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, 2000 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 12, 2001, 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 $95,275,805.

                       Documents incorporated by Reference

                                      None
<PAGE>



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

                         2000 ANNUAL REPORT ON FORM 10-K

                                TABLE OF CONTENTS


<TABLE>
<CAPTION>
                                                                                                        Page
                                                                                                        ----
                                                                PART I
<S>                                                                                                      <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...........       5
Item 6.           Selected Financial Data..........................................................       6
Item 7.           Management's Discussion and Analysis of Financial Condition and
                     Results of Operations.........................................................       7
Item 7A.          Qualitative and Quantitative Disclosures about Market Risk.......................      11
Item 8.           Financial Statements and Supplementary Data......................................      11
Item 9.           Changes in and Disagreements with Accountants on Accounting and
                     Financial Disclosure..........................................................      11



                                                               PART III

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



                                                                PART IV

Item 14.          Exhibits, Financial Statement Schedules and Reports on Form 8-K..................      15

Signatures        .................................................................................      17
</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,  2000,  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 2000.


                                     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 2000 and 1999 were as
follows:
<TABLE>
<CAPTION>
                                                                                             Amount of
                                                                2000                       Distribution
   Quarter Ended                                       High              Low                 Per Unit
   -------------                                     --------          --------              --------
   <S>                                               <C>               <C>                   <C>
   March 31                                          $ 8.7500          $ 8.0000              $   0.47 (1)(2)
   June 30                                             8.8750            7.8125                  0.46 (3)(4)
   September 30                                        8.3750            7.8750                  0.18
   December 31                                         8.4375            7.7500                  0.50 (5)
                                                                                             --------

                                                                                             $   1.61
                                                                                             ========

                                                                                            Amount of
                                                                1999                     Distribution
   Quarter Ended                                      High              Low                 Per Unit
   -------------                                    ---------         ---------             --------
   <S>                                              <C>               <C>                   <C>
   March 31                                         $ 12.6250         $ 11.3750             $   0.40 (6)(7)
   June 30                                            11.7500           10.5625                 0.65 (8)(9)
   September 30                                       11.0000           10.4375                 0.22
   December 31                                        10.8750            8.0000                 1.82 (10)(11)(12)
                                                                                            --------

                                                                                            $   3.09
                                                                                            ========
</TABLE>

     The following disposition proceeds are included in the distributions listed
above:
<TABLE>
<CAPTION>
                                                                          Date                           Net
                                                                        Proceeds          Type of      Proceeds
                              Complex Name(s)                           Received        Disposition    Per Unit
                              ---------------                           --------        -----------    --------
     <S>                                                              <C>               <C>             <C>
      (1) Northwood Apartments                                        December 1999     Prepayment      $0.13
      (2) Turtle Creek Apartments                                     January 2000      Prepayment       0.13
      (3) Woodland Hills Apartments and New Castle Apartments         May 2000          Prepayment       0.22
      (4) Colony West Apartments                                      May 2000          Prepayment       0.05
      (5) Independence Park                                           October 2000      Prepayment       0.32
      (6) Gamel & Gamel Apartments                                    December 1998     Prepayment       0.06
      (7) Debenture from Portervillage I Apartments *                 January 1999      Assignment       0.10
      (8) Nassau Apartments, Walnut Apartments and Kings
          Villa/Discovery Commons                                     April 1999        Prepayment       0.37
      (9) Quail Creek Apartments                                      May 1999          Prepayment       0.04
     (10) Huntington Apartments                                       September 1999    Prepayment       0.24
     (11) Bowling Brook, Section 1                                    October 1999      Prepayment       0.94
     (12) Lincoln Green, Ridgecrest Timbers, Holden Court
          Apartments, and Lakeside Apartments                         November 1999     Prepayment       0.42
</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, 2000
     --------------                                 -----------------------
Depositary Units of Limited
   Partnership Interest                                     10,300


ITEM 6.    SELECTED FINANCIAL DATA
           (Dollars in thousands, except per Unit amounts)
<TABLE>
<CAPTION>
                                                                For the Years Ended December 31,
                                                2000         1999          1998         1997         1996
                                                ----         ----          ----         ----         ----
<S>                                          <C>           <C>          <C>          <C>          <C>
Income                                       $  9,979      $12,230      $ 14,744     $ 16,761     $ 17,943

Net gains on mortgage
  dispositions/modifications                      428          857         1,403          908          522

Net earnings                                    8,866       11,225        13,893       15,137       15,789

Net earnings per Limited
  Partnership Unit - Basic (1)                 $ 0.71       $ 0.89        $ 1.11       $ 1.20       $ 1.26

Distributions per Limited
  Partnership Unit (1)(2)                      $ 1.61       $ 3.09        $ 3.45       $ 2.76       $ 2.25


                                                                    As of December 31,
                                                2000          1999         1998         1997         1996
                                                ----          ----         ----         ----         ----
Total assets                                $ 118,621     $143,470     $ 170,970    $ 203,450    $ 215,951

Partners' equity                              110,982      120,445       153,543      187,682      204,687
</TABLE>

(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, 2000,  1999,  1998, 1997 and 1996, which were paid
     subsequent  to year  end.  See  Notes  7 and 8 of the  Notes  to  Financial
     Statements.

     The selected  income data presented  above for the years ended December 31,
2000,  1999 and 1998,  and the balance  sheet data as of  December  31, 2000 and
1999,  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, 1997 and 1996 and the balance sheet
data as of December 31, 1998,  1997 and 1996 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 t'e
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.

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 (as discussed
below) 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,  2000,  the  Partnership  had  invested  in 52 Insured
Mortgages,  with an aggregate  amortized cost of approximately  $107 million,  a
face value of approximately  $112 million and a fair value of approximately $111
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,
                                                                           2000             1999
                                                                           ----             ----
<S>                                                                    <C>              <C>
Fully Insured Acquired Mortgages:
   Number of
      GNMA Mortgage-Backed Securities(5)                                          4                5
      FHA-Insured Certificates
      (1)(2)(3)(4)(6)                                                            35               39
Amortized Cost                                                         $ 68,440,285     $ 77,969,011
Face Value                                                               71,404,632       81,218,457
Fair Value                                                               70,770,317       79,052,484

Fully Insured Originated Mortgages:
   Number of
      GNMA Mortgage-Backed Securities                                             1                1
      FHA-Insured Certificates                                                    1                1
Amortized Cost                                                         $ 16,311,904     $ 16,772,658
Face Value                                                               16,279,536       16,416,058
Fair Value                                                               15,927,124       15,703,179
</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) Turtle Creek Apartments           $ 1,660,000     Jan. 2000     $  44,023     $ 0.13     Jan. 2000      May 2000
(2) Woodland Hills Apartments             693,000     April 2000       93,811       0.06     May 2000       Aug. 2000
(3) New Castle Apartments               1,988,000     May 2000          8,158       0.16     May 2000       Aug. 2000
(4) Colony West Apartments                646,000     May 2000        132,967       0.05     June 2000      Aug. 2000
(5) Independence Park Apartments        3,997,000     Oct. 2000       (39,819)      0.32     Oct. 2000      Feb. 2001
(6) The Meadows of Livonia *            6,653,000     Jan. 2001       253,434       0.53     Jan. 2001      May 2001
    * First Quarter 2001 transaction
</TABLE>

     As of  March  1,  2001,  all  of the  fully  insured  GNMA  Mortgage-Backed
Securities and FHA-Insured  Certificates are current with respect to the payment
of  principal  and  interest,  except  for the  mortgages  on Gold  Key  Village
Apartments, Dunhaven Apartments, Section I and Rainbow Terrace Apartments, which
are delinquent  with respect to the February  payment of principal and interest.
In addition,  the Partnership no longer receives monthly  principal and interest
from the mortgages that are in the HUD assignment  process under Section 221, as
discussed below.

