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 1-13239

                                AEGIS REALTY, INC.
                                ------------------
              (Exact name of Registrant as specified in its Charter)

          Maryland                                      13-3916825
--------------------------                         -------------------
(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:
                Title of each class
       -----------------------------------
       Common Stock, par value $.01 per share

       Name of each exchange on which registered:
       ------------------------------------------
       American Stock Exchange

Securities registered pursuant to Section 12(g) of the Act:
       None

     Indicate  by check mark  whether the  Registrant  (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
Registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days. Yes X No ___

     Indicate by check mark if disclosure of delinquent  filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's  knowledge,  in definitive proxy or information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]

     The approximate  aggregate market value of the voting and non-voting common
equity  held by  non-affiliates  of the  Registrant  as of  March  9,  2001  was
$79,983,582,  based on a price of $10.50 per share,  the closing sales price for
the Registrant's Common Stock on the American Stock Exchange on that date.

     As of March  9,  2001,  there  were  8,051,141  outstanding  shares  of the
Registrant's Common Stock.

                       DOCUMENTS INCORPORATED BY REFERENCE

Index to exhibits may be found on page 45
Page 1 of 53


<PAGE>




                      CAUTIONARY STATEMENT FOR PURPOSES OF
                          THE "SAFE HARBOR" PROVISIONS OF
               THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995



WHEN  USED  IN  THIS  ANNUAL  REPORT  ON  FORM  10-K,   THE  WORDS   "BELIEVES,"
"ANTICIPATES,"  "EXPECTS"  AND  SIMILAR  EXPRESSIONS  ARE  INTENDED  TO IDENTIFY
FORWARD-LOOKING  STATEMENTS.  STATEMENTS LOOKING FORWARD IN TIME ARE INCLUDED IN
THIS ANNUAL REPORT ON FORM 10-K  PURSUANT TO THE "SAFE HARBOR"  PROVISION OF THE
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995. SUCH STATEMENTS ARE SUBJECT TO
CERTAIN  RISKS AND  UNCERTAINTIES  WHICH  COULD CAUSE  ACTUAL  RESULTS TO DIFFER
MATERIALLY,  INCLUDING,  BUT NOT  LIMITED TO,  THOSE SET FORTH IN  "MANAGEMENT'S
DISCUSSION  AND  ANALYSIS OF  FINANCIAL  CONDITION  AND RESULTS OF  OPERATIONS."
READERS  ARE  CAUTIONED  NOT TO PLACE UNDUE  RELIANCE  ON THESE  FORWARD-LOOKING
STATEMENTS, WHICH SPEAK ONLY AS OF THE DATE HEREOF.



<PAGE>



                                     PART I

Item 1.  Business.

General
-------

Aegis Realty, Inc. ("Aegis" or the "Company") is a Maryland corporation that has
qualified as a real estate  investment trust ("REIT") under the Internal Revenue
Code of 1986 as  amended  (the  "Code").  The  Company  was  formed to  acquire,
renovate, own and operate primarily  supermarket-anchored  neighborhood shopping
centers.  As of December  31, 2000,  the Company  owned a portfolio of 28 retail
properties (the "Retail  Properties")  containing a total of  approximately  3.0
million gross leaseable square feet ("GLA"),  held partnership  interests in two
suburban garden apartment properties (the "Multifamily Properties") and held one
FHA  insured  participating  mortgage  secured  by a suburban  garden  apartment
property (the "FHA Mortgage").  The locations of the assets in 14 states provide
the Company with a geographically diverse portfolio. Moreover, the Company has a
predictable  and stable  revenue  stream that,  for the year ended  December 31,
2000, was derived approximately 47% from either base rent from anchor tenants or
from interest payments on the FHA Mortgage. No single asset accounted for 10% or
more of total  gross  revenues  for any of the three  years in the period  ended
December 31, 2000.

The Retail Properties are well located neighborhood shopping centers anchored by
nationally  recognized and/ or credit tenants such as Kroger,  Publix,  Safeway,
Food Lion, Bi-Lo, Hy-Vee, Walgreens and CVS Stores. The neighborhood centers are
typically  open air  centers  ranging in size from  55,000 GLA to  approximately
214,000 GLA,  with an average of  approximately  107,000 GLA.  These centers are
usually leased to tenants that provide consumers with convenient access to every
day necessity  items,  such as food and pharmacy items;  therefore,  the Company
believes  that the economic  performance  of these  centers is less  affected by
downturns than other retail  property types. As of December 31, 2000, the Retail
Properties had an average physical occupancy of 92.0%. Through 2006 no more than
10.6% of leased GLA is subject to  expiration in any one year.  The  Multifamily
Properties total 290 units and had an average physical  occupancy of 94.2% as of
December 31, 2000.  The FHA  Mortgage has a principal  balance of  approximately
$3.2  million  and  carries an annual  interest  rate of 8.95%.  The  underlying
property had an average physical occupancy of 86.4% as of December 31, 2000.

On  December  21,  2000,  the  Company  entered  into a  definitive  acquisition
agreement  to acquire a  portfolio  of 19 shopping  centers  and several  retail
development  opportunities from Dallas,  Texas-based P.O'B. Montgomery & Company
(and its investment  partners) (see Pending Portfolio  Acquisition  Transaction,
below).

Organization
------------

The  Company  was formed on  October 1, 1997 as the result of the  consolidation
(the   "Consolidation")   of  four  publicly   registered,   non-listed  limited
partnerships,  Summit Insured Equity L.P.  ("Insured I"),  Summit Insured Equity
L.P. II ("Insured II"),  Summit  Preferred  Equity L.P. and Eagle Insured,  L.P.
(the "Partnerships",  and each individually a "Partnership"). One of the general
partners  of the  Partnerships  was an  affiliate  of  Related  Capital  Company
("Related"), a nationwide, fully integrated real estate financial services firm.
Pursuant to the  Consolidation,  the Company  issued shares of its common stock,
par  value  $.01  per  share  (the  "Common  Stock")  to  all  partners  in  the
Partnerships in exchange for their interests in the Partnerships based upon each
partner's proportionate interest in the Common Stock issued to their Partnership
in the  Consolidation.  The Common Stock commenced trading on the American Stock
Exchange on October 10, 1997 under the symbol "AER".

The Company is governed by a board of  directors  comprised  of two  independent
directors and three directors who are affiliated  with Related.  The Company has
engaged Related Aegis LP (the "Advisor"),  a Delaware limited partnership and an
affiliate  of Related,  to manage its day to day  affairs.  Through the Advisor,
Related  offers the  Company a core  group of  experienced  staff and  executive
management,  who provide the Company with  services on both a full and part-time
basis.  These  services  include,  among other things,  acquisition,  financial,
accounting,  capital markets, asset monitoring,  portfolio management,  investor
relations and public relations  services.  The Company believes that it benefits
significantly  from its  relationship  with Related,  since Related provides the
Company with  resources that are not generally  available to small  capitalized,
self-managed REITs.

In addition,  RCC Property Advisors (the "Property Manager"),  also an affiliate
of Related,  has been retained by the Company to provide property management and
leasing  services  to the  Retail  Properties.  The  Property  Manager is a full
service retail management company which has 25 employees,  employed in the areas
of leasing,  accounting,  management and  redevelopment.  The Company represents
substantially  all of the Property  Manager's  property  management  revenue and
therefore  substantially  all of its staff is  engaged,  on a  full-time  basis,
providing services to the Company.

The Company owns all of its assets  directly or indirectly  through Aegis Realty
Operating  Partnership,  LP, a  Delaware  limited  partnership  (the  "Operating
Partnership"  or "OP"),  of which the  Company is the sole  general  partner and
holder of  91.31%  of the units of  partnership  interest  (the "OP  Units")  at
December 31, 2000. Also, at December 31, 2000, 5.54% of the OP Units are held by
the sellers of three of the Retail  Properties  and 3.15% are held by affiliates
of Related.

Business Plan
-------------

The Company has a focused  business/strategic  plan  designed to increase  funds
from operations ("FFO") and enhance the value of its stock.

The  Company's   external   growth  will  be  accomplished   through   continued
acquisitions  of retail  properties  either  directly or in joint  venture on an
individual  or bulk  basis.  The  Company  believes  that there are  significant
opportunities   available   to   acquire   undervalued,    undermanaged   and/or
underutilized  neighborhood and community shopping centers. The Company believes
that by being a consolidator  of shopping  centers on a national  basis,  rather
than  targeting  a few  markets  or a  region,  it  will  be  able  to grow at a
meaningful rate,  without the need for it to compromise asset quality or current
return.  In  addition,  a national  acquisition  program  allows the  Company to
maintain  geographic  diversity,  which the  Company  believes  reduces the risk
otherwise  associated with focusing on one region.  The Company seeks to acquire
primarily, but not exclusively, supermarket-anchored shopping centers, which are
well located in primary and  secondary  markets.  Acquisitions  will be balanced
between stabilized centers that the Company believes are undervalued and centers
that may be enhanced through  intensive  management,  leasing,  redevelopment or
expansion  efforts.  In all such cases,  the Company  generally seeks to acquire
only those centers that are expected to  immediately  increase FFO. In addition,
the  Company  will  consider  strategic  combinations  in the form of  portfolio
acquisitions,  joint ventures or mergers in order to maximize  shareholder value
(see "Pending Porfolio  Acquisition  Transaction"  below).  The Company's growth
will be financed  through proceeds of an expandable $60 million senior revolving
credit facility shared among Fleet National Bank, KeyBank National  Association,
Citizens Bank of Rhode Island and Sovereign  Bank (the "Credit  Facility"),  the
issuance of shares of the  Company's  Common  Stock or OP Units in exchange  for
real estate,  funds generated from operations in excess of dividend payments and
through placements of equity. Although the Credit Facility may be increased, the
Company's  Charter dictates  leverage of no more than 50% of the Company's Total
Market Value defined as the greater of (i) the sum of (a) the  aggregate  market
value of the Company's outstanding shares of Common Stock and (b) the total debt
of the Company or (ii) the aggregate value of the Company's assets as determined
by the  Advisor  based  upon  third-party  or  management  appraisals  and other
criteria  as the Board of  Directors  shall  determine  in its sole  discretion.
During the  period  October 1, 1997  through  December  31,  2000,  the  Company
acquired 14 Retail Properties and two out-parcels of developable land contiguous
to two Retail Properties.

<PAGE>

Internal growth will occur from the  re-deployment  of proceeds from the sale or
other  disposition  of non-core  assets  currently in the  portfolio and through
intensive management, leasing and redevelopment services provided to the Company
by the Property Manager and the Advisor.  The Company considers  non-core assets
to be those  assets the Company has  enhanced  and no longer  offer above market
rates of return or those assets which due to location,  configuration  or tenant
profile no longer offer the Company the prospects of better than market rates of
growth.  The Company regularly reviews its portfolio to identify non-core assets
and to determine whether the time is appropriate to sell or otherwise dispose of
such assets whose  characteristics are no longer suited to the Company's overall
growth  strategy or operating  goals.  During the period October 1, 1997 through
December 31, 2000,  the Company  disposed of three  non-core  assets and one iss
under  contract for sale.  As of December 31, 2000,  the Company  considers  its
non-core assets to be the two investments in Limited  Partnerships  (see Item 2.
Properties) and the Woodgate Manor Loan Receivable.

Pending Portfolio Acquisition Transaction
-----------------------------------------

On  December  21,  2000,  the  Company  entered  into a  definitive  acquisition
agreement  to acquire a  portfolio  of 19 shopping  centers  and several  retail
development   opportunities   (the  "Acquisition   Transaction")   from  Dallas,
Texas-based P.O'B.  Montgomery & Company (and its investment  partners) ("POB").
Under the terms of the  acquisition  agreement,  Aegis has agreed to pay POB and
its investment partners total consideration of $203.5 million. The consideration
will be  comprised of : (i) $3 million in cash,  (ii) $58.4  million of OP Units
which are convertible on a one-for-one  basis into Aegis common stock at a value
of $11 per share and cannot be transferred for one year, and (iii) assumption of
$142.1 million in non-recourse  debt encumbering the acquired  shopping centers.
The  consideration  and components of the  consideration  are subject to certain
adjustments provided for in the acquisition agreement.

As a condition to the Acquisition Transaction, Aegis will terminate its advisory
agreement and acquire the assets of the Property Manager  (consisting  primarily
of several desktop computers and software) and terminate the property management
agreement pursuant to the management internalization agreement which was entered
into   simultaneously   with  the   acquisition   agreement   (the   "Management
Internalization").  Upon closing,  certain officers of POB will assume full-time
executive  positions with Aegis and the Board of Directors will be expanded from
five to seven members, four of whom will be independent directors.  As a result,
Aegis will become self-managed and self-administered.

The  Acquisition  Transaction  is subject  to Aegis'  stockholder  approval  and
customary conditions,  and, if approved, both transactions are expected to close
in 2001. The acquisition agreement has been unanimously approved by the Board of
Directors of Aegis (including the independent directors) and the shareholders of
POB and the management  internalization  agreement has been unanimously approved
by the independent  directors of Aegis on behalf of the full Board of Directors.
Although  there  are   limitations  on  Aegis'  ability  to  solicit   competing
transactions,   Aegis'  Board  of  Directors   retains  the  right  to  consider
alternative  transactions in accordance with its duties under applicable law. An
alternative  transaction may include,  among others, any merger,  consolidation,
share  exchange or business  combination.  The exercise of such rights by Aegis'
Board of Directors could result in payment of a termination fee of $3 million to
POB.

The Advisor  will be entitled to its  standard  acquisition  fee of 3.75% of the
acquisition  price of the properties  acquired (equal to $7.5 million if all the
POB properties are acquired) in connection with the Acquisition Transaction.  In
consideration  of the  Management  Internalization,  the  Property  Manager  and
Advisor will be paid an aggregate amount of  approximately  $3.5 million subject
to adjustments pursuant to the management internalization agreement. The maximum
aggregate  consideration payable to the Property Manager and the Advisor will be
$11 million of which up to $1 million  may be paid in cash and the balance  will
be paid in the form of (i) a distribution of Aegis' non-core,  non-retail assets
based upon their book value subject to certain  adjustments and (ii) Aegis stock
issued at a value of $11.

Retail Properties
-----------------

As of December 31, 2000, the Company owned 28 neighborhood shopping centers. See
"Item 2. Properties" for a description of each property.

None of the  Company's  investment  properties  accounted for 10% or more of the
Company's  total gross  revenues  for any of the three years in the period ended
December 31, 2000.

<PAGE>

During the years ended  December 31, 2000,  1999 and 1998,  the Kroger  Company,
which is a tenant at six shopping centers,  accounted for approximately 11%, 12%
and 17%, respectively, of the Company's total revenues.

Based on the  carrying  value at December  31,  2000,  approximately  15% of the
Company's investment properties are located in Ohio, 12% are located in Florida,
10% are  located in North  Carolina  and 10% are located in  Virginia.  No other
state comprises more than 10% of the total carrying value.

Investments in Partnerships
---------------------------

As of December 31, 2000, the Company owned equity interests in two partnerships,
each of which owns a multi-family  residential  garden apartment  property.  See
"Item 2. Properties" for a description of each property.

Mortgage Loan Receivable
------------------------

As of December  31,  2000,  the Company  held a FHA  mortgage and an equity loan
secured by Woodgate Manor, an apartment complex located in Gainesville, Florida.
The FHA mortgage,  in the original  amount of $3,110,300,  has a stated interest
rate of 8.95% and matures  January 1, 2024.  The 8.95%  interest rate includes a
0.07% servicing fee paid by the developer to Related  Mortgage  Corporation,  an
affiliate of the Advisor.  The base interest and principal are co-insured by the
FHA (80%) and an affiliate of the Advisor (20%).

The equity loan, in the original amount of $339,700,  represented a non-interest
bearing  advance  made to the  developer  for such  items as  initial  operating
deficit  escrow  requirements  and HUD  related  contingencies  such as  working
capital  escrow and cash  requirements.  Such amounts are due on demand upon six
months notice at any time after the tenth anniversary of the initial endorsement
of the loan by HUD.

The  Company  is  entitled  to call for  prepayment  of the  entire  outstanding
principal amount of both the mortgage loan and the equity loan. The Company,  in
order to call for  prepayment,  would be  required  to  terminate  the  mortgage
insurance contract with FHA and the other co-insurer. The Company's intention is
to  exercise  the  call  option  only if it  determines  that  the  value of the
underlying  development has increased  sufficiently enough to assume the risk of
foreclosure  should the  mortgagor  fail to make the  accelerated  payment.  The
borrower may elect to prepay at any time without incurring prepayment penalties.

The owners of Woodgate  Manor have  advised the Company  that they have  entered
into an agreement  dated  December 12, 2000 to sell the property to an unrelated
third party.  In connection with the sale, both the mortgage loan receivable and
the  equity  loan held by the  Company  would be  repaid in full.  The owner has
advised the Company that it expects that  transaction  to close during the first
half of 2001 although there can be no assurance of such a closing.

Insurance Policies
------------------

Insured II, an indirectly  wholly-owned subsidiary of the Company, is the record
owner of three of the Retail  Properties.  Insured II is the  beneficiary  of an
insurance policy (the "Policy") from Continental Casualty Company ("CNA") which,
in  effect,   insures  that  the   cumulative   amount  of  cash  available  for
distribution,  from all sources,  as determined in accordance  with the Policies
and  related  agreement  together  with  the  appraised  values  of  the  Retail
Properties  then owned by Insured II, will equal at least 100% of the  aggregate
original  capital  contributions  to  Insured  II  allocated  to  investment  in
properties  ("Original  Contributions") on the day on which the last such Retail
Property was acquired by Insured II (the "Final Acquisition  Date"). The maximum
liability of CNA under the Policy will increase pursuant to a formula based upon
the length of time such Retail Properties are held by Insured II up to a maximum
of  125%  of  Original  Contributions  on the  tenth  anniversary  of the  Final
Acquisition Date (the "Guaranty Payment Date").  The Policy is intended to cover
various  economic risks of the ownership of such Retail  Properties,  but do not
apply to certain losses, costs, penalties or expenses,  including, among others,
those arising out of any physical  loss,  damage,  loss of use or other physical
deterioration of such properties.

Payment of any amounts due under the Policy will be made to Insured II after the
Guaranty Payment Date and the Policy is not a guaranty that  shareholders of the
Company will receive a return  equal to 125% of the  Original  Contributions  to
Insured II, as applicable,  or any lesser amount  insured under the Policy.  The
Policy will expire in May 2001.  Insured I had been the beneficiary of a similar
policy that expired in November 1999. No payments were received on the Insured I
policy and none are expected on the Insured II policy.

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

The real estate  business is highly  competitive  and  substantially  all of the
properties owned by the Company have active  competition from similar properties
in their  respective  vicinities.  See the  table in  "Item 2.  Properties"  for
additional  competitive  information.  With  respect to the Mortgage  Loan,  the
Company's  business is affected by competition to the extent that the properties
from  which it  derives  interest  and  principal  payments  may be  subject  to
competition  from neighboring  properties.  In particular,  additional  interest
payments  which are not insured are dependent  upon the economic  performance of
the  properties  and may be affected by  competitive  conditions.  In  addition,
various other entities have been or may, in the future,  be formed by affiliates
of the Advisor to engage in businesses which may be competitive with the Company
or compete for the time and services of management of the Advisor.

<PAGE>

Regulations
-----------

A current or previous  owner or operator of real property may be legally  liable
for the costs of removal or  remediation  of hazardous or toxic  substances  on,
under or in such property.  Such liability may exist whether or not the owner or
operator knew of, or was responsible for, such hazardous or toxic substances. In
addition, the presence of hazardous or toxic substances may adversely affect the
owner's ability to borrow funds using such real property as collateral.  Certain
environmental laws impose liability for release of asbestos-containing materials
("ACMs")  into the air and  third  parties  may seek  recovery  from  owners  or
operators  of real  properties  for personal  injury  associated  with ACMs.  In
connection with the ownership  (direct or indirect),  operation,  management and
development  of real  properties,  the  Company  may be liable  for  removal  or
remediation  costs,  as well as certain other potential costs which could relate
to such hazardous or toxic substances or ACMs (including  governmental fines and
injuries to persons and  property).  To date,  the Company has not  incurred any
costs of removal or remediations of such hazardous or toxic substances. However,
the  presence,  with or without the Company's  knowledge,  of hazardous or toxic
substances at any property held or operated by the Company could have an adverse
effect on the Company's business, operating results and financial condition.

Phase I  Environmental  Site  Assessments  have  been  undertaken  on all of the
Company's properties.  In certain cases, additional Phase II site investigations
have also been undertaken where deemed  appropriate.  Based on these reports, no
on-site  hazardous  chemicals or petroleum  products  were  detected or found to
exist in the soil or in the groundwater at those  properties  which would result
in action by state  environmental  agencies and which would  require  additional
investigation and/or remediation.  In February 1998, a Phase II investigation of
the Mountain Park Plaza property determined that there were detectable levels of
certain hazardous  materials above threshold levels which are ascertained by the
Georgia State Department of Natural Resources Environmental  Protection Division
("GAEPD").  On May 28, 1999 management received notification form GAEPD that the
site was added to the GAEPD  Hazardous  Site Inventory  ("HSI").  Management has
recently  completed a re-sampling to determine if such levels  continue to exist
in order to potentially  qualify for a de-listing  from the HSI. The re-sampling
indicated  that no hazardous  materials  remain  detectable  above the threshold
levels  which are  ascertained  by GAEPD to require  remediation  and, on May 5,
2000,  the GAEPD  removed the property  from the HSI.  Management  has installed
wells on the site to monitor ongoing levels of hazardous materials in the ground
water pursuant to GAEPD policy.

Notes Payable
-------------

For information  regarding the Company's  notes payable,  see Note 7 of Notes to
Consolidated   Financial   Statements  in  "Item  8.  Financial  Statements  and
Supplementary Data".

Employees
---------

The Company does not directly employ anyone.  All services are performed for the
Company by the Advisor and its affiliates.  The Advisor receives compensation in
connection with such activities as set forth in Items 8, 11 and 13. In addition,
the Company  reimburses  the Advisor and certain of its  affiliates for expenses
incurred in connection  with the  performance by their employees of services for
the Company in accordance with the Advisory  Agreement between the Company,  the
OP and the Advisor dated October 1, 1997.

The 28 Retail  Properties  owned by the  Company  are  managed  by the  Property
Manager,  an  affiliate  of the  Advisor,  for a fee  equal to 4.5% of the gross
rental receipts from the Retail Properties,  which is competitive with such fees
paid in the areas in which the properties are located. The Property Manager also
receives  standard  leasing  commissions for space leased to new tenants and for
lease renewals and is reimbursed for certain expenses. Management fees earned by
the  Property  Manager  for the years ended  December  31,  2000,  1999 and 1998
totaled approximately $1,085,000, $1,037,000 and $735,000, respectively.

Item 2.  Properties.

