<PAGE>


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

                                    FORM 10-K
(Mark One)

   X     ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
-------  EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2000
                                       OR

____   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
       EXCHANGE ACT OF 1934

                         Commission File Number 0-18491

                           CAPITAL MORTGAGE PLUS L.P.
                           --------------------------
             (Exact name of registrant as specified in its charter)
        Delaware                                            13-3502020
---------------------------------                     ----------------------
(State or other jurisdiction of                            (I.R.S. Employer
incorporation or organization)                            Identification No.)

625 Madison Avenue, New York, New York                         10022
--------------------------------------                  -----------------
(Address of principal executive offices)                     (Zip Code)

Registrant's telephone number, including area code:  (212) 421-5333

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

   None

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

   Beneficial Assignment Certificates

     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]

                       DOCUMENTS INCORPORATED BY REFERENCE
     Registrant's  prospectus dated May 10, 1989, as supplemented  July 7, 1989,
January 8, 1990,  February 9, 1990, May 18, 1990, and October 24, 1990, as filed
with the Commission pursuant to Rules 424(b) and 424(c) of the Securities Act of
1933, but only to the extent expressly incorporated by reference in Parts I, II,
III and IV.

Index to exhibits may be found on page 25
Page 1 of 77


<PAGE>

                                     PART I

Item 1.  Business.

General
-------

Capital Mortgage Plus L.P. (the  "Registrant") is a limited  partnership  formed
under the laws of the State of Delaware on November 23,  1988.  The sole general
partner of the Registrant is CIP Associates,  Inc., a Delaware  corporation (the
"General Partner").  The General Partner manages and controls the affairs of the
Registrant.  See Item 10,  Directors and Executive  Officers of the  Registrant,
below.

Investment Objectives
---------------------

The  Registrant's  principal  investment  objectives  are to: (i)  preserve  and
protect the Registrant's  capital;  (ii) provide quarterly cash distributions of
adjusted cash from operations;  and (iii) provide additional  distributions from
additional  interest arising from  participations in the annual cash flow of the
developments  and/or the sale or refinancing  of a development.  There can be no
assurance that all of the objectives can be achieved.

The  Registrant  originated  federally  insured and  co-insured  first  mortgage
construction  and  permanent  loans   ("Mortgages")   to  finance   multi-family
residential  rental  properties   ("Developments"   and  each  a  "Development")
developed by unaffiliated entities. All base interest and initially at least 90%
in the  aggregate  of the  principal of the  Mortgages  in which the  Registrant
invests  are  insured  or  coinsured  by the  Department  of  Housing  and Urban
Development  ("HUD") and Related Mortgage  Corporation  ("RMC"), an affiliate of
the  General  Partner.  The  remaining  10% of  the  Registrant's  portfolio  is
comprised of uninsured  non-interest  bearing  equity loans made directly to the
same developers as the Mortgages for, among other purposes,  defrayal of certain
specific cash requirements of the properties.  The Registrant made five mortgage
loans in the  aggregate  amount of  $26,158,190  and five  non-interest  bearing
equity loans in the  aggregate  amount of  $3,062,135  in  connection  with five
multi-family projects. The mortgage and equity loan relating to the Willow Trace
Apartments ("Willow Trace"), was repaid in full on December 16, 1998.

The  Registrant is engaged  solely in the business of investing in Mortgages and
equity loans;  therefore,  presentation of industry  segment  information is not
applicable.

For detailed  financial  information  pertaining to the  Registrant  see Item 8,
Financial Statements and Supplementary Data, below.
<PAGE>

<TABLE>
Investments
-----------

The following table lists the mortgage loans and equity loans as of February 28,
2001;  it excludes the  investment  in Willow Trace which was repaid on December
16, 1998:
<CAPTION>

                                  Original  Interest
                         Date of  Mortgage   Rate on    Equity  Final
                          Invest-  Loan      Mortgage    Loan  Endorse-  Term  Occu-
Project          Location  ment   Amount(2)  Loan(1)    Amount   ment    (7)   pancy
-------          --------  ----   ---------  --------   ------   ----     --   -----

<S>              <C>      <C>     <C>        <C>    <C>        <C>     <C>    <C>
Mortenson Manor  Ames,    8/31/               8.43%-                   40
Apartments (3)   Iowa      1990   $4,974,090  9.4%  $577,885   2/92    years  100%
Windemere        Wichita, 9/28/               9.62%-                   40
Apartments (4)   Kansas    1990   8,110,300  10.7%   736,550   7/92    years   81%
Fieldcrest III   Dothan,  8/27/               8.75%-                   40
Apartments (5)   Alabama   1991   3,343,700  10.11%  383,300   11/92   years   98%
Holly Ridge II   Gresham, 3/16/               9.25%-                   40
Apartments (6)   Oregon    1993   5,310,100   9.89%  684,000   6/95    years   99%
                                  ---------          -------
                                  $21,738,190       $2,382,135
                                   ==========        =========
</TABLE>

(1) The minimum  interest rate shown above includes  interest  payable under the
first mortgage note plus additional  interest payable pursuant to the terms of a
Limited   Operating   Guaranty   agreement   for   Fieldcrest   III   Apartments
("Fieldcrest")  and Holly Ridge II Apartments ("Holly Ridge") and the Additional
Interest  Guaranty  agreements for Mortenson Manor Apartments  ("Mortenson") and
Windemere Apartments ("Windemere").

(2) The Mortenson and Windemere  mortgage  loans are  co-insured by HUD and RMC.
The  Fieldcrest  and Holly Ridge  mortgage loans are fully insured by HUD. As of
February 28, 2001, all loan amounts have been disbursed.

(3) Default Interest payments in the aggregate amount of approximately  $742,000
for the years ended  December 31, 1993 through 2000 have not been  received and,
as a result, the Registrant  established an allowance for uncollectability which
equals  approximately  $656,000  and  $608,000  at  December  31, 2000 and 1999,
respectively.

(4) A Default  Interest  payment  of  $126,435  for the period  January  2000 to
December 2000 is expected to be received  during the second quarter of 2001. The
Default Interest  payments of approximately  $127,000 and $130,000 for the years
ended December 31, 1999 and 1996, respectively,  have not been received and as a
result,  the  Registrant  established  an allowance for  uncollectability  which
equals approximately $257,000 at December 31, 2000.

(5) A  Contingent  Interest  payment of $46,814 for the period  January  2000 to
December 2000 is expected to be received during the second quarter of 2001.

(6) Default and Contingent  Interest payments of $51,844 and $34,561 and $52,095
and $35,224,  respectively,  for the periods July 2000 to December 2000 and July
1999 to December  1999 is expected to be received  during the second  quarter of
2001 and was received in the first quarter of 2001, respectively.

(7)  All  loans  have  call  provisions  effective  ten  years  following  final
endorsement  and a grace  period.  The  Registrant,  in  order to  enforce  such
provisions,  would be required to terminate the mortgage insurance contract with
FHA (and/or the coinsurer) not later than the  accelerated  payment date.  Since
the  exercise  of such option  would be at the  Registrant's  discretion,  it is
intended to be exercised only where the Registrant  determines that the value of
the  Development  has  increased by an amount which would  justify  accelerating
payment in full and assuming the risks of foreclosure if the mortgagor failed to
make the accelerated  payment.  The Registrant  presently  expects to dispose of
such loans within 10 to 15 years after acquisition.
<PAGE>


The  following is the interest  income from  mortgage  loans as a percentage  of
total revenues.

                         2000             1999              1998
                         ----             ----              ----
Mortenson                19%              19%               13%
Windemere                37               37                24
Fieldcrest               16               16                13
Holly Ridge              26               25                17
Willow Trace              0                0                20


Repayment of Mortgage Loan
--------------------------

On December 16, 1998, Willow Partners,  Ltd. (the "Owner"),  the owner of Willow
Trace,  prepaid the  outstanding  FHA  Co-Insured  Mortgage Loan (the  "Mortgage
Loan") and equity loan (the "Equity  Loan") in full.  The Mortgage  Loan and the
Equity  Loan were  secured  by a  mortgage  on the  Willow  Trace  property  and
partnership  interests in the Owner.  The  outstanding  debt repaid early to the
Partnership totaled $5,372,859,  including the $4,275,984 outstanding balance of
the Mortgage  Loan,  the $680,000  Equity  Loan, a $213,799  prepayment  premium
(which is included in other income on the Statements of Income), and $203,076 of
additional interest due pursuant to the loan documents.

On December 28, 1998, the Partnership  used a portion of the repayment  proceeds
to  pay  then  current  payables,  including  $344,000  of  accrued  Partnership
management fees owed to the General Partner,  and to replenish reserves.  Of the
balance of the repayment  proceeds,  $4,499,817  ($2.45 per BAC, as that term is
defined below) was  distributed to the BACs holders and $45,453 was  distributed
to the General Partner.

Competition
-----------

The  Registrant's  business is affected  by  competition  to the extent that the
underlying properties from which it is to derive interest and principal payments
may be subject to competition from neighboring  properties.  In particular,  the
receipt of additional interest and the repayment of the equity loans, neither of
which is insured or guaranteed by government or  quasi-government  agencies,  is
dependent upon the economic performance of the underlying properties which could
be adversely affected by competitive conditions.

Employees
---------

The Registrant does not directly  employ anyone.  All services are performed for
the Registrant by its General Partner and that entity's affiliates.  The General
Partner receives compensation in connection with such activities as set forth in
Items 11 and 13. In addition,  the Registrant reimburses the General Partner and
certain  of  its  affiliates  for  expenses  incurred  in  connection  with  the
performance by their employees of services for the Registrant in accordance with
the Partnership Agreement.

Item 2.  Properties.

The Registrant does not own or lease any property.
<PAGE>


Item 3.  Legal Proceedings.

There are no  material  legal  proceedings  pending  against  or  involving  the
Registrant.

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

No matters were  submitted to a vote of security  holders during the fiscal year
covered by this report through the solicitation of proxies or otherwise.

                                     PART II

Item 5. Market for the  Registrant's  Common Equity and Related  Security Holder
Matters.

As of December 31, 2000,  the Registrant  had issued and  outstanding  1,836,660
limited partnership  interests  ("Limited  Partnership  Interests").  All of the
issued and outstanding  Limited  Partnership  Interests are issued to Related FI
BUC$  Associates,  Inc.  (the  "Assignor  Limited  Partner"),  which has  issued
Beneficial  Assignment  Certificates  ("BACs").  Each BAC  represents all of the
economic and virtually all of the material  ownership  rights  attributable to a
Limited Partnership  Interest held by the Assignor Limited Partner.  BACs may be
converted  into  Limited  Partnership  Interests  at no cost to the holder,  but
Limited  Partnership  Interests  are not  convertible  back into BACs.  There is
currently  no  established  public  trading  market  for  BACs  and  it  is  not
anticipated  that BACs will be listed for trading on any securities  exchange or
included for quotation on the Nasdaq National Market.

All of the Registrant's general partnership interests, representing an aggregate
capital contribution of $1,000, are held by the General Partner.

There are no material legal restrictions upon the Registrant's present or future
ability  to  make  distributions  in  accordance  with  the  provisions  of  the
Registrant's Amended and Restated Agreement of Limited Partnership.


Distribution Information
------------------------

Cash distributions per BAC made to the limited partners or BACs holders for the
following quarters in 2000, 1999 and 1998 were as follows:

         1st Quarter       2nd Quarter      3rd Quarter       4th Quarter
         -----------       -----------      -----------       -----------
2000       .2212             .2182             .2182            .2206
1999       .2164             .2188             .2212            .2212
1998       .2466             .2493             .2521           2.7021


Quarterly  distributions  are made 45 days  following  the close of the calendar
quarter.

A total of $9,803,296 was  distributed  to the limited  partners or BACs holders
during the years 2000,  1999 and 1998.  The  Registrant  utilized  the  original
working capital reserve, in the aggregate amount of $477,532,  for distributions
from 1989  through  1991,  which is  considered  to be a return of  capital.  An
additional  working capital reserve of approximately  $2,800,000 was established
from uninvested offering proceeds,  a portion of which was applied to pay a part
of the 2000, 1999 and 1998 distributions  (which is considered to be a return of
capital).  Approximately  $274,000,  $4,686,000  (see  below) and $0 paid to the
limited  partners or BACs holders in each of the years ended  December 31, 2000,
1999 and  1998,  respectively,  represented  a  return  of  capital.  A total of
$153,686 was distributed to the General Partner during 2000, 1999 and 1998.
<PAGE>


The 1998 fourth  quarter  distribution  was paid on February 14,  1999,  and was
funded primarily by the Willow Trace repayment proceeds,  $2.45 per BAC of which
is considered to be a return of capital. See Item 7, Management's Discussion and
Analysis of Financial  Condition and Results of Operations,  for a discussion of
the effect of fee  deferments and the  expiration of the final  Guaranteed  Rate
Guaranty Period on the distributions.

<TABLE>
Item 6.  Selected Financial Data.

The information set forth below presents selected financial data of the
Registrant. Additional financial information is set forth in the audited
financial statements and footnotes thereto contained in Item 8 hereof.
<CAPTION>


OPERATIONS                           Year ended December 31,
----------                           -----------------------
                         2000           1999         1998        1997        1996
                      ----------  ------------    ---------   ----------  -----------
<S>                     <C>          <C>          <C>          <C>          <C>
Interest income
Mortgage loans          $1,994,946   $1,987,628   $2,678,758   $2,471,273   $2,423,058
Temporary investments       45,335       61,369       32,135       14,658       39,064
Other income                 3,352        6,517      393,785        2,252        2,202
                        ----------   ----------   ----------   ----------   ----------

Total revenues           2,043,633    2,055,514    3,104,678    2,488,183    2,464,324
                        ----------   ----------   ----------   ----------   ----------

Operating expenses         501,529      488,707      567,549      584,796      598,701

Provision for bad debts    175,493       54,549      144,977       96,079      157,138
                        ----------   ----------   ----------   ----------   ----------

Total Expenses             677,022      543,256      712,526      680,875      755,839
                        ----------   ----------   ----------   ----------   ----------

Net income              $1,366,611   $1,512,258  $2,392,152    $1,807,308   $1,708,485
                        ==========   ==========   ==========   ==========   ==========

Net income per BAC      $     0.73   $     0.81  $      1.28   $     0.96   $     0.91
                        ==========   ==========   ==========   ==========   ==========
</TABLE>
<TABLE>

<CAPTION>


FINANCIAL POSITION                             December 31,
------------------                        -----------------------
                             2000        1999         1998        1997        1996
                          ---------  ------------    ---------   ----------  -----------
<S>                     <C>          <C>          <C>          <C>          <C>

Total assets             $23,535,982 $23,822,034 $28,561,927   $28,597,517  $29,292,812
                          ==========  ==========  ==========    ==========   ==========

CASH DISTRIBUTIONS

Distributions per BAC    $      0.88  $     0.88  $     3.45    $     1.40   $     1.40
                         ===========  ==========  ==========    ==========   ==========
</TABLE>


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

Capital Resources and Liquidity
-------------------------------

Sources of Registrant  funds  included  interest  earned on (1)  investments  in
mortgage loans (see also Item 1, Business) and (2) the working capital reserve.