     As of March 1, 2001, the  Partnership  has received  notification  from the
respective  servicers  that HUD  applications  for insurance  benefits have been
filed for the following mortgages:

                                                     Outstanding
                                                      Principal     Assignment
Property Name                     Application Date     Balance         Date
-------------                     ----------------   -----------    -----------
Park Place Apartments                June 2000       $  754,000         N/A
Summit Square Manor                  June 2000        1,903,000         N/A
Park Hill Apartments                 Sept. 2000       1,737,000         N/A
Fairfax House                        Sept. 2000       2,128,000         N/A
Country Club Terrace Apts.           Sept. 2000       1,439,000         N/A
Fairlawn II                          Sept. 2000         755,000         N/A
Nevada Hills Apts.                   Dec. 2000        1,146,000         N/A

     Under the  Section  221 program of the  National  Housing  Act of 1937,  as
amended,  a mortgagee  has the right to assign a mortgage  ("put") to FHA at the
expiration of 20 years from the date of final endorsement if the mortgage is not
in  default  at such  time.  Any  mortgagee  electing  to assign an  FHA-insured
mortgage to FHA will receive,  in exchange  therefor,  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 a rate  announced  semi-annually  by HUD  in the  Federal  Register
("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.  Once the servicer of a mortgage has
filed an application  for insurance  benefits under Section 221, the Partnership
will no longer  receive the monthly  principal  and  interest on the  applicable
mortgage. The Partnership expects to receive HUD debentures, as discussed above,
plus accrued  interest at the "going Federal  rate",  from date of assignment of
the  mortgage to the date of issuance of the  debenture.  The  Partnership  will
recognize a gain on these  assignments  upon receipt of HUD debentures or a loss
when  it  becomes  probable  that a loss  will  be  incurred.  In  general,  the
Partnership  plans to hold the  debentures  until  called  or date of  maturity,
whichever  comes first.  At that time debenture  proceeds will be distributed to
Unitholders.

     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,  2000,  1999 and 1998,  the  Partnership
received  $0, $0, and  $76,991,  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,
                                                                    2000                    1999
                                                                    ----                    ----
<S>                                                             <C>                      <C>
Fully Insured Acquired Loans:
  Number of Loans (1)                                                     8                        9
Amortized Cost                                                  $10,041,697              $11,167,461
Face Value                                                       12,040,599               13,453,341
Fair Value                                                       12,023,455               13,203,586

Fully Insured Originated Loans:
  Number of Loans                                                         3                        3
Amortized Cost                                                  $12,570,037              $12,699,265
Face Value                                                       12,261,397               12,379,870
Fair Value                                                       12,192,633               12,017,626
</TABLE>

(1)  In December  2000, HUD issued  assignment  proceeds in the form of a 7.125%
     debenture for the mortgage on Fox Run  Apartments.  The  debenture,  with a
     face value of $2,385,233 and a fair value of $2,361,381,  was issued to the
     Partnership,  with interest payable  semi-annually on January 1 and July 1.
     The mortgage on Fox Run Apartments was owned 50% by the Partnership and 50%
     by an affiliate of the Partnership,  American  Insured  Mortgage  Investors
     ("AIM 84").  Upon  disposition of the debenture 50% of the proceeds will be
     payable to AIM 84. The  Partnership  expects to  receive  net  proceeds  of
     approximately  $1.2  million  and has  recognized  a gain of  approximately
     $188,000 for the year ended  December 31, 2000. The net proceeds due AIM 84
     are  included on the balance  sheet in Due to  affiliate.  In general,  the
     Partnership will hold the debenture until its maturity date of June 1, 2010
     or when called,  whichever comes first. A distribution  will be declared at
     that time. The servicer of this mortgage filed an application for insurance
     benefits under the Section 221 program of the National  Housing Act of 1937
     in May 2000.

     As of March 1,  2001,  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,  2000,  1999 and 1998,  the  Partnership
received $21,566, $45,164, and $34,553,  respectively,  from the Participations.
These  amounts,  if any,  are  included  in  mortgage  investment  income on the
accompanying statements of income and comprehensive income.

Results of Operations
---------------------
2000 versus 1999
----------------

     Net earnings  decreased  for 2000 as compared to 1999,  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  2000  as  compared  to  1999,
primarily due to the reduction in the mortgage base. The mortgage base decreased
as a result of 17 mortgage  dispositions with an aggregate  principal balance of
approximately  $37  million,  representing  an  approximate  24% decrease in the
aggregate principal balance of the total mortgage portfolio since March 1999.

     Asset management fees decreased for 2000 as compared to 1999, primarily due
to the reduction in the mortgage base.

     General and administration  expense decreased for 2000 as compared to 1999,
primarily  due to a decrease  in  temporary  employment  costs and a decrease in
mortgage service fees.

     Gains on mortgage dispositions  decreased for 2000 as compared to 1999 as a
result of gains  recognized on four mortgage  prepayments  and one assignment in
2000, as discussed above, versus gains recognized on seven mortgage  prepayments
in 1999. Losses were recognized on one mortgage prepayment in 2000, as discussed
above, versus losses recognized on four mortgage prepayments in 1999.

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 versus gains
recognized on ten mortgage  prepayments and one assignment,  as discussed below,
in 1998.  Losses were  recognized on four mortgage  prepayments in 1999 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.

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.

