partnership  interest of 3.9%
and is a wholly  owned  subsidiary  of  CRIIMI  MAE  Inc.  ("CRIIMI  MAE").  AIM
Acquisition  Partners,  L.P.  (the  "Advisor")  serves  as  the  advisor  to the
Partnership pursuant to an advisory agreement (the "Advisory Agreement').

     The general  partner of the Advisor is AIM  Acquisition  Corporation  ("AIM
Acquisition")  and the  limited  partners  include,  but are not limited to, AIM
Acquisition,  The Goldman  Sachs  Group,  L.P.,  Sun America  Investments,  Inc.
(successor to Broad,  Inc.)and CRI/AIM Investment,  L.P., an affiliate of CRIIMI
MAE. AIM  Acquisition is a Delaware  corporation  that is primarily owned by Sun
America Investments, Inc. and The Goldman Sachs Group, L.P.

     Under the  Advisory  Agreement,  the Advisor  will  render  services to the
Partnership,  including but not limited to, the management of the  Partnership's
portfolio of mortgages and the disposition of the Partnership's mortgages.  Such
services  will be subject to the review and  ultimate  authority  of the General
Partner.  However, the General Partner is required to receive the consent of the
Advisor prior to taking certain significant  actions,  including but not limited
to the  disposition of mortgages,  any transaction or agreement with the General
Partner,  or its  affiliates,  or any material  change as to policies  regarding
distributions  or  reserves of the  Partnership.  The  Advisor is  permitted  to
delegate the performance of services  pursuant to a sub-advisory  agreement (the
"Sub-Advisory Agreement").  The delegation of such services will not relieve the
Advisor of its obligation to perform such services.  CRIIMI MAE Services Limited
Partnership  ("CMSLP"),  an affiliate of CRIIMI MAE,  manages the  Partnership's
portfolio,  pursuant to the Sub-Advisory Agreement. The general partner of CMSLP
is CRIIMI MAE Services, Inc., an affiliate of CRIIMI MAE.


Year 2000
---------
     During the transition from 1999 to 2000, the Partnership did not experience
any significant problems or errors in its information  technology ("IT") systems
or date-sensitive  embedded  technology that controls certain systems.  Based on
operations   since  January  1,  2000,  the  Partnership  does  not  expect  any
significant  impact to its  business,  operations,  or financial  condition as a
result of the Year 2000 issue.  However,  it is possible that the full impact of
the date change has not been fully  recognized.  The Partnership is not aware of
any  significant  Year 2000  problems  affecting  third  parties  with which the
Partnership interfaces directly or indirectly.

Mortgage Investments
--------------------
     Prior  to  the  expiration  of the  Partnership's  reinvestment  period  in
December  1993,  the  Partnership  was engaged in the  business  of  originating
mortgage loans  ("Originated  Insured  Mortgages") and acquiring  mortgage loans
("Acquired  Insured  Mortgages" and, together with Originated Insured Mortgages,
referred to herein as "Insured Mortgages").  In accordance with the terms of the
Partnership  Agreement,  the Partnership is no longer authorized to originate or
acquire Insured Mortgages and, consequently,  its primary objective is to manage
its  portfolio of mortgage  investments,  all of which are insured under Section
221(d)(4)  or Section 231 of the National  Housing Act of 1937,  as amended (the
"National Housing Act"). The Partnership is a liquidating  partnership and as it
continues  to  liquidate  its  mortgage   investments   and  investors   receive
distributions of return of capital and taxable gains,  investors should expect a
reduction in earnings and distributions due to the decreasing mortgage base. The
partnership agreement states that the Partnership will terminate on December 31,
2009,  unless  previously  terminated  under the  provisions of the  partnership
agreement.

     As of  December  31,  1999,  the  Partnership  had  invested  in 58 Insured
Mortgages,  with an aggregate  amortized cost of approximately  $119 million,  a
face value of approximately  $123 million and a fair value of approximately $120
million, as discussed below.

Investment in Insured Mortgages
-------------------------------
     The   Partnership's   investment  in  Insured  Mortgages  is  comprised  of
participation  certificates  evidencing a 100% undivided  beneficial interest in
government insured multifamily mortgages issued or sold pursuant to FHA programs
("FHA-Insured  Certificates"),  mortgage-backed  securities  guaranteed  by GNMA
("GNMA Mortgage-Backed Securities") and FHA-insured mortgage loans ("FHA-Insured
Loans").   The  mortgages   underlying  the   FHA-Insured   Certificates,   GNMA
Mortgage-Backed Securities and FHA-Insured Loans are non-recourse first liens on
multifamily residential developments or retirement homes.

     The  following is a discussion of the types of the  Partnership's  mortgage
investments, along with the risks related to each type of investment:

Fully Insured GNMA Mortgage-Backed  Securities and FHA-Insured Certificates
--------------------------------------------------------------------------
     Listed below is the  Partnership's  aggregate  investment  in fully Insured
     Mortgages:

<TABLE>
<CAPTION>                                                                       December 31,
                                                                           1999             1998
                                                                       ------------     ------------
<S>                                                                    <C>              <C>
Fully Insured Acquired Mortgages:
   Number of
      GNMA Mortgage-Backed Securities(5)(8)(10)                                   5                8
      FHA-Insured Certificates
      (1)(2)(3)(4)(6)(7)(9)(11)                                                  39               46
Amortized Cost                                                         $ 77,969,011     $104,595,386
Face Value                                                               81,218,457      108,690,257
Fair Value                                                               79,052,484      110,253,225

Fully Insured Originated Mortgages:
   Number of
      GNMA Mortgage-Backed Securities                                             1                1
      FHA-Insured Certificates                                                    1                1
Amortized Cost                                                         $ 16,772,658     $ 16,899,484
Face Value                                                               16,416,058       16,542,867
Fair Value                                                               15,703,179       16,738,030
</TABLE>
     Listed below is a summary of prepayments on fully Insured Mortgages:
<TABLE>
<CAPTION>
                                                               Date                                          Distribution
                                                Net          Proceeds       Gain/     Dist./   Declaration     Payment
       Complex name                             Proceeds     Received      (Loss)      Unit        Date          Date
       ------------                             --------     --------      ------      ----    -----------   ------------
    <S>                                       <C>           <C>          <C>          <C>        <C>            <C>
    (1)Nassau Apartments                      $   866,000   April 1999   $  (3,500)   $ 0.07     May  1999      Aug. 1999
    (2)Walnut Apartments                        2,604,000   April 1999     363,000      0.21     May  1999      Aug. 1999
    (3)Kings Villa/Discovery Commons            1,110,000   April 1999     230,000      0.09     May  1999      Aug. 1999
    (4)Quail Creek Apartments                     553,000   May   1999      62,000      0.04     June 1999      Aug. 1999
    (5)Huntington Apartments                    3,060,000   Sept. 1999     134,000      0.24     Oct. 1999      Feb. 2000
    (6)Bowling Brook, Section 1                11,820,000   Oct.  1999     (49,000)     0.94     Nov. 1999      Feb. 2000
    (7)Lincoln Green                            3,085,000   Nov.  1999     (39,000)     0.25     Nov. 1999      Feb. 2000
    (8)Ridgecrest Timbers                       1,527,000   Nov.  1999      (9,000)     0.12     Dec. 1999      Feb. 2000
    (9)Holden Court Apartments                    220,000   Nov.  1999      29,000      0.02     Dec. 1999      Feb. 2000
   (10)Northwood Apartments                     1,641,000   Dec.  1999      72,000      0.13     Jan. 2000      May  2000
   (11)Turtle Creek Apartments                  1,660,000   Jan.  2000      44,000      0.13     Jan. 2000      May  2000
</TABLE>

     As of February 25,  2000,  all of the fully  insured  GNMA  Mortgage-Backed
Securities and FHA-Insured  Certificates are current with respect to the payment
of principal and interest.

     In addition to base interest payments under Originated  Insured  Mortgages,
the Partnership is entitled to additional  interest based on a percentage of the
net cash flow from the underlying development (referred to as "Participations").
During  the years  ended  December  31,  1999,  1998 and 1997,  the  Partnership
received $0, $76,991, and $51,457, respectively, from the Participations.  These
amounts,  if any, are included in mortgage investment income on the accompanying
statements of income and comprehensive income.

     In the case of fully  insured  Originated  Insured  Mortgages  and Acquired
Insured   Mortgages,   the  Partnership's   maximum  exposure  for  purposes  of
determining  loan  losses  would  generally  be  approximately  1% of the unpaid
principal  balance  of the  Originated  Insured  mortgage  or  Acquired  Insured
Mortgage  (an  assignment  fee charged by FHA) at the date of default,  plus the
unamortized  balance  of  acquisition  fees and  closing  costs  of the  Insured
Mortgage and the loss of approximately 30 days accrued interest.

Fully Insured FHA-Insured Loans
-------------------------------
     Listed  below is the  Partnership's  aggregate  investment  in  FHA-Insured
     Loans:

<TABLE>
<CAPTION>                                                                      December 31,
                                                                    1999                     1998
                                                                -----------              -----------
<S>                                                             <C>                      <C>
Fully Insured Acquired Loans:
  Number of Loans (1)                                                     9                       10
Amortized Cost                                                  $11,167,461              $11,617,321
Face Value                                                       13,453,341               14,068,282
Fair Value                                                       13,203,586               14,087,092

Fully Insured Originated Loans:
  Number of Loans                                                         3                        3
Amortized Cost                                                  $12,699,265              $12,818,519
Face Value                                                       12,379,870               12,488,890
Fair Value                                                       12,017,626               12,747,524

</TABLE>

     (1)  In November 1999, the mortgage on Lakeside Apartments was prepaid. The
          Partnership  received  net  proceeds  of  approximately  $384,000  and
          recognized a gain of approximately $67,000 for the year ended December
          31, 1999. A  distribution  of $0.03 per Unit related to the prepayment
          of this  mortgage  was  declared  in  December  1999  and was  paid to
          Unitholders in February 2000.

     As of February 25, 2000,  all of the fully insured  FHA-Insured  Loans were
current with respect to the payment of principal and interest.

     In addition to base interest payments under Originated  Insured  Mortgages,
the Partnership is entitled to additional  interest based on a percentage of the
net cash flow from the underlying development (referred to as "Participations").
During  the years  ended  December  31,  1999,  1998 and 1997,  the  Partnership
received $45,164, $34,553, and $37,766,  respectively,  from the Participations.
These  amounts,  if any,  are  included  in  mortgage  investment  income on the
accompanying statements of income and comprehensive income.


<PAGE>

                                     PART II

Results of Operations
---------------------
1999 versus 1998
----------------
     Net earnings  decreased  for 1999 as compared to 1998,  primarily  due to a
decrease in mortgage investment income and a decrease in net gains from mortgage
dispositions, as discussed below.

     Mortgage  investment  income  decreased  for  1999  as  compared  to  1998,
primarily due to the reduction in mortgage base from 11 dispositions during 1999
with an aggregate cost balance of approximately $26.0 million.

     Interest and other income decreased for 1999 as compared to 1998, primarily
due to the timing of temporary investment of mortgage disposition proceeds prior
to distribution to Unitholders.

     Asset management fees decreased for 1999 as compared to 1998, primarily due
to the reduction in the mortgage base.

     Interest expense to affiliate  decreased for 1999 as compared to 1998, as a
result of a decrease in interest  payable to an  affiliate  of the  Partnership,
American  Insured  Mortgage  Investors  ("AIM 84"),  on the 9.5%  debenture,  as
discussed below. In 1998,  interest was due to AIM 84 for nine months.  In 1999,
no interest was due. The debenture was redeemed on January 4, 1999.

     Gains on mortgage dispositions  decreased for 1999 as compared to 1998 as a
result of gains  recognized on seven mortgage  prepayments in 1999, as discussed
above,  versus gains recognized on ten mortgage  prepayments and one assignment,
as discussed below, in 1998. Losses were recognized on four mortgage prepayments
in 1999, as discussed above, versus a loss recognized on one mortgage prepayment
in 1998.

