ASSET INVESTORS CORP
10-Q, 1995-05-15
REAL ESTATE INVESTMENT TRUSTS
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<PAGE>
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                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C.  20549
                             _______________________

                                    FORM 10-Q

(MARK ONE)

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

                  FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1995

                                       OR

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


                          COMMISSION FILE NUMBER 1-9360


                           ASSET INVESTORS CORPORATION
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)



          MARYLAND                                        84-1038736
(STATE OR OTHER JURISDICTION OF                        (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION)                         IDENTIFICATION NO.)

3600 SOUTH YOSEMITE STREET, SUITE 900                         80237
       DENVER, COLORADO                                    (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)

                                 (303) 793-2703
              (REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)

                                 NOT APPLICABLE
               FORMER NAME, FORMER ADDRESS AND FORMER FISCAL YEAR,
                          IF CHANGED SINCE LAST REPORT.


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     .
                                         ----    ----

AS OF MAY 1, 1995, 24,227,005 SHARES OF ASSET INVESTORS CORPORATION COMMON STOCK
WERE OUTSTANDING.

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

<PAGE>

                  ASSET INVESTORS CORPORATION AND SUBSIDIARIES

                                    FORM 10-Q

                  FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1995

                                TABLE OF CONTENTS

                                                                            PAGE
                                                                            ----
PART I.  FINANCIAL INFORMATION:

  Item 1. Condensed Consolidated Financial Statements:

          Condensed Consolidated Balance Sheets as of March 31, 1995
          (unaudited) and December 31, 1994                                  1

          Condensed Consolidated Statements of Operations for the three
          months ended March 31, 1995 and 1994 (unaudited)                   2

          Condensed Consolidated Statements of Cash Flows for the three
          months ended March 31, 1995 and 1994 (unaudited)                   3

          Notes to Condensed Consolidated Financial Statements (unaudited)   5

  Item 2. Management's Discussion and Analysis of Financial Condition
          and Results of Operations                                          13

          Summary of Definitions                                             22

PART II.  OTHER INFORMATION:

  Item 6. Exhibits and Reports on Form 8-K                                   27

                                       (i)

<PAGE>
                  ASSET INVESTORS CORPORATION AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                          (DOLLAR AMOUNTS IN THOUSANDS)


<TABLE>
<CAPTION>
                                                    March 31,    December 31,
                                                       1995           1994
                                                   -----------   ------------
ASSETS                                             (Unaudited)
<S>                                                 <C>          <C>
 Cash and cash equivalents                            $7,182        $14,961
 Restricted cash for secured notes payable                --         15,862
 Non-agency MBS Bonds                                 43,570         32,544
 Investment in Commercial Assets                      20,936         21,068
 CMO Residuals and Acquired CMO Classes                2,335          9,834
 Other assets, net                                     2,104          2,614
 CMO Subsidiaries
  Restricted cash                                     56,725        109,830
  Accrued interest receivable                          3,666         11,250
  CMO issuance costs, net                                353            586
  Mortgage Collateral, net                           311,240        932,962
                                                   ---------     ----------
    Total Assets                                    $448,111     $1,151,511
                                                   ---------     ----------
                                                   ---------     ----------

LIABILITIES
 Accounts payable and accrued liabilities             $3,126         $2,698
 Management fees payable                                 339            526
 Short-term borrowings                                 1,598          2,758
 Secured notes payable, recourse to related
  subsidiary assets only                                  --         30,592
 CMO Subsidiaries
  Accrued interest payable                             6,258         17,781
  CMO Bonds, net                                     361,404      1,021,188
                                                   ---------     ----------

    Total Liabilities                                372,725      1,075,543
                                                   ---------     ----------

Minority Interest-CMO Subsidiaries                       324          3,003
                                                   ---------     ----------

STOCKHOLDERS' EQUITY
 Common Stock, par value $.01 per share,
  50,000,000 shares authorized 24,227,005
  and 24,212,002 shares issued and outstanding           242            242
 Additional paid-in capital                          227,210        227,182

 Cumulative dividends                               (222,922)      (220,984)
 Cumulative net income                                70,532         66,525
                                                   ---------     ----------
  Dividends in excess of net income                 (152,390)      (154,459)
                                                   ---------     ----------
    Total Stockholders' Equity                        75,062         72,965
                                                   ---------     ----------
    Total Liabilities and Stockholders' Equity      $448,111     $1,151,511
                                                   ---------     ----------
                                                   ---------     ----------
</TABLE>

            See Notes to Condensed Consolidated Financial Statements.

                                      - 1 -

<PAGE>

                  ASSET INVESTORS CORPORATION AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                      (IN THOUSANDS, EXCEPT PER SHARE DATA)
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                 Three Months Ended March 31,
                                                 ----------------------------
                                                      1995          1994
                                                     -------       -------
<S>                                                  <C>           <C>
REVENUES
  Interest
     CMO Subsidiaries-Mortgage Collateral, net       $22,219       $36,583
     Non-agency MBS bonds                              1,333            --
  CMO Residuals and Acquired CMO Classes, net            528         1,289
  Equity in earnings of Commercial Assets                420           124
  Net gain on sale of assets                           2,031         6,264
  Other income                                           374           241
                                                     -------       -------
     Total Revenues                                   26,905        44,501
                                                     -------       -------

EXPENSES
  CMO Subsidiaries
     Interest                                         20,701        35,993
     Administrative fees and other                       383           524
                                                     -------       -------
                                                      21,084        36,517

  Management fees                                        237           135
  General and administrative                             791           617
  Interest                                               597           791
                                                     -------       -------

     Total Expenses                                   22,709        38,060
                                                     -------       -------

  Income before minority interest                      4,196         6,441
  Minority interest - CMO Subsidiaries                  (189)           74
                                                     -------       -------

NET INCOME                                           $ 4,007       $ 6,515
                                                     -------       -------
                                                     -------       -------

NET INCOME PER SHARE                                 $   .17       $   .46
                                                     -------       -------
                                                     -------       -------

Weighted-average shares outstanding                   24,227        14,080

Dividends per share                                  $   .08        $  .05
                                                     -------       -------
                                                     -------       -------
</TABLE>

            See Notes to Condensed Consolidated Financial Statements.

                                      - 2 -

<PAGE>

                  ASSET INVESTORS CORPORATION AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                  Three Months Ended March 31,
                                                  ----------------------------
                                                          1995        1994
                                                       --------    --------
<S>                                                    <C>         <C>
CASH FLOWS FROM OPERATING ACTIVITIES
  Net income                                           $  4,007    $  6,515
  Adjustments to reconcile net income to net cash
    flows from operating activities
     Amortization of discounts                              269         199
     Net gain on sale of assets                             (23)     (4,617)
     Equity in earnings of Commercial Assets               (420)       (124)
     Increase in other assets                              (201)         --
     (Decrease) increase in accounts payable and
       accrued liabilities                                 (845)         41
     CMO Subsidiaries
       Amortization of discount, net of premium, on
         Mortgage Collateral, discount on CMO bonds
         and CMO issuance costs                             656       3,284
       Gain on sale of CMO Subsidiaries                  (2,008)     (1,647)
       Decrease in accrued interest receivable            1,197       3,032
       Decrease in accrued interest payable              (2,355)     (4,525)
                                                       --------    --------
  Net Cash Provided By Operating Activities                 277       2,158
                                                       --------    --------

CASH FLOWS FROM INVESTING ACTIVITIES
  Acquisition of non-agency MBS bonds                   (11,697)         --
  Principal collections on CMO Residuals, Acquired
     CMO Classes, non-agency MBS bonds and other
     assets                                               1,712       3,674
  Proceeds from the sale of assets                       14,746       6,024
  Decrease (increase) in restricted cash for
     secured notes payable                               15,862        (475)
  CMO Subsidiaries
     Principal collections on Mortgage Collateral        78,990     280,511
     Proceeds from sale of Mortgage Collateral            1,816       2,592
     Net decrease (increase) in restricted cash          39,311      (1,531)
     Decrease in minority interest                         (255)     (1,378)
                                                       --------    --------

  Net Cash Provided By Investing Activities             140,485     289,417
                                                       --------    --------
</TABLE>

            See Notes to Condensed Consolidated Financial Statements.

                                      - 3 -

<PAGE>

                  ASSET INVESTORS CORPORATION AND SUBSIDIARIES
                CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
                                 (IN THOUSANDS)
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                               Three Months Ended March 31,
                                               ----------------------------
                                                         1995        1994
                                                      ---------   ---------
<S>                                                   <C>         <C>
CASH FLOWS FROM FINANCING ACTIVITIES
  Principal payments on CMO Subsidiaries-CMO Bonds    $(116,062)  $(277,390)
  Decrease in short-term borrowings, net                 (1,160)     (1,534)
  Decrease in secured notes payable                     (30,592)     (5,371)
  Dividends paid                                           (727)         --
  Decrease in other assets                                   --           6
                                                      ---------   ---------

  Net Cash Used By Financing Activities                (148,541)   (284,289)
                                                      ---------   ---------

CASH AND CASH EQUIVALENTS
  Decrease                                               (7,779)      7,286
  Beginning of year                                      14,961       7,540
                                                      ---------   ---------

  End of year                                         $   7,182   $  14,826
                                                      ---------   ---------
                                                      ---------   ---------

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
  Cash paid for interest expense                      $  28,386   $  30,128
                                                      ---------   ---------
                                                      ---------   ---------

SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING
AND FINANCING ACTIVITIES

  Increase in CMO Bond principal on Compound
     Interest Classes                                 $   4,037   $   7,832
                                                      ---------   ---------
                                                      ---------   ---------

  Declaration of dividends payable                    $   1,938   $     705
                                                      ---------   ---------
                                                      ---------   ---------
</TABLE>

            See Notes to Condensed Consolidated Financial Statements.

                                      - 4 -

<PAGE>

                  ASSET INVESTORS CORPORATION AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)

     CAPITALIZED TERMS NOT OTHERWISE DEFINED IN THE NARRATIVE BELOW SHALL
     HAVE THE MEANING INDICATED IN THE "SUMMARY OF DEFINITIONS" FOLLOWING
     "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
     RESULTS OF OPERATIONS".

A.   THE COMPANY

     Asset Investors Corporation was incorporated under Maryland law on October
14, 1986 by MDC.  The Common Stock is listed on the NYSE under the symbol "AIC."
The company's assets primarily are non-agency MBS bonds (which it began
acquiring in the second quarter of 1994) and shares of common stock of
Commercial Assets and, to a lesser extent, CMO Ownership Interests and other
mortgage-related assets.

B.   PRESENTATION OF FINANCIAL STATEMENTS

     The Condensed Consolidated Financial Statements of the company presented
herein have been prepared by the company, without audit, pursuant to the rules
and regulations of the Securities and Exchange Commission.  These Financial
Statements reflect all adjustments, consisting of only normal recurring
accruals, which, in the opinion of management, are necessary to present fairly
the financial position, results of operations and cash flows of the company as
of March 31, 1995 and for the period then ended and for all prior periods
presented.  These statements are condensed and do not include all the
information required by GAAP in a full set of financial statements.  These
statements should be read in conjunction with the company's Consolidated
Financial Statements and notes thereto included in the company's Annual Report
on Form 10-K for the fiscal year ended December 31, 1994.

     Certain reclassifications have been made in the 1994 Condensed Consolidated
Financial Statements to conform to the classifications used in the current year.

C.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     PRINCIPLES OF CONSOLIDATION - The Condensed Consolidated Financial
Statements include the accounts of the company and its wholly owned corporate
subsidiaries, Asset Mortgage Funding, Asset Funding, Asset Acceptance, Asset
Southwest,  Asset Acquisition, Asset Finance, Asset Securitization and each of
the company's CMO Subsidiaries.  The portion of the ownership interest of each
such CMO Subsidiary not owned by the company is accounted for as minority
interest.  The company owns approximately 27% of the shares of Commercial Assets
which is recorded under the equity method.  All significant intercompany
balances and transactions have been eliminated in consolidation.

     INCOME TAXES - The company intends to operate in a manner that will permit
it to qualify for the income tax treatment accorded to a REIT.  If it so
qualifies, the company's REIT income, with certain limited exceptions, will not
be subject to federal income tax at the corporate level.  Accordingly, no
provision for taxes has been made in the Condensed Consolidated Financial
Statements.

     In order to maintain its status as a REIT, the company is required, among
other things, to distribute annually to its shareowners at least 95% of the
greater of its REIT income or Excess Inclusion income and meet certain asset,
income and stock ownership tests.  The company currently intends to

                                      - 5 -

<PAGE>

distribute at least 100% of the greater of its REIT income or Excess Inclusion
income to its shareowners within the time limits prescribed by the Code.

D.   SALE OF CMO OWNERSHIP INTERESTS

     On March 30, 1995, Asset Securitization sold 28 CMO Ownership Interests
classified as available-for-sale for $14,927,000.  No gain or loss was
recognized at the time of the sale.  The proceeds from the sale and $15,569,000
of restricted cash for secured notes payable were used to repay the $28,437,000
outstanding principal balance of the secured notes and $355,000 of accrued
interest, and $1,704,000 of proceeds was provided to the company.  As of
December 31, 1994, the company recognized $1,205,000 of net holding losses
related to the assets sold.  The following table presents the unaudited summary
consolidated financial position of the company at December 31, 1994, as if the
March 30, 1995 sale of the CMO Ownership Interests and retirement of the secured
notes payable had occurred at that date (in thousands):


<TABLE>
<CAPTION>
                                                      December 31, 1994
                                                  ---------------------------
                                                  As Reported      Pro Forma
                                                  -----------     -----------
                                                                  (Unaudited)
<S>                                               <C>             <C>

Restricted cash for secured notes payable         $   15,862       $     --
Non-agency MBS bonds                                  32,544         32,544
Investment in Commercial Assets                       21,068         21,068
CMO Residuals and Acquired CMO Classes                 9,834          2,466
CMO Subsidiaries-assets                            1,054,628        463,801
Other assets                                          17,575         17,775
                                                  ----------       --------
  Total Assets                                    $1,151,511       $537,654
                                                  ----------       --------
                                                  ----------       --------

Secured notes payable                                $30,592            $--
CMO Subsidiaries - liabilities                     1,038,969        458,724
Other liabilities                                      5,982          5,593
                                                  ----------       --------

  Total Liabilities                                1,075,543        464,317

Minority interest - CMO Subsidiaries                   3,003            372
Stockholders' Equity                                  72,965         72,965
                                                  ----------       --------

  Total Liabilities and Stockholders' Equity      $1,151,511       $537,654
                                                  ----------       --------
                                                  ----------       --------
</TABLE>


     The following table presents the unaudited summary consolidated results of
operations of the company for the three months ended March 31, 1995 and 1994, as
if the March 30, 1995 sale of the CMO Ownership Interests that collateralized
the secured notes payable and retirement of the secured notes payable had
occurred at the beginning of these periods (in thousands):


<TABLE>
<CAPTION>
                                        Three Months Ended March 31,
                            --------------------------------------------------
                                       1995                       1994
                            -------------------------  -----------------------
                            As Reported      ProForma  As Reported    Proforma
                            -----------      --------  -----------    --------
<S>                         <C>              <C>       <C>            <C>
Revenues                      $26,905        $12,585     $44,501      $19,317
                              -------        -------     -------      -------
                              -------        -------     -------      -------

Net income                    $ 4,007        $ 3,124     $ 6,515      $ 1,730
                              -------        -------     -------      -------
                              -------        -------     -------      -------
</TABLE>

                                      - 6 -

<PAGE>

E.   ADDITIONAL FINANCIAL INFORMATION

     Presented below is certain financial information about the company on a
condensed partially unconsolidated basis.  The partially unconsolidated
presentation nets the assets, liabilities and minority interest of the CMO
Subsidiaries on the balance sheets and nets the revenues, expenses and minority
interest of the CMO Subsidiaries on the statements of operations.  This
presentation reflects the company's net equity in its CMO Ownership Interests so
it is comparable to the company's other assets and revenues.  The balance sheets
at March 31, 1995 and December 31, 1994 and the statements of operations for the
three months ended March 31, 1995 and 1994 are as follows (in thousands):

<TABLE>
<CAPTION>
                                           March 31,  December 31,
                                              1995       1994
                                           ---------  ------------
<S>                                        <C>        <C>
BALANCE SHEETS
     Non-agency MBS bonds                    $43,570   $ 32,544
     Investment in Commercial Assets          20,936     21,068
     CMO Ownership Interests                   6,333     22,490
     Other assets                              9,286     33,437
                                             -------   --------
      Total Assets                             80,125   109,539
                                             -------   --------