     On November 22, 2000, the United States  Bankruptcy  Court for the District
of Maryland,  in Greenbelt,  Maryland (the "Bankruptcy  Court") confirmed CRIIMI
MAE's  and  CRIIMI  MAE   Management,   Inc.'s  Third   Amended  Joint  Plan  of
Reorganization  (as  amended  and  supplemented  by  praecipes  filed  with  the
Bankruptcy  Court on July 13, 14 and 21, and  November  22,  2000,  the "Plan").
CRIIMI MAE is working to complete the debt documentation, evidencing the secured
financings to be provided by (1) the unsecured creditors,  and (2) Merrill Lynch
Mortgage Capital, Inc. and German American Capital Corporation (collectively the
"New Debt  Documents").  On March 9, 2001,  the  Bankruptcy  Court  approved  an
extension of the date by which the Plan must be effective to April 13, 2001. The
Official  Committee of Unsecured  Creditors had previously filed its own plan of
reorganization and proposed disclosure  statement,  but has asked the Bankruptcy
Court, subject to completion of mutually acceptable debt documentation, to defer
consideration  of its plan and proposed  disclosure  statement.  There can be no
assurance  at this time that  CRIIMI MAE will be able to  complete  the New Debt
Documents and effectuate the Plan by April 13, 2001.

     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 for the years ended December 31, 2000, 1999 and 1998 to meet
operating  requirements.  The  Partnership  anticipates  its  cash  flows  to be
sufficient to meet operating expense requirements for 2001.

     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 - 2000 versus 1999
----------------------------

     Net cash provided by operating activities decreased for 2000 as compared to
1999, primarily due to the reduction in mortgage investment income, as discussed
above.

     Net cash provided by investing activities decreased for 2000 as compared to
1999.  This decrease is primarily  due to a reduction in proceeds  received from
the disposition of mortgages, a decrease in net debenture proceeds, as discussed
previously,  and a decrease in the receipt of mortgage  principal from scheduled
payments.

     Net cash used in  financing  activities  increased  for 2000 as compared to
1999 due to an increase in the amount of distributions  paid to partners in 2000
versus 1999.

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 in 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.


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>
                               2001      2002       2003       2004       2005      Thereafter     Total     Fair Value
                               ----      ----       ----       ----       ----      ----------     -----     ----------
<S>                           <C>       <C>        <C>        <C>        <C>           <C>         <C>         <C>
Insured Mortgages
   (in millions)              $20.6     $18.6      $17.0      $16.6      $14.8         $84.1       $171.7      $111.0

Average Interest Rate         7.89%     7.89%      7.90%      7.90%      7.89%         8.16%        8.12%        --
</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 18.


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.  (successor  to Broad,  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 February 20, 2001:
<TABLE>
<CAPTION>
Name                                        Age                          Position
----                                        ---                          --------
<S>                                         <C>                          <C>
William B. Dockser                          63                           Chairman of the Board

H. William Willoughby                       54                           President, Secretary and Director

David B. Iannarone                          40                           Executive Vice President

Cynthia O. Azzara                           41                           Senior Vice President,
                                                                           Chief Financial Officer and
                                                                           Treasurer

Brian L. Hanson                             39                           Senior Vice President

Garrett G. Carlson, Sr.                     63                           Director

G. Richard Dunnells                         63                           Director

Robert Merrick                              55                           Director

Robert E. Woods                             53                           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. 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. Mr. Willoughby has been a
director of CRI since 1974,  Secretary of CRI from 1974 to 1990 and President of
CRI since 1990.

     David B.  Iannarone has served as Executive  Vice  President of the General
Partner  since  December  2000.  Mr.  Iannarone  has  served as  Executive  Vice
President CRIIMI MAE since December 2000; as Senior Vice President of CRIIMI MAE
from March 1998 to December  2000;  and General  Counsel of CRIIMI MAE from July
1996 to December 2000. He served as  Counsel-Securities  and Finance for Federal
Deposit  Insurance  Corporation/Resolution  Trust  Corporation from 1991 to July
1996.

     Cynthia O. Azzara has served as Chief Financial  Officer of the 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, and in the  Accounting and Finance  Departments of CRI
from 1985 to June 1995.

     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; and Chief Operating  Officer,  Director of Asset  Operations and Portfolio
Director of JCF Partners 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;  and Vice  Chairman  of  Shelter
Development Corporation Ltd. from 1983 to 1995.

     G.  Richard  Dunnells has served as Director of the General  Partner  since
1991.  Mr.  Dunnells  has served as Director  of CRIIMI MAE since  1991;  Hiring
Partner of the law firm of Holland & Knight since January 1995;  and 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.

     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 Capital  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.

     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, 2000.


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, 2000, 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  16,  2001 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
Description                                                                                                     Number
-----------                                                                                                     ------
<S>                                                                                                               <C>
Balance Sheets as of December 31, 2000 and 1999................................................................   20

Statements of Income and Comprehensive Income for the years ended December 31, 2000, 1999, and 1998 ...........   21

Statements of Changes in Partners' Equity for the years ended December 31, 2000, 1999 and 1998.................   22

Statements of Cash Flows for the years ended December 31, 2000, 1999 and 1998..................................   23

Notes to Financial Statements..................................................................................   24


(a)(2)  Financial Statement Schedules:

        IV - Mortgage Loans on Real Estate.....................................................................   32
</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.


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

          All other items are not applicable.
<PAGE>
                                     PART IV

                                   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 12, 2001                                    /s/ William B. Dockser
------------------                                    ----------------------
DATE                                                  William B. Dockser
                                                      Chairman of the Board


/s/ March 08, 2001                                    /s/ H. William Willoughby
------------------                                    -------------------------
DATE                                                  H. William Willoughby
                                                      President and Secretary


/s/ March 29, 2001                                   /s/ Cynthia O. Azzara
------------------                                   ---------------------
DATE                                                 Cynthia O. Azzara
                                                     Senior Vice President,
                                                     Chief Financial Officer and
                                                     Treasurer


/s/ March 07, 2001                                   /s/ Garrett G. Carlson, Sr.
------------------                                   ---------------------------
DATE                                                 Garrett G. Carlson, Sr.
                                                     Director


/s/ March 12, 2001                                   /s/ G. Richard Dunnells
------------------                                   -----------------------
DATE                                                 G. Richard Dunnells
                                                     Director


/s/ March 08, 2001                                   /s/ Robert J. Merrick
------------------                                   ---------------------
DATE                                                 Robert J. Merrick
                                                     Director


/s/ March 09, 2001                                  /s/ Robert E. Woods
------------------                                  -------------------
DATE                                                Robert E. Woods
                                                    Director

<PAGE>











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



                              Financial Statements

                        as of December 31, 2000 and 1999

                             and for the Years Ended

                        December 31, 2000, 1999, and 1998

<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, 2000
and 1999, and the related statements of income and comprehensive income, changes
in partners'  equity and cash flows for the years ended December 31, 2000,  1999
and 1998. 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, 2000 and 1999, and the results of its operations and its cash flows
for the  years  ended  December  31,  2000,  1999  and 1998 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,  2000 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, Virginia
March 15, 2001
<PAGE>

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

                                 BALANCE SHEETS
<TABLE>
<CAPTION>
                                                           December 31,         December 31,
                                                              2000                 1999
                                                          -------------        -------------
                        ASSETS
<S>                                                       <C>                  <C>
Investment in FHA-Insured Certificates and GNMA
  Mortgage-Backed Securities, at fair value:
    Acquired insured mortgages                            $  70,770,317        $  79,052,484
    Originated insured mortgages                             15,927,124           15,703,179
                                                          -------------        -------------