     During 1998, the  assignment  proceeds of the mortgage on  Portervillage  I
Apartments were received in the form of a 9.5% debenture. The debenture,  with a
face value of $2,296,098,  was issued to the Partnership,  with interest payable
semi-annually  on  January  1 and  July 1. In  January  1999,  net  proceeds  of
approximately  $2.3 million were received upon  redemption of these  debentures.
Since  the  mortgage  on  Portervillage  I  Apartments  was  owned  50%  by  the
Partnership  and 50% by AIM 84,  approximately  $1.1  million  of the  debenture
proceeds was paid to AIM 84.

1998 versus 1997
----------------
     Net  earnings  decreased  for 1998 as compared to 1997  primarily  due to a
decrease in mortgage investment income.  Partially  offsetting this decrease was
an increase in net gains on mortgage dispositions, as discussed below.

     Mortgage  investment  income  decreased  for  1998  as  compared  to  1997,
primarily due to the reduction in mortgage base from 12 dispositions during 1998
with an aggregate cost balance of approximately $29.6 million.

     Interest and other income increased for 1998 as compared to 1997, primarily
due to the  temporary  investment  of  mortgage  disposition  proceeds  prior to
distribution to Unitholders.  During 1998, twelve mortgages were disposed of, as
compared to seven dispositions in 1997.

     Asset management fees to related parties  decreased for 1998 as compared to
1997 as a result of the reduction in the mortgage base.

     Interest expense to affiliate  increased for 1998 as compared to 1997, as a
result of interest payable to AIM 84, on the 9.5% debenture, as discussed above.

     Net gains  from  dispositions  increased  as a result  of  twelve  mortgage
prepayments or assignments in 1998, as discussed above, versus eight prepayments
or assignments in 1997.

Liquidity and Capital Resources
-------------------------------
     On October 5, 1998,  CRIIMI  MAE,  the parent of the General  Partner,  and
CRIIMI  MAE  Management,  Inc.,  an  affiliate  of CRIIMI  MAE and  provider  of
personnel  and  administrative  services  to the  Partnership,  filed  voluntary
petitions for relief under chapter 11 of title 11 of the United States Code (the
"Bankruptcy  Code").  Such  bankruptcy  filings could result in certain  adverse
effects to the Partnership.  For example, as a debtor-in-possession,  CRIIMI MAE
will not be permitted to provide any available capital to the General Partner or
to the general partner of CMSLP, the Partnership's sub-advisor, without approval
from the bankruptcy court. Even though this restriction or potential loss of the
availability of a potential  capital resource could adversely affect the General
Partner  and the  Partnership,  CRIIMI MAE has not  historically  represented  a
significant  source of capital for the General Partner or the Partnership.  Such
bankruptcy filings could also result in the potential need to replace CRIIMI MAE
Management,  Inc. as a provider of personnel and administrative  services to the
Partnership.  Furthermore,  the bankruptcy filings could negatively impact CMSLP
which could result in the need to obtain  another  party to perform the services
currently  performed  by CMSLP,  as  subadvisor,  pursuant  to the  Sub-Advisory
Agreement.

     On December  23, 1999,  CRIIMI MAE and CRIIMI MAE  Management,  Inc.  filed
their Amended Joint Plan of  Reorganization  and proposed  disclosure  statement
with the  United  States  Bankruptcy  Court for the  District  of  Maryland,  in
Greenbelt,  Maryland (the "Bankruptcy  Court"). The filing of such Amended Joint
Plan of Reorganization  and proposed  disclosure  statement on December 23, 1999
was filed with the full  support of the official  committee  of Equity  Security
Holders in the  CRIIMI MAE  Chapter  11 case,  which is a  co-proponent  of such
Amended  Joint  Plan of  Reorganization.  On or about  February  11,  2000,  the
Official  Committee  of  Unsecured  Creditors of CRIIMI MAE filed its own second
amended plan of reorganization and second amended proposed disclosure statement,
which,  in general,  provides for the liquidation of the assets of CRIIMI MAE. A
hearing  has been  scheduled  for April 25 and April  26,  2000 on the  proposed
disclosure statements filed with the Bankruptcy Court. There can be no assurance
at this time that CRIIMI  MAE's  Amended  Joint Plan of  Reorganization  will be
confirmed and consummated.

     The  Partnership's  operating  cash  receipts,  derived  from  payments  of
principal and interest on Insured  Mortgages plus cash receipts from interest on
short-term  investments,  are the Partnership's principal sources of cash flows,
and were  sufficient  during the years ended December 31, 1999, 1998 and 1997 to
meet operating  requirements.  The Partnership  anticipates its cash flows to be
sufficient to meet operating expense requirements for 2000.

     The basis for paying  distributions  to  Unitholders  is net proceeds  from
mortgage  dispositions,  if any, and cash flow from  operations,  which includes
regular  interest  income and principal from Insured  Mortgages after paying all
expenses  of the  Partnership.  Although  the  Insured  Mortgages  yield a fixed
monthly  mortgage  payment once purchased,  the cash  distributions  paid to the
Unitholders  will vary during each quarter due to (1) the fluctuating  yields in
the  short-term  money market where the monthly  mortgage  payment  receipts are
temporarily  invested prior to the payment of quarterly  distributions,  (2) the
reduction in the asset base resulting from monthly  mortgage payment receipts or
mortgage  dispositions,  (3)  variations  in the cash flow  attributable  to the
delinquency  or  default  of  Insured   Mortgages  and  professional   fees  and
foreclosure  costs incurred in connection  with those Insured  Mortgages and (4)
variations in the Partnership's operating expenses.

     Since the  Partnership  is obligated to distribute the Proceeds of Mortgage
Prepayments,  Sales and  Insurance  on  Insured  Mortgages  (as  defined  in the
Partnership  Agreement)  to its  Unitholders,  the  size  of  the  Partnership's
portfolio  will continue to decrease.  The magnitude of the decrease will depend
upon the size of the Insured  Mortgages which are prepaid,  sold or assigned for
insurance proceeds.

Cash flow - 1999 versus 1998
----------------------------
     Net cash provided by operating activities decreased for 1999 as compared to
1998, primarily due to the reduction in mortgage investment income, as discussed
above.

     Net cash provided by investing activities decreased for 1999 as compared to
1998.  This decrease is primarily  due to a reduction in proceeds  received from
the disposition of mortgages, as discussed previously.

     Net cash used in  financing  activities  decreased  for 1999 as compared to
1998 due to a decrease in the amount of distributions paid to partners.

Cash flow - 1998 versus 1997
----------------------------
     Net cash provided by operating activities decreased for 1998 as compared to
1997, primarily due to the reduction in mortgage investment income, as discussed
above.

     Net cash provided by investing  activities increased in 1998 as compared to
1997 due to the increase in proceeds  from mortgage  dispositions,  as discussed
previously.

     Net cash used in  financing  activities  increased  for 1998 as compared to
1997,  as  a  result  of  an  increase  in   distributions   paid  to  partners.
Distributions  paid to partners in 1998  included  proceeds  resulting  from the
disposition of eleven  mortgages during the fourth quarter of 1997 and the first
three quarters of 1998. This compares to distributions  paid to partners in 1997
which included proceeds  resulting from the disposition of five mortgages during
the fourth quarter of 1996 and the first three quarters of 1997.

ITEM 7A.   QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK

     The Partnership's  principal market risk is exposure to changes in interest
rates in the U.S.  Treasury  market,  which  coupled with the related  spread to
treasury investors required for the Partnership's Insured Mortgages,  will cause
fluctuations in the market value of the Partnership's assets.

     The  table  below  provides  information  about the  Partnership's  Insured
Mortgages,  all of which were entered into for purposes other than trading.  The
table  presents  anticipated  principal  and interest  cash flows based upon the
assumptions  used in  determining  the fair  value of these  securities  and the
related weighted average interest rates by expected maturity.

<TABLE>
<CAPTION>
                             2000       2001       2002       2003       2004      Thereafter     Total     Fair Value
                             ----       ----       ----       ----       ----      ----------     -----     ----------
<S>                          <C>        <C>        <C>        <C>        <C>         <C>          <C>         <C>
Insured Mortgages
   (in millions)             $21.7      $19.4      $17.9      $16.3      $15.9       $95.1        $186.3      $120.0

Average Interest Rate          7.88%      7.89%      7.89%      7.90%      7.90%       8.14%          --          --
</TABLE>


ITEM 8.    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     The information required by this Item is set forth in this Annual Report on
Form 10-K commencing on page 21.


ITEM 9.    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
           FINANCIAL DISCLOSURES

           None.
<PAGE>
                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

      (a),(b),(c),(e)

     The Partnership has no officers or directors.  CRIIMI, Inc. holds a general
partnership  interest of 3.9%. The affairs of the Partnership are managed by the
General Partner, which is wholly owned by CRIIMI MAE, a corporation whose shares
are listed on the New York Stock Exchange.

     The  general  partner of the  Advisor is AIM  Acquisition  and the  limited
partners  include,  but are not limited to, AIM  Acquisition,  The Goldman Sachs
Group,  L.P., Sun America  Investments,  Inc. and CRI/AIM  Investment,  L.P., an
affiliate  of CRIIMI  MAE.  Pursuant to the terms of certain  amendments  to the
partnership agreement, the General Partner is required to receive the consent of
the Advisor  prior to taking  certain  significant  actions,  including  but not
limited to the  disposition of mortgages,  any transaction or agreement with the
General  Partner,  or its  affiliates,  or any  material  change as to  policies
regarding  distributions or reserves of the Partnership.  CMSLP, an affiliate of
CRIIMI MAE, manages the  Partnership's  portfolio,  pursuant to the Sub-Advisory
Agreement.  The  general  partner  of CMSLP is CRIIMI  MAE  Services,  Inc.,  an
affiliate of CRIIMI MAE.


     The General  Partner is also the general  partner of AIM 84, AIM 86 and AIM
88, limited  partnerships  with  investment  objectives  similar to those of the
Partnership.

     The  following  table  sets  forth  information  concerning  the  executive
officers and directors of CRIIMI MAE the sole shareholder of the General Partner
as of March 15, 2000:

<TABLE>
<CAPTION>

Name                                        Age                          Position
-------                                     -----                        ----------

<S>                                         <C>                          <C>
William B. Dockser                          63                           Chairman of the Board

H. William Willoughby                       53                           President, Secretary and Director

Cynthia O. Azzara                           40                           Senior Vice President,
                                                                         Chief Financial Officer and
                                                                         Treasurer

David B. Iannarone                          39                           Senior Vice President and
                                                                         General Counsel

Brian L. Hanson                             38                           Senior Vice President

Garrett G. Carlson, Sr.                     62                           Director

G. Richard Dunnells                         62                           Director

Robert Merrick                              54                           Director

Robert E. Woods                             52                           Director

</TABLE>

     William B.  Dockser  has  served as  Chairman  of the Board of the  General
Partner  since 1991.  Mr.  Dockser has been  Chairman of the Board of CRIIMI MAE
since 1989 and Chairman of the Board of CRIIMI MAE Financial  Corporation  since
1995. Mr. Dockser is also the founder of C.R.I.,  Inc.  ("CRI"),  serving as its
Chairman of the Board since 1974.

     H. William  Willoughby has served as President and Secretary of the General
Partner since 1991.  Mr.  Willoughby has been President of CRIIMI MAE since 1990
and a Director and  Secretary of CRIIMI MAE since 1989.  He has also served as a
director of CRIIMI MAE Financial Corporation since 1995. Mr. Willoughby has been
a director of CRI since 1974,  Secretary of CRI from 1974 to 1990 and  President
of CRI since 1990.

     Cynthia  O.  Azzara has served as Chief  Financial  Officer of the  General
Partner since 1994. Ms. Azzara has served as Chief  Financial  Officer of CRIIMI
MAE since 1994. She has also served as Senior Vice President of CRIIMI MAE since
1995 and Treasurer of CRIIMI MAE since 1997,  Accounting and Finance Departments
of CRI from 1985 to June 1995.

     David B.  Iannarone  has served as Senior  Vice  President  of the  General
Partner since March 1998.  Mr.  Iannarone has served as Senior Vice President of
CRIIMI  MAE since  March  1998;  General  Counsel of CRIIMI MAE since July 1996;
Counsel-Securities     and    Finance    for    Federal    Deposit     Insurance
Corporation/Resolution Trust Corporation from 1991 to July 1996.