     Secured notes payable                        --     30,592
     Other liabilities                         5,063      5,982
                                             -------   --------

      Total Liabilities                        5,063     36,574
                                             -------   --------

     Stockholders' Equity                    $75,062   $ 72,965
                                             -------   --------
                                             -------   --------
</TABLE>

<TABLE>

<CAPTION>

                                          Three Months Ended March 31,
                                          ----------------------------
                                                    1995         1994
                                                  -------      -------
<S>                                               <C>          <C>
STATEMENTS OF OPERATIONS

  Non-agency MBS bonds                             $1,333       $   --
  Equity in earnings of Commercial Assets             420          124
  CMO Ownership Interests                           1,474        1,429
  Net gain on sale of assets                        2,031        6,264
  Other                                               374          241
                                                  -------      -------

   Total Revenues                                   5,632        8,058
                                                  -------      -------

  Management fees                                     237          135
  General and administrative                          791          617
  Interest on borrowings                              597          791
                                                  -------      -------

   Total Expenses                                   1,625        1,543
                                                  -------      -------

  Net Income                                       $4,007       $6,515
                                                  -------      -------
                                                  -------      -------
</TABLE>

                                      - 7 -

<PAGE>


F.   NON-AGENCY MBS BONDS

     Through March 31, 1995, the company acquired 114 non-agency MBS bonds, with
an aggregate outstanding principal balance on the date of acquisition of
$128,868,000 and an aggregate total cost of $45,321,000.  The net carrying
value of the company's non-agency MBS bonds was as follows (dollar amounts in
thousands):


<TABLE>
<CAPTION>
                                                                          Outstanding Balance
                                                                      -------------------------
                                                                       March 31,   December 31,
                                             Price(1)   Coupon(2)        1995          1994
                                             --------   ---------     ----------   ------------
                                                                      (Unaudited)
<S>                                          <C>        <C>           <C>          <C>
Non-agency MBS bonds collateralized by:
  30-year fixed-rate mortgage loans            35.2%       7.0%         $93,056       $56,955
  15-year fixed-rate mortgage loans            38.6        6.5           15,738        12,364
  Adjustable-rate mortgage loans               27.2        6.4            4,206         4,219
  Second tier mortgage loans(3)                58.9        6.5           14,446        14,473
                                               -----       ----         -------       -------
                                               39.2%       6.9%         127,446        88,011
                                               -----       ----
                                               -----       ----
Less:
  Allowance for credit losses                                           (30,131)      (22,075)
  Unamortized discount                                                  (53,745)      (33,392)
                                                                        -------       -------
                                                                        $43,570       $32,544
                                                                        -------       -------
                                                                        -------       -------

<FN>
_________________________
(1)  Weighted-average price as a percentage of the principal balance of the non-
     agency MBS bonds acquired.
(2)  Weighted-average coupon of non-agency MBS bonds at March 31, 1995.
(3)  The second tier mortgages are all adjustable-rate mortgages and include
     $8,150,000 and $8,165,000 of "B" rated non-agency MBS bonds at March 31,
     1995 and December 31, 1994, respectively.
</TABLE>


     The outstanding principal balance of the mortgage loans that are the
collateral for the non-agency MBS bonds which the company owns a subordinate
class and the outstanding principal balance of the non-agency MBS bonds senior
to the company's subordinate non-agency MBS bonds was approximately
$26,500,000,000 and $26,400,000,000, respectively, at March 31, 1995.  During
the three months ended March 31, 1995, the company:  (i) provided an additional
$8,137,000 allowance for credit losses related to the $39,926,000 principal
amount of non-agency MBS bonds acquired during the quarter; (ii) recorded no bad
debt expense; and (iii) charged $81,000 of losses of principal against the
allowance for credit losses, resulting in a $30,131,000 allowance for credit
losses at March 31, 1995.  As of March 31, 1995, there were 29 mortgage loans
that collateralize the company's non-agency MBS bonds with an outstanding
principal balance of $9,518,000 that were considered seriously delinquent (three
or more payments late plus loans in foreclosure). The  company acquires its
non-agency MBS bonds at a significant discount. The potential economic loss
from the  company's seriously delinquent mortgage loans (the product of the
outstanding principal balance and the  company's purchase price of the related
non-agency MBS bond) at March 31, 1995 could range from $0 to $3,743,000. The
eventual amount of the  company's economic loss from these seriously delinquent
mortgage loans is dependent upon: (i) the portion of these mortgage
loans that are foreclosed and (ii) the net amount recovered from the foreclosure
sale of the defaulted mortgage loans.

     The principal amount of the credit support non-agency MBS bonds acquired by
the company represent a small percentage of the principal amount of the total
non-agency MBS bonds issued to securitize a pool of residential mortgage loans.
At March 31, 1995, the weighted-average percentage of the principal amount of
the credit support non-agency MBS bonds owned by the company represented 0.50%
of the principal amount of the total non-agency MBS bonds in the related
securitization.

                                      - 8 -

<PAGE>

G.   CMO SUBSIDIARIES

     CMO SUBSIDIARIES-MORTGAGE COLLATERAL AND OTHER ASSETS - Presented below is
a schedule of CMO Subsidiaries-Mortgage Collateral and other assets which secure
CMO Subsidiaries-CMO Bonds at March 31, 1995 and December 31, 1994 (dollar
amounts in thousands):

<TABLE>
<CAPTION>
                                      Range of Pass-
                                     Through Rates (%)   March 31,  December 31,
                                     at March 31, 1995      1995       1994
                                     -----------------  ----------  ------------
                                                        (Unaudited)
<S>                                  <C>                <C>         <C>
Mortgage Certificates
  GNMA Certificates                             9.0      $ 62,061   $  340,021
  FNMA Certificates                         7.8-9.5        99,165      180,685
  FHLMC Certificates                       9.0-10.0       145,094      401,860
  Private Certificates                           --            --        7,287
Mortgage Loans                             8.1-10.5         4,886        5,122
                                                         --------   ----------
                                                          311,206      934,975
  Unamortized premium, net of
    discount                                                   34       (2,013)
                                                         --------   ----------

CMO Subsidiaries-Mortgage
  Collateral, net                                         311,240      932,962

CMO Subsidiaries-Other Assets
  Restricted cash                                          56,725      109,830
  Accrued interest receivable                               3,666       11,250
  CMO issuance costs, net                                     353          586
                                                         --------   ----------
                                                         $371,984   $1,054,628
                                                         --------   ----------
                                                         --------   ----------
</TABLE>

     During the three months ended March 31, 1995 and 1994, the company
exercised the Call Rights with respect to certain CMO Subsidiaries, recognizing
net gains of $2,008,000 and $1,647,000, respectively.  The exercise of Call
Rights resulted in the sale of $45,698,000 and $36,003,000 principal amount of
Mortgage Collateral during the three months ended March 31, 1995 and 1994,
respectively, and the early redemption of the related CMO Bonds.

     At March 31, 1995 and December 31, 1994, $49,512,000 and $79,658,000,
respectively, in restricted cash was held by a trustee representing proceeds
from the sale of Mortgage Collateral related to the exercise of Call Rights
pending the redemption of the related CMO Bonds.  CMO Bonds with an outstanding
principal balance of $46,582,000 at March 31, 1995 were redeemed at par on
May 1, 1995, and CMO Bonds with an outstanding principal balance of $76,019,000
at December 31, 1994 were redeemed at par on January 1 and February 1, 1995.

                                      - 9 -

<PAGE>


     CMO SUBSIDIARIES-CMO BONDS - Presented below is a schedule of outstanding:
(i) CMO Bonds issued by Asset Mortgage Funding and Asset Funding; (ii) CMO Bonds
relating to other CMO Subsidiaries; and (iii) multi-participant CMO issuances in
which Asset Acceptance and Asset Southwest participated (to the extent of such
participation) and the related accrued interest payable at March 31, 1995 and
December 31, 1994 (amounts in thousands).

<TABLE>
<CAPTION>
                                                March 31,      December 31,
                                                  1995              1994
                                               ----------      ------------
                                               (Unaudited)
<S>                                            <C>             <C>
  Asset Mortgage Funding                         $191,131        $  275,490
  Asset Funding                                        --            43,840
  Other CMO Subsidiaries                          164,290           703,221
  Asset Acceptance                                  3,854             4,111
  Asset Southwest                                     974               979
                                                 --------        ----------
                                                  360,249         1,027,641
     Unamortized discount                         (19,527)          (60,390)
     Reserve                                       20,682            53,937
                                                 --------        ----------

CMO Subsidiaries-CMO Bonds, net                   361,404         1,021,188
Accrued interest payable                            6,258            17,781
                                                 --------        ----------
                                                 $367,662        $1,038,969
                                                 --------        ----------
                                                 --------        ----------
</TABLE>


H.   CMO RESIDUALS AND ACQUIRED CMO CLASSES

     The company's CMO Residuals had an unamortized cost of $2,072,000 and
$9,561,000 and its Acquired CMO Classes had an unamortized cost of $263,000 and
$273,000 at March 31, 1995 and December 31, 1994, respectively.  Substantially
all of these CMO Residuals and Acquired CMO Classes are at, or are nearing, the
ends of their economic lives.  Accordingly, the company does not anticipate
these assets will generate significant amounts of income in the future.

     During the three months ended March 31, 1995 and 1994, the company either
sold or exercised its Call Rights on CMO Residuals and Acquired CMO Classes with
an unamortized cost of $48,000 and $1,408,000, respectively, recognizing a net
gain of $23,000 and $4,617,000, respectively.

I.   INVESTMENT IN COMMERCIAL ASSETS

     On March 31, 1995 and December 31, 1994, the company owned 2,761,126 shares
(approximately 27%) of the common stock of Commercial Assets.  Presented below
is the summarized financial information of Commercial Assets as reported to the
company (in thousands):

                                     - 10 -


<PAGE>


<TABLE>
<CAPTION>
BALANCE SHEET                                      March 31,    December 31,
                                                     1995           1994
                                                   ---------    ------------
                                                  (Unaudited)
<S>                                               <C>           <C>
CMBS bonds                                           $73,938       $74,046
Cash and cash equivalents                              5,715        12,367
Other assets                                           1,254         1,191
                                                     -------       -------
  Total Assets                                        80,907        87,604
                                                     -------       -------

Short-term borrowings                                  4,000        10,295
Other liabilities                                      2,261         2,637
                                                     -------       -------

  Total Liabilities                                    6,261        12,932
                                                     -------       -------

Stockholders' Equity                                 $74,646       $74,672
                                                     -------       -------
                                                     -------       -------


<CAPTION>
STATEMENTS OF INCOME                          Three Months Ended March 31,
                                              ----------------------------
                                                       1995          1994
                                                     -------       -------
                                                           (Unaudited)
<S>                                                  <C>           <C>
CMBS bonds                                            $2,210          $357
Other revenues                                           139           512
                                                      ------          ----
  Total Revenues                                       2,349           869
                                                      ------          ----

Management fees                                          232            75
General and administrative expenses                      394           341
Interest on borrowings                                   190            --
                                                      ------          ----

  Total Expenses                                         816           416
                                                      ------          ----

Net Income                                            $1,533          $453
                                                      ------          ----
                                                      ------          ----
</TABLE>

J.   SHORT-TERM BORROWINGS

     To, among other things, increase amounts available to acquire non-agency
MBS bonds, the company uses Repurchase Agreements and a credit facility, in each
case collateralized by certain non-agency MBS bonds.  The collateral value and
interest rate related to these borrowing agreements is subject to periodic
adjustment.  At March 31, 1995, the company was able to borrow $1,122,000 under
one Repurchase Agreement, based on the value of the pledged collateral.  As of
March 31, 1995 and December 31, 1994, borrowings under this Repurchase Agreement
had an original maturity of 30 days, an effective interest rate of 7.38% and
an aggregate outstanding principal balance of $598,000 and $658,000,
respectively.

                                     - 11 -

<PAGE>


     On December 23, 1994 the company entered into a one-year credit facility
secured by certain non-agency MBS bonds.  At March 31, 1995, the company was
able to borrow $3,088,000 under the credit facility, based on the value of the
pledged collateral.  The credit facility is also subject to certain financial
covenants, with which the company is in compliance, and bears interest, payable
monthly, based on one-month LIBOR.  At March 31, 1995 and December 31, 1994,
$1,000,000 and $2,100,000, respectively, were borrowed under the credit facility
at effective interest rates of 7.13% and 7.49%, respectively.

     In April 1995, the company negotiated two additional Repurchase Agreements
and pledged additional non-agency MBS bonds to secure its various Repurchase
Agreements and one-year credit facility, increasing the amount the company can
borrow to a maximum of $17,514,000.

K.   OTHER MATTERS

     The company has entered into a series of Management Agreements with the
Manager through December 31, 1995.  Pursuant to the Management Agreement, the
Manager advises the company on its business and oversees its day-to-day
operations subject to the supervision of the company's Board of Directors, the
majority of whom are Independent Directors.  During the three months ended March
31, 1995 and 1994, the company incurred management fees of $126,000 and $56,000,
respectively.  The company also incurred Administrative Fees pursuant to the
Management Agreements referred to above and certain administration agreements
entered into with the Manager in connection with certain of the company's CMO
Ownership Interests and non-agency MBS bonds.  Administrative Fees incurred for
the three months ended March 31, 1995 and 1994 were $327,000 and $361,000,
respectively.

     The company has an NOL carryover of approximately $100,000,000 at March 31,
1995 which can be used to reduce the company's requirement under the Code to
distribute at least 95% of REIT income but does not reduce the requirement to
distribute 95% of Excess Inclusion income.  As of March 31, 1995, the company
also has a capital loss carryover of approximately $19,000,000 which expires in
2000.

                                     - 12 -


<PAGE>

ITEM 2.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
          RESULTS OF OPERATIONS.

     CAPITALIZED TERMS NOT OTHERWISE DEFINED IN THE NARRATIVE BELOW SHALL
     HAVE THE MEANING INDICATED IN THE "SUMMARY OF DEFINITIONS" WHICH MAY
     BE FOUND AT THE END OF THIS REPORT.

     GENERAL - Asset Investors Corporation is a real estate investment trust
(REIT) that was incorporated by MDC under Maryland law in 1986.  The Common
Stock of Asset Investors Corporation is listed on the NYSE under the symbol
"AIC."  Asset Investors owns and manages ownership interests in residential
mortgage loan securitizations (non-agency MBS bonds and CMO Ownership Interests)
and owns approximately 27% of the common stock of Commercial Assets, Inc.
(AMEX: CAX).

     For all taxable years commencing on or after January 1, 1987, the company
has operated, and in the future intends to operate, in a manner that will permit
it to qualify for the income tax treatment accorded to a REIT under the Code.
If it so qualifies, the company's REIT income and Excess Inclusion income, with
certain limited exceptions, will not be subject to federal income tax at the
corporate level.  In order to maintain its REIT status, the company will be
required, among other things, to distribute annually (as determined under the
Code) to its shareowners at least 95% of the greater of its REIT income or
Excess Inclusion income and to meet certain asset, income and stock ownership
tests.

     The company's acquisition and other policies are determined by its Board of
Directors.  The company's By-laws require that a majority of the Board of
Directors and each committee thereof be comprised of persons constituting
Independent Directors.

     The company's day-to-day operations are performed by the Manager, a
subsidiary of MDC, pursuant to a Management Agreement which is subject to the
approval of a majority of the Independent Directors.  The Manager  is subject to
the supervision of the Board of Directors.  As part of its duties, the Manager
presents the company with asset acquisition opportunities consistent with the
policies and objectives of the company and furnishes the Board of Directors with
information concerning the acquisition, holding and disposition of assets.  The
company has no employees.

     Through the first quarter of 1995, the company continued its strategy of
acquiring credit-sensitive assets that should benefit from an improving economy.
During the three months ended March 31, 1995, the company acquired 30 non-agency
MBS bonds with an aggregate outstanding balance on the date of acquisition of
$39,926,000 at an aggregate total cost of $11,697,000 (a weighted-average
acquisition price of 30.2%) and with a weighted-average pass-through coupon of
7.3%.  The company acquired an additional five non-agency MBS bonds during April
1995 at a cost of $1,880,000, bringing the total cost of the 119 non-agency MBS
bonds acquired by the company from April 1994 through the end of April 1995 to
$47,201,000.  The 1995 acquisitions were made using the remaining proceeds of
the December 16, 1994 Rights Offering and operating cash flows not needed to pay
expenses or make dividend distributions.  The non-agency MBS bonds acquired
through April 30, 1995 have a weighted average pass-through coupon of 6.8% and
were acquired at a weighted-average acquisition price of 38.6%.