During  the year ended  December  31,  2000,  cash and cash  equivalents  of the
Registrant decreased by approximately  $91,000 due to cash provided by operating
activities   ($1,412,000),   collections   of   principal   on  mortgage   loans
approximately  ($143,000)  and  distributions  paid  to  partners  ($1,646,000).
Included in the adjustments to reconcile the net income to cash flow provided by
operating activities is amortization of approximately $218,000.

Subject to the future performance of the Registrant's investments and results of
operations,  the General Partner  anticipates that there will be sufficient cash
from  operations  generated  to cover  anticipated  expenses in 2001 and to fund
future distributions.

A distribution of approximately  $1,613,000 made to the limited partners or BACs
holders during the year ended December 31, 2000 was made from adjusted cash flow
from operations and, to a lesser extent,  from working capital reserves which is
considered to be a return of capital. A distribution of approximately $6,168,000
made to the limited  partners or BACs holders during the year ended December 31,
1999 was made from  adjusted  cash flow from  operations  and the  Willow  Trace
repayment  proceeds,  $2.45  per BAC of which is  considered  to be a return  of
capital.  Approximately  $33,000  and  $80,000  was  distributed  to the General
Partner for each of the years ended December 31, 2000 and 1999, respectively.

Management is not aware of any trends or events,  commitments  or  uncertainties
that will impact  liquidity  in a material  way.  Management  believes  the only
impact would be from laws that have not yet been adopted.  All base interest and
the principal of the  Registrant's  investments in mortgage loans are insured or
co-insured  by HUD and a private  mortgage  lender (which is an affiliate of the
General Partner). The Registrant's investments in uninsured non-interest bearing
equity loans (which represent  approximately 10% of the Registrant's  portfolio)
are secured by a Registrant  interest in  properties  which are  diversified  by
location so that if one area of the  country is  experiencing  downturns  in the
economy,  the remaining  properties may be experiencing  upswings.  However, the
geographic  diversification  of the portfolio may not protect  against a general
downturn in the national economy.

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

2000 vs. 1999
-------------

Results of operations  for the years ended  December 31, 2000 and 1999 consisted
primarily of interest income of $1,995,000 and $1,988,000,  respectively, earned
from investments in mortgage loans.

Interest income from temporary investments  decreased  approximately $16,000 for
the year ended  December  31, 2000 as compared to 1999  primarily  due to higher
cash and cash equivalents balances in 1999 resulting from the cash received from
the repayment of the Willow Trace mortgage in 1998. A significant  amount of the
cash received from the repayment of the Willow Trace mortgage was distributed to
BACs holders on February 15, 1999.
<PAGE>


General and administrative  increased  approximately  $21,000 for the year ended
December 31, 2000 as compared to 1999  primarily  due to an increase in printing
costs and accounting expense in 2000.

A provision for bad debts of approximately  $175,000 and $55,000 was charged for
the years ended December 31, 2000 and 1999, respectively,  representing the 2000
Guaranteed Interest due from Mortenson and the 1999 Guaranteed Interest due from
Windemere and the 1999 Guaranteed Interest due from Mortenson, respectively.

1999 vs. 1998
-------------

Results of operations  for the years ended  December 31, 1999 and 1998 consisted
primarily of interest income of $1,988,000 and $2,679,000,  respectively, earned
from investments in mortgage loans.

Interest  income from mortgage loans  decreased  approximately  $691,000 for the
year ended  December 31, 1999 as compared to 1998 primarily due to a decrease in
interest  income  received  from the Willow Trace  mortgage  which was repaid in
December 1998.

Interest income from temporary investments  increased  approximately $29,000 for
the year ended  December  31, 1999 as compared to 1998  primarily  due to higher
cash and cash  equivalent  balances from the cash received from the repayment of
the Willow Trace mortgage. The amount of cash received from the repayment of the
Willow  Trace  mortgage  was  used  to  provide  the  necessary  funds  for  the
distribution on February 15, 1999.

Other income  decreased  approximately  $387,000 for the year ended December 31,
1999 as compared to 1998  primarily  due to the gain realized from the repayment
of the Willow Trace Mortgage Loan and Equity Loan in 1998.

General and  administrative-related  parties  expenses  decreased  approximately
$22,000 for the year ended  December 31, 1999 as compared to 1998  primarily due
to a decrease in partnership management fees in 1999 due to the repayment of the
Willow Trace Mortgage Loan.

Amortization expense decreased approximately $58,000 for the year ended December
31, 1999 as compared to 1998  primarily due to the repayment of the Willow Trace
Equity Loan in 1998.

A provision for bad debts of approximately  $55,000 and $145,000 was charged for
the years ending December 31, 1999 and 1998, respectively, representing the 1999
Guaranteed Interest due from Mortenson and the 1996 Guaranteed Interest due from
Windemere.

Item 7A.  Quantitative and Qualitative Disclosure About Market Risk.

Not Applicable


<PAGE>
<TABLE>

<CAPTION>

Item 8.  Financial Statements and Supplementary Data.
                                                                                      Page
                                                                                  ---------------
<S>                                                                                      <C>
(a) 1.   Financial Statements

         Independent Auditors' Report                                                    10

         Statements of Financial Condition as of December 31, 2000 and 1999              11

         Statements of Income for the years ended December 31, 2000, 1999 and 1998       12

         Statements of Changes in Partners' Capital (Deficit) for the years              13
         ended December 31, 2000, 1999 and 1998

         Statements of Cash Flows for the years ended December 31, 2000, 1999 and 1998   14

         Notes to Financial Statements                                                   15
</TABLE>

<PAGE>
                          INDEPENDENT AUDITORS' REPORT




To the General Partner of
Capital Mortgage Plus L.P.



We  audited  the  accompanying  statements  of  financial  condition  of Capital
Mortgage Plus L.P. (a Delaware limited  partnership) as of December 31, 2000 and
1999  and the  related  statements  of  income,  changes  in  partners'  capital
(deficit)  and cash  flows  for each of the  three  years  in the  period  ended
December 31, 2000.  These  financial  statements are the  responsibility  of the
General Partners. Our responsibility is to express an opinion on these financial
statements based on our audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the accounting  principles used and significant  estimates made by the
General  Partner,   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 Capital Mortgage Plus L.P. as
of December 31, 2000 and 1999,  and the results of its  operations  and its cash
flows for each of the three  years in the  period  ended  December  31,  2000 in
conformity with generally accepted accounting principles.




Bethesda, Maryland                         /s/ REZNICK, FEDDER & SILVERMAN
March 21, 2001

<PAGE>

                           CAPITAL MORTGAGE PLUS L.P.
                             (a limited partnership)
                        STATEMENTS OF FINANCIAL CONDITION

                                     ASSETS

                                                             December 31,
                                                      -------------------------
                                                          2000          1999
                                                      -----------   -----------

Investments in mortgage loans (Note 3)                $21,357,424   $21,698,812
Cash and cash equivalents                                 919,391     1,010,890
Accrued interest receivable (net of allowance
  of $913,236 and $737,743, respectively)                 602,930       437,183
Loan origination costs (net of accumulated
  amortization of $177,712 and $158,800, respectively)    656,237       675,149
                                                       ----------    ----------

Total Assets                                          $23,535,982   $23,822,034
                                                       ==========    ==========

                        LIABILITIES AND PARTNERS' CAPITAL

Liabilities:
Accounts payable and other liabilities                $    25,000   $    20,744
Due to general partner and affiliates (Note 4)             46,170        57,264
                                                      -----------    ----------

Total liabilities                                          71,170        78,008
                                                       ----------    ----------

Partners' capital (deficit):
Limited Partners (1,836,660 BACs issued
  and outstanding) (Note 1)                            23,618,659    23,892,289
General Partner                                          (151,847)     (148,263)
                                                      -----------    ----------

Total partners' capital                                23,464,812    23,744,026
                                                       ----------    ----------

Total Liabilities and Partners' Capital               $23,535,982   $23,822,034
                                                       ==========    ==========

See accompanying notes to financial statements.

<PAGE>

                           CAPITAL MORTGAGE PLUS L.P.
                             (a limited partnership)
                              STATEMENTS OF INCOME

                                          Years Ended December 31,
                                      2000         1999           1998
                                 ------------  ------------   -----------
Revenues:

Interest income:
Mortgage loans (Note 3)            $1,994,946    $1,987,628    $2,678,758
Temporary investments                  45,335        61,369        32,135
Other income                            3,352         6,517       393,785
                                 ------------   -----------    ----------

Total revenues                      2,043,633     2,055,514     3,104,678
                                    ---------     ---------     ---------

Expenses:

General and administrative             84,084        63,458        61,918
General and administrative-
  related parties (Note 4)            198,403       206,207       228,185
Provision for bad debts               175,493        54,549       144,977
Amortization                          219,042       219,042       277,446
                                   ----------    ----------    ----------

Total expenses                        677,022       543,256       712,526
                                   ----------    ----------    ----------

Net income                         $1,366,611    $1,512,258    $2,392,152
                                    =========     =========     =========

Net income per BAC                 $     0.73    $     0.81    $     1.28
                                    =========     =========     =========

See accompanying notes to financial statements.

<PAGE>


<TABLE>
                           CAPITAL MORTGAGE PLUS L.P.
                             (a limited partnership)
              STATEMENTS OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)
              FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 and 1998


<CAPTION>
                                                            Limited        General
                             Total Partners Partner

<S>                                               <C>           <C>             <C>
Partners' capital (deficit) - January 1, 1998     $28,150,773   $28,256,354     $(105,581)
Net income                                          2,392,152     2,344,309        47,843
Distributions                                      (2,063,264)   (2,021,999)      (41,265)
                                                   ----------   -----------      ---------

Partners' capital (deficit) - December 31, 1998    28,479,661    28,578,664       (99,003)
Net income                                          1,512,258     1,482,013        30,245
Distributions                                      (6,247,893)   (6,168,388)      (79,505)
                                                   ----------    ----------      ---------

Partners' capital (deficit) - December 31, 1999    23,744,026    23,892,289      (148,263)
Net income                                          1,366,611     1,339,279        27,332
Distributions                                      (1,645,825)   (1,612,909)      (32,916)
                                                  -----------   -----------     ---------

Partners' capital (deficit) - December 31, 2000   $23,464,812   $23,618,659     $(151,847)
                                                   =========    ===========     ==========

See accompanying notes to financial statements.
</TABLE>

<PAGE>
<TABLE>
                           CAPITAL MORTGAGE PLUS L.P.
                             (a limited partnership)
                            STATEMENTS OF CASH FLOWS
<CAPTION>
                                                             Years Ended December 31,
                                                      2000            1999          1998
                                                    -----------    -----------    -----------
Cash flows from operating activities:
<S>                                                 <C>            <C>            <C>
Net income                                          $ 1,366,611    $ 1,512,258    $ 2,392,152
                                                    -----------    -----------    -----------

Adjustments to reconcile net income to net cash
  provided by operating activities:
Provision for bad debts                                 175,493         54,549        144,977
Gain on recovery of amortized portion of Willow
  Trace Equity Loan                                           0              0       (311,742)
Writeoff of unamortized portion of Willow Trace
  Loan costs                                                  0              0        133,859
Amortization                                            219,042        219,042        277,446
Amortization of interest rate buydown                    (1,452)        (1,452)        (1,452)
Changes in operating assets and liabilities:
Increase in other assets                               (341,240)      (147,698)       (45,744)
Increase (decrease) in accounts payable
  and other liabilities                                   4,255             70        (25,772)
Decrease in due to general partner
  and affiliates                                        (11,093)        (4,328)      (338,706)
                                                    -----------    -----------    -----------
Total adjustments                                        45,005        120,183       (167,134)
                                                    -----------    -----------    -----------

Net cash provided by operating activities             1,411,616      1,632,441      2,225,018
                                                    -----------    -----------    -----------

Cash flows from investing activities:
Receipt of principal on mortgage loans                  142,710        134,427      4,432,259
Receipt of principal on equity loan                           0              0        680,000
                                                    -----------    -----------    -----------

Net cash provided by investing activities               142,710        134,427      5,112,259
                                                    -----------    -----------    -----------

Cash flows from financing activities:

Distributions to partners                            (1,645,825)    (6,247,893)    (2,063,264)
                                                    -----------    -----------    -----------

Net cash used in financing
  activities                                         (1,645,825)    (6,247,893)    (2,063,264)
                                                    -----------    -----------    -----------

Net (decrease) increase in cash and cash
  equivalents                                           (91,499)    (4,481,025)     5,274,013

Cash and cash equivalents at beginning of year        1,010,890      5,491,915        217,902
                                                    -----------    -----------    -----------

Cash and cash equivalents at end of year            $   919,391    $ 1,010,890    $ 5,491,915
                                                    ===========    ===========    ===========

See Accompanying Notes to Financial Statements.
</TABLE>


<PAGE>


                           CAPITAL MORTGAGE PLUS L.P.
                             (a limited partnership)
                          NOTES TO FINANCIAL STATEMENTS
                        DECEMBER 31, 2000, 1999 and 1998

NOTE 1 - General

Capital Mortgage Plus L.P., a Delaware limited  partnership (the  "Partnership")
commenced  a public  offering  (the  "Offering")  on May 10,  1989 of  5,000,000
($100,000,000)   Beneficial   Assignment   Certificates   ("BACs")  representing
assignments of limited partnership  interests.  The BACs represent an assignment
of all of the economic and all of the material ownership rights  attributable to
the limited  partnership  interests  in the  Partnership.  The BACs holders have
virtually the same rights and, for all practical purposes,  are limited partners
of the Partnership.

Pursuant to the Offering, the Partnership received $36,733,200 of gross proceeds
from the BACs  holders  representing  1,836,660  BACs.  The  final  close of the
Offering  occurred  on  May  23,  1991  and  no  further  issuance  of  BACs  is
anticipated.

The  Partnership  was  organized  on November 23, 1988 and will  continue  until
December  31,  2041  unless  terminated  sooner  under  the  provisions  of  its
partnership agreement.

The general  partner of the  Partnership  is CIP  Associates,  Inc.,  a Delaware
corporation (the "General  Partner").  Related FI BUC$  Associates,  Inc. is the
Assignor Limited Partner of the Partnership. CIP Associates, Inc. and Related FI
BUC$ Associates, Inc. are under substantially common ownership.