Retail Properties
-----------------
<TABLE>
As of December 31, 2000, the Company owned 28 neighborhood shopping centers. The
following is a description of these shopping centers:
<CAPTION>
                                                                       % Square                                 Comparable
                                                                         Feet       Annualized                 Competition
                                                          Gross        Leased at    Base Rent at   Main          within a
                            Purchase       Date         Leasable       December      December     Anchor        three-mile
Name and Location            Price       Purchased     Square Feet     31, 2000      31, 2000     Tenant          radius
-----------------            -----       ---------     -----------     --------      --------     ------          ------

<S>                      <C>              <C>             <C>             <C>     <C>           <C>              <C>
Cactus Village           $ 6,330,000      7/25/87         72,598            98%   $   518,000   Safeway(a)       11 shopping
  Glendale, AZ                                                                                  & Walgreens      centers

Hickory Plaza              4,902,000      4/23/87         67,336           100        547,000   Kroger &         8 shopping
  Nashville, TN                                                                                 CVS              centers

Highland Fair              5,950,000      7/24/87         74,764            98        633,000   Safeway          7 shopping
  Gresham, OR                                                                                                    centers

Pablo Plaza                7,500,000      2/18/87        141,565            94        934,000   Publix(b)        11 shopping
  Jacksonville, FL                                                                              & Eckerds        centers

Southhaven                 5,666,000      2/28/87         83,750            83        465,000   Kroger           1 shopping
  Southhaven, MS                                                                                                 center

<PAGE>

Town West                  4,932,000      5/11/87         88,200            96        459,000   Kroger &         5 shopping
  Indianapolis, IN                                                                              Office Max (c)   centers

Westbird                   7,000,000      12/31/86       100,087            88        814,000   Publix &         7 shopping
  Miami, FL                                                                                     Eckerds          centers

Winery Square             12,801,700      12/22/87       121,950            93      1,107,000   Food 4           5 shopping
  Fairfield, CA                                                                                 Less &           centers

Walgreens

Mountain View Village     10,350,000      7/25/88         99,908            93        819,000   Kroger           4 shopping
  Snellville, GA                                                                                                 centers

Forest Park Square         8,950,000      5/19/89         92,824           100        868,000   Kroger           2 shopping
  Cincinnati, OH                                                                                                 centers

Kokomo Plaza               6,987,000      5/19/89         89,546            97        589,000   Kroger           6 shopping
  Kokomo, IN                                                                                                     centers

Rolling Hills Square       6,100,000(d)   08/18/88       101,864            96        761,000   Fry's            6 shopping
  Tuscon, AZ                                                                                    Food & Drug      centers


Mountain Park Plaza        6,650,000      12/14/89        77,686            87        273,000   A&P(e),          9 shopping
  Atlanta, GA                                                                                   Future           centers
                                                                                                Store &
                                                                                                Eckerds

Applewood Centre           7,700,000      11/08/90       101,130            97        733,000   Hy-Vee           5 shopping
  Omaha, NE                                                                                     Food             centers
                                                                                                Store

Birdneck Center            3,115,000      12/31/97        67,060            96        458,000   Eckerds &        8 shopping
  Virginia Beach, VA                                                                            Food Lion        centers

The Market Place           5,400,000      12/31/97       125,095            95        644,000   Bi-Lo &          3 shopping
  Newton, NC                                                                                    Big Lots         cemters

Barclay Place              3,800,000      3/31/98         81,459            84        512,000   Food Lion(f)     13 shopping
  Lakeland, FL                                                                                                   centers

The Village At Waterford   6,250,000      4/22/98         79,162            98        692,000   Winn-Dixie       1 shopping
  Midlothian, VA                                                                                                 center

Governor's Square          8,200,000      5/28/98        183,339            85        991,000   Odd Lots         5 shopping
  Montgomery, AL                                                                                                 centers

Marion City Square         5,100,000      6/25/98        163,970            84        731,000   Roses, Bi-Lo     1 shopping
  Marion, NC                                                                                    & CVS            center

Dunlop Village             5,000,000      9/1/98          77,315            86        509,000   Food Lion        6 shopping
  Colonial Heights, VA                                                                          & CVS            centers

Centre Stage               6,990,000      9/2/98         146,549            98        830,000   K-Mart &         2 shopping
  Springfield, TN                                                                               Food Lion        centers

White Oaks Plaza           8,125,000      9/9/98         186,758            76        581,000   Winn-Dixie &     2 shopping
  Spindale, NC                                                                                  Wal-Mart (g)     centers

Cape Henry                 3,900,000      9/29/98         55,075           100        530,000   Food Lion &      8 shopping
  Virginia Beach, VA                                                                            Rite-Aid         centers

Emporia West               2,900,000      11/17/98        76,705           100        381,000   Dillon Food      6 shopping
  Emporia, KS                                                                                   Store            centers

Oxford Mall                8,650,000      11/24/98       166,880            78      1,075,000   Goody's,         2 shopping
  Oxford, MS                                                                                    JC Penney,       centers
                                                                                                Stage &
                                                                                                Wal-Mart(h)

Southgate                 15,100,000      12/9/98        214,321            97      1,466,000   Big Bear         4 shopping
  Heath, OH                                                                                     Stores(i),       centers
                                                                                                Dunham's
                                                                                                Sporting,
                                                                                                Odd-Lots &
                                                                                                Rite-Aid
<PAGE>

Crossroads East            4,800,000      12/9/98         71,925            86        482,000   (j)              3 shopping
  Columbus, OH                                                                                                   centers
</TABLE>


     (a) Tenant has vacated but continues to be liable for all amounts due under
     its  lease.  The  tenant  is  currently  in  arrears  as  it  relates  to a
     contractual  increase  in  minimum  rent of $.10 per  square  foot per year
     (approximately  $4,200 per year). The aggregate  arrears as of December 31,
     2000 is $16,604.  The arrears is due to  different  interpretations  of the
     lease which is expected to be resolved in 2001.  With the exception of this
     amount, lease payments are current as of December 31, 2000.

     (b) Publix has vacated and has subleased the space to Office Depot.  Publix
     continues  to be liable for all amounts due under its lease.  Payments  due
     under sublease were current as of December 31, 2000.

     (c) Tenant closed its store on February 28, 2000 but is still obligated to
        pay rent under its lease. Lease payments are current to date.

     (d) The purchase  price does not include the  acquisition,  on September 8,
     1999,  of an  out-parcel  of  developable  land  contiguous to the shopping
     center for a purchase price of $325,000.

     (e) The lease with A&P has been  terminated  as of September 30, 2000 and a
     new lease has been executed with Publix,  which is expected to open in late
     2001.  Annual base rent is $409,507.  The anchor  tenant space is vacant at
     December 31, 2000.  Annualized rent does not include the A&P or Publix base
     rent amount.

     (f) Tenant has vacated on November 4, 2000,  but is still  responsible  for
     rent  through  the  termination  of lease.  Lease  rents are  current as of
     December 31, 2000.

     (g) Both  Winn-Dixie and Wal-Mart have vacated but are responsible for rent
     through  the  termination  of the  lease.  Lease  rents are  current  as of
     December 31, 2000.

     (h) The  portion of the  property  occupied by Wal-Mart is not owned by the
     Company.

     (i) The tenant's parent corporation,  Penn Traffic Co. filed for Chapter 11
     bankruptcy on March 1, 1999.  Lease payments are current as of December 31,
     2000.

     (j) The current  configuration  of the shopping  center does not include an
     anchor tenant.


For further  information  regarding the Company's Retail  Properties,  including
information regarding the mortgage indebtedness  encumbering certain properties,
see  "Item 8.  Financial  Statements  and  Supplementary  Data"  and  "Item  14.
Exhibits,  Financial  Statement  Schedules  and  Reports on Form 8-K - Financial
Statement Schedules - Schedule III".

Investments in Partnerships
---------------------------

As of  December  31,  2000,  the  Company  owned  partnership  interests  in two
partnerships,  each of which owns a multi-family  residential  garden  apartment
property.

The Company owns a limited  partnership  interest in the  TCR-Pinehurst  Limited
Partnership  ("Pinehurst"),  which acquired and operates the Pinehurst apartment
complex in Kansas City,  Missouri.  Under the original terms of this investment,
the Company is entitled  to a  preferred  equity  return of 8.8% per annum on an
initial  investment  of  $3,799,620,  and 9.85% on a  subsequent  investment  of
$1,949,805.   These   preferred   equity   returns   are   cumulative   and  non
interest-bearing.  The cumulative, unrecorded and undistributed preferred equity
returns to the Company  totaled  $1,826,245  and $1,763,772 at December 31, 2000
and 1999,  respectively.  These preferred equity returns are payable from excess
cash flow from  operations or proceeds from a sale or refinancing of Pinehurst's
rental property. The Pinehurst apartment complex contains 96 apartment units and
was  approximately  97.9%  occupied  as of  December  31,  2000.  The  Company's
percentage of ownership in Pinehurst is 98.99%.

On August 26,  1998,  the  Company  invested  $895,200  for a 40%  interest as a
limited  partner  in FAI,  Ltd.  ("FAI"),  the  limited  partnership  which owns
Weatherly Walk Apartments (see Item 1.  Business.-Mortgage  Loans).  This equity
interest earns an annual  preferred  return of 10.5% on $895,200,  paid monthly,
plus 40% of excess cash flow and sale or  refinancing  proceeds.  As of December
31, 2000,  the Company had received all of the  preferred  returns due from FAI.
Weatherly Walk  Apartments  contains 194 apartment  units and was  approximately
91.7% occupied as of December 31, 2000.

Item 3.  Legal Proceedings.

On or about  February  8, 2001,  a complaint  was filed in the New York  Supreme
Court,  County of New York, against the Advisor.  Also individually named in the
suit were Messrs.  Boesky,  Hirmes, Ross, Brenner, Allen and Fisch, each of whom
is either a director of Aegis or the Advisor.  Aegis was also named as a nominal
defendant.  The action is entitled Paul v. The Related Companies L.P., index No.
01-600669.  The suit is a purported  class and  derivative  action in connection
with the Acquisition Transaction and the Management Internalization described in
Note 1. The suit alleges that the defendants  breached  their  fiduciary duty to
Aegis' stockholders by, among other things,  committing Aegis to pay unwarranted
fees and other  consideration  to the  Advisor  and the  Property  Manager.  The
lawsuit  seeks   preliminary  and  permanent   injunctive   relief  against  the
consummation of the Acquisition  Transaction and the Management  Internalization
in addition to unspecified damages, costs and attorney's fees.

<PAGE>

Aegis has retained counsel with regard to the lawsuit and the defendants  intend
to defend the action vigorously. With respect to the allegations in the lawsuit,
the defendants have advised that they continue to believe that the  transactions
are fair and reasonable and in the best interests of Aegis and its  stockholders
and will be submitted for approval by a vote of Aegis' stockholders.

The Company  believes that it has meritorious  defenses to the claims brought in
the lawsuit  described above, but is unable to predict the effect of the outcome
of this lawsuit on the Company's financial  position,  results of operations and
cash flows. In addition,  the timing of the final  resolution of this proceeding
is uncertain.  No provision has been recorded on the financial statements of the
Company to reflect the above litigation.

Except  for the  lawsuit  described  above,  the  Company  is subject to routine
litigation  and  administrative  proceedings  arising in the ordinary  course of
business.  Management  does not believe  that such  matters will have a material
adverse  impact on the Company's  financial  position,  results of operations or
cash flows.

Item 4.  Submission of Matters to a Vote of Shareholders.

The pending  portfolio  acquisition is subject to approval by shareholders.  See
Pending Portfolio Acquisition Transaction in "Item 1 - Business."


                                     PART II

Item 5.  Market for the Company's Common Stock and Related Shareholder Matters

As of March 9, 2001, there were 1,491  registered  shareholders of record owning
8,051,141  shares of Common Stock. The Company's Common Stock has been listed on
the American Stock Exchange since October 10, 1997 under the symbol "AER". Prior
to October 10, 1997,  there was no  established  public  trading  market for the
Company's Common Stock.

The high and low  prices  for each  quarterly  period  of the last two years for
which the shares of Common Stock were traded were as follows:

                     2000             2000              1999            1999
Quarter Ended        Low              High              Low             High
-------------        ---              ----              ---             ----

March 31           $ 8 3/8         $  8 15/16         $ 9 5/16        $ 10 3/8
June 30              8 5/8           10 14/16           9 3/8           10 5/16
September 30         9 5/8           10 1/2             9               10 1/4
December 31          9 3/4           10 3/16            8 5/8            9 5/16

The last reported sale price of Common Stock on the American  Stock  Exchange on
March 9, 2001 was $10.50.

Incentive Stock Option Plan
---------------------------

The Company has adopted an  incentive  stock option plan (the  "Incentive  Stock
Option  Plan"),  the  purpose of which is to (i)  attract  and retain  qualified
persons as directors and officers and (ii) to incentivize and more closely align
the financial  interests of the Advisor and its affiliates and their  respective
employees and officers with the interests of the  stockholders  by providing the
Advisor and its affiliates with substantial  financial interest in the Company's
success. The Compensation Committee administers the Incentive Stock Option Plan.
Pursuant to the Incentive Stock Option Plan, if the Company's  distributions per
share of Common Stock in the immediately  preceding calendar year exceed $0.9869
per share,  the  Compensation  Committee  has the  authority to issue options to
purchase, in the aggregate, that number of shares of Common Stock which does not
exceed  three  percent  of  the  shares  outstanding  as of  December  31 of the
immediately  preceding  calendar  year (or in the initial year, as of October 1,
1997).  Any  options  not  granted in a given year are  carried  over and become
available to be granted in subsequent  years.  The maximum number of shares that
can be issued over the life of the Incentive Stock Option Plan is 805,073.

All options  granted  will have an exercise  price equal to or greater  than the
fair market  value of the shares of Common  Stock on the date of the grant.  The
maximum  option  term is ten  years  from the date of grant.  All stock  options
granted  pursuant to the Incentive Stock Option Plan may vest  immediately  upon
issuance or may vest later,  as determined by the  Compensation  Committee.  The
Company's  distributions  per share of Common Stock for the years ended December
31, 2000 and 1999 did not exceed $.96 per share  therefore  no options were able
to be issued. In 1998, the Company  distributed $1.035 per share of Common Stock
($0.96  from   continuing   operations  and  a  $0.075  special   capital  gains
distribution), thus enabling the Compensation Committee, at their discretion, to
issue options.  Three percent of the shares  outstanding as of December 31, 1998
are equal to 241,346 shares.

On August 6,  1999,  options  to  purchase  30,000  shares of Common  Stock were
granted to an officer of the Company and certain  employees  of an  affiliate of
the Advisor,  who are not employees of the Company.  The exercise price of these
options is $9.50 per share.  The term of each  option is ten years.  The options
vest in equal  installments  on  August  6,  2000,  2001 and  2002.  Each of the
grantees has terminated  employment and all the options were forfeited  prior to
vesting.  No options were issued during 2000. In connection with the Acquisition
Transaction,  the remaining  unissued and issuable options upon  consummation of
the  Acquisition  Tranasaction  at an exercise  price of no less than $11.00 per
share.



<PAGE>

Stock Repurchase Plan
---------------------

On October 9, 1998, the Board of Directors  authorized the  implementation  of a
stock repurchase plan, enabling the Company to repurchase, from time to time, up
to 500,000 shares of its Common Stock.  The repurchases will be made in the open
market and the timing will be dependent on the  availability of shares and other
market  conditions.  As of both  December  31,  2000 and 1999,  the  Company had
acquired  6,300 shares of its Common Stock for an  aggregate  purchase  price of
$58,579  (including  commissions and service  charges).  Repurchased  shares are
accounted for as treasury stock.

Shareholder Rights Plan
-----------------------

On  January  29,  1999,  the  Company  adopted a  shareholder  rights  plan (the
"Shareholder   Rights  Plan"),  the  purpose  of  which  is  to  better  protect
shareholders  and assure that they receive the full value of their investment in
the event of any proposed  takeover of the Company.  The Company  noted that the
adoption of the  Shareholder  Rights  Plan was not in  response to any  specific
attempt to acquire  control of the Company and that the Company had no knowledge
of any such interest on the part of any person or entity.

The  Shareholder  Rights Plan,  which is similar to plans  adopted by many other
U.S. companies, strengthens the ability of the Board of Directors to assure that
the  Company's  shareholders  receive fair and equal  treatment and protects the
interests of the Company's  shareholders in the event of an unsolicited offer to
acquire  control of the Company.  Importantly,  it is intended to encourage  any
potential acquirer to negotiate the manner and terms of any proposed acquisition
with the Board of Directors.

Terms of the  Shareholder  Rights  Plan  provide  for a  distribution  to common
shareholders  of record at the close of  business  on  February  16, 1999 of one
Right for each  outstanding  share of Common  Stock of the  Company.  Subject to
limited exceptions, the Rights will be exercisable if a person or group acquires
15% or more of the Company's Common Stock or announces a tender offer for 15% or
more of the Common  Stock.  Depending  on the  circumstances,  the effect of the
exercise  of the  Rights  will be to  permit  each  holder  of a Right to either
purchase stock in the Company or stock of the buyer, at a substantial  discount,
and, in so doing,  materially  dilute the level of ownership of the buyer in the
Company.  The Company will be entitled to redeem the Rights at $.01 per Right at
any time  before a person has  acquired  15% or more of the  outstanding  Common
Stock. The Shareholder Rights Plan will expire on February 16, 2009.

Other
-----

Through  calendar year 1999, each  independent  director was entitled to receive
annual compensation for serving as a director in the aggregate amount of $15,000
payable in cash  (maximum  of $5,000  per year)  and/or  shares of Common  Stock
valued  based on the fair market  value at the date of  issuance.  Beginning  in
calendar  year  2000,  the annual  compensation  for each  independent  director
increased from $15,000 to $17,500 and the maximum payable in cash increased from
$5,000 to $7,500.  As of  December  31, 2000 and 1999,  2,376 and 1,216  shares,
respectively,  having an aggregate  value of $22,500 and $12,500,  respectively,
have  been  issued  to  each  of the  Company's  two  independent  directors  as
compensation  for their  services.  An  additional  981 shares with an aggregate
value of $10,000 were issued to each independent Director in January, 2001.

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

Distributions Per Share
-----------------------

Quarterly cash distributions per share for the years ended December 31, 2000 and
1999 were as follows:

Cash Distribution                                                  Total Amount
for Quarter Ended          Date Paid           Per Share            Distributed
-----------------          ---------           ---------          --------------

March 31, 2000              5/15/00            $   .240               $1,931,803
June 30, 2000               8/14/00                .240                1,931,803
September 30, 2000         11/14/00                .240                1,931,803
December 31, 2000           2/14/01                .240                1,931,803
                                                -------                ---------

Total for 2000                                 $   .960               $7,727,212
                                                =======                =========

Cash Distribution                                                  Total Amount
for Quarter Ended          Date Paid           Per Share            Distributed
-----------------          ---------           ---------          --------------

March 31, 1999              5/14/99            $   .240               $1,931,246
June 30, 1999               8/15/99                .240                1,931,246
September 30, 1999         11/14/99                .240                1,931,246
December 31, 1999           2/14/00                .240                1,931,247
                                                -------                ---------

Total for 1999                                 $   .960               $7,724,985
                                                =======                =========

There are no material legal  restrictions  upon the Company's  present or future
ability to make distributions in accordance with the provisions of the Company's
Articles of Amendment and Restatement.  Future distributions paid by the Company
will be at the  discretion  of the  Directors and will depend on the actual cash
flow of the Company, its financial condition,  capital requirements,  the annual
distribution  requirements  under the REIT provisions of the Code and such other
factors as the Directors deem relevant.

<PAGE>

Recent Sales/Issuance of Unregistered Equity Securities
-------------------------------------------------------

(i)  Securities Issued

The  following  table  sets  forth the date of  issuance,  title  and  amount of
unregistered  securities  issued  by the  Company's  subsidiary,  the  Operating
Partnership:

Date of Sale/Issuance               Title                     Number
---------------------               -----                     ------
10/01/97                            OP Units                   46,836
06/02/98                            OP Units                   94,726
12/10/98                            OP Units                  376,063
05/28/99                            OP Units                   28,187
12/09/99                            OP Units                  231,401
04/18/00                            OP Units                   (3,371)
06/19/00                            OP Units                   (8,062)
                                                              --------
                                                              765,780

The  acquisitions  of Governor's  Square,  Southgate and Crossroad  East,  three
Retail   Properties  with  purchase   prices  of  $8,200,000,   $15,100,000  and
$4,800,000,  respectively,  were  partially  financed  through  the  issuance of
94,726,  208,914  and  167,149  OP  Units  (subject  to  adjustment)  valued  at
$1,231,438,  $2,715,882 and $2,172,937.  These 470,789 OP Units were convertible
to shares of Common Stock on a one-to-one basis,  subject to adjustment,  on the
one year anniversary of their respective closing dates. The OP Units were issued
at an agreed upon value of $13 per OP Unit.  If as of the last trading day prior
to the first  anniversary  of the  closing  date (the  "Post-Closing  Adjustment
Date"),  the "Average Price Per Share" (as defined below) was less than $13, the
Company was obligated to issue additional OP Units to the respective  sellers in
the amount of the difference  between (i) the quotient  obtained by dividing the
OP Unit  value  at $13 per OP Unit by the  Average  Price  Per  Share  as of the
Post-Closing  Adjustment  Date and (ii) the  number  of OP Units  issued  on the
closing date. The Average Price Per Share means, with respect to any given date,
the average  final  closing  price per share of Common  Stock  during the twenty
trading  day period  ending on such  date.  An  additional  28,187 OP Units were
issued to the seller of Governor's  Square on the  Post-Closing  Adjustment Date
(May 28, 1999) based on an Average Price Per Share of  $10.01875.  An additional
92,439  and  73,957  OP Units  were  issued  to the  sellers  of  Southgate  and
Crossroads East, respectively,  on the Post-Closing Adjustment Date (December 9,
1999) based on an Average Price Per Share of $9.0125.

In  addition,  a note  payable  to the  sellers of  Southgate  and the two notes
payable to the sellers of Crossroads  East in the amounts of $200,000,  $230,000
and $275,000,  respectively,  were partially  repaid in the amounts of $135,400,
$213,708 and $236,646 through the issuance of 15,030, 23,716 and 26,259 OP Units
on December 9, 1999 based on an Average Price Per Share of $9.0125.

(ii)  Underwriters and Other Purchasers

Underwriters  were  not  retained  in  connection  with  the  issuance  of these
securities.

(iii)  Consideration

See (i) above.

(iv)  Exemption from Registration Claimed

The OP Units were issued to "accredited  investors" in  transactions  which were
exempt from registration under Section 4 (2) of the Securities Act of 1933.

<PAGE>

<TABLE>
Item 6.  Selected Financial Data.

The information set forth below presents selected financial data of the Company.
Additional  financial   information  is  set  forth  in  the  audited  financial
statements  and notes thereto  contained in "Item 8.  Financial  Statements  and
Supplementary Data".