                                                             86,697,441           94,755,663

Investment in FHA-Insured Loans, at amortized cost,
  net of unamortized discount and premium:
    Acquired insured mortgages                               10,041,697           11,167,461
    Originated insured mortgages                             12,570,037           12,699,265
                                                          -------------        -------------
                                                             22,611,734           23,866,726

Cash and cash equivalents                                     5,631,117           23,723,644

Receivables and other assets                                  1,319,714            1,123,472

Investment in FHA debenture                                   2,361,381                    -
                                                          -------------        -------------
      Total assets                                        $ 118,621,387        $ 143,469,505
                                                          =============        =============


           LIABILITIES AND PARTNERS' EQUITY

Distributions payable                                     $   6,284,867        $  22,876,915

Accounts payable and accrued expenses                           112,864              147,473

Due to affiliate                                              1,242,107                    -
                                                          -------------        -------------
      Total liabilities                                       7,639,838           23,024,388
                                                          -------------        -------------

Partners' equity:
  Limited partners' equity, 15,000,000 Units
    authorized, 12,079,514 Units issued and outstanding     114,254,731          125,182,237
  General partner's deficit                                  (5,194,582)          (4,751,114)
  Accumulated other comprehensive income                      1,921,400               13,994
                                                          -------------        -------------
      Total partners' equity                                110,981,549          120,445,117
                                                          -------------        -------------
      Total liabilities and partners' equity              $ 118,621,387        $ 143,469,505
                                                          =============        =============
</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,
                                                2000             1999             1998
                                             -----------      -----------      -----------
<S>                                          <C>              <C>              <C>
Income:
  Mortgage investment income                 $ 9,597,605      $11,846,964      $14,067,956
  Interest and other income                      380,932          382,860          675,768
                                             -----------      -----------      -----------

                                               9,978,537       12,229,824       14,743,724
                                             -----------      -----------      -----------


Expenses:
  Asset management fee to related parties      1,142,121        1,382,904        1,617,625
  General and administrative                     397,713          479,113          550,640
  Interest expense to affiliate                        -                -           85,565
                                             -----------      -----------      -----------

                                               1,539,834        1,862,017        2,253,830
                                             -----------      -----------      -----------

Earnings before gains (losses)
  on mortgage dispositions                     8,438,703       10,367,807       12,489,894

Mortgage dispositions
  Gains                                          467,414          956,150        1,499,412
  Losses                                         (39,819)         (99,399)         (96,262)
                                             -----------      -----------      -----------

Net earnings                                 $ 8,866,298      $11,224,558      $13,893,044
                                             ===========      ===========      ===========

Other comprehensive income (loss)              1,907,406       (5,482,391)      (4,666,238)
                                             -----------      -----------      -----------

Comprehensive income                         $10,773,704      $ 5,742,167      $ 9,226,806
                                             -----------      -----------      -----------


Net earnings allocated to:
  Limited partners - 96.1%                   $ 8,520,512      $10,786,800      $13,351,215
  General partner -   3.9%                       345,786          437,758          541,829
                                             -----------      -----------      -----------

                                             $ 8,866,298      $11,224,558      $13,893,044
                                             ===========      ===========      ===========

Net earnings per Limited
  Partnership Unit - Basic                   $      0.71      $      0.89      $      1.11
                                             ===========      ===========      ===========
</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, 2000, 1999, 1998
<TABLE>
<CAPTION>

                                                                                            Accumulated
                                                                                              Other
                                                          General          Limited         Comprehensive
                                                          Partner          Partners           Income             Total
                                                       -------------     -------------     -------------     -------------
<S>                                                    <C>               <C>               <C>               <C>
Balance, January 1, 1998                               $  (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

  Net Earnings                                               345,786         8,520,512                 -         8,866,298
  Adjustment to unrealized gains (losses) on
    investments in insured mortgages                               -                -          1,907,406         1,907,406
  Distributions paid or accrued of $1.61 per Unit,
     including return of capital of $0.90 per Unit          (789,254)      (19,448,018)                -       (20,237,272)
                                                       -------------     -------------     -------------     -------------

Balance, December 31, 2000                             $  (5,194,582)    $ 114,254,731     $   1,921,400     $ 110,981,549
                                                       =============     =============     =============     =============



Limited Partnership Units outstanding - Basic, as of
   December 31, 2000, 1999 and 1998                                        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,
                                                                               2000           1999            1998
                                                                           -----------     -----------     -----------
<S>                                                                        <C>             <C>             <C>
Cash flows from operating activities:
   Net earnings                                                            $ 8,866,298     $11,224,558     $13,893,044
   Adjustments to reconcile net earnings to net cash
      provided by operating activities:
      Losses on mortgage dispositions                                           39,819          99,399          96,262
      Gains on mortgage dispositions                                          (467,414)       (956,150)     (1,499,412)
      Changes in assets and liabilities:
         (Increase) decrease in receivables and other assets                  (196,242)        329,820         222,729
         Decrease in accounts payable and accrued expenses                     (34,609)        (36,763)       (122,476)
         (Decrease) increase in due to affiliate                                     -        (131,129)        131,129
                                                                           -----------     -----------     -----------

         Net cash provided by operating activities                           8,207,852      10,529,735      12,721,276
                                                                           -----------     -----------     -----------

Cash flows from investing activities:
   Proceeds from disposition of mortgages                                    9,346,682      26,870,388      29,895,275
   Receipt of mortgage principal from scheduled payments                     1,182,259       1,308,678       1,322,056
   Proceeds from redemption of debenture                                             -       2,296,098               -
   Debenture proceeds due to affiliate                                               -      (1,148,049)              -
                                                                           -----------     -----------     -----------

        Net cash provided by investing activities                           10,528,941      29,327,115      31,217,331
                                                                           -----------     -----------     -----------

Cash flows from financing activities:
   Distributions paid to partners                                          (36,829,320)    (31,927,125)    (42,862,791)
                                                                           -----------     -----------     -----------
Net (decrease) increase in cash and cash equivalents                       (18,092,527)      7,929,725       1,075,816

Cash and cash equivalents, beginning of year                                23,723,644      15,793,919      14,718,103
                                                                           -----------     -----------     -----------

Cash and cash equivalents, end of year                                     $ 5,631,117     $23,723,644     $15,793,919
                                                                           ===========     ===========     ===========

Non-cash investing activity:
   9.5% debenture received from HUD in exchange for
   the mortgage on Portervillage I Apartments                              $         -     $         -     $ 2,296,098

   7.125% debenture received from HUD in exchange for
   the mortgage on Fox Run Apartments                                        2,385,233               -               -

   Portion of debenture due to affiliate, AIM 84                            (1,242,107)              -      (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.
(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.