The  Partnership  was  formed  to  invest  in  insured  or  guaranteed  mortgage
investments.  The  Partnership has invested in first mortgage  construction  and
permanent  loans  ("Mortgages")  to  finance   multifamily   residential  rental
properties ("Developments") developed by unaffiliated entities. After an initial
period,  a  substantial  portion of the  Mortgages  are  expected to provide for
additional  interest based on the annual cash flow from the Developments and the
proceeds of  prepayments,  sales or other  dispositions.  All base  interest and
initially at least 90% of the principal of the Mortgages is insured or coinsured
by the  Department  of  Housing  and  Urban  Development  ("HUD")  and a private
mortgage lender (which is an affiliate of the General Partner).  The Partnership
has also  invested in uninsured  equity  loans made  directly to  developers  of
developments on which the Partnership holds a first mortgage.

Net income and distributions from operations of the Partnership are allocated 2%
to the  General  Partner  and 98% to the  limited  partners,  until the  limited
partners have received an 11% per annum non-cumulative  non-compounded return on
their adjusted contributions as defined in the Amended and Restated Agreement of
Limited Partnership.  Thereafter, net income and distributions will be allocated
90% to the limited  partners and 10% to the General  Partner.  Distributions  of
disposition  proceeds  are  allocated  1% to the General  Partner and 99% to the
limited  partners until each limited partner has received an amount equal to his
original   contribution   plus  an  amount  which,   when  added  to  all  prior
distributions  equals a 7% per  annum  cumulative  non-compounded  return on his
adjusted  contribution;  then 2% and 98% of  disposition  proceeds,  until  each
limited  partner  has  received  an  amount  which,  when  added  to  all  prior
distributions  equals an 11% per annum cumulative  non-compounded  return on his
adjusted contribution;  and thereafter 10% to the General Partner and 90% to the
limited partners.

The distributions per BAC were approximately $.88, $.88 and $3.45 for 2000, 1999
and 1998.  The 2000,  1999 and 1998  distributions  were made from adjusted cash
flow from  operations  (and, in particular the fourth quarter 1998  distribution
which was paid on February 14, 1999 from the repayment of Willow Trace  Mortgage
Loan and Equity  Loan,  $2.45 per BAC of which is  considered  to be a return of
capital) and to a lesser extent were supplemented from working capital reserves,
which was considered to be a return of capital.

<PAGE>


NOTE 2 - Accounting Policies

a)  Basis of Accounting

The books and records of the  Partnership are maintained on the accrual basis of
accounting in accordance with generally accepted accounting principles ("GAAP").

The  preparation  of financial  statements in conformity  with GAAP requires the
General  Partner to make  estimates  and  assumptions  that affect the  reported
amounts of assets and  liabilities  and the disclosure of contingent  assets and
liabilities  at the date of the  financial  statements  as well as the  reported
amounts of  revenues  and  expenses  during the  reporting  period.  Significant
estimates  are  made  when   accounting  for  the  allowance  for  the  interest
receivable. Actual results could differ from those estimates.

Acquisition  expenses  incurred for the  investment of mortgage  loans have been
capitalized and are included in loan origination costs, which are amortized over
the average expected lives of the respective mortgages when acquired and written
off when the loan is repaid.

The equity loans are considered to be premiums paid to obtain the mortgage loans
and are amortized over the average expected lives of the respective mortgages.

Interest rate buydowns are amortized as an adjustment to the effective  interest
rate over the average expected lives of the respective mortgages.

b)  Cash and Cash Equivalents

Cash and cash equivalents  include temporary  investments with original maturity
dates of less than 3 months when  acquired  and are carried at cost plus accrued
interest, which approximates market.

c)  Income Taxes

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

d)  Revenue Recognition

Interest income on the mortgage loans consists of contingent and  non-contingent
interest  as  defined  in the  mortgage  notes  and  other  additional  interest
agreements. Non-contingent interest consists of base and default interest, which
is recognized as earned. Contingent interest is based on the projects cash flows
and is recognized when received.

<PAGE>


<TABLE>
                           CAPITAL MORTGAGE PLUS L.P.
                             (a limited partnership)
                          NOTES TO FINANCIAL STATEMENTS
                        December 31, 2000, 1999 and 1998
                                   (Unaudited)
Note 3 - Investments in Loans

The  Partnership  originally  funded five  mortgage  loans and  originated  five
noninterest  bearing equity loans in the aggregate  amount of  $29,220,325.  One
loan with a mortgage and equity loan in the aggregate  amount of $5,100,000  was
repaid on December 16, 1998. (F)

Information  relating to  investments  in mortgage  loans and equity loans as of
December 31, 2000 and 1999 is as follows:
<CAPTION>


                                                                   Amounts Advanced
                                      ---------------------------------------------------------------------
            No. of
            Apart   Date of   Final                               Total       Investments in    Investments
Property/   -ment   Invest-  Maturity  Mortgage       Equity     Amounts         Loans at       in Loans at
Location    Units    ment     Date      Loans          Loans     Advanced      12/31/2000(E)   12/31/1999(E)
--------    -----    ----     ----      -----          -----     --------      -------------   -------------
<S>          <C>   <C>        <C>      <C>           <C>         <C>           <C>             <C>
Mortenson    104   8/1990     8/2030   $4,974,090    $577,885    $5,551,975    $ 4,733,086     $4,827,911
Manor
Apts./
Ames, IA

Windemere    204   9/1990     9/2030    8,110,300     736,550     8,846,850      7,892,195      8,006,301
Apts./
Wichita, KS

Fieldcrest   112   8/1991     8/2031    3,343,700     383,300     3,727,000      3,320,237      3,370,691
III
Apts./
Dothan, AL

Holly        144   3/1993     3/2033    5,310,100     684,400     5,994,500      5,411,906      5,493,909
Ridge II                                ---------     -------     ---------      ---------      ---------
Apts./
Gresham, OR

Total                                 $21,738,190  $2,382,135    $24,120,325   $21,357,424    $21,698,812
                                      ===========  ==========    ===========   ===========    ===========


                    Interest earned by the Partnership during 2000
              ------------------------------------------------------------
                  Non-contingent                    Contingent
               -------------------   --------------------------------------
                                                    Cash Flow
                             Default    Annual    Partici-
            Base Interest   Interest    Yield      pation       Total
Property/      Amount/      Amount/     Amount/    Amount/      Interest
Location      Rate (A)      Rate (B)    Race (C)   ate (D)      Earned
----------    --------      --------    --------   -------      ------


Mortenson      $297,477   $93,773   $   0        $   0        $ 391,250
Manor             6.45%     1.98%     .97%        30.00%
Apts./
Ames, IA

Windemere       620,082     126,435       0         0           746,517
Apts./            7.95%      1.60%     1.08%      30.00%
Wichita, KS

Fieldcrest      281,247        0      46,814         0          328,061
III               8.68%        0%      1.36%      30.00%
Apts./
Dothan, AL

Holly          421,056      51,844    34,561      21,657        529,118
Ridge II        8.125%       1.00%     .64%       30.00%
Apts./
Gresham, OR
                ------      -------   ------      ------       ---------

            $1,619,862     $272,052  $81,375     $21,657      $1,994,946
            ==========     ========  =======     =======      ==========

</TABLE>

<PAGE>


                           CAPITAL MORTGAGE PLUS L.P.
                             (a limited partnership)
                          NOTES TO FINANCIAL STATEMENTS
                        DECEMBER 31, 2000, 1999 and 1998


(A) Base interest on the Mortgages is that amount that is  insured/co-insured by
HUD and is being shown net of service fee.

(B) Default  Interest is the minimum  amount due over the base rate,  and is not
contingent upon cash flow. This interest is secured by Partnership interests.

(C) Annual  Yield is the amount over the  default  rate and is  contingent  upon
property cash flow.

(D) Cash Flow  Participation  is the percent of cash flow due to the Partnership
after  payment of the Annual Yield and is  contingent  upon  property cash flow.
Willow Trace  provided  sufficient  cash flow in 1998 to pay the  Partnership  a
participation in 1998. Fieldcrest provided sufficient cash flow in 1998 and 1999
to pay the Partnership a participation during 1998, 1999 and 2000.

(E) The Investments in Loans amount reflects the unpaid balance of the Mortgages
and the  unamortized  balance of the equity loans in the amounts of  $20,807,677
and $549,747,  respectively,  at December 31, 2000 and $20,950,388 and $748,424,
respectively, at December 31, 1999.

(F) On December 16, 1998,  Willow  Partners,  Ltd. (the  "Owner"),  the owner of
Willow  Trace,  prepaid  the  outstanding  FHA  Co-Insured  Mortgage  Loan  (the
"Mortgage  Loan") and equity  loan (the  "Equity  Loan")  (the  Equity  Loan and
Mortgage Loan,  collectively the "Willow Trace Loan") in full. The Mortgage Loan
and the Equity Loan were secured by a mortgage on the Willow Trace  property and
partnership  interests in the Owner.  The  outstanding  debt repaid early to the
Partnership totaled $5,372,859,  including the $4,275,984 outstanding balance of
the Mortgage Loan, the $680,000 Equity Loan, a $213,799  prepayment  premium and
$203,076 of additional interest due pursuant to the loan documents.

Total  interest  earned on the schedule of  investment in loans does not include
the  gain  on the  recovery  of the  amortized  portion  of the  Equity  Loan of
$311,742, the writeoff of the unamortized portion of the Willow Trace Loan costs
of $133,859 and the $213,799  prepayment  premium,  all of which are included in
other income on the Statements of Income.
<PAGE>


                                                    2000                1999
                                                 ------------     -------------

Investment in loans January 1,                   $ 21,698,812      $ 22,031,917

Additions:
Fieldcrest discount amortization                        1,452             1,452
                                                 ------------      ------------

                                                        1,452             1,452
                                                 ------------      ------------
Deductions:
Amortization of equity loans                         (200,130)         (200,130)
Collection of principal -Mortgages
                        -Mortenson                    (46,668)          (43,761)
                        -Windemere                    (52,727)          (48,676)
                        -Fieldcrest                   (18,345)          (16,813)
                        -Holly Ridge                  (24,970)          (25,177)
                                                 ------------      ------------
                                                     (342,840)         (334,557)
                                                 ------------      ------------

Investment in loans December 31,                 $ 21,357,424      $ 21,698,812
                                                 ============      ============


The Mortenson  Manor and Windemere  Mortgages are  co-insured by HUD and Related
Mortgage   Corporation  ("RMC"),  an  affiliate  of  the  General  Partner.  The
Fieldcrest  III and Holly Ridge  Mortgages are insured by HUD.  Willow Trace was
insured by HUD.

In  addition to the  interest  rate during the  post-construction  periods,  the
Partnership  will be  entitled  to payment of 30% of cash flow  remaining  after
payment of the permanent loan interest and accrued interest, if any, and certain
amounts from sale or refinancing proceeds.

The equity loans are  non-interest  bearing and are secured by the assignment of
the  owner/developers'  interests  in the  projects.  The  equity  loans are not
insured  by HUD or any  other  party  and,  for  financial  statement  reporting
purposes,  are  considered  to be premiums paid to obtain the  Mortgages.  These
premiums  are  amortized  over the  average  expected  lives  of the  respective
Mortgages.

At December 31, 2000, all of the loans due to the  Partnership  are current with
respect to their FHA mortgage  obligations.  Mortenson  has not paid its default
interest  of  approximately  $94,000,  $94,000  and  $96,000 for the years ended
December 31, 2000,  1999 and 1998,  respectively.  During the fourth  quarter of
1999 and the first quarter of 1998, the Partnership received default interest of
approximately  $40,000 and  $40,000  representing  partial  payment for 1998 and
1997.  Windmere has not paid its default interest of approximately  $127,000 and
$130,000  for the  years  ended  December  31,  1999 and 1996.  As a result,  an
allowance  for  uncollectability  relating to the default  interest  amounted to
approximately $913,000 and $738,000 at December 31, 2000 and 1999, respectively.

Previously,  the operations of Mortenson were not able to support the payment of
the required  interest.  Accordingly,  effective January 1, 1995 the Partnership
entered into a modification agreement whereby the annual yield was modified to a
cumulative  yield of 9.4% per annum from the Permanent Loan Date and the Default
Rate was redefined as 8.43% per annum. The modification  agreement also provided
that pre-1995  accrued interest not accrue further interest on and after January
1,  1995,  and  shall  be paid  solely  out of  Capital  Proceeds  prior  to the
calculation  of  participation  percentages.  Mortenson also agreed to defer the
management  fee payable up to the Default  Rate.  Pursuant to this  modification
agreement,  default interest for 2000, 1999 and 1998 of  approximately  $94,000,
$94,000 and $96,000,  has been accrued and  approximately  $50,000,  $53,000 and
$55,000 for 2000, 1999 and 1998 has been reserved.
<PAGE>


NOTE 4 - Related Parties

The costs  incurred to related  parties for the years ended  December  31, 2000,
1999 and 1998 were as follows:

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

Partnership management fees (a)           $126,368      $126,368     $146,391
Expense reimbursement (b)                   72,035        79,839       81,794
                                         ---------     ---------    ---------

Total general and administrative-
  related parties                         $198,403      $206,207     $228,185
                                         =========     =========    =========


(a) A  Partnership  management  fee for managing the affairs of the  Partnership
equal to .5% per annum of  invested  assets is  payable  out of cash flow to the
General  Partner.  The  fourth  quarter  1998 and the 1999 and 2000  partnership
management  fees were  calculated on the reduced asset base due to the repayment
of the Willow Trace Loan on December 16, 1998.  During the years ended  December
31,  2000,  1999 and 1998,  payments of  approximately  $126,000,  $126,000  and
$344,000 were made, respectively.  At both December 31, 2000 and 1999, a balance
of approximately $32,000 was due to the General Partner for these fees.

(b) The General Partner and its affiliates  perform services for the Partnership
which  include,  but are not limited to:  accounting  and financial  management;
register,   transfer  and  assignment  functions;  asset  management;   investor
communications, printing services; and other administrative services. The amount
of  reimbursement  from the  Partnership  is  limited by the  provisions  of the
Partnership  Agreement.  An  affiliate  of the General  Partner  performs  asset
monitoring services for the Partnership.  These services include site visits and
evaluations of the performance of the properties  securing the loans. During the
years ended December 31, 2000, 1999 and 1998, payments of approximately $83,000,
$84,000 and $146,000  were made,  respectively,  relating to these costs.  As of
December  31, 2000 and 1999,  the General  Partner and its  affiliates  were due
approximately $15,000 and $26,000, respectively.

RMC is a  co-insurer  on the  Mortenson  and  Windemere  Mortgages  in which the
Partnership has invested.  RMC is entitled to a mortgage insurance premium which
is paid by the mortgagors.