<CAPTION>

                                                                    Year ended December 31,
                                      ------------------------------------------------------------------------------------
OPERATIONS                                 2000           1999               1998           1997 (a)           1996 (a)
----------                            ------------    ------------       ------------       ------------       ------------

<S>                                  <C>             <C>                <C>                <C>                <C>
Total revenues                       $ 26,167,270    $ 25,354,501       $ 19,504,803       $ 10,755,797       $  9,224,030

Total expenses                        (20,147,117)    (19,133,837)       (13,544,516)        (7,309,038)        (6,797,394)
                                     ------------    ------------       ------------       ------------       ------------

Income before gain on sale of           6,020,153       6,220,664          5,960,287          3,446,759          2,426,636
  investment

Gain on sale of real estate               108,332               0                  0                  0                  0

Gain on sale of investment in
  partnership (b)                               0               0                  0            779,893                  0
                                     ------------    ------------       ------------       ------------       ------------

Income before minority interest         6,128,485       6,220,664          6,740,180          3,446,759                  0

Minority interest in income of the
  Operating Partnership                  (535,490)       (397,583)           (93,547)            (8,263)                 0
                                     ------------    ------------       ------------       ------------       ------------

Net income                           $  5,592,995    $  5,823,081       $  6,646,633       $  3,438,496       $  2,426,636
                                     ============    ============       ============       ============       ============


Net income applicable to common      $  5,592,995    $  5,823,081       $  6,646,633       $  1,420,370(d)
                                     ============    ============       ============       ============
shareholders


Net income per share (f) (c)

Basic                                $        .69    $        .72       $        .83       $        .18(d)
                                     ============    ============       ============       ============

Diluted                              $        .69    $        .72       $        .82       $        .18(d)
                                     ============    ============       ============       ============


Weighted average shares
  outstanding: (c)

Basic                                   8,048,894       8,046,574          8,049,987          8,050,727(d)
                                     ============    ============       ============       ============

Diluted                                 8,048,952       8,046,574          8,075,390          8,050,727(d)
                                     ============    ============       ============       ============

</TABLE>
<TABLE>
<CAPTION>
                                                                         December 31,
                                      ------------------------------------------------------------------------------------
FINANCIAL POSITION                         2000           1999          1998         1997 (a)       1996 (a)
------------------                    ------------    ------------   ------------  ------------   ------------


<S>                                   <C>            <C>            <C>            <C>            <C>
Total assets                          $197,693,943   $193,392,424   $195,389,970   $148,639,328   $ 75,842,337
                                      ============   ============   ============   ============   ============

Notes payable                         $ 64,972,605   $ 59,239,944   $ 58,864,099   $ 18,544,242   $  5,565,841
                                      ============   ============   ============   ============   ============

Total liabilities                     $ 71,564,672   $ 64,830,450   $ 65,402,567   $ 22,866,886   $  6,746,907
                                      ============   ============   ============   ============   ============

Minority interest                     $  6,941,884   $  7,260,370   $  6,803,895   $    727,431
                                      ============   ============   ============   ============

Total shareholders'                   $119,187,387   $121,301,604   $123,183,508   $125,045,011   $ 69,095,430
equity/partners'                      ============   ============   ============   ============   ============
capital

DISTRIBUTIONS

Total BUC$holder distributions                N/A            N/A            N/A     $ 2,700,004(e) $ 3,600,005
                                      ============   ============   ============   ============   ============
Total shareholder distributions          7,727,212      7,724,985      8,330,865      1,932,174(d)
                                      ============   ============   ============   ============

Distributions per share (c)                    .96            .96           1.04            .24(d)
                                      ============   ============   ============   ============

</TABLE>
<PAGE>

<TABLE>
<CAPTION>
OTHER DATA
                                                    Year              Year             Year
                                                   Ended             Ended             Ended
                                                December 31,      December 31,     December 31,
                                                    2000              1999             1998
                                                -------------   ---------------    -----------

<S>                   <C>                      <C>               <C>               <C>
Funds From Operations ("FFO") (g)              $   10,445,374    $   10,646,024    $  9,974,863
                                               ==============    ==============    ============

Funds Available for Distribution ("FAD") (g)   $    2,973,856    $    8,254,454    $  8,969,572
                                               ==============    ==============    ============

FFO payout ratio (h)                                     74.0%             72.6%           83.5%
                                               ==============    ==============    ============
Cash flows from:
Operating activities                           $   11,189,802    $    9,567,923    $  9,584,324
                                               ==============    ==============    ============
Investing activities                           $   (8,090,815)   $   (1,970,601)   $(20,087,699)
                                               ==============    ==============    ============
Financing activities                           $   (3,850,809)   $   (8,374,501)   $  6,778,799
                                               ==============    ==============    ============

</TABLE>

(a) Information prior to October 1, 1997 (the date of the Consolidation) is only
with respect to Insured I. Information  subsequent to September 30, 1997 is with
respect to the Company and its consolidated subsidiaries which include Insured I
and the other Partnerships pursuant to the Consolidation.

(b) The 1998 results of operations  reflect a gain of $779,893  recognized  upon
the sale of the Company's  limited  partnership  interest in Dominion Totem Park
Limited Partnership.

(c) Net income and distribution per share information for periods before October
1,  1997  is not  presented  because  it is  not  indicative  of  the  Company's
continuing capital structure.

(d) Represents amount for the three months ended December 31, 1997.

(e) Represents amount for the nine months ended September 30, 1997.

(f) Net income  per share  equals net  income  divided by the  weighted  average
shares outstanding for the period.

(g) See "Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations" for a definition and calculation of Funds From Operations
and Funds Available for Distribution.

(h) Represents total shareholder distributions divided by FFO.

<PAGE>


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

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

The Company requires long-term  financing in order to invest in and maintain its
portfolio of Retail  Properties and other  investments.  To date, this long-term
liquidity has come from proceeds from the Credit Facility, notes payable assumed
upon the  purchase  of  certain  properties  and the  issuance  of shares of the
Company's  Common Stock or OP Units in exchange  for real  estate.  Although the
Credit Facility may be increased,  the Company's Charter dictates leverage of no
more than 50% of the Company's  Total Market Value. On a short-term  basis,  the
Company  requires  funds to pay its  operating  expenses and those of the Retail
Properties, to make improvements to the Retail Properties,  pay its debt service
and make distributions to its shareholders.  The primary source of the Company's
short-term liquidity needs are the cash flow received from the Retail Properties
and interest income.

As a REIT, the Company is required to distribute at least 95% (90% commencing in
2001) of its taxable  income to  maintain  REIT  status.  Funds  generated  from
operations  are  expected  to be  sufficient  to allow the  Company to meet this
requirement.

The Advisor  believes  that the stability of the  Company's  operations  and its
ability to maintain liquidity are enhanced by:

(i) Geographic diversity of its portfolio of real estate.

(ii) 47% of total revenues for the year ended December 31, 2000 were earned from
shopping  center  anchor  tenants  which are  national  credit  tenants and from
interest on an FHA Mortgage.

(iii) No single asset  accounts  for 10% or more of total  revenues for the year
ended December 31, 2000.

(iv) Leases that provide for recovery of actual common area maintenance  charges
and real estate taxes, thereby minimizing any effects from inflation.

(v) Leases that provide for increases in rents based on a percentage of tenants'
sales.

During  the year ended  December  31,  2000,  cash and cash  equivalents  of the
Company and its consolidated subsidiaries decreased approximately $752,000. This
decrease  was  primarily  due  to  improvements  to  real  estate  ($6,199,000),
acquisitions  of  real  estate  including   acquisition   expenses   ($558,000),
distributions paid to shareholders  ($7,727,000),  an increase in deferred costs
($1,042,000),  periodic  principal  payments  on notes  payable  ($297,000)  and
distributions  paid to minority  interest  ($815,000)  which  exceeded  net cash
provided by operating  activities  ($10,637,000),  net proceeds from the sale of
real  estate  ($154,000)  and net  proceeds  from  notes  payable  ($6,030,000).
Included in the  adjustments  to  reconcile  the net income to cash  provided by
operating   activities  is  depreciation  and  amortization  in  the  amount  of
$5,244,000.

As part of the  renewal  of the lease  for the  anchor  tenant  at the  Westbird
property,  the Company  made  approximately  $2,140,000  in tenant  improvements
during 2000. The term of the new lease is 20 years with a minimum annual rent of
$246,000. The minimum annual rent under the old lease was $103,000. In addition,
Governors  Square had over  $1,250,000  in  improvements  and Rolling  Hills had
$810,000.  The total amount of all property's  tenant  improvements  during 2000
totaled over $6,200,000 and were funded by cash from  continuing  operations and
borrowings on the Credit Facility.

The Company has the following  problem assets which may adversely  affect future
operations and liquidity:

(i) Safeway,  the anchor  tenant of Cactus  Village  Shopping  Center closed its
facility in December 1991 due to poor sales.  The tenant is currently in arrears
as it relates to a contractual  increase in minimum rent of $.10 per square foot
per year  (approximately  $4,200 per year). The aggregate arrears as of December
31, 2000 is $16,604.  The arrearage is due to different  interpretations  of the
lease  which is expected to be  resolved  in 2001.  With the  exception  of this
amount,  the tenant  continues  to fully abide by all aspects of its lease which
will  expire in  September  2006.  The Company is  actively  pursuing  potential
replacement tenants and at the appropriate time, hopes to be able to negotiate a
termination agreement with the vacated tenant.

(ii) In July  1994,  A&P closed its store in the  Mountain  Park Plaza  Shopping
Center due to reduced  sales and  increased  competition.  The Company  received
rental  payments from the vacated tenant  pursuant to the terms of the lease. In
December  2000,  A&P bought out its lease for $300,000  and the Company  entered
into a new lease with Publix.  Publix will take physical  occupancy in the third
quarter of 2001.

(iii) Three of White Oaks  Plaza's  anchors  have  vacated  their  spaces.  Two,
Walmart  and Winn  Dixie,  are still  paying  rent and are current in their rent
payments.  The Company is in discussions  regarding the sale of a portion of the
property.

(iv)  Office  Max,  one of the  anchor  tenants  of Town  West  which  was under
sublease,  vacated its space in February  2000 but the original  lessee is still
obligated to pay rent. To date, the lessee is current with all rent payments.

(v) Food Lion,  located in Barclay  Place,  closed their store in December 2000.
They are still  obligated to pay rent through the  expiration  of its lease.  To
date, Food Lion is current with all rent payments.

<PAGE>

In February  2001, a  distribution  of  $1,931,803  ($.24 per share),  which was
declared  in December  2000,  was paid to the  shareholders  from cash flow from
operations for the quarter ended December 31, 2000.

The owners of Woodgate  Manor have  advised the Company  that they have  entered
into  an  agreement  dated  December  12,  2000  to  sell  the  property  to  an
unaffiliated  third party.  In connection  with the sale, both the mortgage loan
receivable  and  equity  loan held by the  Company  will be repaid in full.  The
Company  anticipates  receiving  approximately $3.5 million as repayment for the
loans.

Management is not aware of any trends or events,  commitments or  uncertainties,
which  have not  otherwise  been  disclosed  that  will or are  likely to impact
liquidity in a material way.

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

Comparison of Years Ended December 31, 2000 and 1999
----------------------------------------------------

Net income for the year ended  December  31,  2000  decreased  by  approximately
$230,000,  or 4%, as compared to the year ended 1999. Revenues,  for the period,
increased by approximately  $813,000,  or 3%, as compared to the same period for
1999, while expenses increased by approximately  $1,013,000,  or 5.3%.  Minority
interest in income  increased by approximately  $138,000.  During the year ended
December  31,  2000,  the  Company  recognized  a gain on sale of real estate of
approximately $108,000. There was no such transaction in 1999.

The  increase in revenues  for the year ended  December  31, 2000 as compared to
1999 was primarily due to approximate increases in rental income of $276,000, an
increase  in income  from equity  investments  of $86,000,  an increase in early
lease  termination  payments of $406,000  and an increase in interest  income of
$79,000 partially offset by decreases in tenant  reimbursements of $8,000 and in
other income of $27,000.

Approximately  $378,000 of the total  increase  in rental  income was due to the
minimum rent of Winery  Square,  Pablo Plaza,  Rolling  Hills and  reimbursement
charges  offset by the decrease in White Oak Plaza minimum rent and Oxford Mall,
Southgate,  Emporia West and Crossroads retro property taxes.  Included in early
lease  termination  payments is a $300,000 lease settlement paid by A&P as a fee
for terminating their lease at Mountain Park. The increase in income from equity
investments  was  primarily  due to $23,000  increase  in  Pinehurst  income and
$63,000  increase in Weatherly Walk income.  The increase in interest income was
primarily due to the $74,000  increase in the  Crossroads  and Southgate OP Unit
Loan mortgage interest income.

The  increase in expenses  for the year ended  December  31, 2000 as compared to
1999,  was  primarily  due to increases of $187,000 in repairs and  maintenance,
$58,000 in  operating  expenses,  $461,000  in  interest  expense,  $289,000  in
depreciation  and $145,000 in other expenses,  partially offset by a decrease in
real  estate  taxes  of  approximately   $45,000  and  $80,000  in  general  and
administrative expenses.

Repairs and  maintenance  increased  $88,000  due to parking lot light  repairs,
$70,000 in snow removal and $24,000 in grounds landscaping, offset by a decrease
in painting of approximately  $29,000. The increase in operating expenses is due
to  unamortized  lease  costs,  property  management  fees,  and water and sewer
expenses of approximately  $130,000.  These operating  expenses were offset by a
decrease  of $62,000 in legal  expenses  incurred  in 1999 but not in 2000.  The
decrease in real estate taxes was  primarily  due to $125,000 of  Southgate  and
Crossroads  prior year  adjustments  offset by $80,000  increase  of real estate
taxes.  Interest  expense  increased  $857,000 due to the  increased  use of the
Credit Facility and was offset by $288,000  decrease due to the repayment of the
New York Life note payable and $104,000  decrease in rate swap interest.  Of the
increase in depreciation  and  amortization,  approximately  $224,000 was due to
increased depreciation of additional improvements of Governor's Square, Westbird
and several other  properties and $151,000 was due to increased  amortization of
the deferred costs  associated  with the Credit  Facility.  These increases were
partially  offset by  $200,000  due to the  repayment  of the New York Life note
payable.  The  increase in other  expenses was due to $193,000 in a write off of
projects that were abandoned, offset by $61,000 decrease in bad debt expense.

A gain on sale of real estate of  approximately  $108,000 was  recognized in the
year ended December 31, 2000. No such transaction occurred in 1999.

Minority  interest  in  the  income  of  the  Operating   Partnership  increased
approximately  $138,000 for the year ended December 31, 2000 as compared to 1999
primarily  due to the increase in OP Units in  connection  with the post closing
price  adjustment and settlement of the seller notes relating to the acquisition
of Southgate and Crossroads on December 9, 1999.

Comparison of Years Ended December 31, 1999 and 1998
----------------------------------------------------

Net income for the year ended  December  31,  1999  decreased  by  approximately
$824,000,  or 12.4%,  as  compared  to the year ended  1998.  Revenues,  for the
period, increased by approximately  $5,850,000,  or 30%, as compared to the same
period for 1998, while expenses increased by approximately $5,589,000, or 41.3%.
Minority interest in income increased by approximately $304,000. During the year
ended December 31, 1998, the Company  recognized a gain on sale of investment in
partnership of approximately $780,000. There was no such transaction in 1999.

The  increase in revenues  for the year ended  December  31, 1999 as compared to
1998 was primarily due to increases in rental income of $6,277,000,  an increase
in tenant  reimbursements  of $767,000,  an increase in early lease  termination
payments of  $80,000,  and an  increase  in other  income of $24,000,  partially
offset by decreases in income from equity  investments  of $133,000 and interest
income of $1,167,000.

Approximately  $6,322,000 of the total  increase in rental income was due to the
acquisition of 12 Retail Properties during 1998 (the "1998 Acquisition"). Of the
increase in tenant reimbursements,  approximately $1,576,000 was due to the 1998
Acquisition,  offset by a decrease of  approximately  $809,000 due to additional
billings  and  increases  in  estimates  for  recoverable  amounts in 1998.  The
decrease in income from equity  investments was primarily due to the sale of the
Company's limited partnership interest in Dominion and a decrease in income from
Pinehurst. The decrease in interest income was primarily due to the repayment of
the Cross Creek and Weatherly  Walk FHA Mortgage  loans and the repayment of the
Cross Creek Loan in mid to late 1998.

<PAGE>

The  increase in expenses  for the year ended  December  31, 1999 as compared to
1998,  was  primarily  due to  approximate  increases of $406,000 in repairs and
maintenance,  $864,000 in  operating  expenses,  $712,000 in real estate  taxes,
$2,558,000 in interest expense,  $178,000 in general and administrative expenses
and $1,049,000 in depreciation, partially offset by a decrease in other expenses
of approximately $178,000.

Repairs  and  maintenance  increased  approximately  $656,000  due to  the  1998
Acquisition, offset by a decrease in spending at non-1998 Acquisition properties
of  approximately  $250,000 due primarily to parking lot light repairs,  roofing
repairs and painting expenses incurred in 1998 but not in 1999. The increases in
operating expenses and real estate taxes were due almost exclusively to the 1998
Acquisition.  Interest expense  increased  primarily due to increased use of the
Credit  Facility and the  assumption of existing debt on four of the  properties
included  in  the  1998  Acquisition.   Of  the  increase  in  depreciation  and
amortization,  approximately  $1,173,000  was due to the  1998  Acquisition  and
$149,000 was due to increased amortization of the deferred costs associated with
the Credit  Facility.  These  increases were partially  offset by  approximately
$404,000  relating to deferred  insurance costs becoming fully amortized  during
1999.  the decrease in other expenses was primarily due to decreases in bad debt
expenses and losses on the repayment of the Cross Creek and Weatherly Walk loans
in 1998, partially offset by increases due to the 1998 Acquisition.

A gain on sale of  investment  in  partnership  in the  amount of  approximately
$780,000 was recorded for the year ended  December 31, 1998 relating to the sale
of the Company's limited  partnership  interest in Dominion in the first quarter
of 1998.

Minority  interest  in  the  income  of  the  Operating   Partnership  increased
approximately  $304,000 for the year ended December 31, 1999 as compared to 1998
primarily  due to the  issuance  of OP Units  with  respect to three of the 1998
Acquisitions.

Funds from Operations and Funds Available for Distribution
----------------------------------------------------------

Funds from  operations  ("FFO"),  represents net income  (computed in accordance
with generally accepted  accounting  principles)  ("GAAP"),  excluding gains (or
losses)  from debt  restructuring  or  repayments  and sales of  property,  plus
depreciation   and   amortization   and  including  funds  from  operations  for
unconsolidated joint ventures calculated on the same basis. FFO is calculated in
accordance  with the  National  Association  of Real  Estate  Investment  Trusts
("NAREIT")  definition.  FFO does not represent  cash  generated  from operating
activities in  accordance  with GAAP and is not  necessarily  indicative of cash
available to fund cash needs which is disclosed in the  Consolidated  Statements
of Cash Flows included in the financial statements,  for the applicable periods.
There are no material  legal or functional  restrictions  on the use of FFO. FFO
should not be considered as an  alternative to net income as an indicator of the
Company's operating  performance or as an alternative to cash flows as a measure
of  liquidity.  Management  considers  FFO a  supplemental  measure of operating
performance  and  along  with cash flow  from  operating  activities,  financing
activities and investing activities, it provides investors with an indication of
the  ability  of the  Company  to  incur  and  service  debt,  to  make  capital
expenditures, pay distributions to shareholders, and to fund other cash needs.

Funds available for distribution ("FAD") represents FFO plus recurring principal
receipts  from  mortgage  loans  less  lease   commissions,   recurring  capital
expenditures  (excluding property acquisitions) and debt principal amortization.
Net income computed in accordance with GAAP includes straight-lining of property
rentals for rent  escalations in the amounts of $241,592,  $367,078 and $191,057
for the years ended December 31, 2000, 1999 and 1998,  respectively.  FAD should
not be  considered  an  alternative  to net income as a measure of the Company's
financial  performance  or to cash flow from operating  activities  (computed in
accordance  with  GAAP)  as a  measure  of the  Company's  liquidity,  nor is it
necessarily  indicative  of  sufficient  cash flow to fund all of the  Company's
needs.
<PAGE>


FFO, as  calculated in accordance  with the NAREIT  definition,  and FAD for the
years ended  December 31, 2000 and 1999 and the three months ended  December 31,
1997 are summarized in the following table:
<TABLE>
<CAPTION>

                                                              Year              Year             Year
                                                             Ended             Ended             Ended
                                                          December 31,      December 31,     December 31,
                                                              2000              1999             1998
                                                          -------------   ---------------    -----------

<S>                                                        <C>              <C>              <C>
Net income                                                 $  5,592,995     $  5,823,081     $  6,646,633
Gain on sale of investment in partnership                             0                0         (779,893)
Gain on sale of real estate                                    (108,332)               0                0
Loss on repayment of mortgages and loans receivable                   0                0          138,438
Depreciation and amortization of real property                4,718,128        4,377,099        3,143,873
Amortization of insurance contract                                    0          200,195          600,580
Depreciation and amortization from equity investments           242,583          245,649          225,232
                                                           ------------     ------------     ------------

Funds From Operations ("FFO")                                10,445,374       10,646,024        9,974,863

Amortization of deferred financing costs                        525,513          377,665          222,538
Principal payments received on mortgage loans                    35,439           32,416          105,124
Straight-lining of property rentals for rent escalations       (241,592)        (367,078)        (191,057)
Improvements to real estate                                  (6,198,584)      (1,308,093)        (695,177)
Principal repayments on notes payable                          (296,865)        (538,401)        (280,463)
Leasing commissions                                          (1,295,429)        (588,079)        (166,256)
                                                           ------------     ------------     ------------

Funds Available for Distribution ("FAD")                   $  2,973,856     $  8,254,454     $  8,969,572
                                                           ============     ============     ============

Distributions to shareholders                              $  7,727,212     $  7,724,985     $  8,330,865
                                                           ============     ============     ============

FFO payout ratio                                                   74.0%            72.6%            83.5%
                                                           ============     ============     ============

Funds From Operations ("FFO"):                             $ 10,445,374     $ 10,646,024     $  9,974,863
Minority interest in income of the operating partnership:       535,490          397,583           93,547
                                                           ------------     ------------     ------------
FFO available to common shares and OP Units                $ 10,980,864     $ 11,043,607     $ 10,068,410
                                                           ============     ============     ============

Cash flows from:
Operating activities                                       $ 11,189,802     $  9,567,923     $  9,584,324
                                                           ============     ============     ============
Investing activities                                       $ (8,090,815)    $ (1,970,601)    $(20,087,699)
                                                           ============     ============     ============
Financing activities                                       $ (3,850,809)    $ (8,374,501)    $  6,778,799
                                                           ============     ============     ============

Weighted average common shares outstanding                    8,048,952        8,046,574        8,049,987
                                                           ============     ============     ============
Weighted average common shares and OP Units outstanding       8,819,484        8,594,904        8,173,478
                                                           ============     ============     ============

</TABLE>

Recently Issued Accounting Standards
------------------------------------

Statement of Financial  Accounting  Standards ("SFAS") No. 133,  "Accounting for
Derivative  Instruments  and  Hedging  Activities",   as  amended,   establishes
accounting and reporting standards for derivative instruments, including certain
derivative instruments embedded in other contracts,  and for hedging activities,
and is effective for the Company  beginning  with the first quarter of 2001. The
Company has no derivative instruments at December 31, 2000, so implementation of
this standard will have no impact on the Company.

SFAS No. 140,  "Accounting  for Transfers and Servicing of Financial  Assets and
Extiguisment of Liabilities"  replaces SFAS No. 125, which had the same name. It
revises the standards for accounting for  securitizations and other transfers of
financial assets and collateral and requires certain disclosures, but it carries
over most of SFAS No. 125's provisions  without  reconsideration.  The Company's
management does not believe that application of this statement,  required in the
second quarter of 2001, will have a material  impact on the Company's  financial
statements.