     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.

     On November 22, 2000, the United States  Bankruptcy  Court for the District
of Maryland,  in Greenbelt,  Maryland (the "Bankruptcy  Court") confirmed CRIIMI
MAE's  and  CRIIMI  MAE   Management,   Inc.'s  Third   Amended  Joint  Plan  of
Reorganization  (as  amended  and  supplemented  by  praecipes  filed  with  the
Bankruptcy  Court on July 13, 14 and 21, and  November  22,  2000,  the "Plan").
CRIIMI MAE is working to complete the debt documentation, evidencing the secured
financings to be provided by (1) the unsecured creditors,  and (2) Merrill Lynch
Mortgage Capital, Inc. and German American Capital Corporation (collectively the
"New Debt  Documents").  On March 9, 2001,  the  Bankruptcy  Court  approved  an
extension of the date by which the Plan must be effective to April 13, 2001. The
Official  Committee of Unsecured  Creditors had previously filed its own plan of
reorganization and proposed disclosure  statement,  but has asked the Bankruptcy
Court, subject to completion of mutually acceptable debt documentation, to defer
consideration  of its plan and proposed  disclosure  statement.  There can be no
assurance  at this time that  CRIIMI MAE will be able to  complete  the New Debt
Documents and effectuate the Plan by April 13, 2001.

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.

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,  2000,  the  weighted  average  remaining  term of the
Partnership's  investments in GNMA  Mortgage-Backed  Securities and  FHA-Insured
Certificates is  approximately  27 years.  However,  the  partnership  agreement
states that the Partnership will terminate in approximately 9 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 under Section 221 program of the National Housing
Act of 1937, as amended (the "Section 221 program"), as discussed in Note 5.

     In connection with this  classification,  as of December 31, 2000 and 1999,
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,  2000 and 1999,  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.  In  addition,
mortgages  are  assigned to HUD under the Section 221  program,  as discussed in
Note 5. 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
are usually  more than 9 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
three 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
responsibility of the Unitholders.

Statements of Cash Flows
------------------------

     No cash  payments  were made for  interest  expense  during the years ended
December  31,  2000,  1999 and 1998.  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 all  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, 2000            As of December 31, 1999
                                          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           $  68,440,285    $   70,770,317    $  77,969,011    $   79,052,484
   Originated insured mortgages            16,311,904        15,927,124       16,772,658        15,703,179
                                        -------------    --------------    -------------    --------------

                                        $  84,752,189    $   86,697,441    $  94,741,669    $   94,755,663
                                        =============    ==============    =============    ==============

Investment in FHA-Insured Loans:
  Acquired insured mortgages            $  10,041,697    $   12,023,455    $  11,167,461    $   13,203,586
  Originated insured mortgages             12,570,037        12,192,633       12,699,265        12,017,626
                                        -------------    --------------    -------------    --------------

                                        $  22,611,734    $   24,216,088    $  23,866,726    $   25,221,212
                                        =============    ==============    =============    ==============

Cash and cash equivalents               $   5,631,117    $    5,631,117    $  23,723,644    $   23,723,644
                                        =============    ==============    =============    ==============

Accrued interest receivable             $   1,067,139    $    1,067,139    $     853,861    $      853,861
                                        =============    ==============    =============    ==============

Investment in FHA Debenture             $   2,385,233    $    2,361,381    $          --    $           --
                                        =============    ==============    =============    ==============
</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 Debenture
------------------------------------------------------------------------

     The  fair  value  of the  FHA-Insured  Certificates,  GNMA  Mortgage-Backed
Securities and FHA-Insured  Loans is priced  internally.  The Partnership used a
discounted cash flow methodology to estimate the fair value; the cash flows were
discounted  using  a  discount  rate  that,  in  the  Partnership's   view,  was
commensurate  with the market's  perception of risk and value.  The  Partnership
used a variety  of  sources  to  determine  its  discount  rate  including:  (i)
institutionally-available research reports, (ii) a relative comparison of dealer
provided  quotes from the previous  year to those  disclosed in recent  research
reports and  incorporating  adjustments  to reflect  changes in the market,  and
(iii) communications with dealers and active insured mortgage security investors
regarding  the  valuation of  comparable  securities.  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  consists of changes in unrealized  gains and losses related
to the  Partnership's  mortgages  and  debenture  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>
                                                                2000             1999             1998
                                                            ------------     ------------     ------------
<S>                                                         <C>              <C>              <C>
Reclassification adjustment for losses (gains)
   included in net income                                   $    114,365     $ (1,213,550)    $ (1,944,214)
Unrealized holding gains (losses) arising during
   the period                                                  1,793,041       (4,268,841)      (2,722,024)
                                                            ------------     ------------     ------------

Net adjustment to unrealized gains (losses)                 $  1,907,406     $ (5,482,391)    $ (4,666,238)
                                                            ============     ============     ============
</TABLE>


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

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,
                                                                           2000             1999
                                                                           ----             ----
<S>                                                                    <C>              <C>
Fully Insured Acquired Mortgages:
   Number of
      GNMA Mortgage-Backed Securities (5)                                         4                5
      FHA-Insured Certificates (1)(2)(3)(4)(6)                                   35               39
Amortized Cost                                                         $ 68,440,285     $ 77,969,011
Face Value                                                               71,404,632       81,218,457
Fair Value                                                               70,770,317       79,052,484

Fully Insured Originated Mortgages:
   Number of
      GNMA Mortgage-Backed Securities                                             1                1
      FHA-Insured Certificates                                                    1                1
Amortized Cost                                                         $ 16,311,904     $ 16,772,658
Face Value                                                               16,279,536       16,416,058
Fair Value                                                               15,927,124       15,703,179
</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) Turtle Creek Apartments           $ 1,660,000     Jan. 2000     $  44,023     $ 0.13     Jan. 2000      May 2000
(2) Woodland Hills Apartments             693,000     April 2000       93,811       0.06     May 2000       Aug. 2000
(3) New Castle Apartments               1,988,000     May 2000          8,158       0.16     May 2000       Aug. 2000
(4) Colony West Apartments                646,000     May 2000        132,967       0.05     June 2000      Aug. 2000
(5) Independence Park Apartments        3,997,000     Oct. 2000       (39,819)      0.32     Oct. 2000      Feb. 2001
(6) The Meadows of Livonia *            6,653,000     Jan. 2001       253,434       0.53     Jan. 2001      May 2001
    * First Quarter 2001 transaction
</TABLE>

     As of  March  1,  2001,  all  of the  fully  insured  GNMA  Mortgage-Backed
Securities and FHA-Insured  Certificates are current with respect to the payment
of  principal  and  interest,  except  for the  mortgages  on Gold  Key  Village
Apartments, Dunhaven Apartments, Section I and Rainbow Terrace Apartments, which
are delinquent  with respect to the February  payment of principal and interest.
In addition,  the Partnership no longer receives monthly  principal and interest
from the mortgages that are in the HUD assignment  process under Section 221, as
discussed below.