     On March 30, 1995, Asset Securitization sold 28 CMO Ownership Interests
for $14,927,000.  The proceeds from the sale plus $15,569,000 of restricted
cash were used to repay $28,437,000 principal amount of secured notes and
$355,000 of accrued interest and $1,704,000 of proceeds was provided to the
company. The 28 CMO Ownership Interests were classified as "available for sale"
for accounting purposes as of December 31, 1994 and,

                                     - 13 -

<PAGE>

accordingly, the company recognized, as of such date, $1,205,000 of net holding
losses for Book income purposes related to the 28 CMO Ownership Interests sold.
As a result, no gain or loss was recorded at the time of the sale of the CMO
Ownership Interests and repayment of the secured notes in 1995.

     The acquisition of 30 non-agency MBS bonds, the recent sale of 28 CMO
Ownership Interests and the repayment of the secured notes significantly has
changed the assets of the company at March 31, 1995 compared to
December 31, 1994 and 1993.  The table below presents the condensed, partially
unconsolidated, assets of the company at March 31, 1995, December 31, 1994 and
1993.  The partially unconsolidated presentation nets the assets, liabilities
and minority interest of the CMO Subsidiaries.  This presentation reflects the
company's net equity in its CMO Ownership Interests so it is comparable to the
company's other assets (dollar amounts in thousands, see Note E to the Condensed
Consolidated Financial Statements).


<TABLE>
<CAPTION>
                                                  March 31, 1995              December 31, 1994             December 31, 1993
                                          -------------------------    --------------------------     -------------------------
                                                            Percent                       Percent                       Percent
                                            Amount         of Total      Amount          of Total       Amount         of Total
                                            ------         --------      ------          --------       ------         --------
<S>                                        <C>             <C>         <C>               <C>          <C>              <C>
Non-agency MBS bonds                       $43,570            54%       $ 32,544            30%        $    --            --%
Investment in Commercial Assets             20,936            26          21,068            19          20,625            22
CMO Ownership Interests                      6,333             8          22,490            21          46,902            50
Other assets (1)                             9,286            12          33,437            30          26,723            28
                                           -------           ----       --------           ----        -------           ----

     Total assets                          $80,125           100%       $109,539           100%        $94,250           100%
                                           -------           ----       --------           ----        -------           ----
                                           -------           ----       --------           ----        -------           ----
<FN>
- ---------------
(1) Includes $7,182,000, $30,823,000 and $24,602,000 of cash and restricted cash
    at March 31, 1995 and December 31, 1994 and 1993, respectively.

</TABLE>


     Unlike the agency-guaranteed mortgage certificates which are pledged to
secure the CMO Bonds related to the company's CMO Ownership Interests, the
company's unrated subordinate non-agency MBS bonds have substantial credit risk.
Non-agency MBS bonds are collateralized by non-conforming mortgage loans that do
not meet GNMA, FNMA or FHLMC guarantee standards generally because the mortgage
loans exceed agency size limits (e.g., the current FNMA limit is $203,150) or
the borrower does not meet other agency credit underwriting criteria.  The
company generally acquires the class of the non-agency MBS bond which bears the
first losses from the related Mortgage Collateral.  If a borrower defaults on a
non-conforming mortgage loan which is pledged as collateral for a residential
mortgage loan securitization and the proceeds of the foreclosure sale of the
property securing the mortgage loan are less than the unpaid balance of the
mortgage, foreclosure costs and servicer advances, the company, as the holder of
the first-loss class, would suffer a loss up to the then outstanding principal
balance of such class.  Conversely, the holder of an agency-guaranteed mortgage
loan virtually is assured of full payment of principal and interest due to the
agency guarantee.

     The company intends to use its available funds and may use a conservative
amount of leverage to acquire additional non-agency MBS bonds.  While the
company's primary emphasis will be on the acquisition of subordinate unrated
non-agency MBS bonds, future acquisitions may include, among other things, rated
classes of residential mortgage loan securitizations and participations in
residential real estate.  The company also may acquire or originate agency-
guaranteed and non-conforming mortgage loans which, among other things, may be
used for future securitizations.

                                     - 14 -

<PAGE>

     The schedule below presents certain information with respect to the
company's acquisition and disposition of CMO Subsidiaries, CMO Residuals,
Acquired CMO Classes and non-agency MBS bonds since inception (dollar amounts in
thousands).

<TABLE>
<CAPTION>

                                                                                     Acquired CMO                Non-agency
                                CMO Subsidiaries            CMO Residuals               Classes                 MBS Bonds(2)
                             -------------------------   --------------------     ---------------------    ----------------------
Period/Quarter               Number    Initial Cost(1)   Number  Initial Cost     Number   Initial Cost    Number    Initial Cost
- --------------               ------    ---------------   ------  ------------     ------   ------------    ------    ------------
<S>                          <C>       <C>               <C>     <C>              <C>      <C>             <C>       <C>
ACQUISITIONS
1986-1991                      42         $220,486         47      $113,570          4        $21,305        --        $    --
1992                           --               --         18        41,259         11         42,953        --             --
1993                           --               --         --            --          1          4,250        --             --
1994
 Second                        --               --         --            --         --             --        28         13,185
 Third                         --               --         --            --         --             --        15          3,891
 Fourth                        --               --         --            --         --             --        41         16,548
1995
  First                        --               --         --            --         --             --        30         11,697
                               --         --------         --      --------         --        -------       ---        -------
Subtotal                       42          220,486         65       154,829         16         68,508       114         45,321
                               --         --------         --      --------         --        -------       ---        -------
SALES/REDEMPTIONS
1986-1991                      --               --          1         3,459          2         13,889        --             --
1992                            1            4,000         --            --          1          6,425        --             --
1993                            6            9,839         10        23,196         10         35,586        --             --
1994
 First                          2            2,946          1         7,878          1          7,367        --             --
 Second                         2            3,175         --            --         --             --        --             --
 Third                          1              876         --            --         --             --        --             --
 Fourth                         5           13,315          7         9,665          1          4,250        --             --
1995
 First                         15          129,715         15        46,853         --             --        --             --
                               --         --------         --      --------         --        -------       ---        -------
Subtotal                       32          163,866         34        91,051         15         67,517        --             --
                               --         --------         --      --------         --        -------       ---        -------

Initial cost of
assets held at
March 31, 1995                 10          $56,620         31       $63,778          1           $991       114        $45,321
                               --         --------         --      --------         --        -------       ---        -------
                               --         --------         --      --------         --        -------       ---        -------

<FN>
________________
(1)  Does not include the company's minority interest in four series of multi-
     participant CMO issuances with an aggregate cost of $3,786,000.
(2)  The company acquired an additional five non-agency MBS bonds during
     April 1995 at an aggregate cost of $1,880,000.
</TABLE>

                                     - 15 -

<PAGE>

                            RESULTS OF OPERATIONS FOR
                 THE THREE MONTHS ENDED MARCH 31, 1995 AND 1994

BOOK INCOME

     The company had Book income (computed in accordance with GAAP) of
$4,007,000 ($.17 per share) for the three months ended March 31, 1995, compared
with $6,515,000 ($.46 per share) for the three months ended March 31, 1994.
Book income included gains from the exercise of Call Rights of $2,031,000
($.08 per share) and $6,264,000 ($.44 per share) for the quarters ended
March 31, 1995 and 1994, respectively.  Excluding these gains, Book income
increased from $251,000 ($.02 per share) in the first quarter of 1994 to
$1,976,000 ($.08 per share) in the first quarter of 1995.

     On December 16, 1994, the company completed a Rights Offering that
resulted in net proceeds of $17,208,000 and increased the company's outstanding
Common Stock by 71%, from 14,158,208 shares to 24,212,002 shares.  The proceeds
of the Rights Offering allowed the company to acquire additional high-yielding
non-agency MBS bonds.

     The table below summarizes the company's results of operations during the
three months ended March 31, 1995 and 1994 and a comparison between the periods
(in thousands, except per share data).

<TABLE>
<CAPTION>
                                               Three Months Ended
                                                     March 31,
                                               ------------------    Increase
                                                1995        1994    (Decrease)
                                               ------      ------  ----------
<S>                                           <C>        <C>       <C>
CMO Subsidiaries                               $  946    $    140    $    806
CMO Residuals and Acquired CMO Classes            528       1,289        (761)
Net gain on the sale of assets                  2,031       6,264      (4,233)
                                               ------    --------    --------
  CMO Ownership Interests                       3,505       7,693      (4,188)

Non-agency MBS bonds                            1,333          --       1,333
Equity in earnings of Commercial Assets           420         124         296
Other income                                      374         241         133
                                               ------    --------    --------
                                                5,632       8,058      (2,426)

Management fees                                   237         135         102
General and administrative                        791         617         174
Interest                                          597         791        (194)
                                               ------    --------    --------
                                                1,625       1,543          82
                                               ------    --------    --------

Book income                                    $4,007    $  6,515     $(2,508)
                                               ------    --------    --------
                                               ------    --------    --------
Book income per share                          $  .17    $    .46     $  (.29)
                                               ------    --------    --------
                                               ------    --------    --------

Estimated REIT loss                            $ (500)   $(11,679)   $ 11,179
                                               ------    --------    --------
                                               ------    --------    --------
Estimated REIT loss per share                  $ (.02)       (.83)   $    .81
                                               ------    --------    --------
                                               ------    --------    --------

Excess Inclusion income                        $  600    $  1,018    $   (418)
                                               ------    --------    --------
                                               ------    --------    --------
Excess Inclusion income per share              $  .02    $    .07    $   (.05)
                                               ------    --------    --------
                                               ------    --------    --------

Weighted average shares outstanding            24,227      14,080      10,147
</TABLE>

                                     - 16 -

<PAGE>

     NET GAIN ON SALE OF ASSETS - During the three months ended March 31, 1995
and 1994, the company exercised Call Rights on CMO Ownership Interests resulting
in gains of $2,008,000 ($.08 per share) and $6,264,000 ($.44 per share),
respectively.  The exercise of these Call Rights during the three months ended
March 31, 1995 and 1994 reduced the outstanding principal amount of the
company's Mortgage Collateral by $45,698,000 and $36,003,000, respectively.

     On March 30, 1995, Asset Securitization sold 28 CMO Ownership Interests
and repaid the secured notes payable, as discussed above. As of December 31,
1994, the  company recognized $1,205,000 of net holding losses for Book income
purposes related to the 28 CMO Ownership Interests sold.  As a result, no gain
or loss was recorded on the sale of the CMO Ownership Interests and repayment of
the secured notes in 1995.  During the three months ended March 31, 1995 and
1994, the company earned Book income from Asset Securitization of $883,000 and
$4,785,000 (including a $4,664,000 gain from the exercise of a Call Right in
1994), respectively.

     CMO RESIDUALS AND ACQUIRED CMO CLASSES - Book income from the company's CMO
Residuals, before write-downs, decreased $733,000 ($.03 per share) during the
three months ended March 31, 1995, compared with the same period in 1994.  The
company's Book income from Acquired CMO Classes decreased by $28,000 ($.00 per
share) during the three months ended March 31, 1995, compared with the same
period in 1994.  The Book income from CMO Residuals and Acquired CMO classes
continues to decrease because they are at, or are nearing, the end of their
economic lives. Accordingly, the  company does not anticipate these assets will
generate significant amounts of income in the future.

     CMO SUBSIDIARIES - The company's Book income from CMO Subsidiaries improved
in 1995 compared with 1994 by $806,000 ($.03 per share), primarily due to lower
mortgage prepayments.  Lower mortgage prepayments positively impact Book income
because less amortization of the CMO Bond discount is required to be recognized
as interest expense.

     The aggregate proportionate principal balance of the LIBOR Classes
underlying the company's Variable-Rate CMO Ownership Interests and the aggregate
proportionate notional principal amount of the Variable-Rate Acquired CMO
Classes were $12,054,000 and $225,388,000 at March 31, 1995 and 1994,
respectively.  The LIBOR Classes decreased by $113,157,000 due to the March 30,
1995 sale of 28 CMO Ownership Interests.  As a result, increases and decreases
in LIBOR should not have a significant impact on the company's interest expense
from Variable-Rate CMO Ownership Interests in the future.

     COMMERCIAL ASSETS - Commercial Assets commenced operations on October 12,
1993, and had only limited operations in 1993 and the first quarter of 1994.  As
reported to the company, Commercial Assets has acquired, since its inception, 11
CMBS bonds from six securitizations at a cost of $74,433,000.  At March 31, 1995
and 1994, these CMBS bonds had an outstanding balance of $101,089,000 and
$58,383,000, respectively, and a weighted-average yield-to-maturity before
credit losses of 13.4% and 11.0%, respectively.  Income from the company's
ownership interest in Commercial Assets (which for Book income purposes is
determined based on the company's percentage of ownership interest in Commercial
Assets and Commercial Assets' Book income) increased by $296,000 ($.01 per
share) due to the CMBS bonds acquired by Commercial Assets during 1994.

                                     - 17 -

<PAGE>

     NON-AGENCY MBS BONDS - From April 1994 to March 1995, the company acquired
114 non-agency MBS bonds with an outstanding principal balance of $128,868,000
and weighted-average coupon of 6.79% at acquisition.  The company's accounting
policies require that the company record an allowance for credit losses at the
time a non-agency MBS bond is acquired.  At March 31, 1995, the allowance for
credit losses related to the company's non-agency MBS bonds was $30,131,000.
The allowance reduces substantially the amount of Book income the company
records from these assets.

     As of March 31, 1995, there were 29 mortgage loans that collateralize the
company's non-agency MBS bonds with an outstanding principal balance of
$9,518,000 that were considered seriously delinquent (three or more payments
late plus loans in foreclosure).  The  company acquires its non-agency MBS bonds
at a significant discount. The potential economic loss from the  company's
seriously delinquent mortgage loans (the product of the outstanding principal
balance and the  company's purchase price of the related non-agency MBS bond)
at March 31, 1995 could range from $0 to $3,743,000. The eventual amount of the
company's economic loss from these seriously delinquent mortgage loans is
dependent upon: (i) the portion of these mortgage loans that are foreclosed and
(ii) the net amount recovered from the foreclosure sale of the defaulted
mortgage loans. The company is monitoring the collection activities of the
servicers of these mortgage loans in an attempt to mitigate potential principal
losses allocated to the company.

     The company's effective yield on its non-agency MBS bonds at March 31, 1995
and December 31, 1994, based on an estimate of the timing and amount of future
credit losses, was 15.0%.  The company had no non-agency MBS bonds at March 31,
1994.

     GENERAL AND ADMINISTRATIVE EXPENSES - General and administrative expenses
increased $174,000 ($.01 per share) during the three months ended March 31,
1995, compared with the same period in 1994.  The increase resulted from, among
other things, the increase in the accrual of DERs of $52,000 and higher legal
and accounting fees of $118,000.

     MANAGEMENT FEES - Incentive Fees accrued to the Manager under the
Management Agreement for the three months ended March 31, 1995, and 1994 were
$78,000 and $0, respectively.  During the three months ended March 31, 1995, the
Base Fee decreased $8,000 to $48,000 compared with 1994.  In addition, the
company pays Administrative Fees primarily to the Manager and, to a much lesser
extent, unaffiliated CMO administrators for each of its CMO Ownership Interests
and non-agency MBS bonds.  During the three months ended March 31, 1995 and
1994, Administrative Fees totaled $341,000 and $375,000, respectively.

     INTEREST EXPENSE - Interest expense on the company's borrowing facilities
decreased by $194,000 ($.01 per share) during the three months ended March 31,
1995, compared to the same period in 1994.  The decrease in interest expense in
1995 compared with 1994 was attributable to the repayment of $11,408,000 of the
secured notes payable in 1994.

     The company's debt-to-equity ratio (excluding CMO Subsidiaries and CMO
Bonds) at March 31, 1995 and 1994 was .07 to 1 and .77 to 1, respectively.  The
debt-to-equity ratio at March 31, 1994 without the effect of the non-recourse
secured notes payable (and related equity) was .08 to 1.

REIT INCOME

     The company incurred an estimated REIT loss of $500,000 ($.02 per share)
for the three months ended March 31, 1995, compared with a REIT loss of
$11,679,000 ($.83 per share) for the same period in 1994.  The company
recognized approximately $8,000,000 ($.33 per share) of net capital losses
during the three months ended March 31, 1995; such capital losses are not
included in REIT income, but increased the company's capital loss carryover to
approximately $19,000,000 at March 31, 1995.  Under the Code, capital losses do
not offset REIT income.  For the three months ended March 31, 1994, the company
recognized $5,293,000 ($.38 per share) of net capital gains from the exercise of
Call Rights; which were reduced, as required by the Code, to zero by the
company's capital loss carryovers from prior years.