     Brian L. Hanson has served as Senior Vice President of the General  Partner
since March 1998.  Mr. Hanson has served as Senior Vice  President of CRIIMI MAE
since March 1998;  Group Vice  President  of CRIIMI MAE from March 1996 to March
1998;  Chief  Operating  Officer,  Director of Asset  Operations  and  Portfolio
Director of JCF Partners, Lanham, Maryland from 1991 to March 1996.

     Garrett G. Carlson, Sr. has served as Director of the General Partner since
1989. Mr. Carlson has served as Director of CRIIMI MAE since 1989;  President of
Can-American  Realty Corp.  and Canadian  Financial  Corp.  since 1979 and 1974,
respectively; President of Garrett Real Estate Development since 1982; President
of the Satellite  Broadcasting  Corporation since 1996; Chairman of the Board of
SCA Realty Holdings Inc. from 1985 to 1995; Vice Chairman of Shelter Development
Corporation  Ltd. from 1983 to 1995 and member of the board of Bank Windsor from
1992 to 1994.

     G.  Richard  Dunnells has served as Director of the General  Partner  since
1991.  Mr.  Dunnells has served as Director of CRIIMI MAE since 1991;  Firm-wide
Hiring  Partner of the law firm of Holland & Knight since 1995;  Chairman of the
Washington, D.C. law firm of Dunnells & Duvall from 1989 to 1993; Senior Partner
of such law firm from 1973 to 1993; Special Assistant to the Under-Secretary and
Deputy  Assistant  Secretary for Housing and Urban Renewal and Deputy  Assistant
Secretary for Housing  Management with the U.S.  Department of Housing and Urban
Development  from 1969 to 1973;  President's  Commission on Housing from 1981 to
1982.

     Robert J. Merrick has served as Director of the General Partner since 1997.
Mr.  Merrick  has served as  Director  of CRIIMI MAE since  1997;  Chief  Credit
Officer and Director of MCG Credit  Corporation  since February 1998;  Executive
Vice President from 1985 and Chief Credit Officer of Signet Banking  Corporation
through 1997, also served as Chairman of the Credit Policy  Committee and member
of  the  Asset  and  Liability  Committee  and  Management   Committee;   Credit
Officer-Virginia Banking Corporation, an affiliate of Signet Bank/Virginia, from
1980 to 1984; Senior Vice President of Bank of Virginia from 1976 to 1980.

     Robert E. Woods has served as Director of the General  Partner  since 1998.
Mr. Woods has served as Director of CRIIMI MAE since 1998; Managing Director and
head of loan syndications for the Americas at Societe  Generale,  New York since
1997; Managing Director, head of Real Estate Capital Markets and Mortgage-backed
Securities   division,   Citicorp   from  1991  to  1997,   Head  of  Citicorp's
syndications, private placements, money markets and asset-backed businesses from
1985 to 1990.

     (d)  There  is no  family  relationship  between  any of the  officers  and
          directors of the General Partner.

     (f)  Involvement in certain legal proceedings.

                  None.

     (g)  Promoters and control persons.

                  Not applicable.

     (h)  Section 16(a) Beneficial Ownership Reporting Compliance - Based solely
          on its review of Forms 3, 4 and 5 and amendments  thereto furnished to
          the Partnership,  and written  representations  from certain reporting
          persons  that  no  Form  5s  were  required  for  those  persons,  the
          Partnership believes that all reporting persons have filed on a timely
          basis Forms 3, 4 and 5 as  required in the fiscal year ended  December
          31, 1999.


ITEM 11.      EXECUTIVE COMPENSATION

     The  Partnership  does not  have any  directors  or  officers.  None of the
directors  or officers of the General  Partner  received  compensation  from the
Partnership,  and the General  Partner does not receive  reimbursement  from the
Partnership for any portion of their  salaries.  Other  information  required by
Item 11 is hereby incorporated herein by reference herein to Note 7 of the Notes
to Financial Statements of the Partnership.


ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

(a)  As of December 31, 1999, no person was known by the  Partnership  to be the
     beneficial owner of more than five percent (5%) of the outstanding Units of
     the Partnership.

(b)  The following table sets forth certain information regarding the beneficial
     ownership  of the  Partnership's  Units  as of  February  17,  2000 by each
     director  of the  General  Partner,  each  named  executive  officer of the
     General  Partner,  and by affiliates of the  Partnership.  Unless otherwise
     indicated,  each  Unitholder  has sole  voting  and  investment  power with
     respect to the Units beneficially owned.

                             Amount and Nature
                                of Units                     Percentage of Units
Name                         Beneficially Owned                  Outstanding
----                         ------------------              -------------------
William B. Dockser               11,000 (1)                           *
CRIIMI MAE                        4,000                               *

(1)  Includes 4,000 Units held by Mr. Dockser's wife
*    Less than 1%

(c)  There are no arrangements known to the Partnership,  the operation of which
     may  at  any  subsequent  date  result  in  a  change  in  control  of  the
     Partnership.


ITEM 13.      CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

          (a)  Transactions with management and others.

               Note 7 of the Notes to Financial  Statements  of the  Partnership
               contains a discussion of the amounts, fees and other compensation
               paid or accrued by the Partnership to the directors and executive
               officers of the  General  Partner  and their  affiliates,  and is
               hereby incorporated by reference herein.

          (b)  Certain business relationships.

               Other than as set forth in Item 11 of this report which is hereby
               incorporated by reference herein, the Partnership has no business
               relationship with entities of which the current.  General Partner
               of the Partnership are officers, directors or equity owners.

          (c)  Indebtedness of management.

                           None.

          (d)  Transactions with promoters.

                           Not applicable.
<PAGE>
                                     PART IV

ITEM 14.      EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
              FORM 8-K

         (a)(1)   Financial Statements:
<TABLE>
<CAPTION>
                                                                                                       Page
                                                                                                       Number
         Description                                                                                   ------
         -----------
         <S>                                                                                             <C>
         Balance Sheets as of December 31, 1999 and 1998.................................................22

         Statements of Income and Comprehensive Income for the years ended December 31, 1999,
            1998, and 1997 ..............................................................................23

         Statements of Changes in Partners' Equity for the years ended December 31, 1999, 1998
            and 1997.....................................................................................24

         Statements of Cash Flows for the years ended December 31, 1999, 1998 and 1997...................25

         Notes to Financial Statements...................................................................26


         (a)(2)  Financial Statement Schedules:

                  IV - Mortgage Loans on Real Estate.....................................................36
</TABLE>
                    All other  schedules  have  been  omitted  because  they are
               inapplicable, not required, or the information is included in the
               Financial Statements or Notes thereto.

         (a)(3)  Exhibits:

               4.0  Amended and Restated Certificates of Limited Partnership are
                    incorporated   by   reference   to   Exhibit   4(a)  to  the
                    Registration  Statement  on Form  S-11 (No.  2-93294)  dated
                    January 28, 1985 (such Registration  Statement,  as amended,
                    is referred to herein as the "Registration Statement").

               4.1  Second  Amended  and  Restated   Partnership   Agreement  is
                    incorporated  by reference to Exhibit 3 to the  Registration
                    Statement.

               4.2  Amendment   No.  1  to  the  Second   Amended  and  Restated
                    Partnership   Agreement  is  incorporated  by  reference  to
                    Exhibit 4(a) to the Partnership's Annual Report on Form 10-K
                    for the year ended December 31, 1986.

               4.3  Amendment   No.  2  to  the  Second   Amended  and  Restated
                    Partnership   Agreement  is  incorporated  by  reference  to
                    exhibit 4(b) to the Partnership's Annual Report on Form 10-K
                    for the year ended December 31, 1986.

               4.4  Amendment  No. 3 dated  February  12,  1990,  to the  Second
                    Amended and Restated Agreement of Limited Partnership of the
                    Partnership incorporated by reference to Exhibit 4(c) to the
                    Partnership's  Annual Report on Form 10-K for the year ended
                    December 31, 1989.

              10.0  Escrow   Agreement,   dated  January  14,  1985,  among  the
                    Partnership,  the Managing  General  Partner and  Integrated
                    Resources  Marketing,  Inc.,  incorporated  by  reference to
                    Exhibit 10(a) to the Registration Statement.

              10.1  Amended and Restated  Origination and  Acquisition  Services
                    Agreement,   dated  as  of  January  8,  1985,  between  the
                    Partnership  and IFI,  incorporated  by reference to Exhibit
                    10(b) to the Registration Statement.

              10.2  Amended and Restated Management Services Agreement, dated as
                    of  January  8,  1985,  between  the  Partnership  and  IFI,
                    incorporated   by   reference   to  Exhibit   10(c)  to  the
                    Registration Statement.

              10.3  Amended and Restated Disposition  Services Agreement,  dated
                    as of January  8, 1985,  between  the  Partnership  and IFI,
                    incorporated   by   reference   to  Exhibit   10(d)  to  the
                    Registration Statement.

              10.4  Agreement,  dated as of January  8,  1985,  among the former
                    managing  general  partner,  the  former  associate  general
                    partner and  Integrated  Resources,  Inc.,  incorporated  by
                    reference to Exhibit 10(e) to the Registration Statement.

              10.5  Reinvestment   Plan,   incorporated   by  reference  to  the
                    Prospectus contained in the Registration Statement.

              10.6  Declaration of Trust and Pooling  Servicing  Agreement dated
                    as of  July  1,  1982 as to  Pass-Through  Certificates,  is
                    incorporated  by reference to Exhibit 10(h) to  Registrant's
                    Annual  Report  on Form  10-K  for  the  fiscal  year  ended
                    December 31, 1986.


              10.7  Pages A-1 - A-5 of the Partnership  Agreement of Registrant,
                    incorporated by reference to Exhibit 28 to the Partnership's
                    Annual  Report on Form 10-K for the year ended  December 31,
                    1990.

              10.8  Purchase   Agreement  among  AIM  Acquisition,   the  former
                    managing  general  partner,  the  former  corporate  general
                    partner,  IFI and Integrated  dated as of December 13, 1990,
                    as  amended  January  9,  1991,  incorporated  by  reference
                    Exhibit  28(a) to the  Partnership's  Annual  Report on Form
                    10-K for the year ended December 31, 1990.

              10.9  Purchase Agreement among CRIIMI, Inc., AIM Acquisition,  the
                    former  managing  general  partner,   the  former  corporate
                    general partner, IFI and Integrated dated as of December 13,
                    1990  and  executed  as of March 1,  1991,  incorporated  by
                    reference  to  Exhibit  28(b)  to the  Partnership's  Annual
                    Report on Form 10-K for the year ended December 31, 1990.

              10.10 Amendment to Partnership  Agreement dated September 4, 1991,
                    incorporated   by  reference  to  Exhibit   28(c),   to  the
                    Partnership's  Annual Report on Form 10-K for the year ended
                    December 31, 1991.

              10.11 Sub-Management  Agreement by and between AIM Acquisition and
                    CRI/AIM  Management,  Inc.,  dated  as  of  March  1,  1991,
                    incorporated   by   reference   to  Exhibit   28(f)  to  the
                    Partnership's  Annual Report on Form 10-K for the year ended
                    December 31, 1992.

              10.12 Expense  Reimbursement  Agreement  by and  among  Integrated
                    Funding Inc. and the Partnership,  American Insured Mortgage
                    Investors  L.P. - Series 86, and American  Insured  Mortgage
                    Investors  L.P. - Series 88,  effective  December  31, 1992,
                    incorporated   by   reference   to  Exhibit   28(g)  to  the
                    Partnership's  Quarterly Report on Form 10-Q for the quarter
                    ended June 30, 1991.

              10.13 Non-negotiable  promissory note to American Insured Mortgage
                    Investors  L.P.  - Series 88 in the  amount  of  $319,074.67
                    dated April 1, 1994,  incorporated  by  reference to Exhibit
                    10(q) to the  Partnership's  Annual  Report on Form 10-K for
                    the year ended December 31, 1994.

              10.14 Amendment  No. 1 to  Reimbursement  Agreement  by and  among
                    Integrated  Funding  Inc.  and  the  Partnership,   American
                    Insured  Mortgage  Investors  L.P. - Series 86, and American
                    Insured Mortgage Investors L.P. - Series 88, effective April
                    1, 1994,  incorporated  by reference to Exhibit 10(r) to the
                    Partnership's  Annual Report on Form 10-K for the year ended
                    December 31, 1994.