     As of March 1, 2001, the  Partnership  has received  notification  from the
respective  servicers  that HUD  applications  for insurance  benefits have been
filed for the following mortgages:

                                                     Outstanding
                                                      Principal     Assignment
Property Name                     Application Date     Balance         Date
-------------                     ----------------   ----------     -----------
Park Place Apartments                June 2000       $  754,000         N/A
Summit Square Manor                  June 2000        1,903,000         N/A
Park Hill Apartments                 Sept. 2000       1,737,000         N/A
Fairfax House                        Sept. 2000       2,128,000         N/A
Country Club Terrace Apts.           Sept. 2000       1,439,000         N/A
Fairlawn II                          Sept. 2000         755,000         N/A
Nevada Hills Apts.                   Dec. 2000        1,146,000         N/A

     Under  the  Section  221  program,  a  mortgagee  has the right to assign a
mortgage  ("put")  to FHA at the  expiration  of 20 years from the date of final
endorsement  if the  mortgage  is not in  default at such  time.  Any  mortgagee
electing  to assign an  FHA-insured  mortgage to FHA will  receive,  in exchange
therefor, 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 a rate announced  semi-annually  by HUD in
the  Federal  Register  ("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.  Once the servicer
of a mortgage has filed an application for insurance benefits under Section 221,
the Partnership will no longer receive the monthly principal and interest on the
applicable  mortgage.  The  Partnership  expects to receive HUD  debentures,  as
discussed above, plus accrued interest at the "going Federal rate", from date of
assignment  of the  mortgage  to the  date of  issuance  of the  debenture.  The
Partnership  will  recognize  a gain on these  assignments  upon  receipt of HUD
debentures or a loss when it becomes  probable that a loss will be incurred.  In
general,  the Partnership  plans to hold the debentures  until called or date of
maturity,  whichever  comes  first.  At that  time  debenture  proceeds  will be
distributed to Unitholders.

     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,  2000,  1999 and 1998,  the  Partnership
received  $0, $0, and  $76,991,  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.

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,
                                                                    2000                    1999
                                                                    ----                    ----
<S>                                                             <C>                      <C>
Fully Insured Acquired Loans:
  Number of Loans (1)                                                     8                        9
Amortized Cost                                                  $10,041,697              $11,167,461
Face Value                                                       12,040,599               13,453,341
Fair Value                                                       12,023,455               13,203,586

Fully Insured Originated Loans:
  Number of Loans                                                         3                        3
Amortized Cost                                                  $12,570,037              $12,699,265
Face Value                                                       12,261,397               12,379,870
Fair Value                                                       12,192,633               12,017,626
</TABLE>

(1)  In December  2000, HUD issued  assignment  proceeds in the form of a 7.125%
     debenture for the mortgage on Fox Run  Apartments.  The  debenture,  with a
     face value of $2,385,233 and a fair value of $2,361,381,  was issued to the
     Partnership,  with interest payable  semi-annually on January 1 and July 1.
     The mortgage on Fox Run Apartments was owned 50% by the Partnership and 50%
     by an affiliate of the Partnership,  American  Insured  Mortgage  Investors
     ("AIM 84").  Upon  disposition of the debenture 50% of the proceeds will be
     payable to AIM 84. The  Partnership  expects to  receive  net  proceeds  of
     approximately  $1.2  million  and has  recognized  a gain of  approximately
     $188,000 for the year ended  December 31, 2000. The net proceeds due AIM 84
     are  included on the balance  sheet in Due to  affiliate.  In general,  the
     Partnership will hold the debenture until its maturity date of June 1, 2010
     or when called,  whichever comes first. A distribution  will be declared at
     that time. The servicer of this mortgage filed an application for insurance
     benefits under the Section 221 program of the National  Housing Act of 1937
     in May 2000.

     As of March 1,  2001,  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,  2000,  1999 and 1998,  the  Partnership
received $21,566, $45,164, and $34,553,  respectively,  from the Participations.
These  amounts,  if any,  are  included  in  mortgage  investment  income on the
accompanying statements of income and comprehensive income.


7.   TRANSACTIONS WITH RELATED PARTIES

     The principal  officers of the General Partner for the years ended December
31,  2000,  1999 and 1998 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, 2000, 1999 and 1998, earned or received compensation or
payments for services from the Partnership as follows:

                 COMPENSATION PAID OR ACCRUED TO RELATED PARTIES
<TABLE>
<CAPTION>
                                                                           For the year ended December 31,
Name of Recipient               Capacity in Which Served/Item            2000           1999           1998
-----------------               -----------------------------         ----------     ----------     ----------
<S>                             <C>                                   <C>            <C>            <C>
CRIIMI, Inc.(1)                 General Partner/Distribution          $  789,254     $1,514,779     $1,691,257

AIM Acquisition Partners,
 L.P.(2)                        Advisor/Asset Management Fee           1,142,121      1,382,904      1,617,625

CRIIMI MAE Management, Inc.     Affiliate of General Partner/Expense      42,074         43,624         54,497

American Insured Mortgage       Affiliate of General Partner/
 Investors                       Share of FHA Debenture                1,242,107             --      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 $336,565,  $407,699, and $476,800 for the years ended December
     31, 2000, 1999, and 1998,  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.


8.   DISTRIBUTIONS TO UNITHOLDERS

     The  distributions  paid or accrued to  Unitholders on a per Unit basis for
the years ended December 31, 2000, 1999 and 1998 are as follows:
<TABLE>
<CAPTION>
                                                 2000                1999                1998
                                                ------              ------              ------
<S>                                             <C>                 <C>                 <C>
Quarter ended March 31,                         $ 0.47(1)(2)        $ 0.40(6)(7)        $ 1.07(13)
Quarter ended June 30,                            0.46(3)(4)          0.65(8)(9)          0.58(14)(15)
Quarter ended September 30,                       0.18                0.22                0.53(16)(17)
Quarter ended December 31,                        0.50(5)             1.82(10)(11)(12)    1.27(18)(19)
                                                ------              ------              ------

                                                $ 1.61              $ 3.09              $ 3.45
                                                ======              ======              ======
</TABLE>