Forward-Looking Statements
--------------------------

Certain   statements  made  in  this  report  may  constitute   "forward-looking
statements"  within the meaning of Section 27A of the Securities Act of 1933, as
amended and Section 21E of the Securities Exchange Act of 1934, as amended. Such
forward-looking  statements include statements  regarding the intent,  belief or
current  expectations  of the Company and its  management  and involve known and
unknown  risks,  uncertainties  and other  factors  which  may cause the  actual
results,  performance or achievements of the Company to be materially  different
from any future  results,  performance or  achievements  expressed or implied by
such forward-looking  statements.  Such factors include, among other things, the
following:  general  economic and business  conditions,  which will, among other
things,  affect the demand for retail space or retail  goods,  availability  and
creditworthiness  of  prospective  tenants,   lease  rents  and  the  terms  and
availability of financing; adverse changes in the real estate markets including,
among  other  things,  competition  with other  companies;  risks of real estate
development  and  acquisition;   governmental   actions  and  initiatives;   and
environment/safety requirements.

<PAGE>

Inflation
---------

Inflation  did not have a  material  effect  on the  Company's  results  for the
periods presented.


Item 7A. Quantitative and Qualitative Disclosures About Market Risk

The debt  financing  used to raise capital for the  acquisition of the Company's
investments exposes the Company to fluctuations in market interest rates. Market
interest  rates are highly  sensitive to many  factors,  including  governmental
policies,  domestic and international political considerations and other factors
beyond the control of the Company.

Cash flows from the  Company's  investments  do not  fluctuate  with  changes in
market interest rates. In addition,  as of December 31, 2000,  approximately 36%
of the  Company's  total  notes  payable  outstanding  are either  fixed rate or
non-interest  bearing, and so the payments on these instruments do not fluctuate
with changes in market interest rates. In contrast,  payments required under the
Credit  Facility  vary  based on market  interest  rates,  primarily  the 30 day
Euro-contract  rate.  Thus, an increase in market interest rates would result in
increased payments under the Credit Facility,  without a corresponding  increase
in cash flows from the Company's  investments in the same amounts.  For example,
based on the $41,693,000  outstanding  under the Credit Facility at December 31,
2000, the Company  estimates that an increase of 1% in the 30 day  Euro-contract
rate would decrease the Company's annual net income by approximately $417,000; a
2% increase in the 30 day Euro-contract rate would decrease annual net income by
approximately  $834,000.  For the same  reasons,  a decrease in market  interest
rates would  generally  benefit the Company,  as a result of decreased  payments
under the Credit Facility without corresponding decreases in cash flows from the
Company's  investments.  Various  financial  vehicles  exist  which  would allow
Company  management to mitigate the impact of interest rate  fluctuations on the
Company's cash flows and earnings. On December 1, 1998, the Company entered into
an interest rate swap agreement with a notional amount of $10,000,000 at a fixed
rate of 5.44%. This agreement expired on December 1, 2000. Management may engage
in  additional  hedging  strategies  in the future,  depending  on  management's
analysis  of the  interest  rate  environment  and the  costs  and risks of such
strategies.

<PAGE>


Item 8.  Financial Statements and Supplementary Data.
                                                                Page
                                                           ---------------
(a) 1.   Financial Statements

         Independent Auditors' Report                            20

         Consolidated   Balance  Sheets
         as of  December  31,  2000 and
         1999                                                    21

         Consolidated   Statements   of
         Income  for  the  years  ended
         December  31,  2000,  1999 and
         1998                                                    22

         Consolidated   Statements   of
         Changes    in    Shareholders'
         Equity/Partners'       Capital
         (Deficit)    for   the   years
         ended   December   31,   2000,
         1999 and 1998                                           23

         Consolidated   Statements   of
         Cash   Flows   for  the  years
         ended   December   31,   2000,
         1999 and 1998                                           24

         Notes     to      Consolidated
         Financial Statements                                    26



<PAGE>




                          INDEPENDENT AUDITORS' REPORT

To the Shareholders and
Board of Directors of
Aegis Realty, Inc.
New York, New York


We have audited the  accompanying  consolidated  balance sheets of Aegis Realty,
Inc. and subsidiaries  (the "Company") as of December 31, 2000 and 1999, and the
related consolidated  statements of income,  changes in shareholders' equity and
cash flows for each of the three years in the period  ended  December  31, 2000.
Our audits  also  included  the  financial  statement  schedules  listed in Item
14(a)2.  These financial  statements and financial  statement  schedules are the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these financial statements and financial statement schedules based on
our audits.

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

In our opinion,  such consolidated  financial  statements present fairly, in all
material respects, the financial position of Aegis Realty, Inc. and subsidiaries
as of December 31, 2000 and 1999, and the results of their  operations and their
cash flows for each of the three years in the period ended  December 31, 2000 in
conformity with accounting principles generally accepted in the United States of
America.  Also,  in  our  opinion,  such  financial  statement  schedules,  when
considered  in  relation  to the basic  financial  statements  taken as a whole,
present fairly, in all material respects, the information set forth therein.


DELOITTE & TOUCHE LLP
New York, New York

February 23, 2001



<PAGE>





                        AEGIS REALTY, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>


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

<S>                                                                  <C>              <C>
Real estate, net                                                     $ 175,156,729    $ 172,784,964
Investment in partnerships                                               5,746,841        5,923,199
Mortgage loan receivable                                                 3,170,322        3,220,191
Loans receivable from affiliates                                         2,312,543        2,077,886
Cash and cash equivalents                                                1,474,473        2,226,295
Accounts receivable-tenants, net of allowance for doubtful
  accounts of $383,000 and $343,000, respectively                        3,215,665        2,958,033
Deferred costs, net                                                      5,679,884        2,800,537
Other assets                                                               937,486        1,401,319
                                                                     -------------    -------------

  Total Assets                                                       $ 197,693,943    $ 193,392,424
                                                                     =============    =============

                      LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
  Notes payable                                                      $  64,972,605    $  59,239,944
  Accounts payable and other liabilities                                 4,476,477        3,514,381
  Distributions payable                                                  2,115,590        2,076,125
                                                                     -------------    -------------

  Total Liabilities                                                     71,564,672       64,830,450
                                                                     -------------    -------------

Minority interest of unitholders in the Operating Partnership            6,941,884        7,260,370
                                                                     -------------    -------------

Commitments and Contingencies

  Shareholders' equity:
  Common stock; $.01 par value; 50,000,000 shares authorized;
  8,055,479 issued and 8,049,179 outstanding and 8,053,159
   issued and 8,046,859 outstanding in 2000 and 1999, respectively          80,554           80,531
  Treasury stock; $.01 par value; 6,300 shares                                 (63)             (63)
  Additional paid in capital                                           125,339,053      125,319,076
  Distributions in excess of net income                                 (6,232,157)      (4,097,940)
                                                                     -------------    -------------

  Total Shareholders' Equity                                           119,187,387      121,301,604
                                                                     -------------    -------------

  Total Liabilities and Shareholders' Equity                         $ 197,693,943    $ 193,392,424
                                                                     =============    =============
</TABLE>


See accompanying notes to consolidated financial statements.

<PAGE>


                        AEGIS REALTY, INC. AND SUBSIDIARIES
                        CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>


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

<S>                                         <C>             <C>             <C>
  Rental income                             $ 19,956,353    $ 19,680,116    $ 13,402,982
  Tenant reimbursements                        4,674,235       4,682,075       3,914,656
  Early lease termination payments               500,162          93,846          13,464
  Income from equity investments                 376,903         291,082         423,624
  Interest income                                561,693         482,442       1,649,071
  Other                                           97,924         124,940         101,006
                                            ------------    ------------    ------------

  Total revenues                              26,167,270      25,354,501      19,504,803
                                            ------------    ------------    ------------

Expenses:

  Repairs and maintenance                      2,097,007       1,910,194       1,503,746
  Operating                                    2,708,158       2,650,579       1,786,619
  Real estate taxes                            2,391,257       2,436,047       1,724,424
  Interest                                     4,950,058       4,489,556       1,931,874
  General and administrative                   1,917,587       1,998,052       1,819,556
  Depreciation and amortization                5,186,493       4,897,811       3,849,190
  Other                                          896,557         751,598         929,107
                                            ------------    ------------    ------------

  Total expenses                              20,147,117      19,133,837      13,544,516
                                            ------------    ------------    ------------

Income before gains on sale                    6,020,153       6,220,664       5,960,287
Gain on sale of real estate                      108,332               0               0
Gain on sale of investment in partnership              0               0         779,893
                                            ------------    ------------    ------------

Income before minority interest                6,128,485       6,220,664       6,740,180

Minority interest in income of the
  Operating Partnership                         (535,490)       (397,583)        (93,547)
                                            ------------    ------------    ------------

Net income                                  $  5,592,995    $  5,823,081    $  6,646,633
                                            ============    ============    ============

Net income per share:

  Basic                                     $        .69    $        .72    $        .83
                                            ============    ============    ============

  Diluted                                   $        .69    $        .72    $        .82
                                            ============    ============    ============

Weighted average shares outstanding:

  Basic                                        8,048,894       8,046,574       8,049,987
                                            ============    ============    ============

  Diluted                                      8,048,952       8,046,574       8,075,390
                                            ============    ============    ============


See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>



                     AEGIS REALTY, INC. AND SUBSIDIARIES
         CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>


                                         Common Stock           Treasury Stock       Additional      Distributions
                                      ------------------      -----------------       Paid-in        in Excess of
                                       Shares     Amount      Shares     Amount       Capital         Net Income           Total
                                       ------     ------      ------     ------       -------         ----------       ------------

<S>                <C>                <C>         <C>              <C>  <C>        <C>              <C>              <C>
Balance at January 1,1998             8,050,727   $ 80,507         0    $     0    $ 125,476,308    $    (511,804)   $ 125,045,011

Net income                                    0          0         0          0                0        6,646,633        6,646,633
Issuance of shares of common stock          432          4         0          0            4,996                0            5,000
Purchase of treasury shares                   0          0    (6,300)       (63)         (58,516)               0          (58,579)
Consolidation costs                           0          0         0          0         (123,692)               0         (123,692)
Distributions                                 0          0         0          0                0       (8,330,865)      (8,330,865)
                                     ----------   --------  --------    -------    -------------    -------------    -------------

Balance at December 31, 1998          8,051,159     80,511    (6,300)       (63)     125,299,096       (2,196,036)     123,183,508

Net income                                    0          0         0          0                0        5,823,081        5,823,081
Issuance of shares of common stock        2,000         20         0          0           19,980                0           20,000
Distributions                                 0          0         0          0                0       (7,724,985)      (7,724,985)
                                     ----------   --------  --------    -------    -------------    -------------    -------------

Balance at December 31, 1999          8,053,159     80,531    (6,300)       (63)     125,319,076       (4,097,940)     121,301,604

Net income                                    0          0         0          0                0        5,592,995        5,592,995
Issuance of shares of common stock        2,320         23         0          0           19,977                0           20,000
Distributions                                 0          0         0          0                0       (7,727,212)      (7,727,212)
                                     ----------   --------  --------    -------    -------------    -------------    -------------

Balance at December 31, 2000          8,055,479   $ 80,554    (6,300)   $   (63)   $ 125,339,053    $  (6,232,157)   $ 119,187,387
                                     ==========   ========  ========    =======    =============    =============    =============


See accompanying notes to consolidated financial statements.

</TABLE>
<PAGE>




                        AEGIS REALTY, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>


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

Cash flows from operating activities:

<S>                                                 <C>             <C>             <C>
Net income                                          $  5,592,995    $  5,823,081    $  6,646,633
Adjustments to reconcile net income to net cash
  provided by operating activities:
  Gain on sale of real estate                           (108,332)              0               0
  Gain on sale of investment in partnership                    0               0        (779,893)
  Loss on repayments of mortgage loans receivable              0               0         138,438
  Depreciation and amortization                        5,243,641       4,954,959       3,966,178
  Minority interest in income of the Operating
   Partnership                                           535,490         397,583          93,547
  Distributions from equity investments
   in excess of income                                   133,640         129,626          97,954
  Leasing commissions and costs                       (1,395,929)       (659,579)       (166,256)
  Changes in operating assets and liabilities:
  Accounts receivable-tenants                           (297,359)       (474,991)     (1,353,348)
  Allowance for doubtful accounts                         39,727         (40,146)         79,978
  Other assets                                           463,833        (165,577)       (696,092)
  Accounts payable and other liabilities                 982,096        (397,033)      1,557,185
                                                    ------------    ------------    ------------

  Net cash provided by operating activities           11,189,802       9,567,923       9,584,324
                                                    ------------    ------------    ------------

Cash flows from investing activities:

  Net proceeds from sale of real estate                  154,409               0               0
  Proceeds from sale of investment in partnership              0               0       4,727,500
  Improvements to real estate                         (6,198,584)     (1,308,093)       (695,177)
  Acquisitions of real estate including
   acquisition expenses                                 (557,823)       (653,015)    (51,598,294)
  Increase in deferred acquisition expenses           (1,289,599)        (45,038)       (114,229)
  Repayments of loans receivable from affiliates          21,280           3,129       3,060,000
  Loans made to affiliate                               (255,937)              0      (2,081,015)
  Principal payments received on mortgage loans           35,439          32,416      27,528,253
  Closing costs relating to the repayment of
   mortgage loan receivable                                    0               0         (19,537)
  Investment in partnership                                    0               0        (895,200)
                                                    ------------    ------------    ------------

  Net cash used in investing activities               (8,090,815)     (1,970,601)    (20,087,699)
                                                    ------------    ------------    ------------

Cash flows from financing activities:

  Repayments of notes payable                         (4,845,474)              0     (28,703,385)
  Periodic principal payments on notes payable          (296,865)       (538,401)       (202,078)
  Proceeds from notes payable                         10,875,000       1,500,000      44,568,000
  Distributions paid to shareholders                  (7,726,655)     (8,327,874)     (7,728,904)
  Increase in deferred loan costs                     (1,041,747)       (553,324)       (896,901)
  Distributions paid to minority interest               (815,068)       (454,902)        (74,942)
  Purchase of treasury shares                                  0               0         (58,579)
  Consolidation costs                                          0               0        (124,412)
                                                    ------------    ------------    ------------

  Net cash (used in) provided by
   financing activities                               (3,850,809)     (8,374,501)      6,778,799
                                                    ------------    ------------    ------------

                                                                        (continued)
<PAGE>

Net decrease in cash and cash equivalents                   (751,822)      (777,179)     (3,724,576)

Cash and cash equivalents at the beginning of
  the year                                                 2,226,295      3,003,474       6,728,050
                                                    ----------------   ------------    ------------

Cash and cash equivalents at the end of the year    $      1,474,473   $  2,226,295    $  3,003,474
                                                    ================   ============    ============

Supplemental information:
  Interest paid                                     $      4,950,059   $  4,841,223    $  1,626,784
                                                    ================   ============    ============

Supplemental disclosure of noncash activities:

Notes payable assumed in acquisition of real
  estate                                            $              0   $         $0    $ 23,952,320
                                                    ================   ============    ============

Real estate acquired for units
  in the Operating Partnership                      $              0   $          0    $  6,120,257
                                                    ================   ============    ============

Payable to directors liquidated
  through the issuance of shares
  of common stock                                   $         20,000   $     20,000    $      5,000
                                                    ================   ============    ============

Reclassification of deferred acquisition expenses
  to real estate upon purchase                      $              0   $     61,278    $     47,459
                                                    ================   ============    ============

Real estate acquired through issuance of
  purchase money notes to sellers                   $              0   $          0    $    705,000
                                                    ================   ============    ============

Repayment of purchase money notes
  to sellers through the issuance
  of units in the Operating Partnership             $              0   $    585,754    $          0
                                                    ================   ============    ============

See accompanying notes to consolidated finaicial statements.
</TABLE>

<PAGE>



                        AEGIS REALTY, INC. AND SUBSIDIARIES
                    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - General

Aegis Realty, Inc. ("Aegis" or the "Company") is a Maryland corporation that has
qualified as a real estate  investment trust ("REIT") under the Internal Revenue
Code of 1986 as amended (the  "Code").  The Company was formed to acquire,  own,
operate and renovate primarily  supermarket-anchored  neighborhood and community
shopping  centers.  As of December 31, 2000, the Company owned a portfolio of 28
retail  properties  containing  a  total  of  approximately  3.0  million  gross
leaseable  square  feet,  held  partnership  interests  in two  suburban  garden
apartment properties and held one FHA insured participating  mortgage secured by
a suburban garden apartment property.

The  Company  was formed on  October 1, 1997 as the result of the  consolidation
(the   "Consolidation")   of  four  publicly   registered,   non-listed  limited
partnerships,  Summit Insured Equity L.P.  ("Insured I"),  Summit Insured Equity
L.P. II ("Insured II"),  Summit  Preferred  Equity L.P. and Eagle Insured,  L.P.
(the "Partnerships",  and each individually a "Partnership"). One of the general
partners  of the  Partnerships  was an  affiliate  of  Related  Capital  Company
("Related"), a nationwide, fully integrated real estate financial services firm.
Pursuant to the  Consolidation,  the Company  issued shares of its common stock,
par  value  $.01  per  share  (the  "Common  Stock")  to  all  partners  in  the
Partnerships in exchange for their interests in the Partnership  based upon each
partner's proportionate interest in the Common Stock issued to their Partnership
in the Consolidation.

The Company is governed by a board of  directors  comprised  of two  independent
directors and three directors who are affiliated  with Related.  The Company has
engaged Related Aegis LP (the "Advisor"),  a Delaware limited partnership and an
affiliate of Related, to manage its day to day affairs.

The Company owns all of its assets  directly or indirectly  through Aegis Realty
Operating  Partnership,  LP, a  Delaware  limited  partnership  (the  "Operating
Partnership"  or "OP"),  of which the  Company is the sole  general  partner and
holder of  91.31%  of the units of  partnership  interest  (the "OP  Units")  at
December 31, 2000.  At December 31, 2000,  5.54% of the OP Units are held by the
sellers of three of the retail  properties  and 3.15% were held by affiliates of
Related.

On  December  21,  2000,  the  Company  entered  into a  definitive  acquisition
agreement  to acquire a  portfolio  of 19 shopping  centers  and several  retail
development   opportunities   (the  "Acquisition   Transaction")   from  Dallas,
Texas-based P.O'B.  Montgomery & Company (and its investment  partners) ("POB").
Under the terms of the  acquisition  agreement,  Aegis has agreed to pay POB and
its investment partners total consideration of $203.5 million. The consideration
will be  comprised of : (i) $3 million in cash,  (ii) $58.4  million of OP Units
which are convertible on a one-for-one  basis into Aegis common stock at a value
of $11 per share and cannot be transferred for one year, and (iii) assumption of
$142.1 million in non-recourse  debt encumbering the acquired  shopping centers.
The  consideration  and components of the  consideration  are subject to certain
adjustments provided for in the acquisition agreement.

As a condition to the Acquisition Transaction, Aegis will terminate its advisory
agreement and acquire the assets of the Company's  property manager (see Note 8)
(consisting  primarily of several desktop  computers and software) and terminate
the property  management  agreement  pursuant to the management  internalization
agreement which was entered into simultaneously  with the acquisition  agreement
(the "Management  Internalization").  Upon closing, certain officers of POB will
assume full-time  executive positions with Aegis and the Board of Directors will
be  expanded  from  five to  seven  members,  four of whom  will be  independent
directors. As a result, Aegis will become self-managed and self-administered.

The  Acquisition  Transaction  is subject  to Aegis'  stockholder  approval  and
customary conditions,  and, if approved, both transactions are expected to close
in 2001. The acquisition agreement has been unanimously approved by the Board of
Directors of Aegis (including the independent directors) and the shareholders of
POB and the management  internalization  agreement has been unanimously approved
by the independent  directors of Aegis on behalf of the full Board of Directors.
Although  there  are   limitations  on  Aegis'  ability  to  solicit   competing
transactions,   Aegis'  Board  of  Directors   retains  the  right  to  consider
alternative  transactions in accordance with its duties under applicable law. An
alternative  transaction may include,  among others, any merger,  consolidation,
share  exchange or business  combination.  The exercise of such rights by Aegis'
Board of Directors could result in payment of a termination fee of $3 million to
POB.

The Advisor  will be entitled to its  standard  acquisition  fee of 3.75% of the
acquisition  price of the properties  acquired (equal to $7.5 million if all the
POB properties are acquired) in connection with the Acquisition Transaction.  In
consideration  of the  Management  Internalization,  the  Property  Manager  and
Advisor will be paid an aggregate amount of  approximately  $3.5 million subject
to adjustments pursuant to the management internalization agreement. The maximum
aggregate  consideration payable to the Property Manager and the Advisor will be
$11 million of which up to $1 million  may be paid in cash and the balance  will
be paid in the form of (i) a distribution of Aegis' non-core,  non-retail assets
based upon their book value subject to certain  adjustments and (ii) Aegis stock
issued at a value of $11.

NOTE 2 - Summary of Significant Accounting Policies

a)  Basis of Accounting

The books and  records of the  Company are  maintained  on the accrual  basis of
accounting in accordance with accounting  principles  generally  accepted in the
United States of America  ("GAAP").  The preparation of financial  statements in
conformity with GAAP requires the Advisor 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. Actual results could differ from those estimates.

<PAGE>


b)  Basis of Consolidation

The consolidated  financial  statements  include the accounts of the Company and
its subsidiary  partnerships.  All intercompany  accounts and transactions  have
been eliminated in consolidation.

c)  Real Estate

The carrying  amount of real estate  includes the  purchase  price,  acquisition
expenses, and other direct costs incurred in acquiring the properties. Buildings
are  depreciated  on a straight  line basis over their  estimated  useful lives,
generally 40 years.  Maintenance and repairs are charged to expense as incurred.
Renewals and betterments that significantly extend the useful life of a property
are  capitalized  and  amortized  over  their  estimated  useful  lives.  Tenant
improvements are capitalized and amortized over the life of the lease.

d)  Investment in Partnerships

The Company  accounts for its investment as a limited  partner in  partnerships,
which own the  multifamily  properties,  using the equity  method of  accounting
because it exercises  significant  influence  over, but does not control,  these
limited partnerships.

e)  Impairment

The Company  reviews each of its property  investments,  including those held by
the partnerships which own the multifamily  properties,  for possible impairment
at least annually, and more frequently if circumstances  warrant.  Impairment of
properties is determined to exist when  estimated  amounts  recoverable  through
future  operations on an undiscounted  basis are below the properties'  carrying
value.  If a property is  determined  to be impaired,  it is written down to its
estimated fair value.

At least annually,  and more frequently if  circumstances  warrant,  the Company
evaluates the collectibility of both interest and principal of its mortgage loan
receivable  to determine  whether it is  impaired.  A loan is  considered  to be
impaired  when,  based on current  information  and events,  it is probable  the
Company  will be unable to collect  all amounts due  according  to the  existing
contractual  terms. When a loan is considered to be impaired,  the amount of the
loss accrual is determined by discounting  the expected future cash flows at the
loan's effective  interest rate or, for practical  purposes,  from the estimated
fair value of the collateral.