                                     - 18 -

<PAGE>

     The estimated REIT losses during the three months ended March 31, 1995 and
1994 included $2,000,000 and $262,000, respectively, of interest expense related
to the write off of unamortized discount from CMO Bonds redeemed during the
period from the exercise of Call Rights.  Exclusive of the interest expense
related to exercising Call Rights, the company earned estimated REIT income of
$1,500,000 ($.06 per share) and incurred a REIT loss of $11,417,000 ($.81 per
share) during the three months ended March 31, 1995 and 1994, respectively.

     The higher 1994 REIT loss predominantly resulted from continued low
mortgage interest rates which resulted in high levels of prepayments of the
Mortgage Collateral underlying the company's CMO Ownership Interests through May
1994.  The high levels of prepayments resulted in significant amounts of non-
cash interest expense from amortization of the discounts on the company's CMO
Bonds.

     Assuming that current operating expense levels are maintained and that
losses on the company's non agency MBS bonds do not exceed expected levels, the
company believes REIT income from continuing operations in 1995 and future years
should improve from 1994 levels as the company's REIT income from non-agency MBS
bonds increases and REIT losses from the company's CMO Ownership Interests
decline as a result of sales, exercises of Call Rights and principal paydowns.

EXCESS INCLUSION INCOME

     The company's Excess Inclusion income for the three months ended March 31,
1995 was approximately $600,000 ($.02 per share) compared with $1,018,000 ($.07
per share) during the three months ended March 31, 1994.

     Excess Inclusion income is attributable to the company's residual interests
in REMICs.  During the three months ended March 31, 1995 and 1994, Excess
Inclusion income exceeded REIT income.  Excess Inclusion income may not be
reduced by any expenses or deductions, including normal operating expenses,
losses from the company's CMO Ownership Interests and NOLs.  Dividends paid to
shareowners of the company will be characterized as Excess Inclusion income to
the extent that such dividends are attributable to Excess Inclusion income
realized by the company.

     The March 30, 1995 sale of CMO Ownership Interests resulted in the sale of
most of the REMIC residual interests owned by the company that generated Excess
Inclusion income.  As a result, the company believes that its Excess Inclusion
income for the remainder of 1995 will be significantly less than in previous
periods.

NOL CARRYOVER

     The company had an NOL carryover of approximately $100,000,000 as of March
31, 1995; the NOL can be used to reduce the company's requirement to distribute
at least 95% of its REIT income but does not reduce its requirement to
distribute 95% of Excess Inclusion income.

RECONCILIATION OF REIT INCOME, EXCESS INCLUSION INCOME AND BOOK INCOME

     The company computes its income in accordance with the Code (REIT income
and Excess Inclusion income) and in accordance with GAAP (Book income).  As a
REIT, the company's REIT income and Excess Inclusion income are extremely
important because they are the basis upon which the Code requires the company to
make distributions to shareowners.  However, the Commission requires all public

                                     - 19 -

<PAGE>

companies to report their income in accordance with GAAP.  The differences
between REIT income, Excess Inclusion income and Book income are discussed
below.

     The difference between Excess Inclusion income and REIT income was
$1,100,000 ($.04 per share) during the three months ended March 31, 1995 and
$12,697,000 ($.90 per share) during the three months ended March 31, 1994.
These differences resulted from expenses and deductions, including normal
operating expenses, losses from the company's CMO Ownership Interests and NOLs,
which reduce REIT income but do not reduce Excess Inclusion income.

     During the three months ended March 31, 1995, Book income exceeded REIT
income by $4,507,000 ($.19 per share), and during the three months ended March
31, 1994, REIT income exceeded Book income by $18,194,000 ($1.29 per share).
Substantially all of the difference between REIT income and Book income is due
to:  (i) gains on the sales of assets recorded for Book income purposes that are
reduced to zero for REIT income purposes due to the company's capital loss
carryover; and (ii) differences in the calculation of discount and premium
amortization for REIT income compared to Book income attributable to non-agency
MBS bonds and CMO Ownership Interests.

DIVIDEND DISTRIBUTIONS

     During the three months ended March 31, 1995, the company declared a
regular dividend of $1,938,000 ($.08 per share).  Since its inception, the
company has distributed dividends to its shareowners totaling $222,922,000
($17.03 per share).  The distributions included cash dividends of $170,324,000
($13.29 per share) and the value of 7,040,043 shares of common stock of
Commercial Assets (one-half share of common stock of Commercial Assets for every
share of Common Stock owned) distributed to the company's shareowners on October
12, 1993.  During the three months ended March 31, 1994, the company declared
dividends of $704,000 ($.05 per share).  Because of the company's significant
restructuring during 1993 and 1994, prior dividend distributions may not be
indicative of future dividends.


                         LIQUIDITY AND CAPITAL RESOURCES

     The company uses its cash flow from operating activities and other capital
resources to provide working capital to support its operations, for the payment
of dividends to its shareowners, for the acquisition of assets and for the
repayment of borrowings.

     During the three months ended March 31, 1995, the company generated cash
flow of $3,711,000 (including $1,910,000 from the sale of assets and the
exercise of Call Rights) from its CMO Ownership Interests, $552,000 from its
shares of Commercial Assets and $2,109,000 from its non-agency MBS bonds. During
the three months ended March 31, 1994, the company generated cash flow of
$7,280,000 (including $7,239,000 from the exercise of Call Rights) from its CMO
Ownership Interests.

     During the three months ended March 31, 1995, the company used its
available cash not required for expenses and principal payments on CMO
Subsidiaries-CMO Bonds to make $1,160,000 in principal payments on its borrowing
facilities, to acquire 30 non-agency MBS bonds for $11,697,000 and to make
dividend payments of $727,000.  The company acquired an additional five
non-agency MBS bonds during April 1995 at an aggregate cost of $1,880,000.
During the three months ended March 31, 1994, the company retained its cash flow
not required for dividend distributions, expenses and principal payments on CMO
Subsidiaries-CMO Bonds to make $6,903,000 in principal payments on its
borrowing facilities.

                                     - 20 -

<PAGE>

     To, among other things, increase amounts available to acquire non-agency
MBS bonds, the company uses Repurchase Agreements and a credit facility, in
each case collateralized by certain non-agency MBS bonds.  The collateral value
and interest rate related to these borrowing agreements is subject to periodic
adjustment.  At March 31, 1995, the company was able to borrow $1,122,000 under
one Repurchase Agreement, based on the value of the pledged collateral.  As of
March 31, 1995 and December 31, 1994, borrowings under this Repurchase Agreement
had an original maturity of 30 days, an effective interest rate of 7.38% and an
aggregate outstanding principal balance of $598,000 and $658,000, respectively.

     On December 23, 1994, the company entered into a one-year credit facility
secured by certain non-agency MBS bonds.  At March 31, 1995, the company was
able to borrow $3,088,000 under the credit facility, based on the value of the
pledged collateral.  The credit facility is also subject to certain financial
covenants with which the company is in compliance, and bears interest, payable
monthly based on one-month LIBOR. At March 31, 1995 and December 31, 1994,
$1,000,000 and $2,100,000, respectively, were borrowed under the credit facility
at effective interest rates of 7.13% and 7.49%, respectively.

     In April 1995, the company negotiated two additional Repurchase Agreements
and pledged additional non-agency MBS bonds to secure its various Repurchase
Agreements and one-year credit facility, increasing the amount the company can
borrow from short-term credit facilities to a maximum of $17,514,000.

     The dividend of shares of common stock of Commercial Assets to the
company's shareowners in 1993, and sales of assets in 1994 and 1995, have
reduced substantially the size of the company and has reduced, and is expected
to continue to reduce its income over historical levels.  The company's ability
to acquire additional assets may depend on, among other things:  (i) the amount
of cash flow required for dividend distributions with respect to the company's
REIT income and Excess Inclusion income; and (ii) the ability to raise
additional funds, to the extent permitted by its operating policies and By-laws,
through additional borrowings including, without limitation, intermediate and
long-term borrowings, issuing commercial paper and entering into Repurchase
Agreements with selected banks and securities dealers.  The company's ability to
obtain funds from such sources will be affected adversely by high interest
rates.  In addition, depending on conditions in the equity market for REIT
stocks and other factors over which the company has no control, the company may
increase the amount available for asset acquisitions through the issuance of
additional equity securities.

     The amount of defaults and resulting credit losses on the company's non-
agency MBS bonds may be impacted adversely by natural disasters not generally
insured against by a standard homeowners insurance policy (e.g., floods,
earthquakes, etc.) in geographic areas in which residential properties that
collateralize the company's non-agency MBS bonds are located.  The company is
unable to predict with any certainty the impact natural disasters may have on
the company's income.  The company has provided for $30,131,000 of allowances
for credit losses at March 31, 1995 to absorb the impact of possible future
credit losses.

                                     - 21 -

<PAGE>

                             SUMMARY OF DEFINITIONS

     WHEN THE FOLLOWING TERMS ARE USED IN THE TEXT, THEY WILL BE UNDERSTOOD TO
HAVE THE MEANINGS INDICATED BELOW.

ACQUIRED CMO CLASS - A CMO Class acquired by the company which does not
constitute a CMO Subsidiary or CMO Residual and is accounted for under the
Level-Yield Method.

ADMINISTRATIVE FEE - A fee, of up to $35,000 per annum per CMO Ownership
Interest, and up to $2,500 per annum per non-agency MBS bond, for bond
administration and other services related to the company's CMO Ownership
Interests and non-agency MBS bonds paid pursuant to the Management Agreement,
consulting agreements and other management agreements.

AGENCIES - GNMA, FNMA or FHLMC.

AMEX - American Stock Exchange, Inc.

ASSET ACCEPTANCE - Asset Investors Acceptance, Inc., a wholly owned subsidiary
of the company incorporated under Colorado law.

ASSET ACQUISITION - Asset Investors Acquisition Corp., a wholly owned subsidiary
of the company incorporated under Maryland law.

ASSET FINANCE - Asset Investors Finance Corporation, a wholly owned subsidiary
of the company incorporated under Maryland law.

ASSET FUNDING - Asset Investors Funding Corporation, a wholly owned subsidiary
of the company incorporated under Delaware law.

ASSET MORTGAGE FUNDING - Asset Investors Mortgage Funding Corporation, a wholly
owned subsidiary of the company incorporated under Delaware law.

ASSET SECURITIZATION - Asset Investors Securitization Corporation, a wholly
owned subsidiary of the company incorporated under Delaware law.

ASSET SOUTHWEST - Asset Investors Southwest, Inc., a wholly owned subsidiary of
the company incorporated under Colorado law.

BASE FEE - An annual management fee equal to 3/8 of one percent of the company's
consolidated Average Invested Assets (as defined in the Management Agreement)
which is payable quarterly to the Manager pursuant to the Management Agreement.

BOOK INCOME - Income computed in accordance with generally accepted accounting
principles.

BY-LAWS - The By-laws of the company, as amended from time to time.

CALL RIGHTS - The rights provided in the Indenture of a CMO Bond that allow the
issuer of the CMO Bond to sell the Mortgage Collateral and redeem the bonds at
par at a predetermined date or if the outstanding bond balance falls below a
predetermined amount (for example, 10% of the original bond balance).  Any
excess proceeds from the sale of the Mortgage Collateral over the funds required
to redeem the bonds is passed on to the residual interest holder.

                                     - 22 -

<PAGE>

CMBS BOND - Commercial mortgage-backed security, which is a debt instrument
which is secured by mortgage loans on commercial real property.

CMOS - Collateralized mortgage obligations.  CMOs are multi-class issuances of
bonds which are secured and funded as to the payment of interest and repayment
of principal by the Collateral.

CMO CLASS OR CMO BOND - A debt obligation resulting from the issuance of a CMO.
A CMO Class may represent the right to receive interest only, principal only, a
proportionate amount of interest and principal (each, respectively, an "IO
Class," "PO Class" and "Regular Class") or a disproportionate amount of interest
and principal.

CMO OWNERSHIP INTEREST - A CMO Residual, Acquired CMO Class and/or CMO
Subsidiary.

CMO RESIDUAL - In connection with the EITF Issue 89-4 consensus, the term CMO
Residual has been revised to refer to a non-equity ownership interest in a CMO
issuance that is accounted for under the Prospective Method.

CMO SUBSIDIARY - In connection with the EITF Issue 89-4 consensus, the term CMO
Subsidiary has been revised to refer to an equity ownership interest in a CMO
issuance that is accounted for under the Consolidation Method (or equity
method), including CMO issuances of the company's corporate subsidiaries.

CODE - The Internal Revenue Code of 1986, as amended.

COLLATERAL - A specific group of mortgage loans or mortgage-backed certificates
and other collateral pledged to secure an issuance of CMOs.

COMMERCIAL ASSETS - Commercial Assets, Inc., a publicly traded REIT formed by
the company in August 1993, incorporated under Maryland law.  (AMEX: CAX)

COMMISSION - The Securities and Exchange Commission.

COMMON STOCK - Asset Investors Corporation common stock, par value $.01 per
share, listed on the New York Stock Exchange, Inc. under the symbol "AIC."

COMPANY - Asset Investors Corporation, a Maryland corporation.

COMPOUND INTEREST CLASS - A CMO Class on which interest accrues and is added to
the principal amount thereof on each CMO payment date until the conditions set
forth in the Indenture related to the CMO issuance have been satisfied.

CONSOLIDATION METHOD - The accounting method used by the company for CMO
Subsidiaries.  Under the Consolidation Method, the Collateral, the CMO bonds,
interest income, interest expense and operating expenses of CMO Subsidiaries are
consolidated in the company's financial statements.  The portion of the
ownership interest of each such CMO Subsidiary not owned by the company is
accounted for as minority interest.  Additionally, the net book value of CMO
Subsidiaries may be subject to write-downs in accordance with FAS 115.

CONTRIBUTION AGREEMENT - The contribution agreement between the company and
Commercial Assets, Inc. dated as of August 20, 1993.

DERS - Dividend equivalent rights as defined in the 1986 Stock Option Plan, as
amended.

DISTRIBUTION - The company's distribution of approximately 70% of the common
stock of Commercial Assets to the company's shareowners on October 12, 1993.

                                     - 23 -

<PAGE>

EITF - Emerging Issues Task Force, a task force of the Financial Accounting
Standards Board.

EXCESS CASH FLOW - The company's proportionate share of the difference between
(i) the cash flow from the Collateral pledged to secure the related CMO issuance
together with reinvestment income thereon, if any; and (ii) the amount required
for debt service payments on such CMO issuance together with administrative
expenses.

EXCESS INCLUSION INCOME - Excess Inclusion income is attributable to residual
interests of a REMIC.  Excess Inclusion income is the amount of income from a
residual interest in a REMIC which exceeds a specified return as provided in the
Code.  Excess Inclusion income cannot be reduced by any expenses or reductions,
including normal operating expenses, losses from the company's CMO Ownership
Interests and NOLs.

FAS 91 - Statement of Financial Accounting Standards No. 91, ACCOUNTING FOR NON-
REFUNDABLE FEES AND COSTS ASSOCIATED WITH ORIGINATING OR ACQUIRING LOANS AND
INDIRECT COSTS OF LEASES (see "Level-Yield Method").

FAS 107 - Statement of Financial Accounting Standards No. 107, DISCLOSURES ABOUT
FAIR VALUE OF FINANCIAL INSTRUMENTS.

FAS 115 - Statement of Financial Accounting Standards No. 115, ACCOUNTING FOR
CERTAIN INVESTMENTS IN DEBT AND EQUITY SECURITIES.

FASB - The Financial Accounting Standards Board.

FHLMC - Federal Home Loan Mortgage Corporation.

FHLMC CERTIFICATE - A FHLMC mortgage certificate.

FIXED-RATE CMO OWNERSHIP INTEREST - A CMO Ownership Interest related to a CMO
issuance comprised of CMO Classes which, in the aggregate, respond like fixed-
rate CMO Classes.

FNMA - Federal National Mortgage Association.

FNMA CERTIFICATE - A FNMA mortgage pass-through certificate.

GAAP - Generally accepted accounting principles.

GIC - Guaranteed investment contract.  A contract pursuant to which the cash
flow from the Collateral related to a CMO issuance is reinvested at a specified
fixed rate or variable rate until the next payment date of such CMO issuance.

GNMA - Government National Mortgage Association.

GNMA CERTIFICATE - A fully-modified pass-through mortgage-backed certificate
guaranteed by GNMA.

GUILD -  Guild Mortgage Investments, Inc., a former San Diego-based CMO Mortgage
REIT that the company acquired on July 1, 1988.