     The following disposition proceeds are included in the distributions listed
above:
<TABLE>
<CAPTION>
                                                                                    Date                                 Net
                                                                                  Proceeds                Type of      Proceeds
                         Complex Name(s)                                          Received              Disposition    Per Unit
                         ---------------                                          --------              -----------    --------
<S>                                                                              <C>                    <C>             <C>
 (1) Northwood Apartments                                                        December 1999          Prepayment      $0.13
 (2) Turtle Creek Apartments                                                     January 2000           Prepayment       0.13
 (3) Woodland Hills Apartments and New Castle Apartments                         May 2000               Prepayment       0.22
 (4) Colony West Apartments                                                      May 2000               Prepayment       0.05
 (5) Independence Park                                                           October 2000           Prepayment       0.32
 (6) Gamel & Gamel Apartments                                                    December 1998          Prepayment       0.06
 (7) Debenture from Portervillage I Apartments *                                 January 1999           Assignment       0.10
 (8) Nassau Apartments, Walnut Apartments and Kings Villa/Discovery Commons      April 1999             Prepayment       0.37
 (9) Quail Creek Apartments                                                      May 1999               Prepayment       0.04
(10) Huntington Apartments                                                       September 1999         Prepayment       0.24
(11) Bowling Brook, Section 1                                                    October 1999           Prepayment       0.94
(12) Lincoln Green, Ridgecrest Timbers, Holden Court Apartments,
      and Lakeside Apartments                                                    November 1999          Prepayment       0.42
(13) Spanish Trace Apartments                                                    February 1998          Prepayment       0.77
(14) Isle of Pines Village Apartments and Emerald Green Apartments               April 1998             Prepayment       0.19
(15) Stoney Brook Apartments                                                     May 1998               Prepayment       0.12
(16) Amador Residential                                                          July 1998              Prepayment       0.11
(17) Continental Village and Bentgrass Hills Apartments                          August 1998            Prepayment       0.16
(18) Northdale Commons                                                           October 1998           Prepayment       0.06
(19) Cedar Bluff and Wayland Health Center                                       November 1998          Prepayment       0.94
</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.   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.


10.   SUMMARY OF QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)

     The following is a summary of unaudited quarterly results of operations for
the years ended December 31, 2000, 1999 and 1998.

(In Thousands, Except Per Unit Data)

<TABLE>
<CAPTION>
                                                               2000
                                                           Quarter ended
                                      March 31         June 30      September 30    December 31
                                      --------         -------      ------------    -----------
<S>                                 <C>             <C>             <C>             <C>
Income                              $     2,676     $     2,553     $     2,330     $     2,420
Net gains from
   mortgage dispositions                     44             235              --             149
Net earnings                              2,320           2,396           1,948           2,202
Net earnings per Limited
   Partnership Unit - Basic                0.18            0.19            0.15            0.19

                                                               1999
                                                           Quarter ended
                                      March 31         June 30      September 30    December 31
                                      --------         -------      ------------    -----------

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


                                                               1998
                                                           Quarter ended
                                      March 31         June 30      September 30    December 31
                                      --------         -------      ------------    -----------

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>

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

                   SCHEDULE IV - MORTGAGE LOANS ON REAL ESTATE

                                December 31, 2000
<TABLE>
<CAPTION>

                                                                            Interest                      Net         Annual Payment
                                                                            Rate on      Face           Carrying      (Principal and
                                                        Maturity    Put     Mortgage   Value of           Value          Interest)
Development Name/Location                                 Date     Date(1)  (6)(10)    Mortgage(4)     (4)(12)(13)      (10)(11)
-------------------------                               --------   ------   --------  ------------     -----------    --------------

ACQUIRED INSURED MORTGAGES
FHA-Insured Certificates (carried at fair value)
------------------------------------------------
<S>                                                      <C>       <C>       <C>      <C>              <C>            <C>
The Executive House, Dayton, OH                           8/21     12/01      7.5%    $    825,764     $    824,696   $    78,855(5)
Fairlawn II, Waterbury, CT (2)                            6/20      5/00      7.5%         749,116          743,033        73,364(5)
Willow Dayton, Chicago, IL                                8/19      N/A       7.5%         995,910          987,984        99,489(5)
Cedar Ridge Apts., Richton Park, IL                       4/20      2/01      7.5%       2,672,138        2,669,304       262,699(5)
Park Hill Apts., Lexington, KY (2)                        3/19      3/00      7.5%       1,721,953        1,708,398       173,845(5)
Fairfax House, Buffalo, NY (2)                           11/19      5/00      7.5%       2,111,142        2,094,234       209,608(5)
Country Club Terrace Apts., Holidaysburg, PA (2)          8/19      6/00      7.5%       1,426,838        1,415,482       142,537(5)
Summit Square Manor, Rochester, MN (2)                    8/19      5/99      7.5%       1,876,595        1,861,660       187,467(5)
Park Place, Rochester, MN (2)                             3/20     10/99      7.5%         743,604          737,661        73,980(5)
Nevada Hills Apts., Reno, NV (2)                          2/21      8/00      7.5%       1,143,496        1,134,077       110,345(5)
Dunhaven Apts., Section I, Baltimore County, MD           1/20     12/99      7.5%         884,115          883,220        87,429(7)
Steeplechase Apts., Aiken, SC                             9/18      N/A       7.5%         495,470          495,128        50,921(7)
Walnut Hills Apts., Plainfield, IN                        9/19      3/00      7.5%         478,404          477,951        47,692(7)
Woodland Villas, Jasper, AL                               8/19      3/00      7.5%         304,999          304,715        30,468(7)
Ashley Oaks Apts., Carrollton, GA                         3/22      4/02      7.5%         553,981          553,214        52,292(8)
Highland Oaks Apts., Phase III, Wichita Falls, TX         2/21      4/02      7.5%         929,977          928,852        89,741(8)
Magnolia Place Apts., Franklin, TN                        5/20      4/02      7.5%         313,939          313,601        30,804(8)
Rainbow Terrace Apts., Milwaukee, WI                      7/22      4/02      7.5%         315,369          314,918        29,581(8)
Rock Glen Apts., Baltimore, MD                            1/22      4/02      7.5%       1,049,366        1,047,940        99,375(8)
Stonebridge Apts., Phase I, Montgomery, AL                4/20      4/02      7.5%       1,008,289        1,007,220        99,125(8)
Village Knoll Apts., Harrisburg, PA                       4/20      4/02      7.5%       1,046,844        1,045,733       102,914(8)
Executive Tower, Toledo, OH                               3/27      N/A       8.75%      2,822,360        2,806,516       275,283
Sangnok Villa, Los Angeles, CA                            1/30      N/A      10.25%        895,675          896,618        96,825
The Meadows of Livonia, Livonia, MI                       9/34      N/A       9.40%      6,393,564        6,395,783       627,836
Eaglewood Villa Apts., Springfield, OH                    2/27      N/A       8.875%     2,685,480        2,670,356       264,707
Gold Key Village Apts., Englewood, OH                     6/27      N/A       9.00%      2,840,334        2,824,215       282,030
Stafford Towers, Baltimore, MD                            8/16      N/A       9.50%        342,603          345,062        42,613
Garden Court Apts., Lexington, KY                         8/27      N/A       8.60%      1,154,860        1,148,350       110,583
Northwood Place, Meridian, MS                             6/34      N/A       8.75%      4,459,786        4,432,911       412,635
Cheswick Apts., Indianapolis, IN                          9/27      N/A       8.75%      3,049,308        3,032,051       295,736
The Gate House Apts., Lexington, KY                       2/28      N/A       8.55%      2,781,401        2,765,652       264,092
Bradley Road Nursing, Bay Village, OH                     5/34      N/A       8.875%     2,495,153        2,480,095       233,708
Franklin Plaza, Cleveland, OH                             5/23      N/A       8.175%     5,164,171        5,031,614       503,183
Heritage Heights Apts., Harrison, AZ                      4/32      N/A       9.50%        412,274          414,405        41,313
Pleasant View Nursing Home, Union, NJ                     6/29      N/A       7.75%      7,376,613        7,183,717       643,311
                                                                                      ------------     ------------
  Total FHA-Insured Certificates -
    Acquired Insured Mortgages, carried at fair value                                 $ 64,520,891     $ 63,976,366
                                                                                      ------------     ------------