<PAGE>


NOTE 5 - Concentration of Credit Risk

The  Partnership  maintains  its cash in several  banks which are insured by the
Federal Deposit Insurance  Corporation  (FDIC) for a balance up to $100,000.  At
times during 2000, 1999 and 1998, the account balance exceeded the FDIC limit.

NOTE 6 - Fair Value of Financial Instruments

Financial Accounting Standards Board SFAS No. 107, "Disclosures about Fair Value
of Financial  Instruments,"  requires that the estimated fair value of financial
instruments, as defined by SFAS No. 107, be disclosed. Financial instruments are
defined as cash,  evidence of an  ownership  interest in an entity or a contract
which creates  obligations  and rights to exchange  cash and/or other  financial
instruments.  SFAS  No.  107  also  requires  disclosures  of  the  methods  and
significant   assumptions   used  to  estimate   the  fair  value  of  financial
instruments.

Considerable  judgment is required in interpreting data to develop the estimates
of fair value.  Accordingly,  the estimates presented herein are not necessarily
indicative of the amounts that the Partnership could realize in a current market
exchange.   The  use  of  different   market   assumptions   and/or   estimation
methodologies may have a material effect on the estimated fair value amounts.

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

Cash and Cash Equivalents
-------------------------

Fair  value  is  determined  to be the  carrying  value  because  each  class of
financial  instrument  matures  in three  months or less and does not  represent
unanticipated credit concerns.

Investments in Loans
--------------------

At December  31,  2000,  the  estimated  carrying  value of the  mortgage  loans
approximated  fair value.  The  estimated  fair values at December 31, 2000 were
based on internal valuations of the four properties collateralizing these loans.
Fair value  estimates  are made at a specific  point in time,  based on relevant
market  information and information  about the financial  instrument  which sets
forth the terms of a loan.  This  estimate is  subjective in nature and involves
uncertainties and matters of significant judgment.  Changes in assumptions could
significantly affect estimates. Due to the property-specific nature of the loans
and the lack of a ready market for such  investments,  this fair value  estimate
does not necessarily  represent the amount which the  Partnership  could realize
upon a current sale of its investments.

NOTE 7 - Subsequent Event

On February  14,  2001,  distributions  of $405,119  and $8,268 were paid to BAC
holders  and the General  Partner,  respectively,  representing  the 2000 fourth
quarter distributions.

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

None.
                                    PART III

Item 10.  Directors and Executive Officers of the Registrant.

The Registrant has no directors or executive officers.  The Registrant's affairs
are  managed and  controlled  by the General  Partner.  The General  Partner was
organized in Delaware in November 1988.  The executive  officers and director of
the General  Partner  have held their  positions  as  indicated  below.  Certain
information  concerning  the  director  and  executive  officers  of the General
Partner is set forth below.

The Registrant, the General Partner and its director and executive officers, and
any BACs  holder  holding  more than ten  percent of the  Registrant's  BACs are
required  to report  their  initial  ownership  of such BACs and any  subsequent
changes in that ownership to the Securities and Exchange  Commission on Forms 3,
4 and 5. Such  executive  officers,  directors  (and ten  percent  holders)  are
required  by  Securities  and  Exchange  Commission  regulators  to furnish  the
Registrant  with copies of all Forms 3, 4 or 5 they file.  The Registrant is not
aware of any BACs  holders  who own more than ten  percent  of the BACs.  All of
these  filing  requirements  were  satisfied by the officers and director of the
General Partner on a timely basis. In making these  disclosures,  the Registrant
has relied solely on written  representations  of the General Partner's director
and  executive  officers  or copies of the  reports  they  have  filed  with the
Securities  and Exchange  Commission  during and with respect to its most recent
fiscal year.

CIP Associates Inc.

   Name                             Position              Position Held Since
 ---------------                 ----------------         ----------------------

Stephen M. Ross                     Director                           1988

Stuart J. Boesky                    Senior Vice President              1988

Alan P. Hirmes                      Senior Vice President              1988

Glenn F. Hopps                      Treasurer                          1998

Teresa Wicelinski                   Secretary                          1998

STEPHEN M. ROSS, 60, is a Director of the General Partner. Mr. Ross is President
of The Related Companies, L.P. He graduated from The University of Michigan with
a Bachelor of Business Administration degree and from Wayne State School of Law.
Mr.  Ross  then  received  a Master  of Law  degree  in  taxation  from New York
University  School of Law. He joined the accounting firm of Coopers & Lybrand in
Detroit as a tax specialist and later moved to New York, where he worked for two
large Wall Street  investment  banking  firms in their real estate and corporate
finance departments.  Mr. Ross formed The Related Companies, Inc. ("Related") in
1972,  to  develop,  manage,  finance and acquire  subsidized  and  conventional
apartment  developments.  To date, Related has developed multi-family properties
totaling  in excess of 25,000  units,  all of which it  manages.  Mr.  Ross also
serves on the Board of Directors of CharterMac.

<PAGE>


STUART J. BOESKY, 44, is a Vice President of the General Partner. Mr. Boesky
practiced real estate and tax law in New York City with the law firm of Shipley
& Rothstein from 1984 until February 1986 when he joined Capital where he
presently serves as Managing Director. From 1983 to 1984 Mr. Boesky practiced
law with the Boston law firm of Kaye, Fialkow Richard & Rothstein (which
subsequently merged with Strook & Strook & Lavan) and from 1978 to 1980 was a
consultant specializing in real estate at the accounting firm of Laventhol &
Horwath. Mr. Boesky graduated from Michigan State University with a Bachelor of
Arts degree and from Wayne State School of Law with a Juris Doctor degree. He
then received a Master of Law degree in Taxation from Boston University School
of Law. Mr. Boesky also serves on the Board of Directors of Aegis Realty, Inc.,
CharterMac and American Mortgage Acceptance Company.

ALAN P. HIRMES,  46, is a Vice President of the General Partner.  Mr. Hirmes has
been a Certified  Public  Accountant  in New York since  1978.  Prior to joining
Capital in October  1983,  Mr.  Hirmes was  employed by Weiner & Co.,  certified
public  accountants.  Mr.  Hirmes is also a Managing  Director of  Capital.  Mr.
Hirmes  graduated from Hofstra  University  with a Bachelor of Arts degree.  Mr.
Hirmes  also  serves  on the  Board of  Directors  of  Aegis  Realty,  Inc.  and
CharterMac.

GLENN F. HOPPS, 37, joined Related in December, 1990, and prior to that date was
employed  by Marks  Shron &  Company  and  Weissbarth,  Altman  and  Michaelson,
certified public accountants. Mr. Hopps graduated from New York State University
at Albany with a Bachelor of Science Degree in Accounting.

TERESA  WICELINSKI,  35, joined Related in June 1992, and prior to that date was
employed  by  Friedman,  Alprin  &  Green,  certified  public  accountants.  Ms.
Wicelinski  graduated  from Pace  University  with a Bachelor  of Arts Degree in
Accounting.

There  are  no  family  relationships  between  the  foregoing  director  and/or
executive officers.



<PAGE>


Item 11.  Executive Compensation.

The  Registrant  has no officers or directors.  The  Registrant  does not pay or
accrue  any fees,  salaries  or other  forms of  compensation  to  directors  or
officers of the General  Partner for their  services.  The  director and certain
officers of the General  Partner receive  compensation  from the General Partner
and its affiliates for services performed for various affiliated  entities which
may include  services  performed for the Registrant.  Such  compensation  may be
based in part on the performance of the Registrant; however, the General Partner
believes  that any  compensation  attributable  to  services  performed  for the
Registrant  is  immaterial.  See also Note  4-Related  Parties,  in Notes to the
Financial Statements, included in Item 8 above.

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

As of March 3, 2001, no person was known by the  Registrant to be the beneficial
owner of more than five  percent of the  Limited  Partnership  Interests  and/or
BACs; and neither the General Partner nor any director or officer of the General
Partner owns any Limited Partnership Interests or BACs.

As of March 3, 2001, the director and officers of the General Partner as a group
own, in the aggregate, 95.2% of the common stock of CIP Associates Inc.

Item 13.  Certain Relationships and Related Transactions.

The  Registrant  has and will  continue to have certain  relationships  with the
General  Partner  and  its  affiliates,  as  discussed  in  Item  11,  Executive
Compensation.  However, there have been no direct financial transactions between
the Registrant and the director and/or officers of the General Partner. See Note
4-Related  Parties,  in Notes to the  Financial  Statements,  included in Item 8
above.

<PAGE>
                                     PART IV
<TABLE>
<CAPTION>

Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.
                                                                                   Sequential
                                                                                     Page
                                                                                 ---------------
<S>                                                                                      <C>
(a) 1.   Financial Statements

         Independent Auditors' Report                                                    10

         Statements of Financial Condition as of December 31, 2000 and 1999              11

         Statements of Income for the years ended December 31, 2000, 1999 and 1998       12

         Statements of Changes in Partners' Capital (Deficit) for the years              13
         ended December 31, 2000, 1999 and 1998

         Statements of Cash Flows for the years ended December 31, 2000, 1999 and 1998   14

         Notes to Financial Statements                                                   15


</TABLE>

<PAGE>

<TABLE>
<CAPTION>

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

                                                                                   Sequential
                                                                                     Page
                                                                                 ---------------
<S>                                                                                 <C>
(a) 2.   Financial Statement Schedules

         All schedules have been omitted because they are not required or
         because the required information is contained in the financial
         statements or notes hereto.

(a) 3.   Exhibits

(3A)     The Registrant's Amended and Restated Agreement of Limited Partnership,
         incorporated by reference to Exhibit A to the Registrant's Prospectus,
         dated May 10, 1989 (the "Prospectus"), filed pursuant to Rule 424(b)
         under the Securities Act of 1933, File No. 33-26690.

(3B)     The Registrant's Certificate of Limited Partnership, as amended,
         incorporated by reference to Exhibits 3B and 3C to the Registrant's
         Registration Statement on Form S-11, File No. 33-26690, dated January
         24, 1989 and to Exhibit 3D to Amendment No. 1 to such Registration
         Statement dated April 28, 1989

(3C)     Amendment No. 1, dated July 7, 1989, to the Registrant's Amended
         and Restated Agreement of Limited Partnership

(10A)    Mortgage Note, dated August 31, 1990, with respect to Mortenson Manor
         Apartments in Ames, Iowa, in the principal amount of $4,974,900
         (incorporated by reference to Exhibit 10(a) in the Registrant's Current
         Report on Form 8-K dated August 31, 1990)

(10B)    Equity Loan Note dated August 31, 1990, with respect to Mortenson Manor
         Apartments in Ames, Iowa, in the principal amount of $577,885
         (incorporated by reference to Exhibit 10(b) in the Registrant's Current
         Report on Form 8-K dated August 31, 1990)
<PAGE>


(10C)    Subordinated Promissory Note, dated August 31, 1990 with respect to
         Mortenson Manor Partnership (incorporated by reference to Exhibit 10(c)
         in the Registrant's Current Report on Form 8-K dated August 31, 1990)

(10D)    Mortgage Note, dated September 27, 1990, with respect to Windemere
         Apartments in Wichita, Kansas, in the principal amount of $8,110,300
         (incorporated by reference to Exhibit 10(a) in the Registrant's Form 8
         Amendment dated October 30, 1990 to Current Report on Form 8-K dated
         September 28, 1990)

(10E)    Equity Loan Note, dated September 27, 1990, with respect to Windemere
         Apartments in Wichita, Kansas, in the principal amount of $736,500
         (incorporated by reference in Exhibit 10(b) in the Registrant's Form 8
         Amendment dated October 30, 1990 to Current Report on Form 8-K dated
         September 28, 1990)

(10F)    Subordinated Promissory Note, dated September 27, 1990 with respect to
         Windemere Development, Inc. (incorporated by reference to Exhibit 10(c)
         in the Registrant's Form 8 Amendment dated October 30, 1990 to Current
         Report on Form 8-K dated September 28, 1990)

(10G)    Mortgage Note, dated August 23, 1991, with respect to Fieldcrest III
         Apartments in Dothan, Alabama, in the principal amount of $3,450,200
         (incorporated by reference to Exhibit 10(a) in the Registrant's Current
         Report on Form 8-K dated August 27, 1991)

(10H)    Equity Loan Note, dated August 27, 1991, with respect to Fieldcrest III
         Apartments in Dothan, Alabama, in the principal amount of $383,300
         (incorporated by reference to Exhibit 10(b) in the Registrant's Current
         Report on Form 8-K dated August 27, 1991)

(10I)    Subordinated Promissory Note, dated August 27, 1991 with respect to
         Fieldcrest III Apartments (incorporated by reference to Exhibit 10(c)
         in the Registrant's Current Report on Form 8-K dated August 27, 1991)

(10J)    Mortgage Note, dated March 1, 1993, with respect to Holly Ridge
         Apartments in Gresham, Oregon, in the principal amount of $5,310,000
         (incorporated by reference to Exhibit 10(a) in the Registrant's Current
         Report on Form 8-K dated March 16, 1993)

(10K)    Equity Loan dated March 16, 1993, with respect to Holly Ridge
         Apartments in Gresham, Oregon, in the principal amount of $684,000
         (incorporated by reference to Exhibit 10(b) in the Registrant's Current
         Report on Form 8-K dated March 16, 1993)

<PAGE>

                                                                                   Sequential
                                                                                     Page
                                                                                 ---------------
(10L)    Subordinated Promissory Note, dated March 16, 1993, with respect to
         Holly Ridge Apartments in Gresham, Oregon (incorporated by reference to
         Exhibit 10(c) in the Registrant's Current Report on Form 8-K dated
         March 16, 1993)

(10M)    Modification Agreement, dated January 1, 1995, with respect to
         Mortenson Manor Apartments in Ames, Iowa (incorporated by reference to
         Exhibit (10P) in the Registrant's Form 10-K for the fiscal year ended
         December 31, 1995)

(10N)    Guaranty made for the benefit of the Registrant, dated January 1, 1995,
         with respect to the Modification Agreement regarding Mortenson Manor
         Apartments (incorporated by reference to Exhibit (10Q) in the
         Registrant's Form 10-K for the fiscal year ended December 31, 1995)

99.      Additional Exhibits

(99A)    The Financial  Statements of Windemere  Development,  Inc., which             30
         owns and operates an apartment  complex known as Windemere at
         Tallgrass located in Wichita, Kansas, as required by Staff Accounting
         Bulletin No. 71

(99B)    The Financial Statements of Mortenson II, which owns and operates an          43
         apartment complex known as Mortenson Manor Apartments located in Ames,
         Iowa, as required by Staff Accounting Bulletin No 71.

(99C)    The Financial statements of HR II Associates, which owns and operates         68
         an apartment complex known as Holly Ridge II located in Gresham,
         Oregon, as required by Staff Accounting Bulletin No 71.