The determination of impairment is based not only upon future cash flows,  which
rely upon estimates and  assumptions  including  expense  growth,  occupancy and
rental rates, but also upon market  capitalization and discount rates as well as
other market indicators.  Management believes that the estimates and assumptions
used  are  appropriate  in  evaluating  the  carrying  amount  of the  Company's
properties and loan. However, changes in market conditions and circumstances may
occur in the near term which would  cause these  estimates  and  assumptions  to
change,  which, in turn,  could cause the amounts  ultimately  realized upon the
sale or other  disposition of the  investments to differ  materially  from their
estimated fair value. Such changes may also require write-downs in future years.
No write-downs  for impairment  have been recorded  during the three years ended
December 31, 2000.

f)  Cash and Cash Equivalents

Cash and cash equivalents include cash in banks and money market funds.

g)  Deferred Loan Costs

Costs incurred in connection  with the Company's debt have been  capitalized and
are being  amortized  over the life of the  respective  debt using the effective
yield method.

h)  Deferred Leasing Commissions

Costs  incurred  in  connection  with the  lease-up  of  vacant  space and lease
renewals  have been  capitalized  and are being  amortized  over the term of the
underlying leases.

Amortization  related to the  deferred  costs  described in (g) and (h) above is
included in depreciation and amortization expense.

i)  Deferred Acquisition Expenses

Direct  costs  incurred  in  connection  with the  proposed  purchase  of retail
properties are deferred.  Upon  acquisition of a property,  the associated costs
are  capitalized  as real  estate.  Direct  costs  incurred in  connection  with
properties  which are not  acquired,  and all indirect  acquisition  costs,  are
charged to operations.

<PAGE>

j)  Revenue Recognition

Rental income includes amounts received and accrued from operating  leases.  The
straight-line  basis is used to recognize  base rents under leases which provide
for varying rents over the lease terms.  Rentals based on a percentage of tenant
sales over a specified  threshold  are accrued  after the threshold is exceeded.
Payments  received from tenants to induce the Company to release the tenant from
its lease  obligation prior to expiration are recognized upon termination of the
lease.  Amounts due from tenants as  reimbursements  of common area maintenance,
real  estate  taxes and  insurance  are  accrued  as the  related  expenses  are
incurred.  Interest  income on the mortgage loan  receivable is accrued as it is
earned.

k)  Income Taxes

The Company has  qualified  as a REIT under the Code.  A REIT is  generally  not
subject  to  federal  income  tax on that  portion  of its REIT  taxable  income
("Taxable  Income") which is distributed  to its  shareholders  provided that at
least 95% of Taxable Income is  distributed  and provided that such income meets
certain other conditions.  Accordingly, no provision for federal income taxes is
required. The Company may be subject to state taxes in certain jurisdictions.

During 2000, the Company  declared  distributions of $.96 per share. For federal
income tax  purposes,  $.24 per share of ordinary  income was carried  over from
1999,  $.79  and $.17 per  share of  ordinary  income  and  return  of  capital,
respectively,  was  reported  to  shareholders  for 2000  and $.24 per  share of
ordinary income was carried over to 2001.

l)  Comprehensive Income

Because the Company has no items of other  comprehensive  income,  the Company's
net income and comprehensive income are the same for all periods presented.

m)  Segment Information

SFAS  No.  131,  "Disclosures  About  Segments  of  an  Enterprise  and  Related
Information",  requires  enterprises to report certain financial and descriptive
information   about   their   reportable   operating   segments,   and   certain
enterprise-wide  disclosures  regarding products and services,  geographic areas
and major  customers.  The Company is an investor in real estate  related assets
and operates in only one reportable  segment.  All of the Company's  investments
are, or are secured by,  real estate  properties  located in the United  States;
accordingly, all of its revenues were derived from U.S. operations.

n)  New Pronouncements

In December of 1999, the staff of the Securities and Exchange  Commission issued
Staff   Accounting   Bulletin  No.  101,   "Revenue   Recognition  in  Financial
Statements".  This bulletin  summarizes certain of the staff's views in applying
generally  accepted  accounting  principles to revenue  recognition in financial
statements. The Company's management believes that the guidance expressed in the
bulletin does not affect the Company's current revenue recognition policies.

Statement of Financial  Accounting  Standards ("SFAS") No. 133,  "Accounting for
Derivative  Instruments  and  Hedging  Activities"  establishes  accounting  and
reporting  standards for derivative  instruments,  including certain  derivative
instruments embedded in other contracts, and for hedging activities.  As amended
by SFAS No. 137 and 138,  it is  effective  for the Company  beginning  with the
first quarter of 2001. The Company has no derivative instruments at December 31,
2000, so implementation of this standard will have no impact on the Company.

SFAS No. 140  "Accounting  for Transfers  and Servicing of Financial  Assets and
Extinguishments  of Liabilities"  replaces SFAS No. 125 which had the same name.
It revises the standards for accounting for  securitizations and other transfers
of financial  assets and collateral  and requires  certain  disclosures,  but it
carries  over most of SFAS No. 125's  provisions  without  reconsideration.  The
Company's  management  does not  believe  that  application  of this  statement,
required  in the  second  quarter of 2001,  will have a  material  impact on the
Company's financial statements.

o)  Reclassifications

Certain amounts in the 1999 and 1998 financial statements have been reclassified
to conform to the 2000 presentation.

<PAGE>


NOTE 3 - Real Estate

The components of real estate are as follows:

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

Land                                $  40,267,037  $ 39,798,459
Buildings and improvements            162,348,285   156,239,538
                                      -----------   -----------
                                      202,615,322   196,037,997

Less:  Accumulated depreciation       (27,458,593)  (23,253,033)
                                     ------------  ------------

                                     $175,156,729  $172,784,964
                                      ===========   ===========


Amounts  estimated to be recoverable  from future  operations and ultimate sales
are greater than the carrying  value of each property owned at December 31, 2000
and 1999. However,  the carrying value of certain properties may be in excess of
their fair values as of such dates.

On May 19,  2000,  the  Company  acquired  an  out-parcel  of  developable  land
contiguous  to the Forest Park Square  property  for $500,000  plus  acquisition
costs of approximately $32,360.

As part of the  renewal  of the lease  for the  anchor  tenant  at the  Westbird
property, the Company made $1,000,000 in tenant improvements during August 2000.
The term of the new lease is 20 years  with a minimum  rental of  $246,000.  The
minimum annual rent under the old lease was $103,000.

The  acquisitions  of Governor's  Square,  Southgate and Crossroad  East,  three
properties  with purchase  prices of  $8,200,000,  $15,100,000  and  $4,800,000,
respectively,  were partially  financed through the issuance of 94,726,  208,914
and 167,149 OP Units  (subject to adjustment)  valued at $1,231,438,  $2,715,882
and $2,172,937.  These OP Units were  convertible to shares of Common Stock on a
one-to-one basis,  subject to adjustment,  beginning on the one year anniversary
of their  respective  closing dates.  The OP Units were issued at an agreed upon
value of $13 per OP Unit.  If,  as of the last  trading  day  prior to the first
anniversary  of the  closing  date (the  "Post-Closing  Adjustment  Date"),  the
"Average  Price Per Share"  (as  defined)  was less than $13,  the  Company  was
obligated to issue  additional OP Units to the respective  sellers in the amount
of the  difference  between (i) the  quotient  obtained by dividing  the OP Unit
value at $13 per OP Unit by the Average  Price Per Share as of the  Post-Closing
Adjustment  Date and (ii) the number of OP Units issued on the closing  date. An
additional 28,187 OP Units were issued to the seller of Governor's Square on the
Post-Closing  Adjustment Date (May 28, 1999) based on an Average Price Per Share
of  $10.01875.  An  additional  92,439 and  73,957 OP Units  were  issued to the
sellers of Southgate and  Crossroads  East,  respectively,  on the  Post-Closing
Adjustment  Date  (December  9,  1999)  based on an  Average  Price Per Share of
$9.0125.

None of the  Company's  investment  properties  accounted for 10% or more of the
Company's  total gross  revenues  for any of the three years in the period ended
December 31, 2000.

During the years ended  December 31, 2000,  1999 and 1998,  the Kroger  Company,
which is a tenant at six shopping centers,  accounted for approximately 11%, 12%
and 17%, respectively, of the Company's total revenues.

Based on the  carrying  value at December  31,  2000,  approximately  15% of the
Company's investment properties are located in Ohio, 12% are located in Florida,
10% are  located in North  Carolina  and 10% are located in  Virginia.  No other
states comprise more than 10% of the total carrying value.

Insured II, an indirectly  wholly-owned subsidiary of the Company, is the record
owner of three of the retail  properties.  Insured II is the  beneficiary  of an
insurance policy (the "Policy") from Continental Casualty Company ("CNA") which,
in  effect,   insures  that  the   cumulative   amount  of  cash  available  for
distribution,  from all sources, as determined in accordance with the Policy and
related  agreement  together with the appraised values of the Retail  Properties
then owned by Insured  II,  will equal at least 100% of the  aggregate  original
capital contributions to Insured II allocated to investment in properties on the
day on which the last such  Retail  Property  was  acquired  by Insured  II. The
Policy will expire in May 2001.  Insured I had been the beneficiary of a similar
policy that expired in November 1999. No payments were received on the Insured I
policy and none are expected on the Insured II policy.

<PAGE>


NOTE 4 - Deferred Costs

The components of deferred costs are as follows:

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

Deferred loan costs                        $3,437,672    $2,395,925
Deferred leasing commissions and costs      2,667,216     1,426,098
Deferred acquisition expenses               1,387,588        97,989
                                            ---------   -----------
                                            7,492,476     3,920,012

Less:  Accumulated amortization            (1,812,592)   (1,119,475)
                                           ----------    ----------

                                           $5,679,884    $2,800,537
                                            =========     =========

The increase in deferred  acquisition  expenses in 2000 is due to  approximately
$1,119,000 in expenses  incurred to date by the Company in  connection  with the
proposed Acquisition Transaction discussed in Note 1.

NOTE 5 - Investments in Partnerships

The Company owns a limited  partnership  interest in the  TCR-Pinehurst  Limited
Partnership  ("Pinehurst"),  which acquired and operates the Pinehurst apartment
complex in Kansas City,  Missouri.  Under the original terms of this investment,
the Company is entitled  to a preferred  equity  return of 8.8% per annum on its
initial  investment  of  $3,799,620,  and 9.85% on a  subsequent  investment  of
$1,949,805.   These   preferred   equity   returns   are   cumulative   and  non
interest-bearing.  The cumulative, unrecorded and undistributed preferred equity
returns to the Company  totaled  $1,826,245  and $1,763,772 at December 31, 2000
and 1999,  respectively.  These preferred equity returns are payable from excess
cash flow from  operations or proceeds from a sale or refinancing of Pinehurst's
rental property. The Company's percentage of ownership in Pinehurst is 98.99%.

On August 26,  1998,  the  Company  invested  $895,200  for a 40%  interest as a
limited  partner in FAI Ltd.  ("FAI"),  the limited  partnership  which owns the
Weatherly Walk Apartments located in Fayetteville, Georgia. This equity interest
earns an annual preferred return of 10.5% on $895,200, paid monthly, plus 40% of
excess cash flow and sale or refinancing  proceeds. As of December 31, 2000, the
Company had received all of the preferred returns due from FAI.

The Company owned a limited  partnership  investment in the Dominion  Totem Park
Limited  Partnership  ("Dominion"),  which  acquired  and  operated an apartment
complex in  Kirkland,  Washington.  On March 20,  1998,  the general  partner of
Dominion  purchased the Company's  limited  partnership  interest.  The purchase
price was determined by independent appraisals and resulted in a cash payment to
the Company of $4,727,500, which was $779,893 in excess of the carrying value of
this investment at the date of sale.

Amounts  estimated to be recoverable  from future  operations and ultimate sales
are greater than the carrying value of the Company's investments in partnerships
at December 31, 2000.

NOTE 6 - Mortgage Loan Receivable

As of December 31, 2000 and 1999,  the Company held a FHA mortgage and an equity
loan secured by Woodgate  Manor,  an apartment  complex  located in Gainesville,
Florida.  The FHA mortgage,  in the original  amount of $3,110,300  has a stated
interest  rate of 8.95% and matures  January 1, 2024.  The 8.95%  interest  rate
includes  a 0.07%  servicing  fee  paid by the  developer  to  Related  Mortgage
Corporation,  an affiliate of the Advisor.  The base  interest and principal are
co-insured by the FHA (80%) and an affiliate of the Advisor (20%).

The equity loan, in the original amount of $339,700,  represented a non-interest
bearing  advance  made to the  developer  for such  items as  initial  operating
deficit  escrow  requirements  and HUD  related  contingencies  such as  working
capital  escrow and cash  requirements.  Such amounts are due on demand upon six
months notice at any time after the tenth anniversary of the initial endorsement
of the loan by HUD.

The  Company  is  entitled  to call for  prepayment  of the  entire  outstanding
principal amount of the mortgage loan and the equity loan. The Company, in order
to call for  prepayment,  would be required to terminate the mortgage  insurance
contract  with FHA and the  other  co-insurer.  The  Company's  intention  is to
exercise the call option only if it determines  that the value of the underlying
development has increased  sufficiently enough to assume the risk of foreclosure
should the  mortgagor  fail to make the  accelerated  payment.  The borrower may
elect to prepay at any time without incurring prepayment penalties.

The general  partner  interest in the  borrower is held by an  affiliate  of the
Advisor.

The owners of Woodgate  Manor have  advised the company  they they have  entered
into an agreement  dated  December 12, 2000 to sell the property to an unrelated
third party.  In connection with the sale, both the mortgage loan receivable and
the equity loan held by the Company would be repaid in full. The  transaction is
expected  to close  during  the  first  half of 2001.  The  Company  anticipates
receiving approximately $3.5 million in repayment of the loans.

<PAGE>


NOTE 7 - Notes Payable

As of December 31, 2000 and 1999, the Company had notes payable as follows:
<TABLE>
<CAPTION>


                                                                                                Collateral/
                  Date of                 Monthly                                                Carrying
                   Note/                  Payment    Outstanding   Outstanding    Balloon         Value at
                  Maturity   Interest   of Principal   Balance       Balance      Payment/       December
Noteholder          Date       Rate     and Interest  at 12/31/00   at 12/31/99   Due Date       31, 2000
----------       ----------  ---------  ------------  -----------   -----------  ------------     -----------

<S>               <C>           <C>    <C>           <C>           <C>             <C>            <C>
New York Life     7/11/95       9.25%  $   55,984    $        0     $ 4,726,178              -     N/A
  Insurance       6/10/00
  Company

(a)               12/29/97         (b)    Interest   41,693,000(c)  30,818,00(c)             -      (h)
                  12/29/03                    only


Heller            6/24/97(d)    8.50%  $    19,992     2,523,267     2,547,557      $ 2,307,314   Barclay Place/
  Financial, Inc. 7/1/07                                                              7/1/07      $    3,994,587

Nomura            10/28/97(e)   7.54%  $    33,130     3,800,498     3,902,472              -     Village At
  Asset Capital   11/11/22                                                                        Waterford/
  Corporation                                                                                     $    6,243,705

Chase Bank        12/16/96(f)  8.875%  $    51,717     6,290,934     6,350,323      $ 5,808,553   Oxford Mall/
                  1/1/07                                                             1/1/07       $    8,772,302

Merrill Lynch     9/18/97 (g)   7.73%  $    79,509    10,664,906    10,776,168      $ 9,634,530   Southgate/
  Credit          10/1/07                                                            10/1/07      $15,282,639
  Corporation

Sellers of        12/10/98        (i)  $         0             0    64,600 (i)              -     None
  Southgate       12/10/99

Sellers of        12/10/98        (i)  $         0             0    16,292 (i)              -     None
  Crossroads East 12/10/99

Sellers of        12/10/98        (i)  $         0             0     38,354(i)              -     None
Crossroads East   12/9/99                           -----------   --------------

                                                    $64,972,605   $   59,239,944
                                                    ===========   ==============

</TABLE>

(a) The Credit Facility is shared among Fleet Bank.  (28.57%),  KeyBank National
Association (28.57%),  Citizens Bank of Rhode Island (28.57%) and Sovereign Bank
(14.29%).

(b) The  interest  rate under the  Credit  Facility  can float 1/2% under  Fleet
Bank's  base rate or can be fixed in 30,  60, 90 and 180 day  periods  at 1.625%
over the indicated  Euro-contract rate at the option of the Company. The Company
has currently elected the 30 day rate which was 6.625% at December 31, 2000.

(c)  Outstanding  balance of a $80  million  senior  revolving  credit  facility
("Credit Facility").

(d) Note was assumed  upon  purchase of the property by the Company on March 31,
1998.

(e) Note was assumed  upon  purchase of the property by the Company on April 22,
1998.

(f) Note was assumed  upon  purchase of the  property by the Company on November
24, 1998.

(g) Note was assumed upon purchase of the property by the Company on December 9,
1998.

(h) The Credit Facility,  which expires on December 29, 2003, was collateralized
at  December  31,  2000 by  nineteen  retail  properties,  one  investment  in a
partnership  and  the  mortgage  loan  with  carrying  values  of  $110,266,019,
$5,070,366 and $3,170,322,  respectively.  In addition, the obligation under the
Credit  Facility is  guaranteed  by the  Company,  two of its  subsidiaries  and
TCR-Pinehurst Limited Partnership.

<PAGE>


(i) The note  payable to the sellers of Southgate  and the two notes  payable to
the  sellers  of  Crossroads  East in the  amounts  of  $200,000,  $230,000  and
$275,000,  respectively,  were non-interest  bearing and partially repaid in the
amounts of  $135,400,  $213,708  and  $236,646  through the  issuance of 15,030,
23,716 and  26,259 OP Units on  December  9, 1999 based on an Average  Price Per
Share (see Note 3) of $9.0125. The balances due of $64,600, $16,292 and $38,354,
respectively, were repaid in cash on January 4, 2000.

On December 1, 1998,  the Company  entered into an interest rate swap  agreement
with a notional amount of $10,000,000,  intended to reduce the impact of changes
in interest rates on the Credit Facility. This agreement effectively changed the
Company's  interest rate on $10,000,000  of the Credit  Facility debt to a fixed
rate of 5.44% and matured on December 1, 2000. The Company accounted for the net
cash  settlements  under this swap  agreement  as  adjustments  to the  interest
expense on the Credit Facility.

Annual  principal  payment  requirements as of December 31, 2000 for each of the
next five fiscal years and thereafter are as follows:

Year Ending                     Amount

2001                       $   325,007
2002                           349,726
2003                        42,071,907*
2004                           407,394
2005                           444,489
Thereafter                  21,374,082
                            ----------
                           $64,972,605
                           ===========

*Includes the maturity of the Credit Facility.

The  Company  has  determined  that  the  carrying  value of the  notes  payable
approximates  their fair value at December 31, 2000 and 1999, either because the
interest rate on such notes  fluctuates  according to a market index, or because
the fixed rate notes  bear  interest  at rates  comparable  to market  rates for
similar instruments.

NOTE 8 - Related Party Transactions

Pursuant to the Advisory  Agreement,  the Advisor  receives (i) acquisition fees
equal to 3.75% of the acquisition prices of properties  acquired;  (ii) mortgage
selection  fees based on the principal  amount of mortgage  loans funded;  (iii)
asset  management  fees  equal to  .375% of the  total  invested  assets  of the
Company;  (iv) a  liquidation  fee based on the gross  sales price of the assets
sold by the Company in connection  with a liquidation  of the Company's  assets;
and (v) reimbursement of certain administrative costs incurred by the Advisor on
behalf of the Company.

The original term of the Advisory  Agreement  will terminate on October 1, 2001.
Thereafter,  the Advisory  Agreement will be renewed annually by the Company and
the OP, subject to the majority approval of the Company's Board of Directors and
the OP. The Advisory  Agreement  cannot be  terminated  by the Company  prior to
October 1, 2001,  other than for gross  negligence or willful  misconduct of the
Advisor  and by a majority  vote of the  Company's  independent  directors.  The
Advisory  Agreement  may be  terminated  without cause by a majority vote of the
Company's  independent  directors following October 1, 2001 or by the Advisor at
any time.

The  Company's  Retail  Properties  are managed by RCC  Property  Advisors  (the
"Property Manager"), an affiliate of the Advisor, for a fee equal to 4.5% of the
gross rental  receipts  from the retail  properties.  The Property  Manager also
receives  standard  leasing  commissions for space leased to new tenants and for
lease renewals and is reimbursed for certain expenses.

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

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

Acquisition fees                $     19,699     $     23,805        $2,707,157
Expense reimbursement                289,962          271,972           290,639
Property management fees           1,084,563        1,037,014           735,338
Leasing commissions and costs      1,126,850          471,888           178,509
Asset management fee                 779,379          779,561           630,661
                                  ----------       ----------        ----------

                                  $3,300,453       $2,584,240        $4,542,304
                                   =========        =========         =========

On December  9, 1998,  in  connection  with the  acquisition  of  Southgate  and
Crossroads  East,  the  Company  made  loans  (the  "OP  Unit  Loans")  totaling
$2,081,015 to Standard Investment Company ("SIC"), a partner in the partnerships
which owned the two properties.  The loans were originally secured by 163,517 OP
units  issued  to  SIC  in  exchange  for  its  partnership   interests  in  the
partnerships  which  owned  the  properties  and  also by a  guarantee  from the
principals  of SIC for 25% of the total loan  amounts.  On  January 4, 2000,  in
connection  with the  repayment  of seller  notes  payable  (see Note 7(i)),  an
additional  101,518 OP units were  issued,  the OP Unit Loans were  increased by
$255,937 and the interest rate was increased from 7.613% to 10.03%.

<PAGE>


The OP Unit Loans  mature on the earlier of December 9, 2015 or the sale date of
the underlying properties. Interest and principal are payable only to the extent
of  distributions  with  respect  to the OP Units.  Such  distributions  will be
retained by the Company until all accrued interest and the outstanding  balances
of the loans are repaid. As of December 31, 2000 and 1999, the balances of these
OP Unit Loans totaled $2,312,543 and $2,077,086,  respectively, and are shown as
Loans Receivable from Affiliates on the consolidated balance sheets.

At  December  31,  2000,  the  Company  was due  $47,521  from the  Advisor  and
affiliates;  this amount is included in other assets.  At December 31, 1999, the
Company owed $344,428 to the Advisor and affiliates;  this amount is included in
accounts payable and other liabilities.

NOTE 9 - Earnings Per Share

Basic net income  per share in the  amount of $.69,  $.72 and $.83 for the years
ended December 31, 2000, 1999 and 1998, respectively,  equals net income for the
periods ($5,592,995,  $5,823,081 and $6,646,633,  respectively),  divided by the
weighted  average  number  of shares  outstanding  for the  periods  (8,048,894,
8,046,574 and 8,049,987, respectively).

Diluted net income per share in the amount of $.69,  $.72 and $.82 for the years
ended December 31, 2000, 1999 and 1998, respectively,  equals net income for the
periods,  divided by the weighted  average number of diluted shares  outstanding
for the periods (8,048,952, 8,046,574 and 8,075,390, respectively). The weighted
average  number of diluted  shares  outstanding  for the year ended December 31,
1998  reflects the weighted  average  impact of an  additional  148,984 OP Units
which would have to be issued to the sellers of three Retail  Properties  on the
Post-Closing  Adjustment  Date based on the closing  price per share on December
31, 1998 (see Note 3). For purposes of this calculation, the additional OP Units
were assumed to be immediately converted to shares of Common Stock.

The stock  options  issued  during  1999  (see Note 11) did not have a  dilutive
effect under the treasury stock method,  because the average market price of the
Company's  Common Stock during the period from issuance to December 31, 1999 did
not exceed the $9.50 exercise price of the options.  During the quarter and year
ended December 31, 2000, the Company's average market price for its common stock
exceeded the exercise price, so the options were dilutive.