INCENTIVE FEE - An annual management fee equal to 20% of the dollar amount by
which cash distributions to shareowners (as defined in the Management Agreement)
of the company exceeds an amount equal to the Average Net Worth (as defined in
the Management Agreement) of the company multiplied by the Ten-Year U.S.
Treasury Rate (as defined in the Management Agreement) plus one percent payable
quarterly to the Manager pursuant to the Management Agreement.

INDENTURE - A formal agreement between the issuer of each of the company's CMOs
and the related bondholders.

                                     - 24 -

<PAGE>

INDEPENDENT DIRECTOR - Pursuant to the company's By-laws, an Independent
Director is a person "who is not affiliated, directly or indirectly, with the
person or entity responsible for directing or performing the day-to-day business
affairs of the corporation (the "advisor"), including a person or entity to
which the advisor subcontracts substantially all of such functions, whether by
ownership of, ownership interest in, employment by, any material business or
professional relationship with, or by serving as an officer of the advisor or an
affiliated business entity of the advisor."

ISSUE 89-4 - The consensus reached by the EITF on Issue No. 89-4, ACCOUNTING FOR
A PURCHASED INVESTMENT IN A COLLATERALIZED MORTGAGE OBLIGATION INSTRUMENT OR IN
A MORTGAGE-BACKED INTEREST-ONLY CERTIFICATE (see "Prospective Method").

LEVEL-YIELD METHOD - The accounting method used, in accordance with FAS 91, by
the company for CMO instruments other than CMO Subsidiaries and CMO Residuals,
such as Acquired CMO Classes.  Under the Level-Yield Method, income is
recognized as the difference between the actual cash flow received from the CMO
instrument and the amortization of the related acquisition cost.  The amount of
acquisition cost amortized each period is equal to the difference between the
discounted projected cash flow at the beginning of the period and at the end of
the period.  Cash flow for this purpose is calculated assuming an estimated
principal prepayment rate on the Mortgage Collateral related to the CMO
issuance, which is adjusted for actual experience, and, for CMO issuances that
include one or more LIBOR Classes, the interest rate on such LIBOR Classes as of
the acquisition date of the CMO instrument.

LIBOR - The London Interbank Offered Rate on Eurodollar deposits.

LIBOR CLASS - A variable-rate CMO Class on which the interest rate is adjusted
quarterly or monthly based on specified margins in relation to LIBOR.

LOSS SEVERITY PERCENTAGE - the rate of losses on the outstanding principal
balance of defaulted mortgage loans.

MANAGEMENT AGREEMENT - The one-year management agreement entered into between
the company and the Manager.

MANAGER - Financial Asset Management Corporation, a Delaware corporation and
indirect subsidiary of MDC.

MDC - M.D.C. Holdings, Inc., a Delaware corporation and the indirect parent of
the Manager.

MORTGAGE CERTIFICATES - GNMA Certificates, FNMA Certificates, FHLMC Certificates
and Private Certificates owned by the company.

MORTGAGE COLLATERAL - Mortgage Certificates and Mortgage Loans, which secure CMO
bonds and non-agency MBS bonds.

MORTGAGE LOANS - Mortgage loans, owned by the company, which are secured by
single-family, residential (one-to four-unit) properties.

NYSE - New York Stock Exchange, Inc.

NOL - net operating loss.

NON-AGENCY MBS BONDS - debt interests in residential mortgage loan
securitizations collateralized by pools of non-conforming (non-agency
guaranteed) single-family mortgage loans.

                                     - 25 -

<PAGE>

PRIVATE CERTIFICATES - Private pass-through mortgage certificates, owned by the
company, representing undivided beneficial interests in pools of Mortgage Loans.

PROSPECTIVE METHOD - The accounting method used by the company for CMO Residuals
as required by Issue 89-4.  Under the Prospective Method, the effective yield
for each CMO Residual is recalculated (at the end of each reporting quarter)
using the then current carrying amount and an estimate of future Excess Cash
Flow.  The recalculated effective yield is then used to accrue income on the CMO
Residual carrying amount for the next accounting period.  Excess Cash Flow
received from the CMO Residual is first applied to the accrued income from the
CMO Residual with any excess reducing the recorded carrying amount.  Future
Excess Cash Flow for this purpose is calculated assuming estimates of projected
prepayments, and for Variable-Rate CMO Ownership Interests, the 90-day average
of LIBOR, all as of or near the balance sheet date.  Additionally, the book
value of CMO Residuals may be subject to write-downs in accordance with FAS 115.

QUALIFYING INTERESTS - mortgages and other liens on and interests in real
estate.

REIT - A real estate investment trust as defined in the Code.

REIT INCOME/LOSS - Taxable income/loss computed as prescribed for REITs prior to
consideration of any NOL carryovers and prior to the "dividends paid deduction"
(including the dividends paid deduction for dividends related to capital gains).

REMIC - A pass-through tax entity known as a "real estate mortgage investment
conduit" created by the Tax Reform Act of 1986 to facilitate the structuring of
mortgage-asset transactions.

REPURCHASE AGREEMENTS - Financial transactions involving the sale and subsequent
repurchase of an identical security on a specified date at two different, pre-
negotiated prices.  Because Repurchase Agreements require the same security to
be returned when the transaction is completed, these agreements are perceived as
and accounted for as collateralized borrowing/lending arrangements.

RIGHTS - Transferable subscription rights issued in the Rights Offering.

RIGHTS OFFERING - on December 16, 1994, the company completed a one-for-one
Rights Offering of its Common Stock.  Subscriptions for 10,053,794 shares of
Common Stock were received at a price of $1.90 per share.

SECOND TIER MORTGAGE LOANS - mortgage loans made to borrowers who have credit
histories of a lower overall quality than most borrowers.  These credit
histories generally result from previous repayment difficulties, brief job
histories, previous bankruptcies or other causes.  The loan-to-value ratio for a
second tier mortgage loan is typically lower than the loan-to-value ratio on
most mortgages, and the coupon for a second tier mortgage loan is typically
higher than the coupon on most mortgage loans.

STOCK OPTION PLAN - The company's 1986 Stock Option Plan, as restated November
15, 1990, as amended.

THREE-MONTH LIBOR CLASS - A LIBOR Class on which the interest rate is adjusted
quarterly.

VARIABLE-RATE CMO OWNERSHIP INTEREST (ALSO VARIABLE-RATE CMO SUBSIDIARY AND
VARIABLE-RATE CMO RESIDUAL) - A CMO Ownership Interest related to a CMO issuance
that includes one or more LIBOR Classes unless such CMO Ownership Interest has
the characteristics of a Fixed-Rate CMO Ownership Interest (e.g., a Variable-
Rate CMO Ownership Interest with one or more inverse LIBOR Classes which offset
the effect of the LIBOR Classes).

                                     - 26 -

<PAGE>

                                     PART II


ITEM 6.        EXHIBITS AND REPORTS ON FORM 8-K.

               (a)  Exhibits.

EXHIBIT NO.    DESCRIPTION

  4            Form of certificate representing Common Stock of the Registrant
               (incorporated herein by reference to Exhibit 10.15 to the Annual
               Report on Form 10-K of the Registrant for the fiscal year ended
               December 31, 1988, Commission File No. 1-9360, filed on April 5,
               1989).

  4.1(a)       Indenture, dated as of January 1, 1986, between Asset Investors
               Mortgage Funding Corporation ("Asset Mortgage Funding") and
               Bankers Trust  company ("BTC"), as trustee (incorporated herein
               by reference to Exhibit 2 to the Current Report on Form 8-K of
               Asset Mortgage Funding, Commission File No. 0-13955, filed on
               February 7, 1986).

  4.1(b)       First Supplemental Indenture, dated as of January 1, 1988,
               between Asset Mortgage Funding and BTC, as trustee (incorporated
               herein by reference to Exhibit 4 to the Current Report on Form 8-
               K of Asset Mortgage Funding, Commission File No. 0-13955, filed
               on February 3, 1988).

  4.1(c)       Form of Residual Interest Agreement entered into in connection
               with issuances of collateralized mortgage obligations ("CMOs") of
               Asset Mortgage Funding (incorporated herein by reference to
               Exhibit 4.1(t) to the Annual Report on Form 10-K of the
               Registrant for the fiscal year ended December 31, 1988,
               Commission File No. 1-9360, filed on April 5, 1989).

  4.2(a)       Indenture, dated as of August 1, 1987, between Asset Investors
               Funding Corporation ("Asset Funding") and BTC, as trustee
               (incorporated herein by reference to Exhibit 4(a) to the
               Quarterly Report on Form 10-Q of Asset Funding for the quarter
               ended September 30, 1987, Commission File No. 0-14967, filed on
               November 16, 1987).

  4.2(b)       Form of Residual Interest Agreement entered into in connection
               with CMO issuances (w/o funding notes) of Asset Funding
               (incorporated herein by reference to Exhibit 4.2(i) to the Annual
               Report on Form 10-K of the Registrant for the fiscal year ended
               December 31, 1988, Commission File No. 1-9360, filed on April 5,
               1989).

  4.2(c)       Form of Residual Interest Agreement entered into in connection
               with CMO issuances (w/ funding notes) of Asset Funding
               (incorporated herein by reference to Exhibit 4.2(j) to the Annual
               Report on Form 10-K of the Registrant for the fiscal year ended
               December 31, 1988, Commission File No. 1-9360, filed on April 5,
               1989).

  4.3(a)       Indenture, dated as of August 1, 1986, between Asset Investors
               Finance Corporation ("Asset Finance") and The First National Bank
               of Chicago ("First Chicago"), as trustee (incorporated herein by
               reference to Exhibit 4(a) to the Registration Statement on Form
               S-11 of Asset Finance, Registration No. 33-9718).

                                     - 27 -

<PAGE>

  4.3(b)       Form of Residual Interest Agreement entered into in connection
               with CMO issuances of Asset Finance (incorporated herein by
               reference to Exhibit 4.3(e) to the Annual Report on Form 10-K of
               the Registrant for the fiscal year ended December 31, 1988,
               Commission File No. 1-9360, filed on April 5, 1989).

  4.4          Indenture, dated as of December 1, 1992, between Asset Investors
               Securitization Corporation and State Street Bank and Trust
                company, as Note Trustee. *

  10.1(a)      Management Agreement dated as of January 1, 1994, between the
               Registrant and Asset Management (incorporated herein by reference
               to Exhibit 10.1 (e) to the Annual Report on Form 10-K of the
               Registrant for the fiscal year ended December 31, 1994,
               Commission File No. 1-9360, filed on March 31, 1995).

  10.1 (b)     Management Agreement dated as of January 1, 1995, between the
               Registrant and Asset Management.

  10.2         CMO Participation Agreement, dated as of December 15, 1986, among
               the Registrant, Holdings and Yosemite Financial, Inc.
               (incorporated herein by reference to Exhibit 10.10 to the
               Quarterly Report on Form 10-Q of the Registrant for the quarter
               ended June 30, 1988, Commission File No. 1-9360, filed on August
               15, 1988).

  10.3         Form of Repurchase Agreement (incorporated herein by reference to
               Exhibit 10.9 to the Quarterly Report on Form 10-Q of the
               Registrant for the quarter ended June 30, 1988, Commission File
               No. 1-9360, filed on August 15, 1988).

  10.4         Form of Indemnification Agreement between the Registrant and each
               Director of the Registrant (incorporated herein by reference to
               Appendix A to the Proxy Statement of the Registrant, Commission
               File No. 1-9360, dated May 18, 1987).

  10.5(a)      1986 Stock Option Plan of the Registrant as restated November 15,
               1990 (incorporated herein by reference to Exhibit A to the Proxy
               Statement of the Registrant, Commission File No. 1-9360, dated
               April 22, 1991).

  10.5(b)      First Amendment to the Registrant's 1986 Stock Option Plan as
               restated November 15, 1990 (incorporated herein by reference to
               Exhibit 10.9(b) to the Annual Report on Form 10-K of the
               Registrant for the fiscal year ended December 31, 1992,
               Commission File No. 1-9360, filed on April 5, 1993).

  10.5(c)      Second Amendment to the Registrant's 1986 Stock Option Plan as
               restated November 15, 1990, as amended (incorporated herein by
               reference to Exhibit 10.9(c) to the Annual Report on Form 10-K of
               the Registrant for the fiscal year ended December 31, 1992,
               Commission File No. 1-9360, filed on April 5, 1993).

  10.5(d)      Form of Non-Qualified Stock Option Agreement pursuant to the 1986
               Stock Option Plan of the Registrant as amended and restated
               through November 15, 1990 (incorporated here-in by reference to
               Exhibit 10.9(b) to the Annual Report on Form 10-K of the
               Registrant for the fiscal year ended December 31, 1991,
               Commission File No. 1-9360, filed on March 30, 1992).

                                     - 28 -

<PAGE>

  10.5(e)      Third Amendment to the Registrant's 1986 Stock Option Plan as
               restated November 15, 1990, as amended (incorporated herein by
               reference to Exhibit 10.9(e) to the Quarterly Report on Form 10-Q
               of the Registrant for the quarter ended September 30, 1993,
               Commission File No. 1-9360, filed on November 15, 1993).

  10.6         Forms of Investment Agreement entered into in connection with CMO
               issuances (incorporated herein by reference to Exhibit 10.26 to
               the Quarterly Report on Form 10-Q of the Registrant for the
               quarter ended June 30, 1988, Commission File No. 1-9360, filed on
               August 15, 1988).

  10.7         Forms of Consulting Agreement entered into in connection with CMO
               issuances of Asset Investors Trusts (incorporated herein by
               reference to Exhibit 10.31 to the Quarterly Report on Form 10-Q
               of the Registrant for the quarter ended June 30, 1988, Commission
               File No. 1-9360, filed on August 15, 1988).

  10.8         Form of Management Agreement entered into in connection with CMO
               issuances of Asset Mortgage Funding (incorporated herein by
               reference to Exhibit 10.28 to the Annual Report on Form 10-K of
               the Registrant for the fiscal year ended December 31, 1988,
               Commission File No. 1-9360, filed on April 5, 1989).

  10.9         Form of Management Agreement entered into in connection with CMO
               issuances (w/o funding notes) of Asset Funding (incorporated
               herein by reference to Exhibit 10.29 to the Annual Report on Form
               10-K of the Registrant for the fiscal year ended December 31,
               1988, Commission File No. 1-9360, filed on April 5, 1989).

  10.10        Form of Management Agreement entered into in connection with CMO
               issuances (w/ funding notes) of Asset Funding (incorporated
               herein by reference to Exhibit 10.30 to the Annual Report on Form
               10-K of the Registrant for the fiscal year ended December 31,
               1988, Commission File No. 1-9360, filed on April 5, 1989).

  10.11        Form of Management Agreement entered into in connection with CMO
               issuances of Asset Finance (incorporated herein by reference to
               Exhibit 10.31 to the Annual Report on Form 10-K of the Registrant
               for the fiscal year ended December 31, 1988, Commission File No.
               1-9360, filed on April 5, 1989).

  10.12        Management Agreement, dated as of July 10, 1987, between Sears
               Mortgage Securities Corporation ("SMSC") and Wilmington Trust
                company ("WTC"), as owner trustee, and relating to Trust 1987-1
               (incorporated herein by reference to Exhibit C to the Current
               Report on Form 8-K of Trust 1987-1, Commission File No. 33-5466,
               filed on August 7, 1987).

  10.13        Administrative Services Agreement, dated as of January 29, 1990,
               between WTC, as owner trustee, and Asset Management and relating
               to Mortgage Capital Trust III (incorporated herein by reference
               to Exhibit 10.17 to the Annual Report on Form 10-K of the
               Registrant for the fiscal year ended December 31, 1991,
               Commission File No. 1-9360, filed on March 30, 1992).

                                     - 29 -

<PAGE>

  10.14        Management Agreement, dated as of June 17, 1991, between WTC, as
               owner trustee, and Asset Management and relating to Dean Witter
               CMO Trust 1 (incorporated herein by reference to Exhibit 10.18 to
               the Annual Report on Form 10-K of the Registrant for the fiscal
               year ended December 31, 1991, Commission File No. 1-9360, filed
               on March 30, 1992).

  10.15        Contribution Agreement, dated as of August 20, 1993, by and
               between the Registrant and Commercial Assets, Inc. (incorporated
               herein by reference to Exhibit 10.19 to the Quarterly Report on
               Form 10-Q of the Registrant for the quarter ended September 30,
               1993, Commission File No. 1-9360, filed on November 15, 1993).