(b)      Reports on Form 8-K

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

<PAGE>

                                   SIGNATURES



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


                           CAPITAL MORTGAGE PLUS L.P.
                                  (Registrant)



                                            By:    CIP ASSOCIATES, INC.
                                                   General Partner



Date:                                              By: _________________________
                                                       Alan P. Hirmes
                                                       Senior Vice President
                                                       (Principal Executive and
                                                       Financial Officer)



<PAGE>


Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
this report has been signed by the following persons on behalf of the registrant
and in the capacities and on the dates indicated:


   Signature                            Title                        Date
---------------------        -------------------------------    --------------



                             Senior Vice President (principal
                             executive and financial officer)
_____________________        of CIP Associates, Inc.
Alan P. Hirmes               (the General Partner of the Registrant)



                             Treasurer (principal accounting
_____________________        officer) of CIP Associates, Inc.
Glenn F. Hopps               (the General Partner of the Registrant)



_____________________        Director of CIP Associates, Inc.
Stephen M. Ross              (the General Partner of the Registrant)


<PAGE>
                                   SIGNATURES



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


                           CAPITAL MORTGAGE PLUS L.P.
                                  (Registrant)



                                            By:    CIP ASSOCIATES, INC.
                                                   General Partner



Date:  March 30, 2001                              By: /s/ Alan P. Hirmes
                                                       ------------------
                                                       Alan P. Hirmes
                                                       Senior Vice President
                                                       (Principal Executive and
                                                       Financial Officer)


<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
this report has been signed by the following persons on behalf of the registrant
and in the capacities and on the dates indicated:

   Signature                            Title                        Date
---------------------        -------------------------------    --------------



                        Senior Vice President (principal
                        executive and financial officer)
/s/ Alan P. Hirmes      of CIP Associates, Inc.
------------------      (the General Partner of the Registrant)   March 30, 2001
Alan P. Hirmes



                        Treasurer (principal accounting
/s/ Glenn F. Hopps      officer) of CIP Associates, Inc.
------------------      (the General Partner of the Registrant)   March 30, 2001
Glenn F. Hopps



/s/ Stephen M. Ross      Director of CIP Associates, Inc.
-------------------     (the General Partner of the Registrant)   March 30, 2001
Stephen M. Ross



<PAGE>



                           WINDEMERE DEVELOPMENT, INC.



                              Financial Statements
                           December 31, 2000 and 1999


                                      Contents
                                      --------

                          Independent Auditors' Report

                              Financial Statements

                                 Balance Sheets

                              Statements of Income

                 Statements of Changes in Stockholders' Equity

                            Statement of Cash Flows

                         Notes to Financial Statements




<PAGE>

                          INDEPENDENT AUDITORS' REPORT


Board of Directors
Windemere Development, Inc.
Wichita, Kansas


We have audited the accompanying balance sheets of Windemere  Development,  Inc.
(a subchapter S corporation),  as of December 31, 2000 and 1999, and the related
statements of income,  changes in  stockholders'  deficit and cash flows for the
years then ended.  These  financial  statements  are the  responsibility  of the
Company's  management.  Our  responsibility  is to  express  an opinion on these
financial statements based on our audit.

We conducted our audit in accordance with generally accepted auditing standards.
Those standards  require that we plan and perform the audit to obtain reasonable
assurance   about  whether  the  financial   statements  are  free  of  material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audit provides 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 Windemere Development,  Inc. as
of December  31, 2000 and 1999,  and the results of its  operations,  changes in
stockholders  deficit and cash flows for the years then ended in conformity with
generally accepted accounting principles.


/s/ Peterson, Peterson & Goss, L.C.


February 15, 2001


<PAGE>

                           WINDEMERE DEVELOPMENT, INC.
                                  Balance Sheet
                           December 31, 2000 and 1999

                                     Assets

                                                        2000             1999
                                                   ------------     ------------
Current assets:
  Petty cash                                         $     100       $       100
  Cash in bank and interest-bearing deposits            38,688            54,756
  Rent receivable                                       14,165             9,153
                                                    ----------        ----------
Total current assets                                    52,953            64,009

Deposits held in trust - funded:
  Tenant security deposits                              25,311            39,024

Restricted deposits and funded reserves:
  Mortgagee escrow deposits - Note 2                    69,513            67,129
  Reserve for replacements - Note 4                     37,071            32,929
                                                   -----------       -----------
Total deposits                                         106,584           100,058

Fixed assets:
  Land and special assessments                         756,956           746,418
  Buildings and improvements                         7,808,748         7,808,748
  Furniture and equipment                              139,991           110,114
                                                    ----------        ----------
                                                     8,705,695         8,665,280
  Less accumulated depreciation                      1,770,541         1,559,036
                                                     ---------         ---------
Total fixed assets                                   6,935,154         7,106,244

Other assets:
  Loan costs, net of amortization of $145,453
    and $128,934                                       515,309           531,828
                                                    ----------        ----------

Total                                               $7,635,311        $7,841,163
                                                     =========         =========

<PAGE>
                           WINDEMERE DEVELOPMENT, INC.
                                  Balance Sheet
                           December 31, 2000 and 1999

                      Liabilities and Stockholders' Equity
                      ------------------------------------

                                                 2000             1999
                                            ------------     ---------------
Current liabilities:
  Accounts payable, trade                  $      8,773    $          614
  Accrued management fee                        140,879            89,130
  Accrued interest payable                      431,876           306,808
  Accrued real estate taxes                      52,664            55,054
  Accrued mortgage insurance                     29,144            29,341
  Mortgage payable, current portion              57,114            52,727
  Rent deferred credits                           6,273            12,531
                                            -----------       -----------
Total current liabilities                       726,723           546,205

Deposit liabilities:
  Tenant security deposits                       31,200            36,789

Long-term liabilities:
  Mortgage payable                            7,769,555         7,822,282
  Less current portion                           57,114            52,727
                                            -----------       -----------
Total long-term liabilities                   7,712,441         7,769,555

Stockholders' equity (deficit):
  Common stock, authorized 1,000 shares;
 issued - 1,000 shares                            1,000             1,000
  Additional paid-in capital                    749,569           736,650
  Retained deficit                           (1,585,622)       (1,249,036)
                                             ----------        ----------
Total stockholders' deficit                    (835,053)         (511,386)
                                            -----------       -----------

Total                                        $7,635,311        $7,841,163
                                              =========         =========

See notes to financial statements.


<PAGE>

                           WINDEMERE DEVELOPMENT, INC.
                              Statements of Income
                     Years Ended December 31, 2000 and 1999

                                                2000             1999
                                           ------------     ---------------
Operating income:
  Rental                                     $1,197,453        $1,371,335

Operating expenses:
  Interest                                      750,504           764,683
  Mortgage insurance                             58,090            58,499
  Bank charges                                      247                 0
  Property taxes                                 94,807            96,600
  Insurance                                      32,468            29,977
  Equipment leasing                               2,009             5,087
  Management fees                                65,852            80,224
  Salaries and wages                            110,844           100,809
  Payroll taxes                                   5,612             3,781
  Utilities                                      58,086            71,903
  Professional fees                              13,417            14,452
  Repairs and maintenance                        87,607           117,279
  Advertising                                    10,711             7,908
  Office supplies and postage                     2,844             1,468
  Donations                                           0               300
  Miscellaneous                                   2,743             3,076
  Depreciation and amortization                 228,024           226,130
                                             ----------        ----------

Total operating expenses                      1,523,865         1,582,176
                                              ---------         ---------

Loss from operations                           (326,412)         (210,841)

Other income (expense):
  Interest and dividends                          3,714             3,328
  Gain on sale of assets                          2,351             2,432
  Unrealized loss on securities                 (16,239)           (3,936)
                                           ------------       -----------
Total other income (expense)                    (10,174)            1,824
                                           ------------       -----------

Net Loss                                    $  (336,586)      $  (209,017)
                                             ==========        ==========

See notes to financial statements.


<PAGE>

                           WINDEMERE DEVELOPMENT, INC.
             Statements of Changes in Stockholders' Equity (Deficit)
                     Years Ended December 31, 2000 and 1999

                                         Additional
                            Common        Paid-In      Retained
                             Stock        Capital      Earnings         Total
                        ------------   -----------   -----------   -------------
Balance at
  January 1,
  1999   $                     1,000   $   736,650   $(1,040,019)   $  (302,369)
Net loss                           0             0      (209,017)      (209,017)
                         -----------   -----------   -----------    -----------

Balance at
  December 31,
  1999                         1,000       736,650    (1,249,036)      (511,386)
Net loss                           0             0      (336,586)      (336,586)
Contributed capital                0        12,919             0         12,919
                         -----------   -----------   -----------    -----------

Balance of
  December 31,
  2000   $                     1,000   $   749,569   $(1,585,622)   $  (835,053)
                         ===========   ===========   ===========    ===========

See notes to financial statements.


<PAGE>

                           WINDEMERE DEVELOPMENT, INC.
                            Statements of Cash Flows
                     Years Ended December 31, 2000 and 1999

                                                  2000             1999
                                             ------------     ---------------
Cash flows from operating activities:
  Rental receipts                             1,186,184         1,360,373
  Interest and dividend receipts                  3,714             3,328
  Capital gain dividends                          2,351             2,432
                                           ------------      ------------
                                              1,192,249         1,366,133

  Administrative                                (24,390)          (30,600)
  Management fees                               (14,103)          (18,835)
  Utilities                                     (58,112)          (72,218)
  Salaries and wages                           (116,456)         (104,590)
  Operating and maintenance                     (87,003)         (122,573)
  Real estate taxes and escrow deposits         (99,581)          (92,887)
  Property insurance                            (32,468)          (29,977)
  Tenant security and other deposits             (8,115)             (216)
  Interest on mortgage                         (625,437)         (703,933)
  Mortgage insurance premium                    (58,287)          (58,682)
                                             ----------        ----------
                                             (1,123,952)       (1,234,511)
                                             ----------        ----------
Net cash provided by operating activities        68,297           131,622

Cash flows from investing activities:
  Purchase of property and equipment            (40,415)          (67,713)
  Deposits into reserve for replacement         (31,937)          (30,877)
  Withdrawals from reserve for replacement       27,795                 0
  Transfer to cash escrow                             0            47,139
                                             ----------        ----------

Net cash used in investing activities           (44,557)          (51,451)

Cash flows from financing activities:
  Mortgage principal payments                   (52,727)          (48,676)
  Capital contributed                            12,919                 0
                                             ----------       -----------

Net cash used in financing activities           (39,808)          (48,676)
                                             ----------        ----------

Net increase (decrease) in cash and
 cash equivalents                               (16,068)           31,495

Cash and cash equivalents, beginning of year     54,856            23,361
                                             ----------        ----------

Cash and cash equivalents, end of year      $    38,788       $    54,856
                                             ==========        ==========


<PAGE>
                           WINDEMERE DEVELOPMENT, INC.
                            Statements of Cash Flows
                     Years Ended December 31, 2000 and 1999

                                                            2000        1999
                                                       -----------   -----------
Cash flows from operating activities:
  Net loss                                               $(336,586)   $(209,017)
  Adjustments to reconcile net income to net cash
    provided by operating activities:
    Depreciation and amortization                          228,024      226,130
    Unrealized loss on securities                           16,239        3,936
    (Increase) decrease in rent receivable                  (5,012)      (7,513)
    Decrease in accounts receivable, related party               0        4,348
    (Increase) decrease in cash restricted for tenant
      security deposits                                     (2,526)         353
    (Increase) decrease in mortgagee escrow deposits        (2,384)       1,259
    Increase (decrease) in accounts payable                  8,159       (8,242)
    Increase in accrued liabilities                        174,230      124,386
    Increase (decrease) in tenant security deposits         (5,589)        (569)
    Increase in deferred revenue                            (6,258)      (3,449)
                                                         ---------    ---------

Net cash provided by operating activities                $  68,297    $ 131,622
                                                         =========    =========

See notes to financial statements.



<PAGE>


                           WINDEMERE DEVELOPMENT, INC.
                          Notes to Financial Statements
                           December 31, 2000 and 1999

1.  Summary of Significant Accounting Policies

Method of Accounting
--------------------

The Company  maintains its books and records on the basis of accounting used for
income tax purposes.  This basis  includes the use of cash basis  accounting and
Internal Revenue Service (IRS) depreciation lives and methods.  The Company uses
this  basis  because  it is the most  meaningful  for the use of  management  in
maintaining  its operations.  The Company has made the adjustments  necessary to
present  these  financial  statements  in  accordance  with  generally  accepted
accounting principles.

History and Business Activity
-----------------------------

Windemere  Development,  Inc.  was  founded  in 1991 to  develop  and  operate a
206-unit apartment complex in Wichita, Kansas, known as Windemere at Tallgrass.

The apartments are located at 8220 East Oxford Circle, Wichita, Kansas 67226 and
consist of one and two bedroom units.

Property and Equipment
----------------------

Depreciation  is computed by using the  straight-line  method over the following
estimated useful lives:

Buildings - 40 years
Landscape improvements - 20 years
Furniture and equipment - 10 years

Expenditures  for  maintenance  and repairs  are charged to income as  incurred.
Expenditures  which  materially  extended the useful lives of assets or increase
their productivity are capitalized.

Income Taxes
------------

An income tax provision has not been included in the financial  statements since
the income or loss of the Company is required to be reported by the  shareholder
on his respective income tax return.

Cash and Cash Equivalents
-------------------------

The Company considers all highly liquid investments with original  maturities of
three months or less to be cash equivalents.
<PAGE>


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

The preparation of financial  statements in conformity  with generally  accepted
accounting principles requires management to make estimates and assumptions that
affect certain  reported amounts and  disclosures.  Accordingly,  actual results
could differ from those estimates.

Advertising
-----------

The Company  follows the policy of charging the costs of  advertising to expense
as  incurred.  Advertising  expense  was  $10,711 and $7,908 for the years ended
December 31, 2000 and 1999, respectively.