              10.15 Amendment  No. 2 to  Reimbursement  Agreement by  Integrated
                    Funding,  Inc.,  and  American  Insured  Mortgage  Investors
                    L.P.-Series  86, and  American  Insured  Mortgage  Investors
                    L.P.-Series  88,  effective  April 1, 1997,  incorporated by
                    reference  to  Exhibit  10.15  to the  Partnership's  Annual
                    Report on Form 10-K for the year ended December 31, 1997.

              27.   Financial Data Schedule (filed herewith).

         (b)  Reports on Form 8-K filed  during  the last  quarter of the fiscal
              year: None.

                  All other items are not applicable.


                                   SIGNATURES

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

                                                     AMERICAN INSURED MORTGAGE
                                                      INVESTORS-SERIES 85, L.P.
                                                     (Registrant)

                                                     By:    CRIIMI, Inc.
                                                            General Partner

/s/ March 1, 2000                                    /s/ William B. Dockser
---------------------------                          ---------------------------
DATE                                                 William B. Dockser
                                                     Chairman of the Board


/s/ March 1, 2000                                    /s/ H. William Willoughby
---------------------------                          ---------------------------
DATE                                                 H. William Willoughby
                                                     President and Secretary


/s/ March 1, 2000                                    /s/ Cynthia O. Azzara
---------------------------                          ---------------------------
DATE                                                 Cynthia O. Azzara
                                                     Senior Vice President,
                                                     Chief Financial Officer and
                                                     Treasurer


/s/ March 1, 2000                                    /s/ Garrett G. Carlson, Sr.
---------------------------                          ---------------------------
DATE                                                 Garrett G. Carlson, Sr.
                                                     Director


/s/ March 1, 2000                                    /s/ G. Richard Dunnells
---------------------------                          ---------------------------
DATE                                                 G. Richard Dunnells
                                                     Director


/s/ March 1, 2000                                    /s/ Robert J. Merrick
---------------------------                          ---------------------------
DATE                                                 Robert J. Merrick
                                                     Director


/s/ March 1, 2000                                    /s/ Robert E. Woods
---------------------------                          ---------------------------
DATE                                                 Robert E. Woods
                                                     Director
<PAGE>











              AMERICAN INSURED MORTGAGE INVESTORS - SERIES 85, L.P.



                              Financial Statements

                        as of December 31, 1999 and 1998

                             and for the Years Ended

                        December 31, 1999, 1998, and 1997

<PAGE>
                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Partners of American Insured Mortgage Investors - Series 85, L.P.:

     We have  audited  the  accompanying  balance  sheets  of  American  Insured
Mortgage Investors - Series 85, L.P. (the "Partnership") as of December 31, 1999
and 1998, and the related statements of income and comprehensive income, changes
in partners'  equity and cash flows for the years ended December 31, 1999,  1998
and 1997. These financial  statements and the schedule referred to below are the
responsibility of the Partnership's management. Our responsibility is to express
an opinion on these financial statements and the schedule based on our audits.

     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 provide a reasonable  basis
for our opinion.

     In our opinion,  the financial statements referred to above present fairly,
in all  material  respects,  the  financial  position of the  Partnership  as of
December 31, 1999 and 1998, and the results of its operations and its cash flows
for the  years  ended  December  31,  1999,  1998  and 1997 in  conformity  with
accounting principles generally accepted in the United States.

     Our  audits  were made for the  purpose  of forming an opinion on the basic
financial statements taken as a whole. Schedule IV-Mortgage Loans on Real Estate
as of  December  31,  1999 is  presented  for  purposes  of  complying  with the
Securities and Exchange Commission's rules and regulations and is not a required
part of the basic  financial  statements.  The  information in this schedule has
been  subjected  to the auditing  procedures  applied in our audits of the basic
financial  statements  and, in our  opinion,  is fairly  stated in all  material
respects in relation to the basic financial statements taken as a whole.



Arthur Andersen LLP
Vienna, VA
March 6, 2000
<PAGE>

              AMERICAN INSURED MORTGAGE INVESTORS - SERIES 85, L.P.

                                 BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                December 31,          December 31,
                                                                   1999                  1998
                                                               -------------         -------------
                       ASSETS
<S>                                                            <C>                   <C>
Investment in FHA-Insured Certificates and GNMA
  Mortgage-Backed Securities, at fair value:
    Acquired insured mortgages                                 $  79,052,484         $ 110,253,225
    Originated insured mortgages                                  15,703,179            16,738,030
                                                               -------------         -------------
                                                                  94,755,663           126,991,255
                                                               -------------         --------------
Investment in FHA-Insured Loans, at amortized cost,
  net of unamortized discount and premium:
    Acquired insured mortgages                                    11,167,461            11,617,321
    Originated insured mortgages                                  12,699,265            12,818,519
                                                               -------------         -------------
                                                                  23,866,726            24,435,840

Cash and cash equivalents                                         23,723,644            15,793,919

Receivables and other assets                                       1,123,472             1,453,292

Investment in FHA debentures                                               -             2,296,098
                                                               -------------         -------------
      Total assets                                             $ 143,469,505         $ 170,970,404
                                                               =============         =============


           LIABILITIES AND PARTNERS' EQUITY

Distributions payable                                          $  22,876,915         $  15,963,562

Accounts payable and accrued expenses                                147,473               184,236

Due to affiliate                                                           -             1,279,178
                                                               -------------         -------------
      Total liabilities                                           23,024,388            17,426,976
                                                               -------------         -------------

Partners' equity:
  Limited partners' equity, 15,000,000 Units
      authorized, 12,079,514 Units issued and outstanding        125,182,237           151,721,136
  General partner's deficit                                       (4,751,114)           (3,674,093)
  Accumulated other comprehensive income                              13,994             5,496,385
                                                               -------------         -------------
      Total partners' equity                                     120,445,117           153,543,428
                                                               -------------         -------------
      Total liabilities and partners' equity                   $ 143,469,505         $ 170,970,404
                                                               =============         =============
</TABLE>
                   The accompanying notes are an integral part
                         of these financial statements.



<PAGE>

              AMERICAN INSURED MORTGAGE INVESTORS - SERIES 85, L.P.

                  STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

<TABLE>
<CAPTION>
                                                  For the years ended December 31,
                                                1999            1998            1997
                                            ------------    ------------    ------------
<S>                                         <C>             <C>             <C>
Income:
  Mortgage investment income                $ 11,846,964    $ 14,067,956    $ 16,350,497
  Interest and other income                      382,860         675,768         410,839
                                            ------------    ------------    ------------
                                              12,229,824      14,743,724      16,761,336
                                            ------------    ------------    ------------

Expenses:
  Asset management fee to related parties      1,382,904       1,617,625       1,873,563
  General and administrative                     479,113         550,640         652,511
  Interest expense to affiliate                        -          85,565           5,783
                                            ------------    ------------    ------------
                                               1,862,017       2,253,830       2,531,857
                                            ------------    ------------    ------------

Earnings before gains (losses)
  on mortgage dispositions                    10,367,807      12,489,894      14,229,479


Mortgage dispositions
  Gains                                          956,150       1,499,412         907,923
  Losses                                         (99,399)        (96,262)              -
                                            ------------    ------------    ------------
Net earnings                                $ 11,224,558    $ 13,893,044    $ 15,137,402
                                            ============    ============    ============


Other comprehensive income                    (5,482,391)     (4,666,238)      2,549,887
                                             -----------     -----------    ------------
Comprehensive income                         $ 5,742,167     $ 9,226,806    $ 17,687,289
                                             -----------     -----------    ------------

Net earnings allocated to:
  Limited partners - 96.1%                  $ 10,786,800    $ 13,351,215    $ 14,547,043
  General partner -   3.9%                       437,758         541,829         590,359
                                            ------------    ------------    ------------
                                            $ 11,224,558    $ 13,893,044    $ 15,137,402
                                            ============    ============    ============

Net earnings per Limited
  Partnership Unit - Basic                  $       0.89    $       1.11    $       1.20
                                            ============    ============    ============
</TABLE>



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

<PAGE>
              AMERICAN INSURED MORTGAGE INVESTORS - SERIES 85, L.P.

                    STATEMENTS OF CHANGES IN PARTNERS' EQUITY

                For the years ended December 31, 1999, 1998, 1997


<TABLE>
<CAPTION>
                                                                                          Accumulated
                                                                                            Other
                                                    General             Limited          Comprehensive
                                                    Partner            Partners             Income               Total
                                                  ------------       -------------       -------------       -------------
<S>                                               <C>                <C>                 <C>                 <C>
Balance, January 1, 1997                          $ (1,762,017)      $ 198,836,652       $   7,612,736       $ 204,687,371

  Net Earnings                                         590,359          14,547,043                 -            15,137,402
  Adjustment to unrealized gains (losses) on
    investments in insured mortgages                        -                   -            2,549,887           2,549,887
  Distributions paid or accrued of $2.76 per Unit,
    including return of capital of $1.56 per Unit   (1,353,007)        (33,339,452)                 -          (34,692,459)
                                                   -----------       -------------       -------------       -------------
Balance, December 31, 1997                          (2,524,665)        180,044,243          10,162,623         187,682,201

  Net Earnings                                         541,829          13,351,215                  -           13,893,044
  Adjustment to unrealized gains (losses) on
    investments in insured mortgages                       -                   -           (4,666,238)          (4,666,238)
  Distributions paid or accrued of $3.45 per Unit,
    including return of capital of $2.34 per Unit   (1,691,257)        (41,674,322)                 -          (43,365,579)
                                                   -----------        ------------       ------------        -------------
Balance, December 31, 1998                          (3,674,093)        151,721,136          5,496,385          153,543,428

  Net Earnings                                         437,758          10,786,800                  -           11,224,558
  Adjustment to unrealized gains (losses) on
    investments in insured mortgages                       -                   -           (5,482,391)          (5,482,391)
  Distributions paid or accrued of $3.09 per Unit,
    including return of capital of $2.20 per Unit   (1,514,779)        (37,325,699)                 -          (38,840,478)
                                                  ------------       -------------       ------------        -------------
Balance, December 31, 1999                        $ (4,751,114)      $ 125,182,237       $     13,994        $ 120,445,117
                                                  ============       =============       ============        =============

Limited Partnership Units outstanding - Basic, as of
   December 31, 1999, 1998 and 1997                                   12,079,514
                                                                      ==========
</TABLE>

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


<PAGE>
              AMERICAN INSURED MORTGAGE INVESTORS - SERIES 85, L.P.
                            STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                  For the years ended December 31,
                                                                      1999           1998           1997
                                                                  -----------    -----------    -----------
<S>                                                               <C>            <C>            <C>
Cash flows from operating activities:
 Net earnings                                                     $11,224,558    $13,893,044    $15,137,402
 Adjustments to reconcile net earnings to net cash
   provided by operating activities:
   Losses on mortgage dispositions                                     99,399         96,262              -
   Gains on mortgage dispositions                                    (956,150)    (1,499,412)      (907,923)
   Changes in assets and liabilities:
     Decrease in receivables and other assets                         329,820        222,729         51,641
     (Decrease) increase in accounts payable and accrued expenses     (36,763)      (122,476)       107,751
     (Decrease) increase in due to affiliate                         (131,129)       131,129        (66,805)
                                                                  -----------    -----------    -----------
     Net cash provided by operating activities                     10,529,735     12,721,276     14,322,066
                                                                  -----------    -----------    -----------
Cash flows from investing activities:
 Proceeds from disposition of mortgages                            26,870,388     29,895,275     18,996,279
 Receipt of mortgage principal from scheduled payments              1,308,678      1,322,056      1,598,933
 Proceeds from redemption of debenture                              2,296,098              -              -
 Debenture proceeds due to affiliate                               (1,148,049)             -              -
                                                                  -----------    -----------    -----------
     Net cash provided by investing activities                     29,327,115     31,217,331     20,595,212
                                                                  -----------    -----------    -----------
Cash flows from financing activities:
 Distributions paid to partners                                   (31,927,125)   (42,862,791)   (29,915,961)
                                                                  -----------    -----------    -----------
Net increase in cash and cash equivalents                           7,929,725      1,075,816      5,001,317

Cash and cash equivalents, beginning of year                       15,793,919     14,718,103      9,716,786
                                                                  -----------    -----------    -----------
Cash and cash equivalents, end of year                            $23,723,644    $15,793,919    $14,718,103
                                                                  ===========    ===========    ===========
Non-cash investing activity:
 9.5% debenture received from HUD in exchange for
 the mortgage on Portervillage I Apartments                       $         -    $ 2,296,098    $         -

Portion of debenture due to affiliate, AIM 84                               -     (1,148,049)             -

</TABLE>

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



<PAGE>
                  AMERICAN MORTGAGE INVESTORS - SERIES 85, L.P.