  24           Independent Auditors' Consent - Kenneth Leventhal &  company.

  27           Financial Data Schedule.

  28           Automatic Dividend Reinvestment Plan relating to the Common Stock
               of the Registrant, as amended (incorporated herein by reference
               to Exhibit 28 to the Annual Report on Form 10-K of the Registrant
               for the fiscal year ended December 31, 1991, Commission File No.
               1-9360, filed on March 30, 1992).
- ------------------
*    The securities issued pursuant to the indenture do not exceed 10% of the
     total assets of the Registrant and its subsidiaries on a consolidated basis
     and will be filed upon request of the Commission.

               (b)  Reports on Form 8-K.

               On February 21, 1995, a Form 8-K was filed for an Item 5 event.

                                     - 30 -

<PAGE>

                                   SIGNATURES

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

                                        ASSET INVESTORS CORPORATION
                                        (Registrant)


Date:  May 15, 1995                     By  ____________________________________
                                        Paris G. Reece III
                                        Chief Financial Officer

                                     - 31 -



<PAGE>
                                                                  EXECUTION COPY



                              MANAGEMENT AGREEMENT


          THIS AGREEMENT, dated as of January 1, 1994 by and between ASSETS
INVESTORS CORPORATION, a Maryland corporation (hereinafter referred to as the
"Company"), and FINANCIAL ASSET MANAGEMENT CORPORATION, a Delaware corporation
(hereinafter referred to as the "Manager").

                              W I T N E S S E T H:


          WHEREAS, the Company owns Mortgage Assets and qualifies for the tax
benefits accorded by Section 856 through 860 of the Internal Revenue Code of
1986; and

          WHEREAS, the Company has engaged and desires to continue to retain the
Manager to manage the assets of the Company and to perform administrative
services for the Company in the manner and on the terms set forth herein;

          NOW, THEREFORE, in consideration of the mutual agreements herein set
forth, the parties hereto agree as follows:

          Section 1.  DEFINITIONS.  Capitalized terms used but not defined
herein shall have the respective meanings assigned them below.

               (a)  "Affiliate" means, when used with reference to a specified
person, (i) any person that directly or indirectly controls or is controlled by
or is under common control with the specified person, (ii) any person that is an
officer, director or employee of, partner in or trustee


<PAGE>

                                                                               2

of, or serves in a similar capacity with respect to, the specified person, or of
which the specified person is an officer, director or employee of, partner in or
trustee of or with respect to which the specified person serves in a similar
capacity, (iii) any person that, directly or indirectly, is the beneficial owner
of 5% or more of any class of equity securities issued by the specified person,
or any person 5% or more of whose equity securities are, directly or indirectly
beneficially owned by such other person, or (iv) any person that has a material
business or professional relationship with the specified person, PROVIDED,
however, that a person shall not be deemed to be an Affiliate of the Manager or
of any person that is an Affiliate of the Manager solely by reason of serving as
a director of one or more investment companies of which the Manager or an
Affiliate of the Manager serves as investment advisor or in any other capacity;

               (b)  "Affiliated Issuer" means any Person that issues Mortgage-
Backed Obligations and which is organized by or on behalf of the Company;

               (c)  "Agreement" means this Management Agreement, as amended from
time to time;

               (d)  "Average Invested Assets" for any period means the average
of the aggregate book value of the consolidated assets of the Company, its
trusts and subsidiaries, computed in accordance with GAAP, invested, directly or
indirectly, in equity interests in and loans secured by real


<PAGE>


                                                                               3

estate, including assets that are pledged to secure Mortgage-Backed Obligations,
after reserves for depreciation or bad debts or other similar noncash reserves,
less the book value of minority interest (the portion of equity interest in a
Mortgage-Backed Obligation not owned by the Company) and the liabilities
associated with issued and outstanding Mortgage-Backed Obligations of the
Company, its trusts and subsidiaries, computed for any period by adding the
Average Invested Assets at the end of each month during such period and dividing
by the number of months in the period (provided that Average Invested Assets
shall not include (A) investments in any other REIT for which the Manager or an
Affiliate of the Manager acts as a manager and (B) cash, certificates of
deposit, treasury instruments and other non-real estate related assets);

               (e)  "Board of Directors" means the Board of Directors of the
Company;

               (f)  "CAI" means Commercial Assets, Inc., a Maryland corporation;

               (g)  "Cash Distribution" means any cash distribution other than
those resulting from a complete or partial liquidation of the assets of the
Company as determined by the Independent Directors;

               (h)  "CMO" means Collateralized Mortgage Obligations which are
secured and funded as to the payment of interest and principal by a specific
group of residential mortgage loans;


<PAGE>

                                                                               4

               (i)  "Commercial Mortgage-Backed Obligations" means debt
Obligations which are secured and funded as to the payment of interest and
principal by a specific group of mortgage loans on multi-family or other
commercial real estate, accounts and other collateral;

               (j)  "Commitment" means, with respect to any Mortgage Asset, the
agreement containing the terms pursuant to which the Company agrees to acquire
on a forward basis such Mortgage Asset from any Person;

               (k)  "Company" means Asset Investors Corporation, a Maryland
corporation, for all purposes; provided, however, that with respect to
references to Series of Mortgage-Backed Obligations issued by the Company, the
term "Company" shall include subsidiaries of the Company which issue such
Mortgage-Backed Obligations;

               (l)  "Conforming Mortgage Loan" means a mortgage loan that
complies with the requirements for inclusion in a guaranty or purchase program
sponsored by any of FNMA, FHLMC or GNMA;

               (m)  "Direct Issuance Costs" means all fees and expenses incurred
in connection with the issuance of Mortgage-Backed Obligations issued or caused
to be issued by the Company, including trustee, accounting, consulting, legal,
rating agency, registration, printing and engraving, tax advisory and tax
preparation (but not including preparation of annual tax returns) fees and
expenses, underwriting


<PAGE>

                                                                               5

discounts, up-front master servicing fees, and up-front costs of credit
enhancements;

               (n)  "FDIC" means the Federal Deposit Insurance Corporation or
any successor or assign or any resulting, surviving or transferee entity;

               (o)  "FHLMC" means the Federal Home Loan Mortgage Corporation, a
corporation organized and existing under the laws of the United States of
America, or any successor or assign or any resulting, surviving or transferee
entity;

               (p)  "FHLMC Certificate" means a FHLMC mortgage participation
certificate;

               (q)  "FNMA" means the Federal National Mortgage Association, a
corporation organized and existing under the laws of the United States of
America, or any successor or assign or any resulting, surviving or transferee
entity;

               (r)  "FNMA Certificate" means a FNMA mortgage pass-through
certificate;

               (s)  "GAAP" means generally accepted accounting principles;

               (t)  "GNMA" means the Government National Mortgage Association, a
corporation organized and existing under the laws of the United States of
America, or any successor or assign or any resulting, surviving or transferee
entity;


<PAGE>

                                                                               6

               (u)  "GNMA Certificate" means a fully-modified pass-through
mortgage-backed certificate guaranteed by GNMA;

               (v)  "Governing Instruments" means, the Company's Articles of
Incorporation, as amended, By-Laws, as amended, and any resolutions duly adopted
by the Board of Directors;

               (w)  "Independent Directors" shall have the meaning ascribed to
that term in the By-Laws of the Company, as the same may be amended or
supplemented from time to time;

               (x)  "Internal Revenue Code" or "Code" means the Internal Revenue
Code of 1986, as amended;

               (y)  "Mortgage Assets" means, collectively, Mortgage Instruments,
Residual Interests, Mortgage-Backed Obligations and Non-Agency MBS Bonds;

               (z)  "Mortgage-Backed Obligations" means, collectively,
collateralized mortgage obligations, mortgage-backed bonds and mortgage
collateralized debt, mortgage pass-through obligations or other instruments
collateralized by, or representing interests in, mortgage debt or Mortgage
Instruments;

               (aa) "Mortgage Certificates" means, collectively (i) GNMA
Certificates, (ii) FHLMC Certificates, (iii) FNMA Certificates and (iv) any
other mortgage certificates; including private label pass-through certificates,


<PAGE>

                                                                               7

and other mortgage instruments as reasonably determined by the Company;


               (bb) "Mortgage Instruments" means, collectively, Mortgage
Certificates and Mortgage Loans;

               (cc) "Mortgage Loans" means, collectively, Conforming Mortgage
Loans and Non-conforming Mortgage Loans;

               (dd)  "Net Income" means the Company's taxable income including
capital gains and capital losses arising from the Company's operations in the
year they are generated before (i) the Manager's incentive compensation,
(ii) net operating loss deductions arising from losses in prior periods,
(iii) dividends from CAI, (iv) special deductions permitted by the Internal
Revenue Code in calculating taxable income for a REIT, and (v) the deduction
arising from the exercise of stock options permitted under Code Section 83 and
the deduction for dividend equivalent rights.  In addition, taxable income will
also be reduced by 25% of the expense otherwise deductible for tax purposes
relating to the exercise of stock options and the issuance of Common Stock
relating to dividend equivalent rights;

               (ee) "Non-Agency MBS Bonds" means interests issued in residential
mortgage loan securitizations supported by pools of non-conforming (non-agency
guaranteed) mortgage loans.

               (ff) "Non-conforming Mortgage Loan" means a mortgage loan that
meets the requirements of the guaranty programs of either FNMA, FHLMC or GNMA;
except for the


<PAGE>

                                                                               8

requirements with respect to the maximum original outstanding principal amounts
of such mortgage loans and such other particular requirements of such programs
presented to and approved by the Board of Directors;

               (gg) "Other Mortgage Assets" means (i) interest-only
certificates, (ii) principal-only certificates, (iii) subordinated interests in
mortgage pass-through transactions and (iv) other mortgage-derivative assets;

               (hh) "Person" means a natural person, corporation, partnership,
association, trust (including any beneficiary thereof), company, joint venture,
joint stock company, unincorporated organization or other entity;

               (ii) "REIT" means a real estate investment trust under the
Internal Revenue Code;

               (jj) "REIT Income" means taxable income computed as prescribed
for REITs under the Code prior to the "dividends paid deduction" (including the
dividends paid deduction for dividends related to capital gains) and any net
operating loss carryover;

               (kk) "Residual Interests" means interests in Mortgage-Backed
Obligations that entitle the holder to receive excess cash flow from the
collateral pledged to secure such obligations;

               (ll) "Repurchase Agreement" means a financing transaction
pursuant to which the Company would sell Mortgage Assets for cash and
simultaneously agree to repurchase them at a specified date for the same amount
of cash


<PAGE>

                                                                               9

plus an interest component;

               (mm) "Series of Mortgage-Backed Obligations" means a separate
series of Mortgage-Backed Obligations issued or caused to be issued by the
Company or an Affiliated Issuer or other person pursuant to an indenture or
other agreement;

               (nn) "Servicing Agreement" means a servicing agreement between
the Company and any servicer of the Company's Mortgage Loans;

               (oo) "Stockholders" means the registered owners of the shares of
common stock of the Company;

               (pp) "Stockholders Equity" means GAAP Stockholders Equity;

               (qq) "Ten Year U.S. Treasury Rate" for any period means the
arithmetic average of the weekly average yield to maturity for actively traded
current coupon U.S. Treasury fixed interest rate securities (adjusted to
constant maturities of ten years) published by the Federal Reserve Board during
such period, or, if such rate is not published by the Federal Reserve Board,
then any Federal Reserve Bank or agency or department of the federal government
selected by the Company; or, if the Company determines in good faith that for
any reason the Company cannot determine the Ten Year U.S. Treasury Rate for any
period as provided above, then the Ten Year U.S. Treasury Rate for such period
shall be the arithmetic average of the per annum average yields to maturity,
based upon the closing asked


<PAGE>

                                                                              10

price on each business day during such period, as chosen and quoted in New York
City for each business day (or less frequently if daily quotations shall not be
generally available) by at least three recognized dealers in U.S. government
securities selected by the Company, for each actively traded marketable U.S.
Treasury fixed interest rate security (other than securities which can, at the
option of the holder, be surrendered at face value in payment of any federal
estate tax) with a final maturity date not less than eight nor more than twelve
years from the date of such closing asked price;

               (rr) "Total Operating Expenses" means the expenses indicated in
Section 9(c)(iii);

          Section 2.  GENERAL DUTIES OF THE MANAGER.

          The Manager undertakes to use its best efforts to (i) present to the
Company asset acquisition opportunities consistent with the policies and
objectives of the Company and (ii) furnish the Board of Directors with
information concerning the making, acquisition, holding and disposing of assets.
Subject to the supervision and control of the Board of Directors, the Manager
shall provide services to the Company and, to the extent directed by the Board
of Directors, shall provide similar services to any Affiliated Issuer, if any,
or subsidiary of the Company as follows:

               (a)  serve as the Company's consultant with respect to the
formulation of asset acquisition criteria and


<PAGE>

                                                                              11

policy guidelines for recommendation to the Board of Directors;

               (b)  counsel the Company in connection with policy decisions to
be made by the Board of Directors;

               (c)  issue Commitments on behalf of the Company to acquire
Mortgage Assets;

               (d)  represent the Company in connection with the acquisition and
accumulation of Mortgage Assets;

               (e)  furnish reports and statistical and economic research to the
Company regarding the Company's portfolio activities and the services performed
for the Company by the Manager as reasonably requested by the Board of
Directors;

               (f)  monitor and provide to the Board of Directors, on an on-
going basis, rate information and other data regarding Repurchase Agreements and
alternative lending sources;

               (g)  negotiate and enter into agreements on behalf of the Company
with banking institutions and other lenders to provide for the borrowing of
funds by the Company;

               (h)  monitor and provide to the Board of Directors, on an on-
going basis, price information and other data obtained from certain nationally
recognized dealers that maintain markets in Mortgage Assets and Other Mortgage
Assets identified by the Board of Directors from time to time, and provide data
and advice to the Board of Directors in connection with the identification of
such dealers;


<PAGE>

                                                                              12

               (i)  provide a full time chief operating officer of the Company,
a full time chief accounting officer of the Company, provide the personnel to
perform or supervise the duties of the computer programmer and analyst
(including necessary computer support staff), senior investment officer,
controller, shareholder relations, press officer, cash manager, tax manager
(including necessary support staff) (any of which functions may be performed by
the same person or persons) and other personnel necessary to manage the Company
on a day-to-day basis and provide to the Company, commencing as of the date
hereof and thereafter on a semi-annual basis, a list of all the full time and
part time employees of the Manager and a description of the functions of such
employees (for purposes of this subsection, full-time shall mean full time
obligation to both CAI and the Company);

               (j)  administer the day-to-day operations of the Company and
perform or supervise the performance of such other administrative functions
necessary in the management of the Company as may be agreed upon by the Manager
and the Board of Directors, including the collection of revenues and the payment
of the Company's expenses, debts and obligations and maintenance of appropriate
computer services to perform such administrative functions;

               (k)  communicate on behalf of the Company with the holders of the
equity and debt securities of the Company as required to satisfy the continuous
reporting and


<PAGE>

                                                                              13

other requirements of any governmental bodies or agencies, securities exchanges
and bond indentures and to maintain effective relations with such holders;

               (l)  prepare, draft and file all the Company's filings with the
Securities and Exchange Commission, PROVIDED THAT filing fees, legal fees,
accounting fees and any other third-party fees shall be the responsibility of
the Company;

               (m)  to the extent not otherwise subject to an agreement executed
by the Company, designate a servicer for those Mortgage Loans sold to the
Company by originators that have elected not to service such loans and arrange
for the monitoring and administering of such servicers;

               (n)  monitor and administer the servicing of the Company's
Mortgage Loans, other than Mortgage Loans pooled to back Mortgage Certificates
or pledged to secure Mortgage-Backed Obligations or Non-Agency MBS Bonds,
including serving as the Company's consultant with respect to the servicing of
loans; collecting information and submitting reports pertaining to the Mortgage
Loans and to moneys remitted to the Manager or the Company by servicers;
periodically reviewing and evaluating the performance of each servicer to
determine its compliance with the terms and conditions of the servicing
agreement and, if deemed appropriate, recommending to the Company the
termination of such servicing agreement; acting as a liaison between servicers
and the Company and working with servicers to the


<PAGE>

                                                                              14

extent necessary to improve their servicing performance; reviewing
recommendations as to fire losses, easement problems and condemnation,
delinquency and foreclosure procedures with regard to the Mortgage Loans;
reviewing servicers' delinquency, foreclosure and other reports on Mortgage
Loans; supervising claims filed under any mortgage insurance policies; and
enforcing the obligation of any servicer to repurchase Mortgage Loans from the
Company;