2.  Restricted Deposits and Funded Reserves

The Company has deposited with the lender the following amounts:

Mortgagee escrow deposits                       2000              1999
-------------------------                    -----------        --------
Mortgage and Property Insurance,
Real estate taxes and special assessments     $  69,513         $  67,129
                                               ========          ========


An evaluation of the adequacy of certain escrows is as follows:

Estimated  amount  required as of December 31, 2000 and 1999 for future  payment
of:

                                                 2000             1999
                                             ----------        ----------
Property insurance                            $  16,875         $  16,875
Mortgage insurance                               39,059            39,121
                                              ---------         ---------
                                                 55,934            55,996
Total confirmed by mortgagee                     69,513            67,129
                                              ---------         ---------
Amount on deposit in excess of
  estimated requirements                      $  13,579         $  11,133
                                               ========          ========

3.  Tenant Security Deposits and Funded Reserves

Tenant  security  deposits  are held in a  separate  account  in the name of the
project. The total held in the account is $5,889 less than the deposits held for
tenants.  The account  consists of a mutual fund and has been adjusted to market
value at December 31, 2000.
<PAGE>


4.  Reserve for Replacements

In accordance with the provisions of the Regulatory Agreement restricted cash is
held by the mortgagee to be used for  replacement  of property with the approval
of HUD as follows:

                                                  2000           1999
                                             ------------    ------------
Balance at beginning of year                   $ 32,929          $ 49,191
Monthly deposits                                 30,031            30,031
Transfer                                              0           (47,139)
Withdrawal                                      (27,795)                0
                                              ---------      ------------
                                                 35,165            32,083
Interest earned                                   1,906               846
                                             ----------        ----------
     Balance confirmed by mortgagee           $  37,071          $ 32,929
                                               ========           =======

<TABLE>
<CAPTION>

5.  Long-Term Liabilities

Long-term debt at December 31, 2000 and 1999 consisted of the following
obligations:

                                                                   2000             1999
                                                             ------------     ---------------
<S>                                                            <C>               <C>
Mortgage loan payable in monthly  install-  ments of $56,514
including  interest at 8.02% and principal.  The loan is due
May 1, 2032 and is secured by a first  mortgage  on the land
and  buildings.   The  debt  also  includes  a  subordinated
promissory  note which  provides  that  additional  interest
shall be payable semiannually in an amount that will provide
a maximum  cumulative yield  (uncompounded) of 10.70% on the
principal  amount  of the  mortgage  loan  outstanding.  The
amounts for the years ending December 31, 2000 and 1999 were
$124,703  and  125,517   respectively  (at  1.60%)  and  are
included in accrued interest payable.

The subordinated promissory note is
secured by a second mortgage on the
land and buildings.                                            $7,769,555        $7,822,282

Less current portion                                               57,114            52,727
                                                             ------------      ------------
                                                               $7,712,441        $7,769,555
                                                                =========         =========
</TABLE>
<PAGE>

Maturities of debt are as follows:
                                                 2000             1999
                                             ------------     ---------------
2000                                   $              0      $     52,727
2001                                             57,114            57,114
2002                                             61,867            61,867
2003                                             67,015            67,015
2004                                             72,592            72,592
2005                                             78,633                 0
Later years                                   7,432,334         7,510,967
                                              ---------         ---------
                                             $7,769,555        $7,822,282
                                              =========         =========

6.  Accrued Real Estate Taxes

Accrued real estate taxes at December 31, 2000 consist of the following:

Description        Basis for          Period                      Amount
    of Tax          Accrual         Covered        Due Date       Accrued
--------------  ---------------  -------------     --------       -------
Real estate     Second-half      January 1         June 20,       $52,664
taxes and       due for 2000     to December       2001
special                          31
assessments

7.  Related Party Transactions

The  Apartments  are  managed  by Gaddis  Properties,  Inc.,  a  related  entity
controlled by Jerry A. Gaddis.  Under the terms of the management agreement with
Gaddis  Properties,  Inc.,  a  management  fee not in excess of 6% of cash basis
rental revenue, is payable monthly for management services. The total management
fees earned in 2000 were $65,852.

The following summarizes other related party transactions for 2000:

Related Party                       Classification               Amount
-------------                       --------------               ------
Carolyn Gaddis                      Salaries and wages          $  11,700
Jerry Gaddis                        Salaries and wages             13,650
Doug Gaddis                         Salaries and wages              3,900
                                                                ---------
Total                                                           $  29,250
                                                                 ========


<PAGE>



8.  Restatement

The financial statements for the year ended December 31, 1999 have been restated
to correct an error in recording expenses allocated between related parties. The
effects on the financial statements are as follows:


                                                 Prior           Restated
Accounts receivable, related party      $         4,348 $               0
Accounts payable, trade                         111,677               614
Retained earnings                            (1,355,751)       (1,249,036)



<PAGE>
                            FINANCIAL STATEMENTS AND
                          INDEPENDENT AUDITORS' REPORT

                                  MORTENSON II

                           HUD PROJECT NO.: 074-36605

                                DECEMBER 31, 2000



<PAGE>
                                  Mortenson II
                           HUD Project No.: 074-36605

                                TABLE OF CONTENTS

                                                                     PAGE

MORTGAGOR'S CERTIFICATION                                               4

MANAGING AGENT'S CERTIFICATION                                          5

INDEPENDENT AUDITORS' REPORT                                            6

FINANCIAL STATEMENTS

   BALANCE SHEET                                                        8

   STATEMENT OF OPERATIONS                                             10

   STATEMENT OF PARTNERS' EQUITY (DEFICIT)                             13

   STATEMENT OF CASH FLOWS                                             14

   NOTES TO FINANCIAL STATEMENTS                                       16

SUPPLEMENTAL INFORMATION

   RESERVE FOR REPLACEMENTS                                            21

   COMPUTATION OF SURPLUS CASH, DISTRIBUTIONS
     AND RESIDUAL RECEIPTS                                             22

   CHANGES IN FIXED ASSET ACCOUNTS                                     23

   DETAIL OF ACCOUNTS - STATEMENT OF OPERATIONS                        24

   OTHER INFORMATION                                                   25


<PAGE>

                                  Mortenson II
                           HUD Project No.: 074-36605

                                TABLE OF CONTENTS



                                                                     PAGE

   INDEPENDENT AUDITORS' REPORT ON INTERNAL CONTROL                    26

   INDEPENDENT AUDITORS' REPORT ON COMPLIANCE WITH
     SPECIFIC REQUIREMENTS APPLICABLE TO MAJOR HUD
     PROGRAMS                                                          28

   INDEPENDENT AUDITORS' REPORT ON COMPLIANCE WITH
     SPECIFIC REQUIREMENTS APPLICABLE TO FAIR HOUSING
     AND NON-DISCRIMINATION                                            29



<PAGE>
                          INDEPENDENT AUDITORS' REPORT

To the Partners
Mortenson II

We have audited the  accompanying  balance sheet of Mortenson II, as of December
31, 2000, and the related  statements of operations,  partners' equity (deficit)
and cash  flows for the year then  ended.  These  financial  statements  are the
responsibility of the partnership's management. Our responsibility is to express
an opinion on these financial statements based on our audit.

We conducted our audit in accordance with generally  accepted auditing standards
and Government  Auditing  Standards,  issued by the  Comptroller  General of 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 audit  provides 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 Mortenson II as of December 31,
2000, and the results of its operations,  changes in partners'  equity (deficit)
and cash flows for the year then ended,  in conformity  with generally  accepted
accounting principles.

Our audit was made for the purpose of forming an opinion on the basic  financial
statements taken as a whole. The supplemental information on pages 21 through 25
is presented for purposes of  additional  analysis and is not a required part of
the basic  financial  statements.  Such  information  has been  subjected to the
auditing procedures applied in the audit 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.

<PAGE>



In accordance with Government Auditing Standards and the "Consolidated Audit
Guide for Audits of HUD Programs," we have also issued reports dated March 7,
2001 on our consideration of Mortenson II's internal control and on its
compliance with specific requirements applicable to major HUD programs and fair
housing and non-discrimination. Those reports are an integral part of an audit
performed in accordance with Government Auditing Standards and should be read in
conjunction with this report considering the results of our audit.

/s/ Reznick Fedder & Silverman

Charlotte, North Carolina           Federal Employer
March 7, 2001                         Identification Number:
                                      52-1088612
Audit Principal: Ronald G. Vance

<PAGE>

                                  Mortenson II
                           HUD Project No.: 074-36605

                                  BALANCE SHEET

                                December 31,2000

                                     ASSETS


CURRENT ASSETS
1120  Cash - operations                                         $  95,681
1130  Tenant accounts receivable                                   12,504
1140  Accounts and notes receivable - operations                      177
1200  Miscellaneous prepaid expenses                               28,198
                                                                 --------

      Total current assets                                        136,560

DEPOSITS HELD IN TRUST - FUNDED
1191  Tenant deposits                                              66,932

RESTRICTED DEPOSITS AND FUNDED RESERVES
1310  Escrow deposits                        $   69,221
1320  Reserve for replacements                  126,485
1330  Other reserves                              1,930
                                               --------
                                                                  197,636

RENTAL PROPERTY
1410  Land                                       42,101
1420  Buildings                               5,007,451
1440  Building equipment - portable             159,623
                                              ---------
                                              5,209,175
1495  Less accumulated depreciation           1,847,648
                                              ---------
                                                                 3,361,527

OTHER ASSETS
1520  Intangible assets, net of accumulated
       amortization of $142,918                 458,827
                                              ---------
                                                                  458,827
                                                                ---------

                                                               $4,221,482
                                                               ==========

<PAGE>

                                  Mortenson II
                           HUD Project No.: 074-36605

                            BALANCE SHEET - CONTINUED

                                December 31, 2000

                   LIABILITIES AND PARTNERS' EQUITY (DEFICIT)

CURRENT LIABILITIES
2110  Accounts payable - operations                         $      11,014
2123  Accrued management fee payable                              165,854
2131  Accrued interest payable - first mortgage                    24,581
2150  Accrued property taxes payable                              157,184
2170  Mortgage payable - first mortgage,
       current maturities                                          49,769
2210  Prepaid revenue                                               5,698
                                                             ------------

      Total current liabilities                                   414,100

DEPOSITS LIABILITY
2191  Tenant deposits held in trust (contra)                       66,932

LONG-TERM LIABILITIES
2133  Accrued interest payable - other
       loans/notes (surplus cash)           $   743,062
2320  Mortgage payable - first mortgage,
       net of current maturities              4,587,002
2323  Other loans/notes payable - surplus cash,
       net of current maturities                577,885
                                             ----------
                                                                5,907,949

3130  PARTNERS' EQUITY (DEFICIT)                               (2,167,499)
                                                               ----------

                                                               $4,221,482
                                                               ==========


<PAGE>

                                  Mortenson II
                           HUD Project No.: 074-36605

                             STATEMENT OF OPERATIONS

                          Year ended December 31, 2000

RENTAL REVENUE
5120  Rent revenue - gross potential      $     844,737
5170  Garage and parking spaces                  14,179
                                          -------------

   Total rental revenue                                       $   858,916

VACANCIES
5220  Apartments                                (21,769)
                                           ------------

   Total vacancies                                                (21,769)
                                                              -----------

   Net rental revenue                                             837,147

FINANCIAL REVENUE
5410  Financial revenue - project operations      2,720
5440  Revenue from investments -
       replacement reserve                        5,524
                                            -----------

      Total financial revenue                                       8,244

OTHER REVENUE
5910  Laundry and vending                         6,932
5920  Tenant charges                             45,336
                                             ----------

   Total other revenue                                             52,268
                                                              -----------

   Total revenue                                                  897,659
                                                               ----------


<PAGE>

                                  Mortenson II
                           HUD Project No.: 074-36605

                       STATEMENT OF OPERATIONS - CONTINUED

                          Year ended December 31, 2000

ADMINISTRATIVE EXPENSES
6210  Advertising and marketing                   4,015
6311  Office expenses                            29,175
6312  Office or model apartment rent              6,900
6320  Management fee                             43,529
6330  Manager or superintendent salaries         35,242
6340  Legal expense - project                     2,077
6350  Auditing expense                            7,500
6351  Bookkeeping fees/accounting services        7,220
6390  Miscellaneous administrative expenses      26,161
                                              ---------

   Total administrative expenses                                  161,819

UTILITIES EXPENSE
6450  Electricity                                 9,100
6451  Water                                       2,353
6452  Gas                                         5,489
6453  Sewer                                       1,961
                                             ----------

   Total utilities expense                                         18,903

OPERATING AND MAINTENANCE EXPENSES
6510  Payroll                                    15,258
6515  Supplies                                   68,412
6520  Contracts                                   9,139
6521  Operating and maintenance rent free unit    6,840
6525  Garbage and trash removal                   7,743
6570  Vehicle and maintenance equipment
       operation and repairs                      7,619
                                            -----------

   Total operating and maintenance expenses                       115,011



<PAGE>

                                  Mortenson II
                           HUD Project No.: 074-36605

                       STATEMENT OF OPERATIONS - CONTINUED

                          Year ended December 31, 2000

TAXES AND INSURANCE
6710  Real estate taxes                         157,126
6711  Payroll taxes                               7,667
6720  Property and liability insurance            8,138
6721  Fidelity bond insurance                       243
6722  Workmen's compensation                      2,147
6723  Health insurance and other
       employee benefits                          5,109
6790  Miscellaneous taxes, licenses,
       permits and insurance                      1,128
                                             ----------

   Total taxes and insurance                                      181,558

FINANCIAL EXPENSES
6820  Interest on mortgage payable              299,741
6850  Mortgage insurance premium/
       service charge                            34,935
                                             ----------

   Total financial expenses                                       334,676

DEPRECIATION AND AMORTIZATION
6600  Depreciation expense                      184,741
6610  Amortization expense                       15,044
                                            -----------

   Total depreciation and amortization                            199,785

CORPORATE OR MORTGAGOR ENTITY REVENUE AND EXPENSES

7190  Other expenses                             93,773
                                            -----------

   Total corporate or mortgagor entity
    revenue and expenses                                           93,773
                                                              -----------

   Total expenses                                               1,105,525
                                                                ---------

Net income (loss)                                            $   (207,866)
                                                              ===========


<PAGE>

                                  Mortenson II
                           HUD Project No.: 074-36605

                     STATEMENT OF PARTNERS' EQUITY (DEFICIT)

                          Year ended December 31, 2000

                           General partner  Limited partner      Total
                           ---------------  ---------------   ------------
Partners' equity (deficit)
  December 31, 1999          $(1,497,970)      $(461,663)     $(1,959,633)

Net income (loss)                 (2,079)       (205,787)        (207,866)
                              ----------        --------      -----------

Partners' equity (deficit)
  December 31, 2000          $(1,500,049)      $(667,450)     $(2,167,499)
                              ==========        ========       ==========

<PAGE>

                                  Mortenson II
                           HUD Project No.: 074-36605

                             STATEMENT OF CASH FLOWS

                          Year ended December 31, 2000


Cash flows from operating activities
   Rental receipts                                            $   836,203
   Interest receipts                                                8,244
   Other operating receipts                                        52,268
   Administrative expenses paid                                   (76,325)
   Utilities paid                                                 (17,714)
   Salaries and wages paid                                        (50,500)
   Operating and maintenance paid                                 (90,979)
   Real estate taxes paid                                        (157,243)
   Property insurance paid                                         (8,048)
   Miscellaneous taxes and insurance paid                          (1,128)
   Net tenant security deposits received (paid)                    11,245
   Other operating expenses paid                                  (15,166)
   Interest paid on mortgages                                    (300,789)
   Mortgage insurance premium paid                                (34,699)
                                                               ----------