                          NOTES TO FINANCIAL STATEMENTS

1.    ORGANIZATION

     American Insured Mortgage  Investors - Series 85, L.P. (the  "Partnership")
was formed under the Uniform Limited  Partnership Act of the state of California
on June 26, 1984.

     CRIIMI,  Inc. (the "General Partner") holds a partnership  interest of 3.9%
and is a wholly  owned  subsidiary  of  CRIIMI  MAE  Inc.  ("CRIIMI  MAE").  AIM
Acquisition  Partners  L.P.  (the  "Advisor")  serves  as  the  advisor  to  the
Partnership.  The general partner of the Advisor is AIM Acquisition  Corporation
("AIM  Acquisition") and the limited partners  include,  but are not limited to,
AIM Acquisition,  The Goldman Sachs Group, L.P., Sun America  Investments,  Inc.
(sussessor to Broad, Inc.) and CRI/AIM Investment,  L.P., an affiliate of CRIIMI
MAE. AIM  Acquisition is a Delaware  corporation  that is primarily owned by Sun
America Investments, Inc. and The Goldman Sachs Group, L.P.

     Under the  Advisory  Agreement,  the Advisor  will  render  services to the
Partnership,  including but not limited to, the management of the  Partnership's
portfolio of mortgages and the disposition of the Partnership's mortgages.  Such
services  will be subject to the review and  ultimate  authority  of the General
Partner.  However, the General Partner is required to receive the consent of the
Advisor prior to taking certain significant  actions,  including but not limited
to the  disposition of mortgages,  any transaction or agreement with the General
Partner,  or its  affiliates,  or any material  change as to policies  regarding
distributions  or  reserves of the  Partnership.  The  Advisor is  permitted  to
delegate the performance of services  pursuant to a sub-advisory  agreement (the
"Sub-Advisory Agreement").  The delegation of such services will not relieve the
Advisor of its obligation to perform such services.  CRIIMI MAE Services Limited
Partnership  ("CMSLP"),  an affiliate of CRIIMI MAE,  manages the  Partnership's
portfolio,  pursuant to the Sub-Advisory Agreement. The general partner of CMSLP
is CRIIMI MAE Services, Inc., an affiliate of CRIIMI MAE.

     Prior  to  the  expiration  of the  Partnership's  reinvestment  period  in
December  1993,  the  Partnership  was engaged in the  business  of  originating
mortgage loans  ("Originated  Insured  Mortgages") and acquiring  mortgage loans
("Acquired  Insured  Mortgages" and, together with Originated Insured Mortgages,
referred to herein as "Insured Mortgages").  In accordance with the terms of the
Partnership  Agreement,  the Partnership is no longer authorized to originate or
acquire Insured Mortgages and, consequently,  its primary objective is to manage
its  portfolio of mortgage  investments,  all of which are insured under Section
221(d)(4) or Section 231 of the National Housing Act. The Partnership  Agreement
states  that the  Partnership  will  terminate  on  December  31,  2009,  unless
previously terminated under the provisions of the partnership agreement.

     On October 5, 1998,  CRIIMI  MAE,  the parent of the General  Partner,  and
CRIIMI  MAE  Management,  Inc.,  an  affiliate  of CRIIMI  MAE and  provider  of
personnel  and  administrative  services  to the  Partnership,  filed  voluntary
petitions for relief under chapter 11 of title 11 of the United States Code (the
"Bankruptcy  Code").  Such  bankruptcy  filings could result in certain  adverse
effects to the Partnership.  For example, as a debtor-in-possession,  CRIIMI MAE
will not be permitted to provide any available capital to the General Partner or
to the general partner of CMSLP, the Partnership's sub-advisor, without approval
from the bankruptcy court. Even though this restriction or potential loss of the
availability of a potential  capital resource could adversely affect the General
Partner  and the  Partnership,  CRIIMI MAE has not  historically  represented  a
significant  source of capital for the General Partner or the Partnership.  Such
bankruptcy filings could also result in the potential need to replace CRIIMI MAE
Management,  Inc. as a provider of personnel and administrative  services to the
Partnership.  Furthermore,  the bankruptcy filings could negatively impact CMSLP
which could result in the need to obtain  another  party to perform the services
currently  performed  by CMSLP,  as  subadvisor,  pursuant  to the  Sub-Advisory
Agreement.

     On December  23, 1999,  CRIIMI MAE and CRIIMI MAE  Management,  Inc.  filed
their Amended Joint Plan of  Reorganization  and proposed  disclosure  statement
with the  United  States  Bankruptcy  Court for the  District  of  Maryland,  in
Greenbelt,  Maryland (the "Bankruptcy  Court"). The filing of such Amended Joint
Plan of Reorganization  and proposed  disclosure  statement on December 23, 1999
was filed with the full  support of the official  committee  of Equity  Security
Holders in the  CRIIMI MAE  Chapter  11 case,  which is a  co-proponent  of such
Amended  Joint  Plan of  Reorganization.  On or about  February  11,  2000,  the
Official  Committee  of  Unsecured  Creditors of CRIIMI MAE filed its own second
amended plan of reorganization and second amended proposed disclosure statement,
which,  in general,  provides for the liquidation of the assets of CRIIMI MAE. A
hearing  has been  scheduled  for April 25 and April  26,  2000 on the  proposed
disclosure statements filed with the Bankruptcy Court. There can be no assurance
at this time that CRIIMI  MAE's  Amended  Joint Plan of  Reorganization  will be
confirmed and consummated.

2.    SIGNIFICANT ACCOUNTING POLICIES

     Method of Accounting
     --------------------
          The  Partnership's  financial  statements  are prepared on the accrual
     basis of  accounting  in  accordance  with  generally  accepted  accounting
     principles.  The  preparation  of financial  statements in conformity  with
     generally  accepted  accounting  principles  requires  management  to  make
     estimates and  assumptions  that affect the reported  amounts of assets and
     liabilities  at the  date of the  financial  statements  and  the  reported
     amounts of  revenues  and  expenses  during the  reporting  period.  Actual
     results could differ from those estimates.

     Reclassification
     ----------------
          Certain  amounts  in the  financial  statements  for  the  year  ended
     December  31, 1997 have been  reclassified  to conform to the 1998 and 1999
     presentation.

     Investment in Insured Mortgages
     -------------------------------
          The  Partnership's  investment  in Insured  Mortgages  is comprised of
     participation  certificates evidencing a 100% undivided beneficial interest
     in government insured multifamily  mortgages issued or sold pursuant to FHA
     programs   ("FHA-Insured    Certificates"),    mortgage-backed   securities
     guaranteed by the Government National Mortgage  Association ("GNMA") ("GNMA
     Mortgage-Backed  Securities") and FHA-insured  mortgage loans ("FHA-Insured
     Loans").  The  mortgages  underlying  the  FHA-Insured  Certificates,  GNMA
     Mortgage-Backed  Securities and FHA-Insured  Loans are  non-recourse  first
     liens on multifamily residential developments or retirement homes.

          Payments of principal  and interest on  FHA-Insured  Certificates  and
     FHA-Insured  Loans are insured by the United  States  Department of Housing
     and Urban  Development  ("HUD") pursuant to Title 2 of the National Housing
     Act. Payments of principal and interest on GNMA Mortgage-Backed  Securities
     are guaranteed by GNMA pursuant to Title 3 of the National Housing Act.

          As of December 31, 1999,  the weighted  average  remaining term of the
     Partnership's   investments   in  GNMA   Mortgage-Backed   Securities   and
     FHA-Insured   Certificates  is   approximately  28  years.   However,   the
     Partnership  Agreement  states  that  the  Partnership  will  terminate  in
     approximately 10 years, on December 31, 2009, unless previously  terminated
     under the provisions of the  Partnership  Agreement.  As the Partnership is
     anticipated to terminate  prior to the weighted  average  remaining term of
     its  investments  in  GNMA   Mortgage-Backed   Securities  and  FHA-Insured
     Certificates,  the Partnership does not have the ability or intent, at this
     time,  to hold these  investments  to maturity.  Consequently,  the General
     Partner believes that the Partnership's investments in GNMA Mortgage-Backed
     Securities and FHA-Insured Certificates should be included in the Available
     for  Sale  category.   Although  the  Partnership's   investments  in  GNMA
     Mortgage-Backed  Securities and FHA-Insured  Certificates are classified as
     Available for Sale for financial  statement  purposes,  the General Partner
     does not intend to voluntarily sell these assets other than those which may
     be sold as a result of a default or those  which are  eligible to be put to
     FHA at the expiration of 20 years from the date of the final endorsement.

          In connection  with this  classification,  as of December 31, 1999 and
     1998,  all  of  the  Partnership's   investments  in  GNMA  Mortgage-Backed
     Securities and FHA-Insured  Certificates  are recorded at fair value,  with
     the net  unrealized  gains and  losses on these  assets  reported  as other
     comprehensive  income  and as a separate  component  of  partners'  equity.
     Subsequent increases or decreases in the fair value of GNMA Mortgage-Backed
     Securities and FHA-Insured Certificates,  classified as Available for Sale,
     will be included as a separate  component  of  partners'  equity.  Realized
     gains  and  losses  on  GNMA  Mortgage-Backed  Securities  and  FHA-Insured
     Certificates,  classified  as  Available  for  Sale,  will  continue  to be
     reported  in  earnings.  The  amortized  cost  of the  investments  in GNMA
     Mortgage-Backed Securities and FHA-Insured Certificates in this category is
     adjusted  for  amortization  of discounts  and  premiums to maturity.  Such
     amortization is included in mortgage investment income.

          As of December 31, 1999 and 1998,  Investment in FHA-Insured  Loans is
     recorded at amortized cost.

          Gains from  dispositions  of mortgage  investments are recognized upon
     the receipt of cash or HUD debentures.

          Losses on dispositions of mortgage  investments are recognized when it
     becomes  probable  that  a  mortgage  will  be  disposed  of and  that  the
     disposition  will result in a loss. In the case of Insured  Mortgages fully
     insured  by  HUD,  the  Partnership's  maximum  exposure  for  purposes  of
     determining the loan losses would generally be an assignment fee charged by
     HUD representing  approximately  1% of the unpaid principal  balance of the
     Insured  Mortgage at the date of default,  plus the unamortized  balance of
     acquisition  fees and closing costs paid in connection with the acquisition
     of the  Insured  Mortgage  and the loss of  approximately  30 days  accrued
     interest.

     Investment in FHA Debenture
     ---------------------------
          From time to time, the Partnership  assigns  defaulted loans to HUD in
     order to collect  the amount of  delinquent  principal  and  interest.  HUD
     determines  if the claim  will be  settled  in cash or by the  issuance  of
     debentures.  Debentures are obligations of the mortgage insurance funds and
     are  unconditionally  guaranteed  by the  United  States.  The  term of the
     debentures is 20 years and the rate is set based upon the rate in effect at
     the commitment date to provide  insurance or at the final endorsement date,
     whichever  ever  is  greater.  AIM  85  classifies  its  Investment  in FHA
     Debentures as Available for Sale debt securities with changes in fair value
     recorded as an adjustment to equity and other comprehensive income.

     Cash and Cash Equivalents
     -------------------------
          Cash and cash  equivalents  consist of money  market  funds,  time and
     demand deposits,  commercial paper and repurchase  agreements with original
     maturities of four months or less.

      Income Taxes
      ------------
          No provision has been made for Federal, state or local income taxes in
     the accompanying  statements of income and comprehensive  income since they
     are the personal responsibility of the Unitholders.

      Statements of Cash Flows
      ------------------------
          No cash payments were made for interest expense during the years ended
     December 31, 1999,  1998 and 1997.  Since the  statements of cash flows are
     intended  to reflect  only cash  receipt  and cash  payment  activity,  the
     statements of cash flows do not reflect  operating  activities  that affect
     recognized  assets and liabilities  while not resulting in cash receipts or
     cash payments.