There is no  difference  between  basic and  diluted  net  income per share with
respect to the  conversion of the minority  interests' OP Units  outstanding  at
December 31, 2000, 1999 and 1998 into an additional 765,780, 777,213 and 517,625
shares,  respectively,  of Common  Stock  because the earnings of an OP Unit are
equivalent to the earnings of a share of Common Stock.

NOTE 10 - Leases

Future  minimum  base rentals due from tenants  under  non-cancelable  operating
leases as of December 31, 2000 are as follows:

Year Ending December 31      Amount
-----------------------      ------

2001                     $  18,479,000
2002                        16,846,000
2003                        14,825,000
2004                        12,591,000
2005                        10,565,000
Thereafter                  45,803,000
                          ------------

Total                     $119,109,000
                           ===========

Certain  leases  require  the lessees to  reimburse  the Company for real estate
taxes, insurance costs and certain other reimbursable expenses.

All 28 retail  properties  have certain tenants with leases that require payment
of  percentage  rent.  Percentage  rent is an amount  paid by the  tenant  which
represents  a portion of its sales over a specified  threshold  amount as called
for in the lease.  Percentage  rent received during the years ended December 31,
2000,  1999  and  1998  was  approximately  $328,000,   $183,000  and  $132,000,
respectively.

NOTE 11 - Common Stock

The Company has adopted an  incentive  stock option plan (the  "Incentive  Stock
Option  Plan"),  the  purpose of which is to (i)  attract  and retain  qualified
persons as directors and officers and (ii) to incentivize and more closely align
the financial  interests of the Advisor and its affiliates and their  respective
employees and officers with the interests of the  stockholders  by providing the
Advisor and its affiliates with substantial  financial interest in the Company's
success.  The  Compensation  Committee  of  the  Company's  Board  of  Directors
administers  the Incentive  Stock Option Plan.  Pursuant to the Incentive  Stock
Option Plan,  if the  Company's  distributions  per share of Common Stock in the
immediately  preceding  calendar year exceed $0.9869 per share, the Compensation
Committee has the authority to issue options to purchase, in the aggregate, that
number of shares of Common  Stock  which  does not exceed  three  percent of the
shares outstanding as of December 31 of the immediately  preceding calendar year
(or in the initial  year,  as of October 1, 1997).  Any options not granted in a
given year are carried  over and become  available  to be granted in  subsequent
years.  The  maximum  number of shares  that can be issued  over the life of the
Incentive Stock Option Plan is 805,073.

<PAGE>


All options  granted  will have an exercise  price equal to or greater  than the
fair market  value of the shares of Common  Stock on the date of the grant.  The
maximum  option  term is ten  years  from the date of grant.  All stock  options
granted  pursuant to the Incentive Stock Option Plan may vest  immediately  upon
issuance or may vest later,  as determined by the  Compensation  Committee.  The
Company's  distributions  per share of Common Stock for the years ended December
31,  1999 and  1997 did not  exceed  $.9869  per  share.  In 1998,  the  Company
distributed  $1.035 per share of Common Stock ($0.96 from continuing  operations
and a $0.075 special capital gains distribution), thus enabling the Compensation
Committee, at their discretion, to issue up to 241,522 options.

On August 6,  1999,  options  to  purchase  30,000  shares of Common  Stock were
granted to an officer of the Company and certain  employees  of an  affiliate of
the Advisor,  none of whom are employees of the Company.  The exercise  price of
these  options is $9.50 per  share.  The term of each  option is ten years.  The
options vest in equal installments on August 6, 2000, 2001 and 2002. The Company
has  adopted  the  provisions  of SFAS  No.  123,  "Accounting  for  Stock-Based
Compensation"  for its  stock  options  issued  to  non-employees.  Accordingly,
compensation  cost is accrued based on the  estimated  fair value of the options
issued, and amortized over the vesting period. Because vesting of the options is
contingent  upon the  recipient  continuing  to provide  services to the Company
until the vesting date, the Company estimates the fair value of the non-employee
options at each period end up to the vesting date, and adjusts  expensed amounts
accordingly.  The compensation  cost is amortized over the vesting period of the
options.  Each of the grantees has terminated  employment and all of the options
were  forfeited  prior to  vesting.  No options  were  issued  during  2000.  In
connection with the Acquisition Transaction,  the Company has the right to issue
the remaining unissued and issuable options upon consummation of the Acquisition
Transaction at an exercise price of no less than $11.00 per share.

Through calendar year 1999, each independent director was entitled to receive
annual compensation for serving as a director in the aggregate amount of $15,000
payable in cash (maximum of $5,000 per year) and/or shares of Common Stock
valued based on the fair market value at the date of issuance. Beginning in
calendar year 2000, the annual compensation for each independent director was
increased from $15,000 to $17,500 and the maximum payable in cash was increased
from $5,000 to $7,500. As of December 31, 2000 and 1999, 2,376 and 1,216 shares,
respectively, having an aggregate value of $22,500 and $12,500, respectively,
have been issued to each of the Company's two independent directors as
compensation for their services. An additional 981 shares with an aggregate
value of $10,000 were issued to each independent Director in January, 2001.

On October 9, 1998, the Board of Directors  authorized the  implementation  of a
stock repurchase plan, enabling the Company to repurchase, from time to time, up
to 500,000 shares of its Common Stock.  The repurchases will be made in the open
market and the timing will be dependent on the  availability of shares and other
market  conditions.  As of both  December  31,  2000 and 1999,  the  Company had
acquired  6,300 shares of its Common Stock for an  aggregate  purchase  price of
$58,579  (including  commissions and service  charges).  Repurchased  shares are
accounted for as treasury stock.

On  January  29,  1999,  the  Company  adopted a  shareholder  rights  plan (the
"Shareholder  Rights Plan").  Terms of the Shareholder Rights Plan provide for a
distribution  to common  shareholders  of record  at the  close of  business  on
February 16, 1999 of one Right for each outstanding share of Common Stock of the
Company.  Subject to limited  exceptions,  the Rights will be  exercisable  if a
person or group acquires 15% or more of the Company's  Common Stock or announces
a  tender  offer  for  15%  or  more  of  the  Common  Stock.  Depending  on the
circumstances,  the effect of the  exercise of the Rights will be to permit each
holder of a Right to either purchase stock in the Company or stock of the buyer,
at a  substantial  discount,  and, in so doing,  materially  dilute the level of
ownership  of the buyer in the  Company.  The Company will be entitled to redeem
the  Rights at $.01 per Right at any time  before a person has  acquired  15% or
more of the outstanding Common Stock. The Shareholder Rights Plan will expire on
February 16, 2009.

<PAGE>


NOTE 12 - Selected Quarterly Financial Data (unaudited)

<TABLE>
<CAPTION>


                                                        2000 Quarter Ended
                                     ----------------------------------------------------------
                                       March 31       June 30     September 30     December 31
                                       --------       -------     ------------     -----------

Revenues:
<S>                                  <C>            <C>            <C>            <C>
  Rental income                      $ 5,187,635    $ 4,975,979    $ 4,883,709    $ 4,909,030
  Tenant reimbursements                1,150,940      1,107,932      1,132,515      1,282,848
  Income from equity investments         101,592         98,327         82,206         94,778
  Interest income                        133,679        151,311        139,391        137,312
  Other                                  185,913         61,125         29,222        321,826
                                     -----------    -----------    -----------    -----------

  Total revenues                       6,759,759      6,394,674      6,267,043      6,745,794
                                     -----------    -----------    -----------    -----------

Expenses:

  Repairs and maintenance                505,043        454,674        511,980        625,310
  Operating                              667,581        666,880        646,813        726,884
  Real estate taxes                      612,901        589,348        581,376        607,632
  Interest                             1,186,856      1,202,234      1,256,735      1,304,233
  General and administrative             462,291        507,617        483,087        464,592
  Depreciation and amortization        1,215,844      1,257,981      1,350,911      1,361,757
  Other                                  296,194        199,848        231,520        168,995
                                     -----------    -----------    -----------    -----------

  Total expenses                       4,946,710      4,878,582      5,062,422      5,259,403
                                     -----------    -----------    -----------    -----------

Income before gain on sale of real
  estate and minority interest         1,813,049      1,516,092      1,204,621      1,486,391

Gain on sale of real estate                    0              0        108,332              0
                                     -----------    -----------    -----------    -----------

Income before minority interest        1,813,049      1,516,092      1,312,953      1,486,391

Minority interest in income of the
  Operating Partnership                 (159,856)      (132,462)      (114,149)      (129,023)
                                     -----------    -----------    -----------    -----------

Net income                           $ 1,653,193    $ 1,383,630    $ 1,198,804    $ 1,357,368
                                     ===========    ===========    ===========    ===========

Net income per share:

  Basic                              $       .21    $       .17    $       .15    $       .17
                                     ===========    ===========    ===========    ===========

  Diluted                            $       .21    $       .17    $       .15    $       .17
                                     ===========    ===========    ===========    ===========

</TABLE>
<PAGE>

<TABLE>
<CAPTION>


                                                        2000 Quarter Ended
                                     ----------------------------------------------------------
                                       March 31       June 30     September 30     December 31
                                       --------       -------     ------------     -----------
Revenues:

<S>                                  <C>            <C>            <C>            <C>
  Rental income                      $ 5,018,188    $ 4,916,201    $ 4,998,061    $ 4,747,666
  Tenant reimbursements                1,178,675      1,178,670      1,091,893      1,232,837
  Income from equity investments          85,501         85,937         68,014         51,630
  Interest income                        115,177        124,878        126,412        115,975
  Other                                   32,882         25,519         35,970        124,415
                                     -----------    -----------    -----------    -----------

  Total revenues                       6,430,423      6,331,205      6,320,350      6,272,523
                                     -----------    -----------    -----------    -----------

Expenses:

  Repairs and maintenance                411,241        365,487        560,325        573,141
  Operating                              660,629        699,159        639,373        651,418
  Real estate taxes                      624,396        667,561        581,209        562,881
  Interest                             1,105,280      1,107,410      1,127,521      1,149,345
  General and administrative             455,794        531,163        510,424        500,671
  Depreciation and amortization        1,289,742      1,204,899      1,191,916      1,211,254
  Other                                  369,319        198,187        160,981         23,111
                                     -----------    -----------    -----------    -----------

  Total expenses                       4,916,401      4,773,866      4,771,749      4,671,821
                                     -----------    -----------    -----------    -----------

Income before minority interest        1,514,022      1,557,339      1,548,601      1,600,702

Minority interest in income of the
  Operating Partnership                  (91,522)       (95,915)       (98,454)      (111,692)
                                     -----------    -----------    -----------    -----------

Net income                           $ 1,422,500    $ 1,461,424    $ 1,450,147    $ 1,489,010
                                     ===========    ===========    ===========    ===========

Net income per share:

  Basic                              $       .18    $       .18    $       .18    $       .19
                                     ===========    ===========    ===========    ===========

  Diluted                            $       .17    $       .18    $       .18    $       .19
                                     ===========    ===========    ===========    ===========
</TABLE>

NOTE 13 - Commitments and Contingencies

The  Company is subject to routine  litigation  and  administrative  proceedings
arising in the  ordinary  course of business.  Management  does not believe that
such  matters will have a material  adverse  impact on the  Company's  financial
position, results of operations or cash flows.

A current or previous  owner or operator of real property may be legally  liable
for the costs of removal or  remediation  of hazardous or toxic  substances  on,
under or in such property.  Such liability may exist whether or not the owner or
operator knew of, or was responsible for, such hazardous or toxic substances. In
addition, the presence of hazardous or toxic substances may adversely affect the
owner's ability to borrow funds using such real property as collateral.  Certain
environmental laws impose liability for release of asbestos-containing materials
("ACMs")  into the air and  third  parties  may seek  recovery  from  owners  or
operators  of real  properties  for personal  injury  associated  with ACMs.  In
connection with the ownership  (direct or indirect),  operation,  management and
development  of real  properties,  the  Company  may be liable  for  removal  or
remediation  costs,  as well as certain other potential costs which could relate
to such hazardous or toxic substances or ACMs (including  governmental fines and
injuries to persons and  property).  To date,  the Company has not  incurred any
costs of removal or remediations of such hazardous or toxic substances. However,
the  presence,  with or without the Company's  knowledge,  of hazardous or toxic
substances at any property held or operated by the Company could have an adverse
effect on the Company's business, operating results and financial condition.

Phase I  Environmental  Site  Assessments  have  been  undertaken  on all of the
Company's properties.  In certain cases, additional Phase II site investigations
have also been undertaken where deemed  appropriate.  Based on these reports, no
on-site  hazardous  chemicals or petroleum  products  were  detected or found to
exist in the soil or in the groundwater at those  properties  which would result
in action by state  environmental  agencies and which would  require  additional
investigation  and/or  remediation  of the  Mountain  Park  Plaza  property.  In
February 1998, a Phase II  investigation  determined  that there were detectable
levels  of  certain  hazardous   materials  above  threshold  levels  which  are
ascertained by the Georgia State Department of Natural  Resources  Environmental
Protection Division ("GAEPD").  On May 28, 1999 management received notification
form  GAEPD  that the  site was  added to the  GAEPD  Hazardous  Site  Inventory
("HSI").  Management  has recently  completed a re-sampling to determine if such
levels  continue to exist in order to potentially  qualify for a de-listing from
the HSI. The re-sampling indicated that no hazardous materials remain detectable
above the threshold levels which are ascertained by GAEPD to require remediation
and,, on May 5, 2000,  the GAEPD  removed the property from the HSI.  Management
has installed wells on the site to monitor ongoing levels of hazardous materials
in the ground water pursuant to GAEPD policy.

<PAGE>


NOTE 14 - Subsequent Events

On or about  February  8, 2001,  a complaint  was filed in the New York  Supreme
Court,  County of New York, against the Advisor.  Also individually named in the
suit were Messrs.  Boesky,  Hirmes, Ross, Brenner, Allen and Fisch, each of whom
is either a director of Aegis or the Advisor.  Aegis was also named as a nominal
defendant. The action is entitled Paul v. The Related Companies, L.P., Index No.
01-600669.  The suit is a purported  class and  derivative  action in connection
with the Acquisition Transaction and the Management Internalization described in
Note 1. The suit alleges that the defendants  breached  their  fiduciary duty to
Aegis' stockholders by, among other things,  committing Aegis to pay unwarranted
fees and other  consideration  to the  Advisor  and the  Property  Manager.  The
lawsuit  seeks   preliminary  and  permanent   injunctive   relief  against  the
consummation of the Acquisition  Transaction and the Management  Internalization
in addition to unspecified damages, costs and attorney's fees.

Aegis has retained counsel with regard to the lawsuit and the defendants  intend
to defend the action vigorously. With respect to the allegations in the lawsuit,
the defendants have advised that they continue to believe that the  transactions
are fair and reasonable and in the best interests of Aegis and its  stockholders
and will be submitted for approval by a vote of Aegis' stockholders.

The Company  believes that it has meritorious  defenses to the claims brought in
the lawsuit  described above, but is unable to predict the effect of the outcome
of this lawsuit on the Company's financial  position,  results of operations and
cash flows. In addition,  the timing of the final  resolution of this proceeding
is uncertain.  No provision has been recorded on the financial statements of the
Company to reflect the above litigation.

In  February  2001,  an  additional  $1,500,000  was  borrowed  under the Credit
Facility.

<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 Company.

The Board of  Directors  directs the  management  of the business and affairs of
Aegis but retains the Advisor to manage Aegis' day-to-day affairs.  The Board of
Directors delegates to the Advisor responsibilities with respect to, among other
things,  overseeing  the  portfolio  of Aegis'  assets  and the  acquisition  or
disposition  of  investments.  During  2000,  the  Board of  Directors  held six
meetings,  the audit committee held four meetings and the compensation committee
did not hold any meetings.  The average attendance in the aggregate of the total
number of Board and committee meetings was 83%.

The Directors and Executive Officers of Aegis are as follows:
<TABLE>
<CAPTION>


                                                                    Year First Became
         Name           Age             Offices Held                Director/Officer         Term Expires
------------------    -----   ---------------------------------    ------------------       -------------

<S>                     <C>     <C>                                        <C>                    <C>
Stuart J. Boesky        44      Chairman,    President    and              1997                   2003
                                Chief Executive Officer
Michael J. Brenner      55      Director                                   1999                   2003
Alan P. Hirmes          46      Director,     Senior     Vice              1997                   2002
                                President,    and   Assistant
                                Secretary
Peter T. Allen          55      Director                                   1997                   2001
Arthur P. Fisch         59      Director                                   1997                   2001
Bruce H. Brown          47      Senior Vice President                      1997                    --
Mark J. Schlacter       50      Senior Vice President                      1997                    --
Michael I. Wirth        42      Senior  Vice   President  and              2000                    --
                                Chief Financial Officer
Denise L. Kiley         41      Vice President                             1997                    --
Marc D. Schnitzer       40      Vice President                             1997                    --
Jeffrey S. Suchman      38      Vice President                             1999                    --
Gary Parkinson          51      Controller                                 2000                    --
Teresa Wicelinski       34      Secretary                                  1998                    --

</TABLE>

STUART J. BOESKY is Chairman, President and Chief Executive Officer of Aegis and
is President,  Director and Chief Executive  Officer of the sole General Partner
of the Advisor.  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 Related Capital Company, the real estate finance affiliate of The Related
Companies,  L.P. From 1983 to 1984, Mr. Boesky practiced law with the Boston law
firm of Kaye,  Fialkow,  Richmond & 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 Laventhal & Horwath.  Mr.  Boesky is the
sole shareholder of one of the general partners of Related Capital Company.  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 Laws degree in Taxation  from Boston  University  School of Law. Mr.
Boesky  also  serves on the Board of  Trustees  of  Charter  Municipal  Mortgage
Acceptance Company  ("CharterMac")  and of American Mortgage  Acceptance Company
("AMAC"),  which  companies are also advised by  affiliates  of Related  Capital
Company.

MICHAEL J. BRENNER is a Director of Aegis,  and is the Executive  Vice President
and Chief Financial Officer of The Related Companies,  L.P. Prior to joining The
Related  Companies,  L.P.  in 1996,  Mr.  Brenner was a partner  with  Coopers &
Lybrand,  having served as Managing Partner of its Industry  Programs and Client
Satisfaction  initiatives from 1993-1996,  Managing Partner of the Detroit group
of offices from  1986-1993  and Chairman of its  National  Real Estate  Industry
Group from 1984-1986.  Mr. Brenner graduated summa cum laude from the University
of Detroit  with a  Bachelors  degree in  Business  Administration  and from the
University  of  Michigan  with  a  Masters  of  Business  Administration,   with
distinction. Mr. Brenner also serves on the Board of Trustees of CharterMac.

ALAN P. HIRMES is a Director,  Senior Vice President and Assistant  Secretary of
Aegis and is a Director and Senior Vice President of the sole General Partner of
the  Advisor.  Mr.  Hirmes is a Senior  Managing  Director  of  Related  Capital
Company,  where he is  responsible  for  overseeing  the  portfolio  management,
finance and  accounting  departments,  as well as the joint venture  development
program.  Mr. Hirmes is the sole  shareholder of one of the general  partners of
Related Capital Company.  Mr. Hirmes has been a Certified  Public  Accountant in
New York since 1978.  Prior to joining  Related Capital Company in October 1983,
Mr.  Hirmes was  employed by Weiner & Co.,  certified  public  accountants.  Mr.
Hirmes  graduated from Hofstra  University  with a Bachelor of Arts degree.  Mr.
Hirmes also serves on the Board of Trustees of CharterMac.

PETER T. ALLEN is  President  of Peter Allen &  Associates,  Inc., a real estate
development and management  firm, in which capacity he has been  responsible for
the leasing,  refinancing and development of major  commercial  properties.  Mr.
Allen has also been an adjunct  professor of the Graduate  School of Business at
the  University of Michigan  since 1981.  Mr. Allen  received a Bachelor of Arts
Degree in  history/economics  from  DePauw  University  and a Masters  degree in
Business  Administration  with Distinction from the University of Michigan.  Mr.
Allen has been an  independent  director since 1997 and is a member of the Audit
and Compensation  Committees.  Mr. Allen also serves on the Board of Trustees of
CharterMac and AMAC.

<PAGE>


ARTHUR P. FISCH is an attorney in private practice specializing in real property
and  securities law since October 1987,  with Arthur P. Fisch,  P.C. and Fisch &
Kaufman.  From  1975-1987,  Mr.  Fisch was  employed  by E.F.  Hutton & Company,
serving  as First  Vice  President  in the  Direct  Investment  Department  from
1981-1987 and Associate  General Counsel from 1975-1980 in the legal department.
As First Vice President,  he was responsible for the syndication and acquisition
of  residential  real estate.  Mr. Fisch  received a B.B.A.  from Bernard Baruch
College of the City  University  of New York and a Juris Doctor  degree from New
York  Law  School.  Mr.  Fisch  is  admitted  to  practice  law in New  York and
Pennsylvania.  Mr. Fisch has been an  Independent  Director  since 1997 and is a
member of the Audit and  Compensation  Committees.  Mr. Fisch also serves on the
Board of Trustees of CharterMac and AMAC.

BRUCE  H.  BROWN is a  Senior  Vice  President  of  Aegis  and is a Senior  Vice
President of the sole General Partner of the Advisor. Mr. Brown is a Senior Vice
President  of  Related  Capital  Company  and is  Director  of  Related  Capital
Company's  Portfolio  Management  Group.  He is  responsible  for overseeing the
administration  of Related Capital  Company's public  registered debt and equity
affiliates  encompassing  the  monitoring of the  performance of each entity and
each  investment.  He is also  responsible  for Related  Capital  Company's loan
servicing  activities  with respect to the firm's $600 million  portfolio of tax
exempt first mortgage bonds and FNMA/GNMA insured and co-insured loan portfolio.
Prior to joining  Related  Capital  Company in 1987, Mr. Brown was a Real Estate
Lending  Officer at the United States Trust  Company of New York and  previously
held management  positions in the hotel and resort industry with  Helmsley-Spear
and Westin Hotels.  Mr. Brown graduated from Colgate  University with a Bachelor
of Arts degree.

MARK J.  SCHLACTER  is a Senior  Vice  President  of Aegis and is a Senior  Vice
President of the sole General  Partner of the Advisor.  Mr.  Schlacter is a Vice
President of taxable mortgage  acquisitions of Related Capital Company,  and has
been with Related  Capital  Company  since June 1989.  Prior to joining  Related
Capital  Company,  Mr.  Schlacter  garnered  16  years  of  direct  real  estate
experience covering retail and residential construction,  single and multifamily
mortgage   origination  and  servicing,   commercial  mortgage  origination  and
servicing,  property  acquisition  and  financing and mortgage  lending  program
underwriting and development. He was a Vice President with Bankers Trust Company
from 1986 to June 1989, and held prior  positions with Citibank,  Anchor Savings
Bank and the Pyramid  Companies  covering the 1972-1986  period.  Mr.  Schlacter
holds a Bachelor of Arts degree in  Political  Science from  Pennsylvania  State
University.