     Net cash provided by (used in) operating activities          155,369
                                                               ----------

Cash flows from investing activities
   Net deposits to mortgage escrows                                 1,644
   Net deposits to reserve for replacements                       (25,579)
   Net deposits to other reserves                                     (33)
                                                                ---------

     Net cash provided by (used in) investing activities          (23,968)
                                                                ---------

Cash flows from financing activities
   Mortgage principal payments                                    (46,608)
                                                                 --------

   Net cash provided by (used in) financing activities            (46,608)
                                                                 --------

     NET INCREASE (DECREASE) IN CASH                               84,793

     Cash, beginning                                               10,888
                                                                 --------

     Cash, end                                                  $  95,681
                                                                 ========

<PAGE>


                                  Mortenson II
                           HUD Project No.: 074-36605

                       STATEMENT OF CASH FLOWS - CONTINUED

                          Year ended December 31, 2000

Reconciliation of net income (loss) to net
cash provided by (used in) operating activities
   Net income (loss)                                        $    (207,866)
                                                             ------------

   Adjustments to reconcile net income (loss) to net
   cash provided by (used in) operating activities
    Depreciation                                                  184,741
    Amortization                                                   15,044
    Changes in asset and liability accounts
    (Increase) decrease in assets
     Tenant accounts receivable                                     3,674
     Miscellaneous prepaid expenses                                   326
     Tenant security deposits funded                                6,809
    Increase (decrease) in liabilities
     Accounts payable                                               9,963
     Accrued liabilities                                           42,364
     Accrued interest payable                                      93,773
     Tenant security deposits held in trust                         4,436
     Prepaid revenue                                                2,105
                                                              -----------

   Total adjustments                                              363,235
                                                              -----------

Net cash provided by (used in) operating activities         $     155,369
                                                             ============



<PAGE>


                                  Mortenson II
                           HUD Project No.: 074-36605

                          NOTES TO FINANCIAL STATEMENTS

                                December 31, 2000

NOTE A - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING  POLICIES

The partnership was formed as a limited  partnership under the laws of the State
of Iowa on August 23,  1990,  for the purpose of  constructing  and  operating a
rental housing  project under Section  221(d)4 of the National  Housing Act. The
project consists of 104 units located in Ames, Iowa, and is currently  operating
under the name of Celtic Manor.

Cash  distributions are limited by agreements between the partnership and HUD to
the extent of surplus cash as defined by HUD.

NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

The preparation of financial  statements in conformity  with generally  accepted
accounting principles requires management to make estimates and assumptions that
affect  the  reported  amounts  of assets  and  liabilities  and  disclosure  of
contingent  assets and  liabilities at the date of the financial  statements and
the reported amounts of revenue and expenses during the reporting period. Actual
results could differ from those estimates.

Rental Property
---------------

Rental  property is carried at cost.  Depreciation  is  provided  for in amounts
sufficient to relate the cost of  depreciable  assets to  operations  over their
estimated  service  lives by use of the  straight-line  method for buildings and
accelerated   methods  for  equipment.   Improvements  are  capitalized,   while
expenditures  for  maintenance  and repairs are charged to expense as  incurred.
Upon disposal of depreciable  property,  the appropriate  property  accounts are
reduced by the related costs and accumulated  depreciation.  The resulting gains
and losses are reflected in the statement of operations. Estimated service lives
are as follows:

Buildings                 27.5 years
Building equipment - fixed   7 years

Amortization
------------

Loan  costs  are  amortized   over  the  term  of  the  loan  period  using  the
straight-line method.
<PAGE>


Income Taxes
------------

No provision or benefit for income  taxes has been  included in these  financial
statements since taxable income or loss passes through to, and is reportable by,
the partners individually.

Rental Income
-------------

Rental income is recognized as rentals become due. Rental  payments  received in
advance are  deferred  until  earned.  All leases  between the  partnership  and
tenants of the property are operating leases.

NOTE C - MORTGAGE PAYABLE

The mortgage note is co-insured by the Federal Housing  Administration (FHA) and
is  collateralized  by a deed of trust on the  rental  property.  The note bears
interest  at the rate of  6.45%.  Principal  and  interest  are  payable  by the
partnership in monthly  installments of $28,949 through maturity in August 2031.
As of December 31, 2000, the outstanding balance on this loan is $4,636,771.

Under  agreements  with the lender and FHA, the  partnership is required to make
monthly escrow deposits for taxes,  insurance and replacement of project assets,
and is  subject  to  restrictions  as to  operating  policies,  rental  charges,
operating expenditures and distributions to partners.

Aggregate maturities of mortgage payable are as follows:

December 31, 2001         $     49,769
2002                            53,076
2003                            56,602
2004                            60,363
2005                            64,373
Thereafter                   4,352,588
                             ---------

                            $4,636,771
                            ==========


<PAGE>


NOTE D - NOTES PAYABLE

Equity Loan
-----------

An equity loan of $577,885 has been provided by Capital  Mortgage Plus,  L.P. to
fund construction costs of the project and the mortgage buydown escrow. The loan
is  noninterest  bearing  and matures in August  2031.  The loan is secured by a
conditional  third  mortgage,  a security  agreement  and the  mortgage  buydown
escrow.

Subordinated Promissory Note
----------------------------

The  partnership  has executed a subordinated  promissory  note,  which requires
additional  interest  payments on the mortgage loan from Capital  Mortgage Plus,
L.P.  The note is  secured  by a second  mortgage  on the  property,  a security
agreement and the mortgage buydown escrow.  Effective  January 1, 1995, the note
provides for a cumulative  annual yield of 9.4% on the outstanding  principal of
the  mortgage  loan and requires  payment of interest  equal to the prior year's
annual yield shortfall (as defined in the note) plus 30% of all remaining excess
cash.  The interest  payment is also limited to 50% of excess cash for the prior
year. Prior to January 1, 1995, the cumulative annual yield rate was 10.95%. The
obligation to make payments  under this note  commenced on final  endorsement of
the mortgage (February 4, 1992) and ends in August 2031.

As additional  security for this note,  the partners have executed an additional
interest  guaranty  whereby  the  general  partner  has  guaranteed  to fund the
interest due under this note calculated at an alternative interest rate referred
to as the "default  rate" of 8.43%.  Interest of $93,773 was accrued during 2000
at this default rate and  $743,062 of interest  remains  payable at December 31,
2000.  Prior to January 1, 1995, the default rate was 9.84%. The general partner
has also  guaranteed  payment of interest up to the lesser of the management fee
or interest  calculated at the default rate. The general partner has also agreed
to utilize funds to pay the interest,  which would  otherwise be used to pay the
management fee. During 2000, no interest was paid.

The loans are secured by deeds of trust on the  property.  The  liability of the
partnership  is limited to the  underlying  value of the real estate  collateral
plus other amounts deposited with the lender.


<PAGE>

NOTE E - MANAGEMENT FEE

The  property is managed by Ev Cochrane  and  Associates,  an  affiliate  of the
general partner.  The current management agreement provides for a management fee
of 5% of monthly rental  collections.  The fee charged to operations in 2000 was
$43,529.  Operating funds, which would have been used to pay the management fee,
were  instead  utilized to pay  interest on the  subordinated  promissory  note.
During 2000, payment of $43,529 of management fees was deferred.  As of December
31, 2000, $165,854 of management fees remain payable.

An affiliate of the general partner also charged a bookkeeping fee of $7,220 for
the year. As of December 31, 2000, the entire amount has been paid.



<PAGE>

                            SUPPLEMENTAL INFORMATION

                         SUPPORTING DATA REQUIRED BY HUD

<PAGE>

                                  Mortenson II
                           HUD Project No.: 074-36605

                            SUPPLEMENTAL INFORMATION

                         SUPPORTING DATA REQUIRED BY HUD

                          Year ended December 31, 2000


RESERVE FOR REPLACEMENTS

   Balance at December 31, 1999                              $    100,906
   Total monthly deposits                                          20,055
   Interest income                                                  5,524
                                                             ------------

   Balance at December 31, 2000                             $     126,485
                                                             ============


<PAGE>

                                  Mortenson II
                           HUD Project No.: 074-36605

                      SUPPLEMENTAL INFORMATION - CONTINUED

                         SUPPORTING DATA REQUIRED BY HUD

                          Year ended December 31, 2000


COMPUTATION OF SURPLUS CASH, DISTRIBUTIONS AND RESIDUAL RECEIPTS

Part A - Compute Surplus Cash
-----------------------------
Cash (Accounts 1120,1170 and 1191)                                    $ 162,613
Tenant subsidy vouchers due for period covered by
  financial statements                                                        0
Other (describe in detail)                                                    0
                                                                      ---------

   Total cash                                                           162,613
                                                                      ---------

Accrued mortgage interest payable                                        24,581
Delinquent mortgage principal payments                                        0
Delinquent deposits to reserve for replacements                               0
Accounts payable (due within 30 days)                                    11,014
Loans and notes payable (due within 30 days)                                  0
Deficient tax, insurance or MIP escrow deposits                               0
Accrued expenses (not escrowed)                                         165,854
Prepaid revenue (Account 2210)                                            5,698
Tenant security deposits liability (Account 2191)                        66,932
Other current obligations (describe in detail)                                0
                                                                      ---------

   Less total current obligations                                       274,079
                                                                      ---------

   Surplus cash (deficiency)                                          $(111,466)
                                                                      =========

Part B - Compute  Distributions  to Owners  and  Required  Deposit  to  Residual
Receipts
-------------------------------------------------------------------------------

Surplus cash                                                          $(111,466)
                                                                      ---------

Limited Dividend Projects
Annual distribution earned during fiscal period covered by
   the statements                                                             0
Distribution accrued and unpaid as of the end of the prior
   fiscal period                                                              0
Distributions and entity expenses paid during fiscal period
   covered by the statements                                                  0
                                                                      ---------

Amount remaining as distribution earned but unpaid                            0
                                                                      ---------

Amount available for distribution during next fiscal period$                  0
                                                                      =========

Deposit due residual receipts reserve                                 $       0
                                                                      =========

<PAGE>

                                  Mortenson II
                           HUD Project No.: 074-36605

                      SUPPLEMENTAL INFORMATION - CONTINUED

                         SUPPORTING DATA REQUIRED BY HUD

                          Year ended December 31, 2000

CHANGES IN FIXED ASSETS ACCOUNTS

                                             Assets
                  -------------------------------------------------------------
                  Balance                                              Balance
                  12/31/99          Additions        Deletions         12/31/00
                  --------          ---------        ---------         --------

Land             $   42,101      $         0        $        0       $    42,101
Buildings         5,007,451                0                 0         5,007,451
Building
 equipment -
 portable           159,623                0                 0           159,623
                 ----------       ----------         ---------        ----------

                 $5,209,175      $         0        $        0        $5,209,175
                  =========       ==========         =========         =========

Accumulated
 depreciation    $1,662,907      $   184,741        $        0        $1,847,648
                  =========       ==========         =========         =========

Total net
book value                                                            $3,361,527
                                                                       =========


<PAGE>

                                  Mortenson II
                           HUD Project No.: 074-36605

                      SUPPLEMENTAL INFORMATION - CONTINUED

                         SUPPORTING DATA REQUIRED BY HUD

                          Year ended December 31, 2000

DETAIL OF ACCOUNTS - STATEMENT OF ACTIVITIES

MISCELLANEOUS ADMINISTRATIVE EXPENSES (ACCOUNTS NO. 6390)

   Cable Television                                                      $24,000
   Miscellaneous administrative expenses                                   2,161
                                                                         -------

                                                                         $26,161
                                                                         =======

OTHER ENTITY EXPENSES (ACCOUNTS NO. 7190)

   Contingent interest                                                   $93,773
                                                                         -------

                                                                         $93,773
                                                                         =======


<PAGE>


                                  Mortenson II
                           HUD Project No.: 074-36605

                      SUPPLEMENTAL INFORMATION - CONTINUED

                         SUPPORTING DATA REQUIRED BY HUD

                          Year ended December 31, 2000

OTHER INFORMATION

Total mortgage principal payments required during the audit year
(12 monthly payments). Applies to all direct loans and HUD-held
and fully-insured mortgages. Any HUD-approved second mortgages
are included.                                                       $     46,608
                                                                     ===========

Total of 12 monthly deposits in the audit year made to the replacement
reserve account, as required by the regulatory agreement, even if
payments are temporarily suspended or reduced.                      $     20,055
                                                                     ===========

Replacement reserve and residual receipts reserve releases which are
included as expense items on the statement of operations.           $          0
                                                                     ===========

Project improvement reserve releases under the flexible subsidy
program which are included as expense items on the statement of
operations.                                                                  N/A
                                                                      ==========

Mortgage payable note detail (Section 236 only)
Interest reduction payments from subsidy                                     N/A
                                                                      ==========

Related party transactions detail:

Entity name                                                   Amount paid
-----------                                                   -----------

Mortenson I                                                 $       7,220
                                                             ============

<PAGE>


                INDEPENDENT AUDITORS' REPORT ON INTERNAL CONTROL

To the Partners
Mortenson II

We have audited the financial statements of Mortenson II, as of and for the year
ended December 31, 1999, and have issued our report thereon dated March 7, 2001.
We have also audited Mortenson II's compliance with  requirements  applicable to
major  HUD-assisted  programs and have issued our report  thereon dated March 7,
2001.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards,  Government  Auditing Standards issued by the Comptroller  General of
the United States, and the "Consolidated Audit Guide for Audits of HUD Programs"
(the Guide),  issued by the U.S.  Department  of Housing and Urban  Development,
Office of the Inspector  General.  Those standards and the Guide require that we
plan and  perform the audit to obtain  reasonable  assurance  about  whether the
financial  statements  are  free of  material  misstatement  and  about  whether
Mortenson II complied with laws and regulations,  noncompliance with which would
be material to a major HUD-assisted program.

The  management  of  the  partnership  is  responsible  for   establishing   and
maintaining internal control. In fulfilling this  responsibility,  estimates and
judgments by management are required to assess the expected benefits and related
costs of controls.  The objectives of internal control are to provide management
with reasonable, but not absolute, assurance that assets are safeguarded against
loss from  unauthorized  use or disposition,  that  transactions are executed in
accordance with  management's  authorization and recorded properly to permit the
preparation  of financial  statements  in  accordance  with  generally  accepted
accounting principles,  and that HUD-assisted programs are managed in compliance
with applicable  laws and  regulations.  Because of inherent  limitations in any
internal control,  errors,  fraud or instances of noncompliance may nevertheless
occur and not be  detected.  Also,  projection  of any  evaluation  of  internal
control to future  periods is  subject  to the risk that  procedures  may become
inadequate  because of changes in  conditions or that the  effectiveness  of the
design of controls may deteriorate.