3.       FAIR VALUE OF FINANCIAL INSTRUMENTS

     The  following  estimated  fair  values  of  the  Partnership's   financial
instruments  are  presented in accordance  with  generally  accepted  accounting
principles which define fair value as the amount at which a financial instrument
could be exchanged in a current transaction between willing parties,  other than
in a forced or liquidation  sale. These estimated fair values,  however,  do not
represent the liquidation value or the market value of the Partnership.

<TABLE>
<CAPTION>
                                           As of December 31, 1999          As of December 31, 1998
                                          Amortized         Fair           Amortized          Fair
                                            Cost            Value            Cost             Value
                                       -------------    -------------    ------------     -------------
<S>                                    <C>              <C>              <C>              <C>
Investment in FHA-Insured Certificates
   and GNMA Mortgage-Backed
   Securities:
   Acquired insured mortgages          $  77,969,011    $  79,052,484    $ 104,595,386    $ 110,253,225
   Originated insured mortgages           16,772,658       15,703,179       16,899,484       16,738,030
                                       -------------    -------------    -------------    -------------
                                       $  94,741,669    $  94,755,663    $ 121,494,870    $ 126,991,255
                                       =============    =============    =============     ============
Investment in FHA-Insured Loans:
  Acquired insured mortgages           $  11,167,461    $  13,203,586    $  11,617,321    $  14,087,092
  Originated insured mortgages            12,699,265       12,017,626       12,818,519       12,747,524
                                       -------------   --------------    -------------    -------------
                                       $  23,866,726    $  25,221,212    $  24,435,840    $  26,834,616
                                       =============    =============    =============    =============

Cash and cash equivalents              $  23,723,644    $  23,723,644    $  15,793,919    $  15,793,919
                                       =============    ============     =============    =============
Accrued interest receivable            $     853,861    $     853,861    $   1,180,042    $   1,180,042
                                        ============    =============    =============    =============
Investment in FHA Debenture            $          --    $          --    $   2,296,098    $   2,296,098
                                         ===========    =============    =============    =============
</TABLE>



          The following  methods and assumptions  were used to estimate the fair
     value of each class of financial instrument:

     Investment in FHA-Insured  Certificates,  GNMA Mortgage-Backed  Securities,
      FHA-Insured Loans and FHA Debentures
     ---------------------------------------------------------------------------

          The fair value of the FHA-Insured  Certificates,  GNMA Mortgage-Backed
     Securities and  FHA-Insured  Loans is based on quoted market prices from an
     investment  banking  institution  which trades these instruments as part of
     its  day-to-day  activities.  The fair value of the FHA  Debenture is based
     upon the prices of other comparable securities that trade in the market.

     Cash and cash equivalents and accrued interest receivable
     ---------------------------------------------------------
          The  carrying  amount  approximates  fair  value  because of the short
     maturity of these instruments.

4.    COMPREHENSIVE INCOME

          Comprehensive  Income  includes net earnings as currently  reported by
     the   Partnership   adjusted   for  other   comprehensive   income.   Other
     comprehensive income for the Partnership is changes in unrealized gains and
     losses related to the  Partnership's  mortgages  accounted for as available
     for sale.  The table below  breaks out other  comprehensive  income for the
     periods  presented  into the  following two  categories:  (1) the change to
     unrealized gains and losses that relate to mortgages which were disposed of
     during the period with the resulting realized gain or loss reflected in net
     earnings   (reclassification   adjustments)  and  (2)  the  change  in  the
     unrealized gain or loss related to those investments that were not disposed
     of during the period.
<TABLE>
<CAPTION>
                                                                1999          1998          1997
                                                            -----------   -----------   -----------
<S>                                                         <C>           <C>           <C>
Reclassification adjustment for (gains) losses
   included in net income                                   $(1,213,550)  $(1,944,214)  $  (780,085)
Unrealized holding (losses) gains arising during
   the period                                                (4,268,841)   (2,722,024)    3,329,972
                                                            -----------   -----------   -----------
Net adjustment to unrealized gains (losses) on mortgages    $(5,482,391)  $(4,666,238)  $ 2,549,887
                                                            ===========   ===========   ===========
</TABLE>
<PAGE>

5.    INVESTMENT IN FHA-INSURED CERTIFICATES AND GNMA MORTGAGE-BACKED
      SECURITIES

      GNMA Mortgage-Backed Securities and Fully Insured FHA-Insured Certificates
      --------------------------------------------------------------------------

     Listed below is the  Partnership's  aggregate  investment  in fully Insured
     Mortgages:

<TABLE>
<CAPTION>                                                                       December 31,
                                                                           1999             1998
                                                                       ------------     ------------
<S>                                                                    <C>              <C>
Fully Insured Acquired Mortgages:
   Number of
      GNMA Mortgage-Backed Securities(5)(8)(10)                                   5                8
      FHA-Insured Certificates
      (1)(2)(3)(4)(6)(7)(9)(11)                                                  39               46
Amortized Cost                                                         $ 77,969,011     $104,595,386
Face Value                                                               81,218,457      108,690,257
Fair Value                                                               79,052,484      110,253,225

Fully Insured Originated Mortgages:
   Number of
      GNMA Mortgage-Backed Securities                                             1                1
      FHA-Insured Certificates                                                    1                1
Amortized Cost                                                         $ 16,772,658     $ 16,899,484
Face Value                                                               16,416,058       16,542,867
Fair Value                                                               15,703,179       16,738,030
</TABLE>

     Listed below ia s summary of prepayments on fully Insured Mortgages:
<TABLE>
<CAPTION>
                                                               Date                                           Distribution
                                                  Net        Proceeds       Gain/     Dist./    Declaration     Payment
       Complex name                             Proceeds     Received      (Loss)      Unit        Date          Date
       ------------                             --------     --------      ------      ----     -----------   ------------
    <S>                                       <C>           <C>          <C>          <C>        <C>           <C>
    (1)Nassau Apartments                      $   866,000   April 1999   $  (3,500)   $ 0.07     May  1999     Aug. 1999
    (2)Walnut Apartments                        2,604,000   April 1999     363,000      0.21     May  1999     Aug. 1999
    (3)Kings Villa/Discovery Commons            1,110,000   April 1999     230,000      0.09     May  1999     Aug. 1999
    (4)Quail Creek Apartments                     553,000   May   1999      62,000      0.04     June 1999     Aug. 1999
    (5)Huntington Apartments                    3,060,000   Sept. 1999     134,000      0.24     Oct. 1999     Feb. 2000
    (6)Bowling Brook, Section 1                11,820,000   Oct.  1999     (49,000)     0.94     Nov. 1999     Feb. 2000
    (7)Lincoln Green                            3,085,000   Nov.  1999     (39,000)     0.25     Nov. 1999     Feb. 2000
    (8)Ridgecrest Timbers                       1,527,000   Nov.  1999      (9,000)     0.12     Dec. 1999     Feb. 2000
    (9)Holden Court Apartments                    220,000   Nov.  1999      29,000      0.02     Dec. 1999     Feb. 2000
   (10)Northwood Apartments                     1,641,000   Dec.  1999      72,000      0.13     Jan. 2000     May  2000
   (11)Turtle Creek Apartments                  1,660,000   Jan.  2000      44,000      0.13     Jan. 2000     May  2000
</TABLE>


     As of February 25, 2000, all  of  the fully  insured  GNMA  Mortgage-Backed
Securities and FHA-Insured  Certificates are current with respect to the payment
of principal and interest.

     In addition to base interest payments under Originated  Insured  Mortgages,
the Partnership is entitled to additional  interest based on a percentage of the
net cash flow from the underlying development (referred to as "Participations").
During  the years  ended  December  31,  1999,  1998 and 1997,  the  Partnership
received $0, $76,991, and $51,457, respectively, from the Participations.  These
amounts,  if any, are included in mortgage investment income on the accompanying
statements of income and comprehensive income.

     In the case of fully  insured  Originated  Insured  Mortgages  and Acquired
Insured   Mortgages,   the  Partnership's   maximum  exposure  for  purposes  of
determining  loan  losses  would  generally  be  approximately  1% of the unpaid
principal  balance  of the  Originated  Insured  mortgage  or  Acquired  Insured
Mortgage  (an  assignment  fee charged by FHA) at the date of default,  plus the
unamortized  balance  of  acquisition  fees and  closing  costs  of the  Insured
Mortgage and the loss of approximately 30 days accrued interest.

<PAGE>

6.    INVESTMENT IN FHA-INSURED LOANS

      Fully Insured FHA-Insured Loans
      -------------------------------

          Listed below is the Partnership's  aggregate investment in FHA-Insured
               Loans:

<TABLE>
<CAPTION>
                                                                            December 31,
                                                                    1999                    1998
                                                                -----------              -----------
<S>                                                             <C>                      <C>
Fully Insured Acquired Mortgages:
  Number of Loans (1)                                                     9                       10
  Amortized Cost                                                $11,167,461              $11,617,321
Face Value                                                       13,453,341               14,068,282
Fair Value                                                       13,203,586               14,087,092

Fully Insured Originated Mortgages:
  Number of Loans                                                         3                        3
Amortized Cost                                                  $12,699,265              $12,818,519
Face Value                                                       12,379,870               12,488,890
Fair Value                                                       12,017,626               12,747,524

</TABLE>

(1)  In November  1999,  the mortgage on Lakeside  Apartments  was prepaid.  The
     Partnership received net proceeds of approximately  $384,000 and recognized
     a gain of  approximately  $67,000 for the year ended  December  31, 1999. A
     distribution  of $0.03 per Unit related to the  prepayment of this mortgage
     was declared in December 1999 and was paid to Unitholders in February 2000.

     As of February 25, 2000,  all of the fully insured  FHA-Insured  Loans were
current with respect to the payment of principal and interest.

     In addition to base interest payments under Originated  Insured  Mortgages,
the Partnership is entitled to additional  interest based on a percentage of the
net cash flow from the underlying development (referred to as "Participations").
During  the years  ended  December  31,  1999,  1998 and 1997,  the  Partnership
received $45,164, $34,553, and $37,766,  respectively,  from the Participations.
These  amounts,  if any,  are  included  in  mortgage  investment  income on the
accompanying statements of income and comprehensive income.

<PAGE>

7.    TRANSACTIONS WITH RELATED PARTIES

     The principal  officers of the General Partner for the years ended December
31,  1999,  1998 and 1997 did not  receive  fees for  serving as officers of the
General  Partner,  nor are any fees  expected to be paid to the  officers in the
future.

     The General Partner, CMSLP and certain affiliated entities have, during the
years ended December 31, 1999, 1998 and 1997, earned or received compensation or
payments for services from the Partnership as follows:

<TABLE>
<CAPTION>
                         COMPENSATION PAID OR ACCRUED TO RELATED PARTIES
                         -----------------------------------------------
                                                                                    For the year ended December 31,
               Name of Recipient         Capacity in Which Served/Item              1999          1998          1997
               -----------------         -----------------------------           ----------    ----------    ----------
         <S>                               <C>                                   <C>           <C>           <C>
         CRIIMI, Inc.(1)                   General Partner/Distribution          $1,514,779    $1,691,257    $1,353,007

         AIM Acquisition Partners,L.P.(2)  Advisor/Asset Management Fee           1,382,904     1,617,625     1,873,563


         CRIIMI MAE Management, Inc.       Affiliate of General Partner/Expense      43,624        54,497        62,274

         American Insured Mortgage         Affiliate of Partnership/
            Investors - Series 85, L.P.      Share of FHA Debenture                      --     1,202,581            --

</TABLE>

(1)  The General Partner,  pursuant to amendments to the Partnership  Agreement,
     effective   September  6,  1991,   is  entitled  to  receive  3.9%  of  the
     Partnership's income, loss, capital and distributions,  including,  without
     limitation, the Partnership's adjusted cash from operations and proceeds of
     mortgage   prepayments,   sales  or  insurance  (both  as  defined  in  the
     partnership agreement).
(2)  The Advisor,  pursuant to the Partnership  Agreement,  effective October 1,
     1991,  is  entitled  to an  Asset  Management  Fee  equal to 0.95% of Total
     Invested  Assets  (as  defined  in the  Partnership  Agreement).  CMSLP  is
     entitled to a fee equal to 0.28% of Total Invested Assets from the Advisors
     Asset  Management  Fee. Of the amounts paid to the Advisor,  CMSLP earned a
     fee equal to $407,699,  $476,800, and $552,222 for the years ended December
     31, 1999, 1998, and 1997,  respectively.  The limited partner of CMSLP is a
     wholly-owned  subsidiary  of CRIIMI MAE Inc.,  which  filed for  protection
     under Chapter 11 of the U.S. Bankruptcy Code.
<PAGE>