               (o)  in accordance with criteria set up by the Board of
Directors, invest or reinvest the Company's cash consistent with the Company's
status as a REIT provided, however, that the Company shall not invest in
Commercial Mortgage-Backed Obligations;

               (p)  provide to the Company itself or through another appropriate
party (but the Manager shall not charge for the services of such an appropriate
party unless authorized by the Board of Directors) all services in connection
with the issuance of each Series of Mortgage-Backed Obligations or Non-Agency
MBS Bonds issued by the Company or any Affiliated Issuer, including:

                    (i)  representing the Company with respect to the
     structuring of each such Series of Mortgage-Backed Obligations or Non-
     Agency MBS Bonds;

                   (ii)  negotiating the rating requirements with rating
     agencies with respect to the rating of each such Series of Mortgage-Backed
     Obligations or Non-Agency MBS Bonds;


<PAGE>

                                                                              15

                  (iii)  representing the Company in connection with the
     acquisition and accumulation of any Mortgage Instruments and the pooling
     and exchange of Mortgage Loans into Mortgage Certificates in connection
     with each Series of Mortgage-Backed Obligations or Non-Agency MBS Bonds
     issued by the Company or any Affiliated Issuer;

                   (iv)  issuing Commitments on behalf of the Company to acquire
     Mortgage Instruments to be used to secure or constitute the mortgage pool
     for each such Series of Mortgage-Backed Obligations or Non-Agency MBS
     Bonds;

                    (v)  with respect to the issuance of each such Series of
     Mortgage-Backed Obligations or Non-Agency MBS Bonds for which the
     underlying collateral consists of Mortgage Instruments owned by the Company
     or an Affiliated Issuer, accumulating and reviewing all Mortgage
     Instruments which may secure or constitute the mortgage pool for each such
     Series of Mortgage-Backed Obligations or Non-Agency MBS Bonds;

                   (vi)  with respect to the issuance of each such Series of
     Mortgage-Backed Obligations or Non-Agency MBS Bonds for which the
     underlying collateral does not consist of Mortgage Instruments owned by the
     Company or an Affiliated Issuer, reviewing interest rates, maturity dates
     and other attributes of the Mortgage Instruments;


<PAGE>

                                                                              16

                  (vii)  negotiating all agreements and credit enhancements with
     respect to each such Series of Mortgage-Backed Obligations or Non-Agency
     MBS Bonds;

                  (viii) organizing and administering all activities in
     connection with the closing of each such Series of Mortgage-Backed
     Obligations or Non-Agency MBS Bonds including all negotiations and
     agreements with underwriters, trustees, servicers, master servicers and
     other parties; and

                   (ix)  performing such other services as may be required from
     time to time for completing the issuance of each such Series of Mortgage-
     Backed Obligations or Non-Agency MBS Bonds.

               (q)  provide to the Company itself or through another appropriate
party (but the Manager shall not charge for the services of such an appropriate
party unless authorized by the Board of Directors) all services in connection
with the administration of each Series of Mortgage-Backed Obligations or Non-
Agency MBS Bonds issued by the Company or any Affiliated Issuer, including:

                    (i)  communicating on behalf of the Company with the holders
     of each such Series of Mortgage-Backed Obligations or Non-Agency MBS Bonds
     as required to satisfy the reporting and tax informational requirements of
     any governmental bodies or agencies with respect to holders of each such
     Series of Mortgage-Backed Obligations or Non-Agency MBS Bonds and


<PAGE>

                                                                              17

     as required to satisfy any governmental bodies and the provisions of any
     indenture, pooling and servicing agreement or other agreement with respect
     to each such Series of Mortgage-Backed Obligations or Non-Agency MBS Bonds;

                   (ii)  determining the amount of, and making, all payments
     with respect to each such Series of Mortgage-Backed Obligations or Non-
     Agency MBS Bonds and directing the reinvestment of principal and interest
     from the Mortgage Instruments in accordance with the terms of any
     indenture, pooling and servicing agreement or other agreement relating to
     each such Series of Mortgage-Backed Obligations or Non-Agency MBS Bonds;

                 (iii)  furnishing all reports and statistical information
     required with respect to the administration of each such Series of
     Mortgage-Backed Obligations or Non-Agency MBS Bonds;

                   (iv)  working with the Company and with accountants, counsel,
     trustees, servicers, master servicers and other parties with respect to the
     administration of each such Series of Mortgage-Backed Obligations or Non-
     Agency MBS Bonds;

                    (v)  assisting trustees and paying agents in distributing
     all excess or residual payments with respect to each such Series of
     Mortgage-Backed Obligations or Non-Agency MBS Bonds as directed by the


<PAGE>

                                                                              18

     Company or any indenture, pooling and servicing agreement or other
     agreement with respect to each such Series of Mortgage-Backed Obligations
     or Non-Agency MBS Bonds;

                   (vi)  monitoring and providing, on an on-going basis,
     information with respect to each such Series of Mortgage-Backed Obligations
     or Non-Agency MBS Bonds as is required by the Company;

                  (vii)  advising the Company with respect to the administration
     of each such Series of Mortgage-Backed Obligations or Non-Agency MBS Bonds;
     and

                 (viii)  performing such other services as may be required from
     time to time in connection with the administration of each such Series of
     Mortgage-Backed Obligations or Non-Agency MBS Bonds as the Company shall
     deem appropriate under the particular circumstances.

          (r)  provide to the Company itself or through another appropriate
party (but the Manager shall not charge for the services of such an appropriate
party unless authorized by the Board of Directors) services in connection with
reviewing and monitoring the administration of each series of Mortgage-Backed
Obligations or Non-Agency MBS Bonds managed by a party other than the Manager or
any of its Affiliates, including:

                    (i)  reviewing monthly financial statements and/or other
     financial data prepared by the


<PAGE>

                                                                              19

third-party bond administrator and distributed to the Company;

                   (ii)  reviewing bond payment information and verifying the
     excess cash flow payment received by the Company;

                  (iii)  monitoring on-going expenses related to each series of
     Mortgage-Backed Obligations or Non-Agency MBS Bonds, where expense
     information has been provided to the Company;

                   (iv)  reviewing federal income tax reports prepared by the
     third-party bond administrator and distributed to the Company, including
     but not limited to, reports for real estate mortgage investment conduits;
     and

                    (v)  providing and preparing for Residual Interests in
     Mortgage-Backed Obligations or Non-Agency MBS Bonds which are accounted for
     under a level-yield method:  (A) necessary services for computing monthly
     income in accordance with GAAP; and (B) the necessary calculations to
     compute the carrying amount adjustment in accordance with the Company's
     accounting principles.

               (s)  monitor the Company's portfolio with regard to interest rate
risk and recommend to the Board of Directors, and negotiate and enter into on
behalf of the Company, transactions to reduce interest rate risk including, but
not limited to, interest rate swap agreements,


<PAGE>

                                                                              20

forward rate agreements, interest rate cap agreements, interest rate floor
agreements and financial futures and option contracts in accordance with the
criteria established by the Board of Directors;

               (t)  perform such other services as may be required from time to
time for management and other activities relating to the assets of the Company
as the Board of Directors shall deem appropriate under the particular
circumstances;

               (u)  provide tax planning and advisory services and prepare and
file on behalf of the Company all filings required by federal, state and local
governments, including but not limited to, federal and state REIT income tax
returns (including the preparation of the related REIT qualification
calculations), personal property tax returns, sales tax returns, payroll tax
returns, franchise tax returns, annual reports and federal and state information
returns; and
               (v)  provide the executive, administrative and other personnel,
office space and services required in rendering services to the Company listed
in this Section 2.

          The Manager agrees to use its best efforts at all times in performing
services for the Company hereunder.

          Section 3.  ADDITIONAL ACTIVITIES OF MANAGER. Nothing herein shall
prevent or restrict the Manager or any of its officers, employees or Affiliates
from engaging in any business or rendering services of any kind to any other


<PAGE>

                                                                              21

Person, including investment in, or advisory service to others investing in, any
type of real estate assets, including assets which meet the principal portfolio
objectives of the Company, except that, without the consent of the Board of
Directors, which consent shall not be unreasonably withheld, the Manager shall
not provide general management services to any REIT or similar entity other than
the Company and its subsidiaries and affiliates other than acting as a manager
to CAI.  Directors, officers, employees and agents of the Manager or Affiliates
of the Manager may serve as directors, officers, employees, agents, nominees or
signatories for the Company or any subsidiary of the Company, to the extent
permitted by their Governing Instruments, as from time to time amended, or by
any resolutions duly adopted by the Board of Directors pursuant to its Governing
Instruments.  When executing documents or otherwise acting in such capacities
for the Company, such persons shall use their respective titles in the Company.

          Section 4.  COMMITMENTS.  In order to meet the portfolio requirements
of the Company, as determined by the Board of Directors from time to time, the
Manager agrees to issue on behalf of the Company Commitments on such terms as
are established by the Board of Directors, including a majority of the
Independent Directors, for the acquisition of Mortgage Assets originated by, or
acquired from, any Person.


<PAGE>

                                                                              22

          Section 5.  BANK ACCOUNTS.  At the direction of the Board of
Directors, the Manager may establish and maintain one or more bank accounts in
the name of the Company or any subsidiary of the Company, and may collect and
deposit into any such account or accounts, and disburse funds from any such
account or accounts, under such terms and conditions as the Board of Directors
may approve; and the Manager shall from time to time render appropriate
accountings of such collections and payments to the Board of Directors and, upon
request, to the auditors of the Company or any subsidiary of the Company.  Such
accounts shall be insured by the FDIC.

          Section 6.   RECORDS; CONFIDENTIALITY.  The Manager shall maintain
appropriate books of account and records relating to services performed
hereunder, and such books of account and records shall be accessible for
inspection by representatives of the Company or any subsidiary of the Company at
any time during normal business hours.  The Manager shall keep confidential any
and all information obtained in connection with the services rendered hereunder
and shall not disclose any such information to nonaffiliated third parties
except with the prior written consent of the Board of Directors.

          Section 7.  OBLIGATIONS OF MANAGER.

               (a)  The Manager shall require each seller or transferor of
Mortgage Assets to the Company to make such representations and warranties
regarding such Mortgage


<PAGE>

                                                                              23

Assets as may, in the judgment of the Manager, be necessary and appropriate.  In
addition, the Manager shall take such other action as it deems necessary or
appropriate with regard to the protection of the Company's assets.
Notwithstanding any other provision herein, the Manager shall act in accordance
with any portfolio management guidelines that may be established by the Board of
Directors and, in the absence of specific guidelines, in accordance with
industry standards.

               (b)  The Manager shall refrain from any action which would
adversely affect the status of the Company as a REIT or, if applicable, any
subsidiary of the Company as a REIT or as a qualified REIT subsidiary or which
would violate any law, rule or regulation of any governmental body or agency
having jurisdiction over the Company or any such subsidiary or which would
otherwise not be permitted by the Company's or such subsidiary's Governing
Instruments.  If the Manager is ordered to take any such action by the Board of
Directors, the Manager shall promptly notify the Board of Directors of the
Manager's judgment that such action would adversely affect such status or
violate any such law, rule or regulation or the Governing Instruments and
refrain from taking such action pending further clarification from the Board of
Directors.  If the Manager receives further clarification or instructions
expressly ordering that the action be taken, the Manager shall act as instructed
by the Board of Directors and shall have no


<PAGE>

                                                                              24

liability for such action.  Notwithstanding the foregoing, the Manager, its
directors, officers, stockholders and employees shall not be liable to the
Company, any Affiliated Issuer, any subsidiary of the Company, the Independent
Directors or the Company's or its subsidiary's stockholders for any act or
omission by the Manager, its directors, officers, stockholders or employees
except as provided in Section 13 of this Agreement.

          Section 8.  INVESTMENT COMPANY STATUS.

          Notwithstanding any other provision of this Agreement to the contrary,
the Company and the Manager each shall use its best efforts to refrain from
taking any action which, in its judgment made in good faith and with the
exercise of reasonable care, would cause the Company or any subsidiary of the
Company to be required to register as an investment company under the Investment
Company Act of 1940, as amended (the "Investment Company Act").  It shall be the
duty of the Manager to perform such calculations necessary to insure that the
Company or any subsidiary of the Company shall not be required to register under
the Investment Company Act.  If an action is ordered by the Board of Directors,
which in the Manager's judgment might cause such registration to be required,
the Manager shall promptly notify the Board of Directors and shall refrain from
taking such action pending further clarification or instructions from the Board
of Directors.  If the Manager receives further clarification or instructions
expressly ordering that


<PAGE>

                                                                              25

the action be taken, the Manager shall act as instructed by the Board of
Directors and shall have no liability for such action.

          Section 9.  COMPENSATION.

               (a)  BASE FEE.  Subject to Sections 9(c) and 9(e) hereof, the
Company shall pay to the Manager, for services rendered under this Agreement, a
base management fee in an amount equal to 3/8 of 1% per annum of the Average
Invested Assets of the Company during each fiscal year.  An amount equal to 3/32
of 1% of the Average Invested Assets for each fiscal quarter (pro rata based on
the number of days elapsed during any partial fiscal quarter), shall be paid to
the Manager, as provided by, and subject to adjustment under, Section 9(e) of
this Agreement.

               (b)  INCENTIVE COMPENSATION.  The Company shall pay the Manager
as incentive compensation a yearly fee, in an amount equal to 20% of the dollar
amount, if any, by which the Cash Distributions of the Company for each fiscal
year exceeds an amount equal to the Stockholders Equity multiplied by the Ten
Year U.S. Treasury Rate plus one percentage point.  If the Cash Distributions of
the Company are less than the amount equal to the Stockholders Equity multiplied
by the Ten Year U.S. Treasury Rate plus one percentage point, the Manager shall
refund to the Company the net year-to-date incentive compensation previously
paid to the Manager during the current fiscal year, if any.


<PAGE>

                                                                              26

          The quarterly payment of such amount by the Company to the Manager, or
refund to the Company from the Manager in the event the incentive compensation
for any year-to-date period is less than the incentive compensation computed and
paid to the Manager as of the previous year-to-date period, shall be computed
each fiscal quarter on a cumulative year-to-date basis in an amount equal to
(A) 20% of the dollar amount, if any, by which the year-to-date Cash
Distributions applicable to such fiscal quarter, exceeds an amount equal to the
Stockholders Equity for such year-to-date period multiplied by the year-to-date
Ten Year U.S. Treasury Rate plus one percentage point multiplied by the number
of quarters during such year-to-date period divided by four; and (B) minus the
year-to-date incentive compensation computed for the prior fiscal quarter.  If
the year-to-date incentive compensation computed through such fiscal quarter of
the Company is less than the net year-to-date incentive compensation computed
for the previous year-to-date fiscal quarter, the Manager shall refund to the
Company the lesser of (i) the difference between the net year-to-date incentive
compensation computed for the previous year-to-date fiscal quarter and the net
year-to-date incentive compensation computed for the current fiscal quarter or
(ii) the net year-to-date incentive compensation computed for the previous year-
to-date fiscal quarter, if any.  Such quarterly payment shall be paid to the
Manager, or refunded to the Company, as provided by, and subject to


<PAGE>

                                                                              27

adjustment under, Section 9(e) of this Agreement.  A sample calculation of the
incentive compensation is shown in Exhibit A.

               (c)  LIMITATION ON BASE FEE AND INCENTIVE COMPENSATION.

                    (i)  REDUCTION OF BASE FEE AND INCENTIVE COMPENSATION.
     During any fiscal quarter, the base management fee described in
     Section 9(a) above and incentive compensation described in Section 9(b)
     above shall be reduced by the amount, up to the total amount of such base
     management fee and incentive compensation, by which the year-to-date Total
     Operating Expenses (as defined below) of the Company and its subsidiaries
     exceed the greater of 2% of its Average Invested Assets multiplied by the
     number of quarters during such year-to-date period divided by four or 25%
     of its year-to-date Cash Distributions through such fiscal quarter,
     provided, however, that a majority of the Independent Directors may waive
     part or all of any such reduction to the extent that they determine, based
     upon unusual or nonrecurring factors which they deem sufficient, that a
     higher level of expenses is justified for such year.

                   (ii)  RECOVERY OF BASE FEE AND INCENTIVE COMPENSATION.  If at
     the close of any fiscal year the limitation on the base management fee and
     incentive compensation pursuant to Section 9(c)(i) above is


<PAGE>

                                                                              28

     imposed, the Manager shall be entitled to recover without interest any
     reduction of fees during such fiscal year pursuant to Section 9(c)(i) when,
     if, and to the extent that, the Total Operating Expenses of the Company and
     its subsidiaries in any future calendar year, including the recovery of the
     base management fee and incentive compensation or any portion thereof, are
     less than the greater of 2% of the Company's Average Invested Assets or 25%
     of its Cash Distributions for such year.