MICHAEL I. WIRTH is the Chief  Financial  Officer and Senior Vice  President  of
Aegis and the Chief Financial Officer and a Senior Vice President of the General
Partner of the  Advisor.  Mr.  Wirth is also a Senior Vice  President of Related
Capital Company. Mr. Wirth joined Related Capital Company in August, 2000. Prior
to Related  Capital  Company,  Mr. Wirth was a Vice President in the real estate
group  at  CGA  Investment   Management   where  he  was   responsible  for  the
underwriting,  investment  and  management  of all  commercial  real estate debt
investments  made by the  company.  Prior to CGA,  Mr.  Wirth spent 4 years as a
Senior  Manager  at  Deloitte  &  Touche  in the  realty  consulting  group  and
technology  solutions  practice  and 5 years as a Senior  Manager  and  National
Director to the  financial  services  industry at The Roulac Group of Deloitte &
Touche. Mr. Wirth received a Bachelors in Business  Administration  from Georgia
State University. He has been a Certified Public Accountant since 1986.

DENISE  L.  KILEY is a Senior  Vice  President  of  Aegis  and is a Senior  Vice
President  of the sole  General  Partner  of the  Advisor.  Ms.  Kiley is also a
Managing  Director of Related  Capital  Company,  responsible for overseeing the
investment  underwriting and approval of all real estate properties  invested in
Related Capital Company sponsored corporate,  public and private equity and debt
funds.  Prior to  joining  Related  Capital  Company  in  1990,  Ms.  Kiley  had
experience   acquiring,   financing  and  managing  the  assets  of  multifamily
residential  properties.  From  1981  through  1985  she was an  Auditor  with a
national  accounting  firm.  Ms.  Kiley  holds a Bachelor  of Science  degree in
Accounting  from  Boston  College  and is a  Member  of the  Affordable  Housing
Roundtable.

MARC D.  SCHNITZER  is a Senior  Vice  President  of Aegis and is a Senior  Vice
President  of the sole  General  Partner  of the  Advisor.  Mr.  Schnitzer  is a
Managing  Director of Related  Capital  Company and Director of Related  Capital
Company's Tax Credit  Acquisitions  Group.  Mr.  Schnitzer  received a Master of
Business  Administration  degree from The Wharton  School of The  University  of
Pennsylvania  in December 1987, and joined Related  Capital  Company in January,
1988.  From 1983 to 1986,  Mr.  Schnitzer  was a Financial  Analyst in the Fixed
Income  Research  Department of The First Boston  Corporation  in New York.  Mr.
Schnitzer  received a Bachelor of Science  degree,  summa cum laude, in Business
Administration from the School of Management at Boston University.

JEFFREY S. SUCHMAN is a Vice President of Aegis where he is responsible  for the
financial  evaluation and the initial due diligence of potential shopping center
acquisitions. Mr. Suchman has been a consultant to Related Capital Company since
February of 1998. Prior to consulting for Related Capital  Company,  Mr. Suchman
was the  President of The Suchman  Group from  1995-1998.  From  1987-1995,  Mr.
Suchman held  positions with the Macklowe  Organization  as a Vice President and
Rockrose  Development  Corp., as an Assistant Vice President,  participating  in
acquisitions   and  asset   management   and  from  1985-1987  was  employed  by
Helmsley-Spear,  Inc.,  involved in commercial  leasing and sales.  Mr.  Suchman
received a Bachelor of Arts degree in psychology  from New York University and a
Master of  Business  Administration  from  Fordham  University.  Mr.  Suchman is
currently a Member of the International Council of Shopping Centers.

GARY  PARKINSON is the  Controller  of Aegis and is the  Controller  of the sole
General  Partner of the  Advisor.  Mr.  Parkinson  has been a  Certified  Public
Accountant in New York since 1987.  Prior to joining  Related Capital Company in
September  2000,  Mr.  Parkinson was employed by American Real Estate  Partners,
L.P. from July 1991 to September 2000,  Integrated  Resources,  Inc. from August
1988 to July 1991 and Ernst and Young from  September  1984 to August 1988.  Mr.
Parkinson graduated from Northeastern University and The Johnson Graduate School
of Business at Cornell University.

<PAGE>

TERESA  WICELINSKI  is the  Secretary of Aegis and is the  Secretary of the sole
General Partner of the Advisor. Ms. Wicelinski joined Related Capital Company 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.

Committees of the Board of Directors
------------------------------------

The Board of Directors has standing Audit and Compensation Committees. The Audit
Committee's  duties  include the review and oversight of all  transactions  with
affiliates of Aegis,  the periodic  review of Aegis'  financial  statements  and
meetings with Aegis' independent  auditors.  The Audit Committee is comprised of
Messrs.  Allen and Fisch and held four meetings  during Aegis' fiscal year ended
December 31, 2000.

The Compensation Committee's duties include the determination of compensation of
Aegis'  executive  officers and the  administration  of Aegis'  Incentive  Share
Option Plan. The Compensation  Committee is comprised of Messrs. Allen and Fisch
and did not hold any meetings during Aegis' fiscal year ended December 31, 2000.
The Compensation Committee must have at least two members, each of which must be
Independent Directors.

Compliance with Section 16(a) of the Securities Exchange Act of 1934
--------------------------------------------------------------------

     Section 16(a) of the Securities Exchange Act of 1934, as amended,  requires
Aegis'  officers and  directors,  and persons who own more than ten percent of a
registered class of Aegis' equity  securities,  to file reports of ownership and
changes  in  ownership  with  the  Securities  and  Exchange   Commission   (the
"Commission").  These persons are required by  regulation  of the  Commission to
furnish Aegis with copies of all Section 16(a) forms they file.

     Based  solely on its review of the copies of such forms  received by it, or
written  representations  from  certain  reporting  persons that no Forms 5 were
required for those  persons,  Aegis  believes  that during the fiscal year ended
December  31,  2000,  Aegis'  officers,  directors  and greater than ten percent
beneficial   owners   complied   with  all   applicable   Section  16(a)  filing
requirements.

The Advisor
-----------

The Directors and Executive  Officers of Related Aegis, Inc.  ("Related Aegis"),
the sole General Partner of the Advisor,  are set forth below. These Officers of
the General Partner of the Advisor may also provide  services to Aegis on behalf
of the Advisor.

The Directors and Executive  Officers of Related  Aegis,  Inc., the sole General
Partner of the Advisor, are as follows:
<TABLE>
<CAPTION>


                                                                                       Year First Became
      Name              Age                        Offices Held                        Director/Officer
----------------      ------     ------------------------------------------------      ----------------

<S>                     <C>      <C>                                                         <C>
Stuart J. Boesky        44       President, Chief Operating Officer and Director             1997
Alan P. Hirmes          46       Senior Vice President and Director                          1997
Stephen M. Ross         60       Director                                                    1997
Bruce H. Brown          47       Senior Vice President                                       1997
Mark J. Schlacter       50       Senior Vice President                                       1997
Michael I. Wirth        42       Senior Vice President and Chief Financial Officer           2000
Denise L. Kiley         41       Senior Vice President                                       1997
Marc D. Schnitzer       40       Senior Vice President                                       1997
Gary Parkinson          51       Treasurer and Controller                                    2000
Teresa Wicelinski       35       Secretary                                                   1997
</TABLE>

<PAGE>

For biographical  information  with respect to Messrs.  Boesky,  Hirmes,  Brown,
Schlacter,  Wirth,  Schnitzer,  and Parkinson and Mses. Kiley and Wicelinski see
"Directors and Executive Officers of Aegis."

STEPHEN M. ROSS is a Director of the Advisor. Mr. Ross is the founder, Chairman,
CEO and Managing  General  Partner of The Related  Companies,  L.P. He graduated
from the  University  of  Michigan  School  of  Business  Administration  with a
Bachelor of Science degree and from Wayne State University  School of Law with a
Juris Doctor degree.  Mr. Ross then received a Master of Laws 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  predecessor  of The
Related  Companies,  L.P. in 1972 to develop,  manage,  finance and acquire real
estate.

Item 11.  Executive Compensation.

Aegis  has  ten  officers  and  five  Directors  (two of  whom  are  Independent
Directors).  Aegis does not pay or accrue any fees,  salaries  or other forms of
compensation to its Officers or Directors,  other than Independent Directors and
options  received  under the Stock Option Plan.  Independent  Directors  receive
compensation  for serving as  Directors  at the rate of $17,500 per year payable
$7,500 in cash (or at such Director's option, shares of Common Stock) and shares
having an aggregate value of $10,000, based on the fair market value at the date
of issuance,  in addition to an expense  reimbursement for attending meetings of
the Board of Directors.

The  Independent  Directors  also will receive  compensation  for serving on the
special  committee of the Board of Directors in connection  with  evaluating the
Pending Portfolio Acquisition Transaction at the rate of $17,500, payable $7,500
in cash (or at such Director's  option shares of common stock) and shares having
an  aggregate  value of $10,000  based upon the fair market value at the date of
issuance.

The Advisor, at its expense,  provides all personnel necessary to conduct Aegis'
regular  business.  The Advisor  receives  various  fees for  advisory and other
services  performed under the Advisory  Agreement,  as further described in Item
13.  "Certain  Relationships  and Related  Transactions".  An  affiliate  of the
Advisor pays all salaries,  bonuses and other  compensation  (other than options
received  under the Stock  Option Plan) to the officers of Aegis and the general
partner of the  Advisor.  Certain  directors  and  officers of the sole  general
partner of the Advisor and certain officers of Aegis receive  compensation  from
the Advisor and its  affiliates  for services  performed for various  affiliated
entities,  which may include services performed for Aegis. Such compensation may
be based in part on the performance of Aegis; however, the Advisor believes that
any compensation attributable to services performed for Aegis is immaterial.

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


     As of February 28, 2001, one person was known by Aegis to be the beneficial
owner of more than five percent of the outstanding Shares of Common Stock.

                         Amount and Nature of     Percentage of Common
Name and Address         Beneficial Ownership      Shares Outstanding
------------------       --------------------     ---------------------

Warren E. Buffett
1440 Kiewit Plaza
Omaha, NE 68131             569,900 Shares *         7.08%

* The  ownership  of shares of Common  Stock  reported  herein is based upon the
Schedule  13-G/A filed with the Securities  and Exchange  Commission on February
14, 2001.

     As of February 28, 2001,  the directors of the sole general  partner of the
Advisor  own, in the  aggregate,  100% of the voting  stock of the sole  general
partner of the Advisor.

<PAGE>


     As of February  28, 2001,  directors  and  executive  officers of Aegis and
directors  and officers of the sole general  partner of the Advisor own directly
or beneficially Shares of Common Stock as follows:


                                           Amount and Nature of     Percent of
         Beneficial Owner (1)              Beneficial Ownership      Class (2)
---------------------------------------   ---------------------     ----------
Directors,   Nominees   and   Executive
Officers
Stephen M. Ross                            149,768 (3, 4)             1.69%
Alan P. Hirmes                             94,816 (4, 5)              1.07%
Stuart J. Boesky                           154,426 (4, 6)             1.74%
Peter T. Allen                             3,357                      *
Arthur P. Fisch                            3,357                      *
Bruce H. Brown                             400                        *

All  Officers  and  Directors  of Aegis
and  Related   Aegis  as  a  group  (13
persons)                                   401,582 (4, 7)             4.55%

*Less than 1% of the common stock issued by Aegis.

     (1) Address of  beneficial  owner is c/o Aegis  Realty,  Inc.,  625 Madison
     Avenue, New York, New York 10022.

     (2)  Percent of class  assumes  that (i) with  respect  to each  individual
     person,  all units of limited  partnership  held by such  person  have been
     converted  to shares of common  stock and (ii) with respect to all officers
     and directors as a group that all such units of limited partnership held by
     all such persons have been converted to shares of common stock.

     (3) Includes 67,938 units of limited partnership  interest in the Operating
     Partnership, which are currently convertible to shares of common stock on a
     one-to-one basis.

     (4) Includes 2,271 units of limited  partnership  interest in the Operating
     Partnership, which are currently convertible to shares of common stock on a
     one-to-one basis, held by Related Capital Company,  in which Messrs.  Ross,
     Boesky  and  Hirmes  hold a majority  of the  direct  and  indirect  equity
     interest.

     (5) Includes 65,412 units of limited partnership  interest in the Operating
     Partnership, which are currently convertible to shares of common stock on a
     one-to-one basis.

     (6) Includes 98,772 units of limited partnership  interest in the Operating
     Partnership, which are currently convertible to shares of common stock on a
     one-to-one basis.

     (7) Includes 234,393 units of limited partnership interest in the Operating
     Partnership, which are currently convertible to shares of common stock on a
     one-to-one basis.

Stock Option Plan
-----------------

Aegis has adopted an incentive  stock option plan (the  "Plan"),  the purpose of
which is to (i) attract and retain  qualified  persons as directors and officers
and (ii) to  incentivize  and more closely align the financial  interests of the
Advisor and its employees and officers with the interests of the stockholders by
providing the Advisor with substantial financial interest in Aegis' success. The
Compensation Committee,  which consists of Messrs. Allen and Fisch,  administers
the Plan.  Pursuant  to the Plan,  if Aegis'  distributions  per Share of Common
Stock in the immediately  preceding  calendar year exceed $0.9869 per Share, the
Compensation  Committee has the  authority to issue options to purchase,  in the
aggregate, that number of Shares of Common Stock which is equal to three percent
of  the  Shares  outstanding  as of  December  31 of the  immediately  preceding
calendar year (or in the initial year, as of October 1, 1997), provided that the
Compensation  Committee may only issue, in the aggregate,  options to purchase a
maximum  number of Shares of Common Stock over the life of the  Incentive  Stock
Option Plan equal to 809,754 Shares (10% of the Shares outstanding on October 1,
1997).

Subject  to  the  limitations  described  in  the  preceding  paragraph,  if the
Compensation Committee does not grant the maximum number of options in any year,
then the excess of the number of  authorized  options over the number of options
granted  in such year will be added to the number of  authorized  options in the
next  succeeding  year  and will be  available  for  grant  by the  Compensation
Committee in such succeeding year.

All options  granted  will have an exercise  price equal to or greater  than the
fair market  value of the shares of common  stock on the date of the grant.  The
maximum  option  term is ten  years  from the date of grant.  All stock  options
granted  pursuant to the Incentive Stock Option Plan may vest  immediately  upon
issuance or in accordance with the determination of the Compensation Committee.

<PAGE>

No options were granted for the year ended  December  31, 1997.  In 1998,  Aegis
distributed  $1.035 per share of common stock ($0.96 from continuing  operations
and a $0.075 special capital gains distribution), thus enabling the Compensation
Committee, at its discretion, to issue options for up to 241,522 Shares.

In 1999,  Aegis granted a total of 30,000  options to employees of affiliates of
the Advisor. Each of the employees have terminated  employment,  two during 2000
and the third in 2001,  before  their  options had vested and all of the options
were  forfeited back to the Company.  In 2000,  Aegis did not issue any options.
Under the current  terms of the  Acquisition  Agreement,  Aegis is  permitted to
issue the 234,522 options that are outstanding, but unissued.

Item 13.  Certain Relationships and Related Transactions.

Subject  to  consummation  of the  Acquisition  Transaction  and the  Management
Internalization described in Item 1, Aegis and the Operating Partnership entered
into an Advisory Agreement pursuant to which the Advisor is obligated to use its
best efforts to seek out and present to Aegis,  whether  through its own efforts
or those of third parties  retained by it,  suitable and a sufficient  number of
investment  opportunities  which are consistent with the investment policies and
objectives  of  Aegis  and  consistent  with  such  investment  programs  as the
Directors  may adopt from time to time in  conformity  with  Aegis'  Articles of
Amendment and Restatement (the "Articles").

Although the Directors have continuing  exclusive  authority over the management
of Aegis,  the conduct of its  affairs and the  management  and  disposition  of
Aegis' assets, the Directors have initially delegated to the Advisor, subject to
the  supervision  and review of the Board of Directors and  consistent  with the
provisions  of the  Articles,  the power and duty to: (i) manage the  day-to-day
operations of Aegis; (ii) acquire, retain or sell Aegis' assets; (iii) seek out,
present and recommend investment opportunities consistent with Aegis' investment
policies  and  objectives,  and  negotiate  on behalf of Aegis  with  respect to
potential investments or the disposition thereof;  (iv) when appropriate,  cause
an affiliate to serve as the  mortgagee  of record for mortgage  investments  of
Aegis and in that  capacity  hold escrows on behalf of  mortgagors in connection
with the  servicing of  mortgages;  (v) obtain for Aegis such services as may be
required in acquiring and disposing of  investments,  disbursing  and collecting
the funds of Aegis,  paying the debts and fulfilling  the  obligations of Aegis,
and  handling,   prosecuting  and  settling  any  claims  of  Aegis,   including
foreclosing  and  otherwise   enforcing   mortgages  and  other  liens  securing
investments; (vi) obtain for Aegis such services as may be required for property
management,  mortgage brokerage and servicing,  and other activities relating to
the  investment  portfolio of Aegis;  (vii)  evaluate,  structure  and negotiate
prepayments or sales of Aegis'  mortgage  investments  and mortgage  securities;
(viii) monitor  operations and expenses of Aegis; and (ix) from time to time, or
as requested by the  Directors,  make reports to Aegis as to its  performance of
the foregoing services.

The original term of the Advisory  Agreement  will terminate on October 1, 2001,
the fourth anniversary of its effective date. Thereafter, the Advisory Agreement
may be renewed annually by Aegis, subject to an evaluation of the performance of
the Advisor by the Board of Directors.  The Advisory Agreement may be terminated
(i)  without  Cause by the  Advisor  or (ii)  for  Cause  by a  majority  of the
Independent  Directors,  each  without  penalty,  and each  upon 60 days'  prior
written notice to the non-terminating party.

The Advisory  Agreement  cannot be terminated by Aegis prior to October 1, 2001,
other  than for  Cause.  "Cause"  is  defined  as gross  negligence  or  willful
misconduct of the Advisor.  Aegis cannot  dissolve and  liquidate  prior to such
anniversary date except upon a  recommendation  of the Advisor and the vote of a
majority in interest  ("Majority  Vote") of the  Stockholders.  After October 1,
2001,  the vote of the holders of 66-2/3% of Aegis' then  outstanding  Shares is
required  to  approve  a  dissolution  and  liquidation  of  Aegis  that  is not
recommended by the Advisor and the Majority Vote of  Stockholders is required to
approve a liquidation of Aegis  recommended  by the Advisor.  If for any reason,
whether prior to or after October 1, 2001, the Advisory  Agreement is terminated
in accordance with its terms, Aegis may dissolve and liquidate upon the Majority
Vote of Stockholders.

Pursuant  to the terms of the  Advisory  Agreement,  the  Advisor is entitled to
receive the fees and other compensation set forth below:

         Fee/Compensation*                          Amount
         -----------------                         ------

         Acquisition Fee                    3.75% of the  acquisition
                                            price  of  each  property
                                            acquired  by  Aegis,  the
                                            Operating Partnership and
                                            their          respective
                                            subsidiaries.

         Mortgage Selection Fee             3.0  % of  the  principal
                                            amount  of each  mortgage
                                            loan     originated    or
                                            acquired  by  Aegis,  the
                                            Operating     Partnership
                                            and   their    respective
                                            subsidiaries.

         Mortgage Placement Fee             0.75%  of  the  principal
                                            amount  of each  mortgage
                                            loan     originated    or
                                            acquired  by  Aegis,  the
                                            Operating     Partnership
                                            and   their    respective
                                            subsidiaries  (payable by
                                            the  borrower,   and  not
                                            Aegis).

         Asset                              Management Fee/
                                            Special Distribution
                                            0.375% per annum of
                                            total invested assets
                                            of Aegis, the
                                            Operating Partnership
                                            and their respective
                                            subsidiaries.

         Operating Expense Reimbursement    For    direct    expenses
                                            incurred  by the  Advisor
                                            in  an   amount   not  to
                                            exceed    $283,462    per
                                            annum     (subject     to
                                            increase     based     on
                                            increases in Aegis',  the
                                            Operating   Partnership's
                                            and   their    respective
                                            subsidiaries'  assets and
                                            to    annual    increases
                                            based upon  increases  in
                                            the    Consumer     Price
                                            Index).

<PAGE>


         Incentive Share Options            The  Advisor  may receive
                                            options     to    acquire
                                            additional         Shares
                                            pursuant     to    Aegis'
                                            Incentive   Share  Option
                                            Plan   only   if   Aegis'
                                            distributions    in   any
                                            year  exceed  $0.9869 per
                                            Share  (i.e.,   the  1996
                                            pro  forma  distributions
                                            set     forth      Aegis'
                                            Solicitation    Statement
                                            dated   as  of  June  15,
                                            1997),       and      the
                                            Compensation    Committee
                                            of    the     Board    of
                                            Directors  determines  to
                                            grant such options.

         Liquidation Fee                    1.50% of the gross  sales
                                            price of the assets  sold
                                            by    the     Aegis    in
                                            connection     with     a
                                            liquidation     of    the
                                            Aegis' assets  supervised
                                            by the Advisor.

The  Advisor is also  permitted  to earn  miscellaneous  compensation  which may
include,  without  limitation,  construction  fees,  escrow  interest,  property
management fees, leasing  commissions and insurance  brokerage fees. The payment
of any such  compensation is generally  limited to the competitive  rate for the
services being performed.

The  Advisor may engage in other  business  activities  related to real  estate,
mortgage investments or other investments whether similar or dissimilar to those
made by Aegis, or act as manager to any other person or entity having investment
policies  whether  similar or dissimilar to those of Aegis.  Before the Advisor,
the officers  and  directors  of the Advisor and all persons  controlled  by the
Advisor and its officers and directors may take advantage of an opportunity  for
their own account or present or  recommend it to others,  they are  obligated to
present such  investment  opportunity  to Aegis if (i) such  opportunity is of a
character  which could be taken by Aegis,  (ii) such  opportunity  is compatible
with Aegis' investment objectives and policies and (iii) Aegis has the financial
resources to take advantage of such opportunity.

The Articles and the Advisory  Agreement  provide that Aegis will  indemnify the
Advisor and its affiliates under certain circumstances.

The  Advisor is entitled  to  subcontract  its  obligations  under the  Advisory
Agreement to an affiliate.  In accordance  with the  foregoing,  the Advisor has
assigned its rights and obligations to Related.

All of Aegis' twenty-eight properties are managed by RCC Property Advisors, Inc.
(the  "Property  Manager"),  an affiliate of the Advisor.  The Property  Manager
receives standard leasing  commissions for space leased to new tenants and lease
renewals.