8.    DISTRIBUTIONS TO UNITHOLDERS

     The  distributions  paid or accrued to  Unitholders on a per Unit basis for
the years ended December 31, 1999, 1998 and 1997 are as follows:
<TABLE>
<CAPTION>
                                                       1999              1998             1997
                                                     --------          --------          --------
<S>                                                  <C>               <C>               <C>
Quarter ended March 31,                              $   0.40(1)(2)    $   1.07(5)       $   0.39(9)(10)
Quarter ended June 30,                                   0.65(3)           0.58(6)           0.30
Quarter ended September 30,                              0.22              0.53(7)           0.84(11)(12)
Quarter ended December 31,                               1.82(4)           1.27(8)           1.23(13)
                                                     --------          --------          --------
                                                     $   3.09          $   3.45          $   2.76
                                                     ========          ========          ========
</TABLE>

     The following disposition proceeds are included in the distributions listed
above:

<TABLE>
<CAPTION>
                                                                                     Net
                                                               Type of            Proceeds
       Complex Name(s)                                         Disposition        Per Unit
       ---------------                                         -----------        --------
<S>    <C>                                                     <C>                 <C>
(1)    Gamel & Gamel Apartments                                Prepayment          $0.06

(2)    Debenture from Portervillage I Apartments *             Assignment           0.10

(3)    Nassau Apartments, Walnut Apartments, Kings
       Villa/ Discovery Commons, and Quail
       Creek Apartments                                        Prepayment           0.41

(4)    Huntington Apartments, Bowling Brook,
       Section 1, Lincoln Green, Ridgecrest
       Timbers, Holden Court Apartments, and
       Lakeside Apartments                                     Prepayment           1.60

(5)    Spanish Trace Apartments                                Prepayment           0.77

(6)    Isles of Pines Village Apartments, Emerald
       Green Apartments, and Stoney Brook Apartments           Prepayment           0.31

(7)    Amador Residential, Continental
       Village, and Bentgrass Hills Apartments                 Prepayment           0.27

(8)    Northdale Commons, Cedar Bluff, and
       Wayland Health Center                                   Prepayment           1.00

(9)    Meadow Park Apartments                                  Assignment           0.05

(10)   Security Apartments                                     Prepayment           0.02

(11)   Pine Tree Lodge                                         Final Settlement     0.02

(12)   Peachtree Place North                                   Prepayment           0.52

(13)    Ashford Place Apartments, Fleetwood Village
        Apartments, Silverwood Village Apartments,
        and Maryland Meadows                                   Prepayment           0.92
</TABLE>

*    During the first quarter of 1998, the  assignment  proceeds of the mortgage
     on  Portervillage  I  Apartments  were  received  in  the  form  of a  9.5%
     debenture.  The debenture,  with a face value of $2,296,098,  was issued to
     the Partnership,  with interest payable semi-annually on January 1 and July
     1. In January  1999,  net  proceeds  of  approximately  $2.3  million  were
     received  upon  redemption  of these  debentures.  Since  the  mortgage  on
     Portervillage  I Apartments was owned 50% by the  Partnership and 50% by an
     affiliate of the Partnership,  American  Insured  Mortgage  Investors ("AIM
     84"),  approximately $1.1 million of the debenture proceeds was paid to AIM
     84.


     The basis for paying  distributions  to  Unitholders  is net proceeds  from
mortgage  dispositions,  if any, and cash flow from  operations,  which includes
regular  interest  income and  principal  from Insured  Mortgages.  Although the
Insured  Mortgages yield a fixed monthly  mortgage  payment once purchased,  the
cash  distributions paid to the Unitholders will vary during each quarter due to
(1) the  fluctuating  yields in the  short-term  money  market where the monthly
mortgage  payment  receipts  are  temporarily  invested  prior to the payment of
quarterly  distributions,  (2) the  reduction in the asset base  resulting  from
monthly mortgage payments received or mortgage  dispositions,  (3) variations in
the cash flow  attributable to the  delinquency or default of Insured  Mortgages
and  professional  fees and foreclosure  costs incurred in connection with those
Insured Mortgages and (4) variations in the Partnership's operating expenses.

9.    INVESTMENT IN AFFILIATE, NOTE PAYABLE AND DUE TO AFFILIATE

     Integrated Funding, Inc. ("IFI"), an affiliate of the Partnership,  was the
coinsurance lender for coinsured  mortgages  previously held by the Partnership.
In order to capitalize IFI with sufficient net worth under HUD  regulations,  in
April 1994,  American Insured Mortgage Investors L.P. - Series 88 ("AIM 88"), an
affiliate of the Partnership, transferred a GNMA mortgage-backed security in the
amount of $2.0 million to IFI. The  Partnership  and American  Insured  Mortgage
Investors  L.P. - Series 86 ("AIM 86"),  an affiliate of the  Partnership,  each
issued a demand note payable to AIM 88 and recorded an investment in IFI through
an affiliate  ("AIM  Mortgage,  Inc.") in proportion to each entity's  coinsured
mortgages for which IFI was  mortgagee of record as of April 15, 1994.  Interest
expense on the note payable was based on an interest rate of 7.25% per annum.

     IFI  had  entered  into  an  expense   reimbursement   agreement  with  the
Partnership,  AIM 86 and AIM 88  (collectively  the  "AIM  Funds")  whereby  IFI
reimburses  the AIM Funds for general and  administrative  expenses  incurred on
behalf of IFI. The expense  reimbursement is allocated to the AIM Funds based on
an amount  proportionate to each entity's IFI coinsured  mortgages.  The expense
reimbursement, interest from the two notes and the Partnership's equity interest
in IFI's net income or loss,  substantially  equals the mortgage  principal  and
interest on the GNMA mortgage-backed security transferred to IFI.

     The final coinsured  mortgages held by the Partnership were prepaid in late
1996.  As a result,  the  aforementioned  demand note  payable to AIM 88 and the
expense reimbursement agreement from IFI were cancelled as of April 1, 1997.

10.   PARTNERS' EQUITY

     Depositary  Units  representing  economic  rights  in  limited  partnership
interests  ("Units") were issued at a stated value of $20. A total of 12,079,389
Units were issued for an aggregate  capital  contribution  of  $241,587,780.  In
addition,  the initial limited partner  contributed $2,500 to the capital of the
Partnership and received 125 Units in exchange therefor.

<PAGE>

11.   SUMMARY OF QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)

     The following is a summary of unaudited quarterly results of operations for
the years ended December 31, 1999, 1998 and 1997.

(In Thousands, Except Per Unit Data)

<TABLE>
<CAPTION>
                                                              1999
                                                         Quarter ended
                                     March 31        June 30      September 30   December 31
                                    ----------     -----------    ------------   -----------
<S>                                 <C>            <C>            <C>            <C>
Income                              $     3,166    $     3,122    $     3,047    $     2,895
Net gains from
   mortgage dispositions                     --            651            134             72
Net earnings                              2,665          3,292          2,715          2,553
Net earnings per Limited
   Partnership Unit - Basic                0.21           0.26           0.22           0.20

</TABLE>

<TABLE>
<CAPTION>
                                                              1998
                                                         Quarter ended
                                     March 31        June 30      September 30   December 31
                                    -----------    -----------    ------------   -----------
<S>                                 <C>            <C>            <C>            <C>
Income                              $     3,859    $     3,751    $     3,521    $     3,613
Net gains from mortgage
  dispositions                              104            858            202            239
Net earnings                              3,400          4,055          3,236          3,202
Net earnings per Limited
  Partnership Unit - Basic                 0.27           0.32           0.26           0.26

</TABLE>

<TABLE>
<CAPTION>
                                                               1997
                                                          Quarter ended
                                     March 31         June 30     September 30   December 31
                                    -----------     ----------    ------------   -----------
<S>                                 <C>             <C>           <C>            <C>
Income                              $     4,274     $    4,318    $     4,123    $     4,046
Net gains from mortgage
  dispositions                              205             --             --            703
Net earnings                              3,848          3,675          3,480          4,134
Net earnings per Limited
  Partnership Unit - Basic                 0.31           0.29           0.28           0.32

</TABLE>
<PAGE>
              AMERICAN INSURED MORTGAGE INVESTORS - SERIES 85, L.P.

                   SCHEDULE IV - MORTGAGE LOANS ON REAL ESTATE

                                December 31, 1999
<TABLE>
<CAPTION>
                                                                           Interest
                                                                           Rate on      Face            Net         Annual Payment
                                                   Maturity       Put      Mortgage    Value of    Carrying Value   (Principal and
Development Name/Location                            Date        Date(1)   (5)(9)      Mortgage(3)  (3)(11)(12)     Interest)(9)(10)
-------------------------                          --------      ------    --------   -----------  --------------   ---------------

<S>                                                  <C>          <C>         <C>     <C>             <C>            <C>
ACQUIRED INSURED MORTGAGES
--------------------------
FHA-Insured Certificates (carried at fair value)

The Executive House, Dayton, OH                       8/21        12/01       7.5%    $    842,019    $    826,453   $    78,855 (4)
Woodland Hills Apts., Auburn, AL                     10/19         6/99       7.5%         693,447         680,880        68,044 (4)
Fairlawn II, Waterbury, CT                            6/20         5/00       7.5%         765,618         751,599        73,364 (4)
Willow Dayton, Chicago, IL                            8/19        12/00       7.5%       1,019,728       1,001,201        99,489 (4)
Cedar Ridge Apts., Richton Park, IL                   4/20         2/01       7.5%       2,731,968       2,682,020       262,699 (4)
Park Hill Apts., Lexington, KY                        3/19         3/00       7.5%       1,764,887       1,732,955       173,845 (4)
Fairfax House, Buffalo, NY                           11/19         5/00       7.5%       2,160,391       2,121,044       209,608 (4)
Country Club Terrace Apts., Holidaysburg, PA          8/19         6/00       7.5%       1,460,960       1,434,416       142,537 (4)
Summit Square Manor, Rochester, MN                    8/19         5/99       7.5%       1,921,473       1,886,562       187,467 (4)
Park Place, Rochester, MN                             3/20        10/99       7.5%         761,096         747,245        73,980 (4)
Nevada Hills Apts., Reno, NV                          2/21         8/00       7.5%       1,167,109       1,145,619       110,345 (4)
Colony West Apts., Chico, CA                          7/20        12/00       7.5%         651,970         640,023        62,365 (6)
Dunhaven Apts., Section I, Baltimore County, MD       1/20        12/99       7.5%         904,402         887,905        87,429 (6)
Steeplechase Apts., Aiken, SC                         9/18          N/A       7.5%         508,688         499,551        50,921 (6)
Walnut Hills Apts., Plainfield, IN                    9/19         3/00       7.5%         489,750         480,844        47,692 (6)
Woodland Villas, Jasper, AL                           8/19         3/00       7.5%         312,292         306,618        30,468 (6)
Ashley Oaks Apts., Carrollton, GA                     3/22         4/02       7.5%         564,300         553,823        52,292 (7)
Highland Oaks Apts., Phase III, Wichita Falls, TX     2/21         4/02       7.5%         949,180         931,702        89,741 (7)
Magnolia Place Apts., Franklin, TN                    5/20         4/02       7.5%         320,911         315,039        30,804 (7)
Rainbow Terrace Apts., Milwaukee, WI                  7/22         4/02       7.5%         321,064         315,089        29,581 (7)
Rock Glen Apts., Baltimore, MD                        1/22         4/02       7.5%       1,069,223       1,049,395        99,375 (7)
Stonebridge Apts., Phase I, Montgomery, AL            4/20         4/02       7.5%       1,030,864       1,012,017        99,125 (7)
Village Knoll Apts., Harrisburg, PA                   4/20         4/02       7.5%       1,070,281       1,050,713       102,914 (7)
Executive Tower, Toledo, OH                           3/27          N/A       8.75%      2,849,389       2,765,990       275,283
New Castle Apts., Austin, TX                          3/18          N/A       8.75%      1,990,590       1,934,481       219,143
Turtle Creek Apts., San Antonio, TX                   4/16          N/A       8.95%      1,608,730       1,612,421       188,596
Sangnok Villa, Los Angeles, CA                        1/30          N/A      10.25%        900,425         896,296        96,825
The Meadows of Livonia, Livonia, MI                   9/34          N/A       9.40%      6,419,087       6,389,002       627,836
Eaglewood Villa Apts., Springfield, OH                2/27          N/A       8.875%     2,710,626       2,631,244       264,707
Gold Key Village Apts., Englewood, OH                 6/27          N/A       9.00%      2,865,491       2,781,463       282,030
Stafford Towers, Baltimore, MD                        8/16          N/A       9.50%        352,169         351,161        42,613
Garden Court Apts., Lexington, KY                     8/27          N/A       8.60%      1,165,617       1,131,478       110,583
Northwood Place, Meridian, MS                         6/34          N/A       8.75%      4,481,163       4,348,375       412,635
Cheswick Apts., Indianapolis, IN                      9/27          N/A       8.75%      3,076,904       2,986,724       295,736
The Gate House Apts., Lexington, KY                   2/28          N/A       8.55%      2,806,505       2,724,247       264,092
Bradley Road Nursing, Bay Village, OH                 5/34          N/A       8.875%     2,506,847       2,432,542       233,708
Franklin Plaza, Cleveland, OH                         5/23          N/A       8.175%     5,241,707       4,978,934       503,183
Heritage Heights Apts., Harrison, AZ                  4/32          N/A       9.50%        414,315         412,404        41,313
Pleasant View Nursing Home, Union, NJ                 6/29          N/A       7.75%      7,445,317       7,068,954       643,311
                                                                                      ------------    ------------
   Total FHA-Insured Certificates -
      Acquired Insured Mortgages, carried at fair value                               $ 70,316,503    $ 68,498,429
                                                                                      ------------    ------------
ACQUIRED INSURED MORTGAGES
--------------------------
GNMA Mortgage-Backed Securities
   (carried at fair value)