GNMA Mortgage-Backed Securities (carried at fair value)
-------------------------------------------------------
Pine Tree Lodge, Pasadena, TX                            12/33      N/A       9.50%   $  2,005,056     $  2,007,081   $   194,357
Stone Hedge Village Apts., Farmington, NY                11/27      N/A       7.00%      1,766,921        1,733,774       143,375
Afton Square Apts., Portsmouth, VA                       12/28      N/A       7.25%      1,038,310        1,018,719        81,544
Carlisle Apts., Houston, TX                              12/28      N/A       7.125%     2,073,454        2,034,377       166,042
                                                                                      ------------     ------------
  Total GNMA Mortgage-Backed Securities -
    Acquired Insured Mortgages, carried at fair value                                 $  6,883,741     $  6,793,951
                                                                                      ------------     ------------
Total investment in Acquired Insured Mortgages, carried at fair value                 $ 71,404,632     $ 70,770,317
                                                                                      ------------     ------------

ORIGINATED INSURED MORTGAGES
GNMA Mortgage-Backed Security (carried at fair value)
-----------------------------------------------------
Oak Forest Apts. II, Ocoee, FL                           12/31     11/09      8.25%   $ 10,406,049     $ 10,207,329   $   840,446

FHA-Insured Certificate (carried at fair value)
-----------------------------------------------
Waterford Green Apts., South St. Paul, MN (12)           11/30     12/04      7.25%      5,873,487        5,719,795       481,564
                                                                                      ------------     ------------
Total investment in Originated Insured Mortgages, carried at fair value               $ 16,279,536     $ 15,927,124
                                                                                      ------------     ------------
 Total investment in FHA-Insured Certificates and
     GNMA Mortgage-Backed Securities, carried at fair value                           $ 87,684,168     $ 86,697,441
                                                                                      ------------     ------------

ACQUIRED INSURED MORTGAGES
FHA-Insured Loans (carried at amortized cost) (3)
-------------------------------------------------
Bay Pointe Apts., Lafayette, IN                           2/23     11/00      7.5%    $  1,969,057     $  1,649,519   $   185,272(9)
Baypoint Shoreline Apts., Duluth, MN                      1/22      8/00      7.5%         928,902          774,828        87,967(9)
Berryhill Apts., Grass Valley, CA                         1/21      8/99      7.5%       1,198,905        1,003,525       115,899(9)
Brougham Estates II, Kansas City, KS                     11/22      8/00      7.5%       2,476,492        2,059,064       230,860(9)
College Green Apts., Wilmington, NC                       3/23      6/01      7.5%       1,332,254        1,106,703       123,455(9)
Kaynorth Apts., Lansing, MI                               4/23      3/01      7.5%       1,808,236        1,501,515       167,318(9)
Town Park Apts., Rockingham, NC                          10/22      6/01      7.5%         607,462          505,689        56,755(9)
Westbrook Apts., Kokomo, IN                              11/22     12/00      7.5%       1,719,291        1,440,854       163,177(9)
                                                                                      ------------     ------------
   Total investment in Acquired Insured Mortgages,
      FHA-Insured Loans, carried at amortized cost                                    $ 12,040,599     $ 10,041,697
                                                                                      ------------     ------------

ORIGINATED INSURED MORTGAGES
FHA-Insured Loans (carried at amortized cost) (3)
-------------------------------------------------
Cobblestone Apts., Fayetteville, NC                       3/28     12/02      8.50%   $  4,898,354     $  5,035,166   $   462,703
Longleaf Lodge, Hoover, AL                                7/26        --      8.25%      3,008,337        3,044,250       282,958
The Plantation, Greenville, NC                            4/28      4/03      8.25%      4,354,706        4,490,621       402,046
                                                                                      ------------     ------------
   Total investment in Originated Insured Mortgages,
      FHA-Insured Loans, carried at amortized cost                                    $ 12,261,397     $ 12,570,037
                                                                                      ------------     ------------
Total investment in FHA-Insured Loans                                                 $ 24,301,996     $ 22,611,734
                                                                                      ------------     ------------
TOTAL INVESTMENT IN INSURED MORTGAGES                                                 $111,986,164     $109,309,175
                                                                                      ============     ============
</TABLE>

(1)  Under the  Section  221 program of the  National  Housing  Act of 1937,  as
     amended (the "Section 221 program"), 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 an 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.
     Certain  of the  Partnership's  Insured  Mortgages  may have  the  right of
     assignment under this program. The Partnership has initiated its request to
     put these  mortgages to FHA as they become due.  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)  Applications for insurance benefits under the Section 221 program have been
     filed for these mortgages.  The Partnership is currently  awaiting approval
     from HUD for these applications.

(3)  Inclusive of closing costs and acquisition fees.

(4)  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.

(5)  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.

(6)  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.

(7)  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.

(8)  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.

(9)  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.

(10) 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, 2000,  1999 and 1998, the
     Partnership received additional interest of $21,566, $45,164, and $111,544,
     respectively, from the Participations.

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

(12) A reconciliation  of the carrying value of Insured  Mortgages for the years
     ended December 31, 2000 and 1999, is as follows:
<TABLE>
<CAPTION>
                                                                    2000                1999
                                                                ------------        ------------
<S>                                                             <C>                 <C>
Beginning balance                                               $118,622,389        $151,427,095

   Principal receipts on mortgages                                (1,182,259)         (1,308,678)

   Proceeds from disposition of Mortgages                        (10,489,808)(a)     (26,870,388)

   Net gains on mortgage dispositions                                427,595             856,751

   Increase (decrease) to unrealized gains on
      Investments in Insured Mortgages                             1,931,258          (5,482,391)
                                                                ------------        ------------
Ending balance                                                  $109,309,175        $118,622,389
                                                                ============        ============
</TABLE>

     (a)  This amount  represents  cash proceeds of $9,346,682  and net non-cash
          proceeds of $1,143,126 (as reflected in the Statements of Cash Flows).

(13) As of December  31, 2000 and 1999,  the tax basis of the Insured  Mortgages
     was approximately $105.4 million and $116.3 million, respectively.