<PAGE>


                                     PART IV

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

                                                                      Sequential
                                                                        Page
                                                                     -----------


(a) 1.   Financial Statements

         Independent Auditors' Report                                         22

         Consolidated Balance Sheets as of December 31, 2000 and 1999         23

         Consolidated   Statements   of  Income  for  the  years  ended
         December 31, 2000, 1999 and 1998                                     24

         Consolidated    Statements   of   Changes   in   Shareholders'
         Equity/Partners'   Capital   (Deficit)  for  the  years  ended
         December 31, 2000, 1999 and 1998                                     25

         Consolidated  Statements  of Cash  Flows for the  years  ended
         December 31, 2000, 1999 and 1998                                     26

         Notes to Consolidated Financial Statements                           28

(a) 2.   Financial Statement Schedules

         Schedule  II -  Valuation  and  Qualifying  Accounts  for  the
         three years ended December 31, 2000                                  48

         Schedule III - Real Estate and  Accumulated  Depreciation  and
         Notes to Schedule at December 31, 2000                               49

         Schedule IV - Mortgage  Loans on Real  Estate at December  31,
         2000                                                                 51

         All other 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

(3.1A)   Articles of  Incorporation  dated as of August 13, 1996  (incorporated
         by  reference  to  the  Company's  Registration  Statement  on  Form
         10,  File  No. 001-13239)

(3.1B)   Amended Articles of Incorporation dated as of September 26, 1996
         (incorporated by reference to the Company's Registration Statement on
         Form 10, File No. 001-13239)

(3.1C)   Articles of Amendment and Restatement of Articles of Incorporation
         dated as of October 1, 1997 (incorporated by reference to the Company's
         Registration Statement on Form 10, File No. 001-13239)

(3.1D)   Certificate of Correction dated as of October 22, 1997 (incorporated by
         reference to the Company's Current Report on Form 8-K, filed with the
         Commission on March 19, 1998)

(3.2)    Bylaws (incorporated by reference to the Company's Current Report on
         Form 8-K, filed with the Commission on March 19, 1998)

(4.1)    Specimen Copy of Stock Certificate for shares of the Company's Common
         Stock (incorporated by reference to the Company's Amendment No. 1 on
         Form 10/A to the Company's Registration Statement on Form 10, File No.
         001-13239)

(10A)    Continental Casualty Company Insurance Policy issued to the Company
         (incorporated by reference to Exhibit 10(C) to the Company's
         Registration Statement on Form S-11, File No.
         33-8755, as amended)
<PAGE>

(10B)    Indemnity Agreement among Continental Casualty Company, the Company and
         the General Partners (incorporated by reference to Exhibit 10(D) to the
         Company's Registration Statement on Form S-11, File No. 33-8755, as
         amended)


(10C)    Secured Promissory Note between Principal Mutual Life Insurance Company
         and Insured II dated December 11, 1992 (incorporated by reference to
         Exhibit 10F to Insured II's Annual Report on Form 10-K for the year
         ended December 31, 1992)

(10D)    Form of Purchase and Sale Agreement pertaining to Summit Preferred's
         acquisition of Preferred Equity Investments (incorporated herein by
         reference to exhibit 10C to Summit Preferred's S-11 Registration
         Statement)

(10E)    Form of Amended and Restated Agreement of Limited Partnership of
         Operating Partnerships (incorporated herein by reference to Exhibit 10B
         to Summit Preferred's S-11 Registration Statement)

(10F)    Mortgage Note, dated June 10, 1988, with respect to Cross Creek
         Apartments in Charlotte, North Carolina, in the principal amount of
         $17,494,100 (incorporated by reference to Exhibit 10(b) in Eagle's
         Current Report on Form 8-K dated June 15, 1988)

(10G)    Equity Loan Note, dated June 10, 1988, with respect to Cross Creek
         Apartments in Charlotte, North Carolina, in the principal amount of
         $1,783,900 (incorporated by reference to Exhibit 10(c) in Eagle's
         Current Report on Form 8-K dated June 15, 1988)

(10H)    Subordinated Loan Note, dated June 10, 1988, with respect to Cross
         Creek Apartments in Charlotte, North Carolina (incorporated by
         reference to Exhibit 10(d) in Eagle's Current Report on Form 8-K dated
         June 15, 1988)

(10I)    Mortgage Note, dated August 18, 1988, with respect to Weatherly Walk
         Apartments in Fayetteville, Georgia, in the principal amount of
         $7,772,500 (incorporated by reference to Exhibit 10(e) in Eagle's
         Current Report on Form 8-K dated August 19, 1988)

(10J)    Equity Loan Note, dated August 18, 1988, with respect to Weatherly Walk
         Apartments in Fayetteville, Georgia, in the principal amount of
         $895,200 (incorporated by reference to Exhibit 10(f) in Eagle's Current
         Report on Form 8-K dated August 19, 1988)

(10K)    Subordinated Loan Note, dated August 18, 1988, with respect to
         Weatherly Walk Apartments in Fayetteville, Georgia (incorporated by
         reference to Exhibit 10(g) in Eagle's Current Report on Form 8-K dated
         August 19, 1988)

(10L)    Mortgage Note, dated December 12, 1988, with respect to Woodgate Manor
         in Gainesville, Florida, in the principal amount of $3,110,300
         (incorporated by reference to Exhibit 10(h) in Eagle's Current Report
         on Form 8-K dated December 12, 1988)

(10M)    Equity Loan Note, dated December 12, 1988, with respect to Woodgate
         Manor in Gainesville, Florida, in the principal amount of $339,700
         (incorporated by reference to Exhibit 10(i) in Eagle's Current Report
         on Form 8-K dated December 12, 1988)

(10N)    Subordinated Promissory Note, dated December 12, 1988, with respect to
         Woodgate Manor in Gainesville, Florida (incorporated by reference to
         Exhibit 10(j) in Eagle's Current Report on Form 8-K dated December 12,
         1988)

<PAGE>

(10O)    Advisory Agreement dated as of October 1, 1997, between the Company,
         Aegis Realty Operating Partnership, LP (the "OP") and Related Aegis LP
         (the "Advisor") (incorporated by reference to the Company's Current
         Report on Form 8-K, filed with the Commission on March 19, 1998)


(10P)    Agreement  and Plan of  Consolidation  dated as of  October 1,
         1997, by and among the Company,  the OP, Aegis Realty  Holding
         Partnership,  LP  ("Aegis  Holding"),  AOP  Merger Sub I, Inc.
         ("AOP  Sub I"),  AOP  Merger  Sub II,  Inc.  ("AOP  Sub  II"),
         Summit  Insured  Equity L.P.  ("Insured  I"),  Summit  Insured
         Equity II L.P.  ("Insured II"),  Summit  Preferred Equity L.P.
         ("Summit  Preferred"),   Eagle  Insured  L.P.  ("Eagle"),  the
         Advisor,  Related Insured Equity  Associates,  Inc.  ("Related
         GP I"),  RIDC  II,  L.P.  ("Related  GP II"),  Related  Equity
         Funding,  Inc.  ("Related  GP  III"),  Partnership  Monitoring
         Corporation ("PMC"),  Related Federal Insured,  L.P. ("Related
         GP IV"),  Related Insured BUC$  Associates,  Inc., as assignor
         limited  partner of Insured I and  Insured  II  ("Assignor  LP
         I/II"),  Related BUC$  Associates,  Inc.  ("Assignor  LP III")
         and Related FI BUC$,  Inc.  ("Assignor  LP IV")  (incorporated
         by  reference  to the  Company's  Current  Report on Form 8-K,
         filed with the Commission on March 19, 1998)

(10Q)    Incentive Share Option Plan (incorporated by reference to the Company's
         Current Report on Form 8-K, filed with the Commission on March 19,
         1998)

(10R)    Omnibus Assignment Agreement dated as of October 1, 1997, by and among
         the Company, the OP, Aegis Holding, AOP Sub I, AOP Sub II, Insured I,
         Insured II, Summit Preferred, Eagle, the Advisor, Related GP I, Related
         GP II, Related GP III, PMC, Assignor LP I/II, Assignor LP III and
         Assignor LP IV (incorporated by reference to the Company's Current
         Report on Form 8-K, filed with the Commission on March 19, 1998)

(10S)    Revolving Credit Agreement dated as of December 29, 1997 by and between
         the OP, as borrower and BankBoston, N.A. for itself and as Agent
         (incorporated by reference to the Company's Current Reports on Form
         8-K, filed with the Commission on January 9, 1998)

(10T)    Management Agreement between the Company, Insured I, Insured II, the OP
         and the Property Manager dated October 1, 1997 (incorporated by
         reference to Exhibit 10Z in the Company's Annual Report on Form 10-K
         for the period ended December 31, 1997)

21       List of Subsidiaries (filed herewith)                                52

(b)      Reports on Form 8-K

         Current report on Form 8-K relating to the resignation of J. Michael
         Fried as Chairman of the Board of Directors and Chief Executive Officer
         and Stuart J. Boesky as Chief Operating Officer and the unanimous
         appointment of Stuart J. Boesky as Chairman of the Board of Directors
         and Chief Executive Officer and Michael J. Brenner as a Director was
         dated December 16, 1999 and was filed on January 5, 2000.

<PAGE>



                                   SIGNATURES



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


                                AEGIS REALTY, INC.
                                    (Company)



Date:  March 29, 2001         By:  ______________________________
                                   Stuart J. Boesky
                                   Director, Chairman of the Board,
                                   President   and  Chief   Executive
Officer


Date:  March 29, 2001         By:  ______________________________
                                   Michael I. Wirth
                                   Chief 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 Company
and in the capacities and on the dates indicated:



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



--------------------   Director, Chairman of the Board,
Stuart J. Boesky       President and Chief Executive Officer  March 29, 2001


-------------------
Michael J. Brenner     Director                               March 29, 2001


-------------------
Alan P. Hirmes         Director and Senior Vice President     March 29, 2001


-------------------
Peter T. Allen         Director                               March 29, 2001


-------------------
Arthur P. Fisch        Director                               March 29, 2001


-------------------    Senior Vice President and
Michael I. Wirth       Chief Financial Officer                March 29, 2001


-------------------
Gary J. Parkinson      Treasurer and Controller               March 29, 2001




<PAGE>


                                   SIGNATURES



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


                                AEGIS REALTY, INC.
                                    (Company)



Date:  March 29, 2001           By:  /s/ Stuart J. Boesky
                                     --------------------
                                     Stuart J. Boesky
                                     Director, Chairman of the Board,
                                     President   and  Chief   Executive
Officer


Date:  March 29, 2001           By:  /s/ Michael I. Wirth
                                     --------------------
                                     Michael I. Wirth
                                     Chief 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 Company
and in the capacities and on the dates indicated:


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



/s/ Stuart J. Boesky    Director, Chairman of the Board,
--------------------    President and Chief Executive Officer     March 29, 2001
Stuart J. Boesky


/s/ Michael J. Brenner
----------------------
Michael J. Brenner      Director                                  March 29, 2001


/s/ Alan P. Hirmes
------------------
Alan P. Hirmes          Director and Senior Vice President        March 29, 2001


/s/Peter T. Allen
-----------------
Peter T. Allen          Director                                  March 29, 2001


/s/ Arthur P. Fisch
-------------------
Arthur P. Fisch         Director                                  March 29, 2001


/s/ Michael I. Wirth    Senior Vice President and
--------------------    Chief Financial Officer                   March 29, 2001
Michael I. Wirth


/s/ Gary J. Parkinson
---------------------
Gary J. Parkinson       Treasurer and Controller                  March 29, 2001




<PAGE>


                        AEGIS REALTY, INC. AND SUBSIDIARIES

                  SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS



                                       Balance at Additions             Balance
Year Ended                              Beginning  During   Deduction- at End of
December 31          Name               of Period*  Year*   Write-offs*  Period
-----------      --------------        ----------  -----   -----------  --------
2000   Allowance for Doubtful Accounts  $343,000  $360,000  $(320,000)  $383,000
1999   Allowance for Doubtful Accounts  $383,000  $384,000  $(424,000)  $343,000
1998   Allowance for Doubtful Accounts  $304,000  $428,000  $(349,000)  $383,000



<PAGE>

<TABLE>
<CAPTION>


                                AEGIS REALTY, INC.
                              ITEM 14, SCHEDULE III
                    REAL ESTATE AND ACCUMULATED DEPRECIATION
                                DECEMBER 31, 2000


                                                                    Cost Capitalized
                                                                      Subsequent to
                                     Initial Cost to Partnership(F)   Acquisition     Purchase Price Adjustments(E)
                                     -----------------------------   ------------     ----------------------------
                        Encum-                      Buildings and                                     Buildings and
                        brances          Land       Improvements      Improvements       Land         Improvements
                        ----------    ------------  --------------   -------------    -------------    -----------

Shopping Centers:

<S>                      <C>          <C>             <C>             <C>              <C>              <C>
Cactus Village           $        0   $   2,093,532   $   4,631,948   $      33,517    $     (42,583)   $     (67,253)
  Glendale, AZ
Hickory Plaza            (H)              1,288,328       3,931,633          18,291           (3,750)          69,166
  Nashville, TN
Highland Fair                     0       1,288,328       5,059,079         138,661          (67,968)          15,951
  Gresham, OR
Pablo Plaza              (H)              2,147,213       5,922,120         508,141           (7,866)         789,857
  Jacksonville, FL
Southhaven               (H)              1,288,328       4,793,938          31,050                0           (1,635)
  Southhaven, MS
Town West                (H)              1,932,491       3,303,752          20,814                0           18,094
  Indianapolis, IN
Westbird                 (H)              1,566,070       5,475,510         660,577            2,474        2,296,027
  Miami, FL
Winery Square            (H)              4,320,555       8,916,731         157,429         (227,319)        (421,703)
  Fairfield, CA
Mountain View            (H)              2,675,960       8,661,498          88,972         (143,357)        (538,770)
  Village
  Shellville, GA
Forest Park Square                0       1,532,064       7,841,725          10,000          494,430          (81,321)
  Cincinnati, OH
Kokomo Plaza             (H)                695,912       6,643,748          31,557           (8,784)          (5,496)
  Kokomo, IN
Rolling Hills Square     (H)              2,624,639       2,516,365              (7)         332,233          839,908
  Tucson, AZ
Mountain Park Plaza               0       1,566,015       3,791,633               0                0           96,325
  Atlanta, GA
Applewood Centre         (H)              1,795,469       4,574,757               0                0           (4,279)
  Omaha, NE
Birdneck Center          (H)                469,227       2,837,048               0                0           63,313
  Virginia Beach, VA
The Market Place         (H)                810,910       4,875,966               0                0          240,801
  Newton, NC
Barclay Place             2,523,267         573,079       3,452,804          28,402                0          201,081
  Lakeland, FL
The Village At            3,800,498         940,193       5,629,239               0                0           62,260
  Waterford
  Midlothian, VA
Governor's Square  (H)                    1,220,408       7,297,832          14,401                0        1,293,999
  Montgomery, AL
Marion City              (H)                765,950       4,619,926               0                0           95,560
  Square
  Marion, NC
Dunlop Village           (H)                751,518       4,505,067               0                0           36,711
  Colonial Heights,
  VA
Centre Stage             (H)              1,052,698       6,305,930               0                0          336,999
  Springfield, TN
White Oaks Plaza                  0       1,237,309       7,445,072               0                0                0
  Spindale, NC
Cape Henry               (H)                587,486       3,548,028               0                0           47,549
  Virginia Beach,
  VA
Emporia West             (H)                435,001       2,679,059               0                0           62,815
  Emporia, KS
Oxford Mall               6,290,934       1,289,377       7,745,666               0                0          161,989
  Oxford, MS
Southgate                10,664,906       2,269,668      13,391,965               0                0          327,236
  Heath, OH
Crossroads East          (H)                721,798       4,273,252               0                0                0
  Columbus, OH
                       -------------   -------------   -------------   -------------   -------------     -------------

                      $  64,972,605   $  39,939,526   $ 154,671,291    $   1,741,805   $     327,510     $   5,935,184
                      =============    =============   =============   =============   =============     =============

</TABLE>
<PAGE>

<TABLE>
<CAPTION>


                                       Gross Amount at which                                                         Depreciation
                                    Carried At Close of Period (D)                                                      in Latest
                             --------------------------------------                                                     Income
                                          Buildings and                    Accumulated      Year of        Date        Statement
                            Land           Improvements        Total       Depreciation   Construction    Acquired    is Computed
                            ---------     -------------      --------    -------------    ------------  -----------   -----------
Shopping Centers:
<S>                      <C>             <C>             <C>             <C>                     <C>         <C>       <C>
Cactus Village           $   2,050,949   $   4,598,212   $   6,649,161   $   1,573,715           1986   July 1987      40 years
  Glendale, AZ
Hickory Plaza                1,284,578       4,019,090       5,303,668       1,362,558        1974 (A)  Apr. 1987      40 years
  Nashville, TN
Highland Fair                1,220,360       5,213,691       6,434,051       1,717,374           1986   July 1987      40 years
  Gresham, OR
Pablo Plaza                  2,139,347       7,220,118       9,359,465       2,132,725        1972 (B)  Feb. 1987      40 years
  Jacksonville, FL
Southhaven                   1,288,328       4,823,353       6,111,681       1,639,810        1984 (C)  Feb. 1987      40 years
  Southhaven, MS
Town West                    1,932,491       3,342,660       5,275,151       1,160,556           1985   May 1987       40 years
  Indianapolis, IN
Westbird                     1,568,544       8,432,114      10,000,658       2,129,054           1977   Dec. 1986      40 years
  Miami, FL
Winery Square                4,093,236       8,652,457      12,745,693       2,875,148           1987   Dec. 1987      40 years
  Fairfield, CA
Mountain View                2,532,603       8,211,700      10,744,303       2,482,739           1987   July 1988      40 years
  Village
  Shellville, GA
Forest Park Square           2,026,494       7,770,404       9,796,898       2,298,871           1988   May 1989       40 years
  Cincinnati, OH
Kokomo Plaza                   687,128       6,669,809       7,356,937       1,953,899           1988   May 1989       40 years
  Kokomo, IN
Rolling Hills Square         2,956,872       3,356,266       6,313,138         365,886           1980   Oct. 1997      30.5 years
  Tucson, AZ
Mountain Park Plaza          1,566,015       3,887,958       5,453,973         394,960           1988   Oct. 1997      31.2 years
  Atlanta, GA
Applewood Centre             1,795,469       4,570,478       6,365,947         452,251           1989   Oct. 1997      33.1 years
  Omaha, NE
Birdneck Center                469,227       2,900,361       3,369,588         269,603        1987 (G)  Dec. 1997      40 years
  Virginia Beach, VA
The Market Place               810,910       5,116,767       5,927,677         341,901           1989   Dec. 1997      40 years
  Newton, NC
Barclay Place                  573,079       3,682,287       4,255,366         260,779        1974 (J)  Mar. 1998      40 years
  Lakeland, FL
The Village At                 940,193       5,691,499       6,631,692         387,987           1991   Apr. 1998      40 years
  Waterford
  Midlothian, VA
Governor's Square  (H)       1,220,408       8,606,232       9,826,640         544,560        1960 (K)   May 1998       40 years
  Montgomery, AL
Marion City                    765,950       4,715,486       5,481,436         301,041           1988   June 1998      40 years
  Square
  Marion, NC
Dunlop Village                 751,518       4,541,778       5,293,296         268,060           1986   Sep. 1998      40 years
  Colonial Heights,
  VA
Centre Stage                 1,052,698       6,642,929       7,695,627         397,701           1989   Sep. 1998      40 years
  Springfield, TN
White Oaks Plaza             1,237,309       7,445,072       8,682,381         434,066           1988   Sep. 1998      40 years
  Spindale, NC
Cape Henry                     587,486       3,595,577       4,183,063         210,025           1986   Sep. 1998      40 years
  Virginia Beach,
  VA
Emporia West                   435,001       2,741,874       3,176,875         149,888           1980   Nov. 1998      40 years
  Emporia, KS
Oxford Mall                  1,289,377       7,907,655       9,197,032         424,731           1982   Nov. 1998      40 years
  Oxford, MS
Southgate                    2,269,668      13,719,201      15,988,869         706,236        1962 (L)  Dec. 1998      40 years
  Heath, OH
Crossroads East                721,799       4,273,257       4,995,056         222,473        1984 (M)  Dec. 1998      40 years
  Columbus, OH
                         -------------    ------------    ------------     -----------

                         $  40,267,037    $162,348,285    $202,615,322     $27,458,593
                         =============    ============    ============     ===========
</TABLE>

(A) Renovated and expanded in 1985.
(B) Expanded and remodeled from 1983 through
    1985.
(C) Expanded in 1986.
(D) Aggregate cost for federal income tax purposes is $182,330,530.
(E) Amounts received and accrued from sellers' rental guarantees from the
    sellers of the properties purchased by the Company.
(F) Included in buildings and improvements are acquisition fees.
(G) Expanded in 1997.
(H) This shopping center is part of a pool of assets collateralizing the Credit
    Facility which has an outstanding balance of $41,693,000 at December 31,
    2000.
(J) Renovated and expanded in 1988.
(K) Developed and renovated in four phases from 1960 through 1990.
(L) Renovated in 1984 and from 1996 through 1997.
(M) Renovated from 1996 through 1997.

 Reconciliation of Real Estate Owned:
                                       2000              1999           1998
                                  --------------    ----------    -------------

Balance at beginning of period: $196,037,997      $194,144,910     $111,042,804
  Acquisitions                       557,823           714,293       82,423,329
  Dispositions                       (46,077)                0                0
  Improvements                     6,227,319         1,753,345          703,687
  Write-off of improvements         (161,740)         (574,551)         (24,910)
                                 -----------       -----------      -----------
Balance at close of period:     $202,615,322      $196,037,997     $194,144,910
                                 ===========       ===========      ===========

Reconciliation of Accumulated Depreciation:

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

Balance at beginning of period:  $23,253,033      $ 19,268,330     $ 16,404,617
  Depreciation Expense             4,338,565         4,114,002        2,880,114
  Write-off of accumulated
    deprecitaion on improvements    (133,005)         (129,299)         (16,401)
                                ------------       -----------     ------------
Balance at close of period:     $ 27,458,593      $ 23,253,033     $ 19,268,330
                                 ===========       ===========      ===========


<PAGE>


<TABLE>
<CAPTION>


                        AEGIS REALTY, INC. AND SUBSIDIARIES
                    Schedule IV - Mortgage Loans on Real Estate
                                December 31, 2000

                                                                                Original           Carrying
                                          Final       Periodic                 Face Amount          Amount
                    Interest   Closing   Maturity     Payment      Prior       of Mortgage        of Mortgage
Description (1)     Rate (2)     Date    Date(3)(5)    Terms (4)   Liens         Loan             Loan (6)(7)(8)
---------------     --------     ----    ----------    ---------   -----         ----             --------------
First Mortgage Loan:
<S>                  <C>      <C>         <C>           <C>         <C>        <C>                   <C>
Woodgate Manor(9)     8.95%    12/12/88   1/1/24        Monthly     None       $3,110,300            $3,170,322
</TABLE>


(1) The property is a multifamily residential apartment complex.

(2) Includes a servicing fee of 0.07% paid by the mortgagor to Related  Mortgage
Corporation (an affiliate of the Advisor).

(3) As of December 13, 1998,  the Company may call for  prepayment of the entire
outstanding   principal  amount  at  any  time,  subject  to  the  loss  of  the
co-insurance feature.

(4) Monthly  payments  include  principal  and  interest and are made at a level
amount  over  the life of the  mortgage  loan  until  maturity.  See  discussion
regarding additional interest in Item 1, "Business-Mortgage Loans."

(5) As of  December  13,  1998,  the  Borrower  may  elect to prepay at any time
without incurring prepayment penalties.

(6)  Carrying amount of mortgage loans:

                                                   2000          1999
                                                ---------     ----------
Beginning balance                               $3,220,191    $3,267,037
Amortization of purchase accounting premiums       (14,430)      (14,430)
Collections of principal                           (35,439)      (32,416)
                                                 ---------     ---------
Ending Balance                                  $3,170,322    $3,220,191
                                                 =========     =========

(7) The aggregate  cost of the mortgage loan for Federal  income tax purposes at
December 31, 2000 is $2,838,429.  The difference in aggregate cost is due to the
purchase accounting premium recorded for financial statement purposes.

(8) The mortgage loan is current with respect to principal and interest.

(9) The general partnership interest of the mortgagor is held by an affiliate of
the Advisor.

<PAGE>