<PAGE>


In planning  and  performing  our audits of the  partnership  for the year ended
December  31,  2000,  we  obtained  an  understanding  of the design of relevant
controls  and  determined  whether  they have been placed in  operation,  and we
assessed  control risk in order to determine  our  auditing  procedures  for the
purpose of expressing our opinions on the partnership's financial statements and
on  its  compliance   with  specific   requirements   applicable  to  its  major
HUD-assisted  programs and to report on internal  control in accordance with the
provisions of the Guide and not to provide any assurance on internal control.

We  performed  tests of  controls,  as  required by the Guide,  to evaluate  the
effectiveness  of  the  design  and  operation  of  internal  controls  that  we
considered  relevant to  preventing  or detecting  material  noncompliance  with
specific  requirements  that are  applicable to the  partnership's  HUD assisted
programs. Our procedures were less in scope than would be necessary to render an
opinion on internal control. Accordingly, we do not express such an opinion.

Our consideration of internal control would not necessarily disclose all matters
in  internal   control  that  might  be  material   weaknesses  under  standards
established  by the  American  Institute  of  Certified  Public  Accountants.  A
material weakness is a condition in which the design or operation of one or more
of the internal control components does not reduce to a relatively low level the
risk that  errors or fraud in amounts  that would be material in relation to the
financial  statements or that noncompliance with laws and regulations that would
be material  to a  HUD-assisted  program may occur and not be detected  within a
timely  period by employees in the normal course of  performing  their  assigned
functions. We noted no matters involving internal control and its operation that
we consider to be material weaknesses as defined above.

This  report is intended  for the  information  and use of the audit  committee,
management,  others within the  organization  and the  Department of Housing and
Urban  Development,  and is not  intended to be and should not be used by anyone
other than these specified parties.

/s/ Reznick Fedder & Silverman

Charlotte, North Carolina
March 7, 2001


<PAGE>
                                HRII ASSOCIATES

  Financial Statements and Report of Independent Certified Public Accountants

                               December 31, 2000


<PAGE>

[The Stoddard Group LLC Letterhead]

To the Owners of
HRII Associates


We  have  audited  the  accompanying  balance  sheet  of  HRII  Associates  (the
Partnership) as of December 31, 2000, and the related  statements of operations,
changes in  partners'  deficit,  and cash flows for the year then  ended.  These
financial statements are the responsibility of the Partnership's management. Our
responsibility  is to express an opinion on these financial  statements based on
our audit.

We conducted our audit in accordance with generally  accepted auditing standards
and the standards applicable to financial audit contained in Government Auditing
Standards,  issued  by the  Comptroller  General  of 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 audit provides 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 HRII Associates as of December
31, 2000, and the results of its operations,  changes in partners' deficit,  and
cash  flows for the year then  ended,  in  conformity  with  generally  accepted
accounting principles.

/s/ Hansen, Bradshaw, Malmrose & Erickson

February 26, 2001



<PAGE>



                                 HRII ASSOCIATES

                                  Balance Sheet

                                December 31, 2000


Assets

Cash                                                          $   210,853
Tenant accounts receivable - net of allowance for doubtful
  accounts of $32,640                                               8,337
Prepaid expenses                                                   75,993
Restricted deposits (note 3)                                      284,464
Land, buildings and equipment (notes 1,4)                       4,039,442
Loan costs, net of accumulated amortization of $47,284 (note 1)   234,657
                                                               ----------

Total assets                                                   $4,853,746
                                                                =========


Liabilities and Partners' Deficit

Accounts payable                                              $     3,980
Accrued liabilities                                               213,984
Related party payable                                               1,004
Mortgage note payable (note 5)                                  5,169,712
Note payable (note 5)                                              90,093
Tenant security deposits (note 1)                                  34,599
Prepaid revenue (note 1)                                            4,925
Equity loan (note 6)                                              684,400
                                                               ----------

Total liabilities                                               6,202,697

Partners' deficit                                              (1,348,951)
                                                               ----------

Total liabilities and partners' deficit                        $4,853,746
                                                                =========

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



<PAGE>



                                 HRII ASSOCIATES

                  Statement of Operations and Partners' Deficit

                      For the Year Ended December 31, 2000

Revenues:
Rent                                                           $1,054,406
Other                                                              48,774
                                                              -----------

                                                                1,103,180
                                                              -----------

Operating expenses:
Administrative                                                    200,246
Utilities                                                          77,003
Operating and maintenance                                         148,197
Taxes and insurance                                               132,558
Depreciation and amortization (note 1)                            130,008
                                                                 --------

                                                                  688,012
                                                                  -------

   Income from operations                                         415,168
                                                                 --------

Other income (expense):
Loss on write-off of receivable (note 2)                         (239,440)
Interest income                                                    10,593
Interest expense                                                 (521,062)
                                                                 --------

   Total other expense                                           (749,909)
                                                                 --------

   Net loss                                                      (334,741)

Partners' deficit beginning of year                            (1,009,974)

Distributions to partners                                          (4,236)
                                                              -----------

Partners' deficit end of year                                 $(1,348,951)
                                                                =========

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



<PAGE>


                                 HRII ASSOCIATES

                             Statement of Cash Flows

                      For the Year Ended December 31, 2000

Cash flow from operating activities:
Rental receipts                                                $1,051,982
Interest receipts                                                  10,593
Other receipts                                                     48,774
                                                              -----------
                                                                1,111,349

Administrative                                                   (115,872)
Management fees                                                   (43,776)
Utilities                                                         (77,003)
Salaries and wages                                                (93,298)
Operating and maintenance                                        (106,655)
Real estate taxes and escrow deposits                             (97,861)
Property insurance                                                (10,308)
Miscellaneous taxes and insurance                                 (24,389)
Interest on mortgage                                             (340,794)
Tenant security deposits                                            1,892
Interest expense - other loans                                   (116,230)
                                                               ----------
   Net cash provided by operating activities                       87,055
                                                              -----------

Cash flow from investing activities:
Deposits to mortgage escrow                                        (1,084)
Deposits to replacement reserve                                   (23,167)
                                                                 ---------
   Net cash used in investing activities                          (24,251)
                                                                 ---------

Cash flow from financing activities:
Principal payments on long-term debt                              (35,706)
Distributions to partners                                          (4,236)
Increase in note payable                                            1,757
                                                             ------------
   Net cash used in financing activities                          (38,185)
                                                              -----------
   Net increase in cash                                            24,619

Cash, beginning of year                                           186,234
                                                               ----------
Cash, end of year                                             $   210,853
                                                               ==========

Financing and investing activities not affecting cash:
   Issuance of note payable to purchase property and equipment $   88,336
                                                               ===========
<PAGE>

Cash flows from operating activities:
Net loss                                                     $   (334,741)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Loss on write-off of receivable                                   239,440
Depreciation and amortization                                     130,008
Increase in tenant accounts receivable, net                        (1,021)
Increase in miscellaneous prepaid expenses                         (3,968)
Decrease in restricted deposits                                     4,130
Decrease in accounts payable                                       (9,581)
Increase in accrued liabilities                                    65,425
Increase in related party payable                                   1,004
Decrease in tenant security deposits liability                     (2,238)
Decrease in prepaid revenue                                        (1,403)
                                                             ------------

   Net cash provided by operating activities                 $     87,055
                                                              ===========

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


<PAGE>
                                 HRII ASSOCIATES

                          Notes to Financial Statements

                                December 31, 2000

1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES


Business Organization
---------------------

HRII Associates (HUD Project No.  126-35216) (the Partnership) is a Utah Limited
Partnership  which was organized in 1989.  The Project  consists of 144 units in
apartment buildings in Gresham, Oregon. The apartment complex is financed with a
loan which is insured by the U.S.  Department  of Housing and Urban  Development
(HUD),  under  section  221(d)(4) of the  National  Housing Act (HUD Project No.
126-35216).  The Partnership's  operating methods are regulated by HUD under the
terms of a regulatory agreement.

Use of Estimates in the Preparation of Financial Statements
-----------------------------------------------------------

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  and  disclosure  of
contingent  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.

Concentration of Credit Risk
----------------------------

Financial instruments which potentially subject the Partnership to concentration
of credit risk consist  primarily of tenant rents  receivable.  The  Partnership
maintains allowances for possible losses which, when realized,  have been within
range of management's expectations.

The Partnership maintains its cash in bank deposit accounts which, at times, may
exceed federally insured limits.  The Partnership has not experienced any losses
in such accounts and believes it is not exposed to any  significant  credit risk
on cash and cash equivalents.

Cash and Cash Equivalents
-------------------------

For purposes of the  statements  of cash flows,  the  Partnership  considers all
highly liquid debt instruments with an original maturity of three months or less
to be cash equivalents.

Land, Buildings and Equipment
-----------------------------

Land, buildings and equipment are recorded at cost and are depreciated using the
straight-line method over estimated useful lives ranging from 5 to 40 years.
Major additions and improvements are capitalized while minor replacements,
maintenance and repairs which do not increase the useful lives of the property
are expensed as incurred.

Loan Costs
----------

Costs incurred by the Partnership in connection with obtaining the construction
loan and long-term financing have been capitalized and are amortized using the
straight-line method over the term of the HUD insured mortgage.

<PAGE>


                                 HRII ASSOCIATES

                          Notes to Financial Statements

                                December 31, 2000

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

Prepaid rents are accrued as a liability by the Partnership and the associated
revenue is recognized as it is earned. Tenant security deposits are recognized
as income when forfeited.

Cost Allocation
---------------

On March 1, 1993, the Partnership  entered into a cross easement  agreement with
Holly Ridge Associates, an entity which owns Phase I of Holly Ridge. Holly Ridge
Phase I is located on property adjacent to the Phase II property. The two phases
share common  amenities such as the exercise  facilities,  sauna,  tanning beds,
swimming pools, tennis courts,  maintenance building, etc. In addition, the same
management company (The Stoddard Group, L.L.C.) manages both projects. Under the
terms of the agreement, joint costs of the two phases are allocated based on the
number of units in each phase.

Management Fee
--------------

The Partnership pays a management fee equal to 4% of defined gross revenues.

Income Taxes
------------

Under tax law provisions, the Partnership does not pay income taxes on its
income. Instead, the income or loss of the Partnership is allocated to the
partners, and the partners are responsible for any income taxes related to their
share of allocated income.

Financial Instruments
---------------------

None of the Partnership's  financial  instruments are held for trading purposes.
The  Partnership  estimates that the fair value of all financial  instruments at
December 31, 2000, does not differ materially from the aggregate carrying values
of its financial  instruments  recorded in the  accompanying  balance sheet. The
estimated  fair value  amounts have been  determined  by the  Partnership  using
available   market   information   and  appropriate   valuation   methodologies.
Considerable  judgement is necessarily  required in interpreting  market data to
develop the  estimates of fair value,  and,  accordingly,  the estimates are not
necessarily  indicative of the amounts that the Partnership  could realized in a
current market exchange

2.  Related Party Transactions

A general  partner  of HRII  Associates  also owns The  Stoddard  Group,  L.L.C.
(Stoddard).  Stoddard  provides  services  for the  Partnership,  which  include
accounting  services and  management  functions.  The management fee expensed to
Stoddard  for the year  ended  December  31,  2000  was  $43,777.  In  addition,
approximately  $117,170  was paid to  Stoddard  to  reimburse  costs of payroll,
payroll  taxes and  workman's  compensation  insurance  for their  employees who
provide on-site labor to the Project.




<PAGE>



                                 HRII ASSOCIATES

                          Notes to Financial Statements

                                December 31, 2000

Accrued workman's compensation and payroll taxes of $5,243 at December 31, 2000
represents a payable to Stoddard.

The  Partnership  also made cash  advances to  entities  formerly  under  common
ownership and  management  and had a net  receivable  from those entities in the
amount of $239,440 at December 31, 1999. During 2000, the Partnership terminated
its  relationship  with these entities and determined  that this  receivable was
uncollectible.  The Partnership wrote off the net receivable of $239,440 in 2000
as an other expense in the statement of operations.


3.  Restricted Deposits

Restricted deposits consist of the following:

Property tax and insurance escrow                            $     30,084
Replacement reserve escrow                                        137,251
Equity loan reserves                                               82,362
Tenant security deposits                                           34,767
                                                              -----------

                                                                $ 284,464
                                                                =========

4.  Land, Building and Equipment

Land, buildings and equipment consist of the following:

Land and land improvements                                    $   242,044
Buildings                                                       4,627,115
Furniture for tenant use                                          295,312
Office furniture and equipment                                      5,226
                                                             ------------

                                                                5,169,697
Less: accumulated depreciation                                 (1,130,255)
                                                               ----------

                                                               $4,039,442
                                                               ==========


<PAGE>



                                 HRII ASSOCIATES

                          Notes to Financial Statements

                                December 31, 2000

5. Mortgage Payable and Note Payable

The HUD insured  mortgage note is payable to a financial  institution in monthly
installments of $37,921 including  interest at 8.25%. The loan is secured by the
apartment complex and matures on August 1, 2034.

The  Partnership  has  a  note  payable  to a  corporation  due  in  semi-annual
installments of $7,130,  including interest at 6%. The loan matures on September
1, 2005.  The loan balance at December  31, 2000  includes  accrued  interest of
$1,757.


Future maturities over the next five years are as follows:

Year Ending December 31:

2001                                                        $      37,562
2002                                                               40,881
2003                                                               44,464
2004                                                               48,324
2005                                                               96,164
Thereafter                                                      4,992,410
                                                                ---------

                                                               $5,259,805
                                                               ==========

6.  Equity Loan

The  Partnership  has a non-interest  bearing equity loan payable to a financial
institution  payable upon maturity of the HUD insured  mortgage in the amount of
$684,400.

7.  Commitment and Contingency

The  Partnership  entered  into an  agreement in March 1993 with an entity which
provided  funds for certain costs in  connection  with the  construction  of the
Project.  Under the terms of the agreement,  HRII Associates is obligated to pay
additional  interest  amounts to this entity from the proceeds of events such as
sale or refinancing.

8.  Allowable Distributions to Partners

Under the HUD regulatory agreement for Section 221(d)(4) projects, distributions
to partners from funds provided by rental operations are allowed,  provided:  1)
surplus cash, as defined by HUD, is available for such purposes,  2) the project
is in  compliance  with all  outstanding  notices  of  requirements  for  proper
maintenance  and 3) there is no default under the regulatory  agreement or under
the regulatory agreement or under the mortgage note. For the year ended December
31, 2000, there is no surplus cash.