Pine Tree Lodge, Pasadena, TX                        12/33          N/A       9.50%   $  2,013,534    $  2,014,205   $   194,357
Stone Hedge Village Apts., Farmington, NY            11/27          N/A       7.00%      1,788,076       1,718,181       143,375
Afton Square Apts., Portsmouth, VA                   12/28          N/A       7.25%      1,049,411       1,008,288        81,544
Carlisle Apts., Houston, TX                          12/28          N/A       7.125%     2,096,147       2,014,047       166,042
Independence Park, Largo, FL                          9/29          N/A       7.75%      3,954,786       3,799,334       331,030
                                                                                      ------------    ------------
Total GNMA Mortgage-Backed Securities                                                 $ 10,901,954    $ 10,554,055
                                                                                      ------------    ------------
Total investment in Acquired Insured
   Mortgages, carried at fair value                                                   $ 81,218,457    $ 79,052,484
                                                                                      ------------    ------------
ORIGINATED INSURED MORTGAGES
----------------------------
GNMA Mortgage-Backed Security
   (carried at fair value)

Oak Forest Apts. II, Ocoee, FL                       12/31        11/09       8.25%   $ 10,488,963    $ 10,075,773   $   840,446

FHA-Insured Certificate
   (carried at fair value)

Waterford Green Apts., South St. Paul, MN (11)       11/30        12/04       7.25%      5,927,095       5,627,406       481,564
                                                                                       -----------    ------------
Total investment in Originated Insured
   Mortgages, carried at fair value                                                   $ 16,416,058    $ 15,703,179
                                                                                      ------------    ------------
Total investment in FHA-Insured Certificates
   and GNMA Mortgage-Backed Securities                                                $ 97,634,515    $ 94,755,663
                                                                                      ------------    ------------
ACQUIRED INSURED MORTGAGES
--------------------------
FHA-Insured Loans
   (carried at amortized cost)(2)

Bay Pointe Apts., Lafayette, IN                       2/23        11/00       7.5%    $  2,005,166    $  1,670,039   $   185,272 (8)
Baypoint Shoreline Apts., Duluth, MN                  1/22         8/00       7.5%         946,479         785,283        87,967 (8)
Berryhill Apts., Grass Valley, CA                     1/21         8/99       7.5%       1,223,861       1,018,636       115,899 (8)
Brougham Estates II, Kansas City, KS                 11/22         8/00       7.5%       2,519,834       2,084,426       230,860 (8)
College Green Apts., Wilmington, NC                   3/23         6/01       7.5%       1,354,862       1,119,860       123,455 (8)
Fox Run Apts., Dothan, AL                            10/19        12/97       7.5%       1,194,069         998,684       116,242 (8)
Kaynorth Apts., Lansing, MI                           4/23         3/01       7.5%       1,838,685       1,519,204       167,318 (8)
Town Park Apts., Rockingham, NC                      10/22         6/01       7.5%         618,215         512,016        56,755 (8)
Westbrook Apts., Kokomo, IN                          11/22        12/00       7.5%       1,752,170       1,459,313       163,177 (8)
                                                                                      ------------    ------------
Total investment in Acquired Insured
   Mortgages, carried at amortized cost                                               $ 13,453,341    $ 11,167,461
                                                                                      ------------    ------------
ORIGINATED INSURED MORTGAGES
----------------------------
Fully Insured Mortgages
-----------------------
FHA-Insured Loans
   (carried at amortized cost)(2) - Continued

Cobblestone Apts., Fayetteville, NC                   3/28        12/02       8.50%   $  4,942,632    $  5,084,936    $   462,703
Longleaf Lodge, Hoover, AL                            7/26           --       8.25%      3,041,602       3,078,723        282,958
The Plantation, Greenville, NC                        4/28         4/03       8.25%      4,395,636       4,535,606        402,046
                                                                                      ------------    ------------
Total investment in Originated Insured
   Mortgages, carried at amortized cost                                               $ 12,379,870    $ 12,699,265
                                                                                      ------------    ------------
Total investment in FHA-Insured Loans                                                 $ 25,833,211    $ 23,866,726
                                                                                      ------------    ------------
TOTAL INVESTMENT IN INSURED MORTGAGES                                                 $123,467,726    $118,622,389
                                                                                      ============    ============

</TABLE>
<PAGE>
              AMERICAN INSURED MORTGAGE INVESTORS - SERIES 85, L.P.

              NOTES TO SCHEDULE IV - MORTGAGE LOANS ON REAL ESTATE



(1)  Under the  Section  221 program of the  National  Housing  Act of 1937,  as
     amended, a mortgagee has the right to assign an Insured Mortgage ("put") to
     FHA at the  expiration of 20 years from the date of final  endorsement,  if
     the Insured Mortgage is not in default at such time. Any mortgagee electing
     to  assign  a  FHA-insured  mortgage  to  FHA  will  receive,  in  exchange
     therefore,  HUD  debentures  having a total  face  value  equal to the then
     outstanding  principal  balance of the  FHA-insured  mortgage  plus accrued
     interest to the date of  assignment.  These HUD  debentures  will mature 10
     years  from the date of  assignment  and will bear  interest  at the "going
     Federal rate" at such date. This  assignment  procedure is applicable to an
     Insured  Mortgage  which  had a firm  or  conditional  FHA  commitment  for
     insurance  on or before  November  30,  1983 and, in the case of a mortgage
     sold in a GNMA auction,  was sold in an auction prior to February 1984. The
     Partnership has initiated its request to put these mortgages to FHA as they
     become due.  Certain of the  Partnership's  Insured  Mortgages may have the
     right of  assignment  under this  program.  Certain  mortgages  that do not
     qualify under this program possess a special  assignment option, in certain
     Insured Mortgage documents, which allow the Partnership, anytime after this
     date, the option to require payment by the borrower of the unpaid principal
     balance of the Insured  Mortgages.  At such time,  the borrowers  must make
     payment to the Partnership,  or the Partnership,  at its option, may cancel
     the FHA insurance and institute foreclosure proceedings.

(2)  Inclusive of closing costs and acquisition fees.

(3)  The mortgages  underlying  the  Partnership's  investments  in  FHA-Insured
     Certificates,  GNMA  Mortgage-Backed  Securities and FHA-Insured  Loans are
     non-recourse  first  liens  on  multifamily  residential  developments  and
     retirement homes. Prepayment of these Insured Mortgages would be based upon
     the unpaid principal balance at the time of prepayment.

(4)  In April and July  1985,  and  February  1986,  the  Partnership  purchased
     pass-through  certificates  representing  undivided fractional interests of
     157/537,  69/537 and  259/537,  respectively,  in a pool of 19  FHA-insured
     mortgages.  In July 1986 and October 1987, the  Partnership  sold undivided
     fractional  interests  of 67/537 and  40/537,  respectively,  in this pool.
     Accordingly,  the  Partnership  now owns an undivided  fractional  interest
     aggregating  378/537, or approximately 70.4%, in this pool. For purposes of
     illustration   only,  the  amounts  shown  in  this  table   represent  the
     Partnership's  current share of these items as if an undivided  interest in
     each mortgage was acquired.

(5)  In addition,  the  servicer or the  sub-servicer  of the Insured  Mortgage,
     primarily  unaffiliated third parties, is entitled to receive  compensation
     for certain services rendered.

(6)  In June 1985 and February  1986,  the  Partnership  purchased  pass-through
     certificates  representing  undivided  fractional  interests of 317/392 and
     11/392, respectively, in a pool of 13 FHA-insured mortgages. In January and
     February  1988, the  Partnership  sold  undivided  fractional  interests of
     100/392  and  104/392,   respectively,   in  this  pool.  Accordingly,  the
     Partnership now owns an undivided  fractional interest aggregating 124/392,
     or  approximately  31.6%, in this pool. For purposes of illustration  only,
     the amounts shown in this table represent the Partnership's  share of these
     items as if an undivided interest in each mortgage was acquired.

(7)  In June 1985 and February  1986,  the  Partnership  purchased  pass-through
     certificates  representing  undivided  fractional  interests of 200/341 and
     101/341,  respectively,  in a pool of 12 FHA-insured mortgages.  In October
     1987, the  Partnership  sold undivided  fractional  interests of 200/341 in
     this pool.  Accordingly,  the Partnership now owns an undivided  fractional
     interest  aggregating  101/341,  or approximately  29.6%, in this pool. For
     purposes of  illustration  only, the amounts shown in this table  represent
     the Partnership's  share of these items as if an undivided interest in each
     mortgage was acquired.

(8)  These amounts  represent the Partnership's 50% interest in these mortgages.
     The  remaining  50%  interest  was  acquired by American  Insured  Mortgage
     Investors, an affiliate of the Partnership.

(9)  This  represents the base interest rate during the permanent phase of these
     Insured Mortgages.  Additional  interest (referred to as  "Participations")
     measured as a percentage of the net cash flow from the  development and the
     net  proceeds  from  the  sale,  refinancing  or other  disposition  of the
     underlying development (as defined in the Participation  Agreements),  will
     also be due.  During the years ended December 31, 1999,  1998 and 1997, the
     Partnership received additional interest of $45,164, $111,544, and $89,223,
     respectively, from the Participations.

(10) Principal  and interest  are payable at level  amounts over the life of the
     mortgages.

(11) A reconciliation  of the carrying value of Insured  Mortgages for the years
     ended December 31, 1999 and 1998, is as follows:

<TABLE>
<CAPTION>
                                                                   1999              1998
                                                              --------------    --------------

<S>                                                           <C>               <C>
Beginning balance                                             $  151,427,095    $  187,055,564

   Principal receipts on mortgages                                (1,308,678)       (1,322,056)

   Proceeds from disposition of Mortgages                        (26,870,388)      (31,043,325)(1)

   Net gains on mortgage dispositions                                856,751         1,403,150

   Decrease to unrealized gains on
      Investments in Insured Mortgages                            (5,482,391)       (4,666,238)
                                                              --------------    --------------
Ending balance                                                $  118,622,389    $  151,427,095
                                                              ==============    ==============

(1)  This amount  represents  cash proceeds of $29,895,275  (as reflected in the
     Statements of Cash Flows) and non-cash proceeds of $1,148,050.
</TABLE>

(12) As of December  31, 1999 and 1998,  the tax basis of the Insured  Mortgages
     was approximately $116.3 million and $143.5 million, respectively.