                  (iii)  TOTAL OPERATING EXPENSES.  For the purposes of Section
     9(c) only, "Total Operating Expenses" for any period means the aggregate
     year-to-date expenses for such period of every character payable by the
     Company which constitute ordinary operating expenses of the Company,
     exclusive of:

                         (1)  expenses relating to raising capital and all
     interest and discounts;

                         (2)  taxes and license fees;

                         (3)  expenses connected directly with the issuance,
     sale and distribution, and of listing on any stock exchange, of securities
     of the Company including, but not limited to, underwriting and brokerage
     discounts and commissions, private placement fees and expenses, legal and
     accounting costs, printing, engraving and mailing costs, and listing and
     registration fees;



<PAGE>

                                                                              29

                         (4)  expenses connected directly with the acquisition,
     disposition, operation, maintenance, management (including the
     Administrative fee) or ownership of the Company's assets, including but not
     limited to costs of foreclosure, maintenance, repair and improvement of
     property, maintenance and protection of the lien of mortgages, property
     management fees, loan origination fees, servicing and master servicing
     fees, legal fees, premiums for insurance on property owned by or mortgaged
     to the Company, taxes, brokerage and acquisition fees and commissions,
     appraisal fees, title insurance and abstract expenses, provisions for
     depreciation, depletion and amortization, disposition fees and subordinated
     real estate commissions, and losses on the disposition of assets and
     provisions for such losses;

                         (5)  fees and expenses payable to public accountants,
     consultants, or persons employed for the Company directly by the Board of
     Directors;

                         (6)  legal, accounting and other expenses incurred in
     connection with (a) formal or informal administrative actions or legal
     proceedings which involve a challenge of the status of the Company as a
     REIT, (b) advice regarding obtaining or maintaining such status, (c)
     determination by the Company of its taxable income as computed in
     accordance with the REIT provisions of the Internal Revenue Code or (d) a


<PAGE>

                                                                              30

     claim that the activities of the Company or of any member of the Board of
     Directors, officer or stockholder of the Company were improper;

                         (7)  expenses of organizing, reorganizing or
     terminating the Company;

                         (8)  non cash expenditures (including depreciation,
     amortization and bad debt reserves);

                         (9)  fees and expenses of transfer agents, registrars,
     warrant agents, right agents, dividend payment and dividend reinvestment
     agents, escrow holders and indenture trustees;

                         (10)  all expenses connected with communications to
     holders of securities of the Company and other bookkeeping and clerical
     work necessary in maintaining relations with holders of securities,
     including the costs of printing and mailing certificates for securities,
     proxy solicitation materials and reports to such holders and the cost of
     holding meetings of holders of securities of the Company; and

                         (11)  legal, accounting, printing and other costs,
     including clerical costs, of reports required to be filed with state or
     federal governmental agencies.

               (d)  ADMINISTRATIVE FEE.  Unless otherwise agreed by the parties
hereto, in addition to any other fee payable to the Manager under this
Agreement, the Manager shall be paid:


<PAGE>


                                                                              31

                    (i)  for each Series of CMOs issued or owned by the Company
     or any subsidiary of the Company and with respect to which the Manager or
     any Affiliate of the Manager serves as manager, in the case of CMOs sold or
     intended to be sold primarily to institutional investors, the lesser of
     (A) $35,000 annually and (B) an annual amount equal to $35,000 multiplied
     by the percentage ownership of the Company or such subsidiary of the
     Company in such CMO, or in the case of CMOs sold or intended to be sold
     primarily to retail investors, the lesser of (C) $10,000 annually and
     (D) an annual amount equal to $10,000 multiplied by the percentage
     ownership of the Company or such subsidiary of the Company in such CMO;

                   (ii)  for each Series of CMOs issued or owned by the Company
     or any subsidiary of the Company and with respect to which the Manager or
     any Affiliate of the Manager does not serve as manager, in the case of CMOs
     sold or intended to be sold primarily to institutional investors, the
     lesser of (A) $10,000 annually and (B) an annual amount equal to $10,000
     multiplied by the percentage ownership of the Company or such subsidiary of
     the Company in such CMO, or in the case of CMOs sold or intended to be sold
     primarily to retail investors, the lesser of (C) $5,000 annually and (D) an
     annual amount equal to $5,000 multiplied by


<PAGE>

                                                                              32

     the percentage ownership of the Company or such subsidiary of the Company
     in such CMOs; or

                  (iii)  for each Series of Non-Agency MBS Bonds issued or owned
     by the Company or any subsidiary of the Company with respect to the first
     class of such Series the lesser of (A) $2,500 annually and (B) an annual
     amount equal to $2,500 multiplied by the percentage ownership of the
     Company or such subsidiary of the Company in such Non-Agency MBS Bonds,
     and, for each additional class of such Series (C) $625 annually and (D) an
     annual amount equal to $625 multiplied by the percentage ownership of the
     Company or such subsidiary of the Company in such Non-Agency MBS Bond.

               With respect to any series of CMOs or Non-Agency MBS Bonds issued
or acquired on any day other than the first day of the month, the applicable
portion of such fees shall be calculated as if such CMOs or Non-Agency MBS Bonds
were issued or acquired on the first day of the month following the month in
which they were issued or acquired.

               Where the Manager serves as manager for a Series of CMOs issued
by the Company or any subsidiary of the Company, such fees shall be compensation
to the Manager for bond administration, reinvestment direction, computer
operations, special redemption calculations, preparation in sending bondholder
notices and like functions.  Where the Manager serves as manager for a Series of
CMOs owned by but not issued by the Company or any subsidiary of the Company,


<PAGE>

                                                                              33

compensation to the Manager shall be agreed upon between the issuer of such CMOs
and the Manager.  Where the Manager does not serve as manager for a Series of
CMOs issued or owned by the Company or any subsidiary of the Company, such fees
shall be compensation for related accounting functions and overseeing the third-
party management and administration.  Notwithstanding any other provision of
this Agreement, the Manager shall be entitled to reimbursement for its actual
costs in providing servicing functions for any pool of Mortgage Loans.

               (e)  ADJUSTMENT AND PAYMENT.  The Manager shall compute the
estimated compensation payable or refundable under Sections 9(a), 9(b), 9(c) and
9(d) hereof as soon as practicable after the end of each fiscal quarter, but no
later than 50 days after the end of each such quarter.  A copy of such
computations shall be thereafter promptly submitted to the Company.  Such
compensation shall be paid to the Manager, or refunded to the Company, on the
first business day of the third month after such fiscal quarter as payment on
account, subject to adjustment under this Section 9(e) of this Agreement.  The
aggregate amount of the Manager's compensation under Sections 9(a), 9(b), 9(c)
and 9(d) for each fiscal year shall be adjusted within: (x) 120 days after the
end of such fiscal year; or (y) 120 days after the filing of the Company's
federal income tax return for such fiscal year, whichever is later.  Such
adjustment shall be made to reflect additional information provided by


<PAGE>

                                                                              34

the Company's tax return for such fiscal year.  Any excess owed to, or refund
owed by, the Manager shall be paid to the Manager or remitted by the Manager to
the Company within ten days of presentment of the adjustment.

          Section 10.  COMPENSATION FOR ADDITIONAL SERVICES.  If the Company
requests the Manager (or any Affiliate or any officer or employee thereof) to
render services for the Company other than those required to be rendered by  the
Manager hereunder, such additional services, if performed, shall be compensated
separately on terms to be agreed upon between such party and the Board of
Directors from time to time.  To the extent that the Manager or any Affiliate of
the Manager performs any brokerage, leasing, loan servicing, loan
administration, property management or other similar services for the Company
other than as required hereunder, the rate of compensation for such services
shall be either (a) the rate at which the Manager or such Affiliate of the
Manager is then performing similar services for unaffiliated parties in the same
geographic area or (b) the rate at which qualified unaffiliated persons are then
performing such services for similar investors in the same geographic area.

          Section 11.  EXPENSES OF THE MANAGER.  Without regard to the
compensation received hereunder by the Manager, the Manager shall bear the
following expenses (unless agreed otherwise by the Board of Directors):

               (a)  Employment expenses of the personnel employed by the
Manager, including, but not limited to,


<PAGE>

                                                                              35

salaries, wages, payroll taxes, and the cost of employee benefit plans for such
employees;

               (b)  Rent, telephone, utilities, office furniture, equipment,
machinery (including computers), subscriptions and such other overhead expenses
incurred in connection with the conduct of the Manager's business;

               (c)  Travel and other expenses of directors, officers and
employees of the Manager, except expenses of such persons incurred in connection
with attending meetings, conferences or conventions that relate solely to the
business affairs of the Company or any subsidiary of the Company;

               (d)  Legal, accounting and auditing fees, and tax advisory and
tax preparation fees, relating to the corporate affairs of the Manager;

               (e)  If the Manager or an Affiliate acts as bond administrator
for a Series of Mortgage-Backed Obligations, all expenses relating to the
performance of the services set forth in Sections 2(p) and 2(q) of this
Agreement for such Series of Mortgage-Backed Obligations;

               (f)  Expenses incurred (including personnel) in preparation of
the Company's monthly financial statements; and

               (g)  Miscellaneous administrative expenses incurred in
supervising and monitoring the Company's assets or any subsidiary's assets or
relating to performance by the Manager of its functions hereunder.



<PAGE>

                                                                              36

               If any of the expenses set out above total $5,000 or more
individually, or $15,000 or more in the aggregate and are incurred by the
Manager in part for the purposes of the Company and in part for purposes
unrelated to the Company (including expenses incurred on behalf of CAI), the
Manager shall submit an accounting to the Company's Audit Committee of the Board
of Directors on a quarterly basis to show the allocation of such expenses.  The
Manager shall also submit a quarterly schedule of its allocation of expenses
between the Company and CAI.

          Section 12.  EXPENSES OF THE COMPANY.  The Company or any subsidiary
of the Company shall pay all of its expenses, except those that are the
responsibility of the Manager pursuant to Section 11 of this Agreement or other
provisions of this Agreement, and without limiting the generality of the
foregoing, the following expenses of the Company or any subsidiary of the
Company shall be paid by the Company or such subsidiary and shall not be paid by
the Manager:

               (a)  Expenses related to raising capital, including the cost of
borrowed money, interest payments, discounts, loan and commitment fees, points
and any other related charges;

               (b)  All license fees and all taxes applicable to the Company or
any subsidiary of the Company, including interest and penalties thereon;


<PAGE>

                                                                              37

               (c)  Legal, audit, accounting, underwriting, brokerage, listing,
rating agency, registration and other fees, printing, engraving and other
expenses and taxes incurred in connection with the issuance, sale, distribution,
transfer, registration and stock exchange listing of the securities of the
Company or of any subsidiary of the Company;

               (d)  Employment expenses, fees and out-of-pocket costs of the
Company and fees and expenses paid to employees, agents, advisers and
independent contractors, consultants, managers, and other agents (other than the
Manager) employed directly by the Company or any subsidiary of the Company or by
the Manager at the request of the Company or such subsidiary for the account of
the Company or the subsidiary;

               (e)  Expenses connected with the acquisition, disposition,
operation (except for those duties performed by the Manager) and ownership of
the assets of the Company or any subsidiary of the Company, including, without
limitation, commitment, appraisal, guaranty and hedging fees, brokerage and
acquisition fees and commissions, ad valorem taxes, costs of foreclosure,
maintenance, repair and improvement of property, maintenance and protection of
the lien of mortgages, property management fees, loan origination fees,
servicing and master servicing fees, legal fees, premiums for insurance on
property owned by the Company or any subsidiary of the Company and insurance and
abstract


<PAGE>

                                                                              38

expenses; PROVIDED, that with regard to brokerage fees, unless approved
by a majority of the Independent Directors, neither the Manager nor any of its
Affiliates shall charge a brokerage commission or similar fee to the Company or
any subsidiary of the Company in connection with the acquisition, disposition or
ownership of the assets of the Company or the subsidiary;

               (f)  Expenses of organizing, reorganizing, dissolving or winding-
up the Company or any subsidiary of the Company;

               (g)  All insurance costs not included in paragraph (e) hereof and
incurred by the Company or any subsidiary of the Company, including without
limitation, the cost of officer and director liability insurance;

               (h)  Expenses connected with payments of dividends or interest or
distributions in cash or any other form made or caused to be made by the Board
of Directors to holders of the securities of the Company or any subsidiary of
the Company;

               (i)  Direct Issuance Costs;

               (j)  All expenses connected with communications to holders of
equity securities or debt securities of the Company or any subsidiary of the
Company and with governmental agencies and the other bookkeeping and clerical
work necessary in maintaining relations with holders of such securities and in
complying with the continuous reporting and other requirements of governmental
bodies or agencies,


<PAGE>

                                                                              39

including, without limitation, the cost of printing and mailing certificates for
such securities and proxy solicitation materials and reports to holders of the
Company's or any subsidiary's securities and reports to third-parties required
under any indenture to which the Company or any subsidiary of the Company is a
party, except such expenses that are the responsibility of the Manager as set
forth in Section 11 hereof, including but not limited to the expenses listed in
Sections 11(a) and 11(b) incurred by the Manager in connection with this Section
12(j);

               (k)  Fees and charges of any transfer agent or registrar;

               (l)  Fees and expenses paid to directors of the Company or any
subsidiary of the Company, except, in each case, directors who are Affiliates of
the Manager;

               (m)  Legal, accounting and auditing fees, and tax advisory and
tax preparation fees, relating to the operations of the Company or any
subsidiary;

               (n)  Legal, accounting and auditing fees, tax advisory and tax
preparation fees, consulting fees and expenses relating to the administration of
Mortgage-Backed Obligations issued or caused to be issued by the Company;

               (o)  Any judgment rendered against the Company or any subsidiary
of the Company, or against any officer or director of the Company or any
subsidiary of the Company in his capacity as such by any court or governmental
agency;


<PAGE>

                                                                              40

               (p)  If the Manager or an Affiliate does not act as bond
administrator for a Series of Mortgage-Backed Obligations issued by an
Affiliated Issuer by or on behalf of the Company, all fees charged by the bond
administrator who performs the services set forth in Sections 2(p) and 2(q) of
this Agreement for such Series of Mortgage-Backed Obligations;

               (q)  Fees paid to the Manager with the approval of a majority of
the Independent Director for participation by the Company in programs operated
by the Manager for the pricing and acquisition of Mortgage Loans;

               (r)  Amounts payable by the Company to the Manager under Section
13 of this Agreement;

               (s)  Third-party fees and expenses incurred by the Manager under
Section 14 of this Agreement; and

               (t)  Other miscellaneous expenses in connection with the
operation of the Company or any subsidiary of the Company which are not expenses
of the Manager under Section 11 of this Agreement, provided that any such single
expense in excess of $10,000 shall be submitted to the Company's Audit Committee
of the Board of Directors on a quarterly basis.

          Section 13.  LIMITS OF RESPONSIBILITY OF THE MANAGER.

               (a)  The Company shall indemnify the Manager and its Affiliates
with respect to all expenses, losses, damages, liabilities, demands, charges or
claims of any


<PAGE>

                                                                            41

nature in respect of acts or omissions of the Manager made in good faith and in
accordance with the standards set forth in this Agreement.

               (b)  Notwithstanding subsection (a) of this Section 13, the
Company shall not be responsible for any and all losses, damages, costs,
charges, counsel fees, payments, expenses and liabilities arising out of or
attributable to the Manager's failure to comply with the terms of this Agreement
or any action or failure or omission to act by the Manager as a result of the
gross negligence, willful misconduct or lack of good faith of the Manager or any
of its agents or as a result of its or any of their reckless disregard of its
duties and any obligations hereunder, or which arise out of the willful breach
of any representation or warranty of the Manager hereunder.

               (c)  The Manager shall indemnify and hold harmless the Company
with respect to all expenses, losses, damages, liabilities, demands, charges or
claims of any nature in respect of acts or omissions of the Manager not in
accordance with the standards set forth in this Agreement.

               (d)  The Manager shall promptly notify the Board of Directors of
any litigation or governmental investigation involving the Company and shall
keep the Board of Directors fully informed of the status of any such litigation
or governmental investigation.

          Section 14. POOLING OF MORTGAGE LOANS; ISSUANCE OF MORTGAGE
CERTIFICATES.  If the Manager determines it to be


<PAGE>


                                                                              42

in the best interests of the Company and consistent with the portfolio criteria
approved by the Board of Directors of the Company, the Manager shall, directly
or indirectly and on behalf of the Company, pool Mortgage Loans acquired by the
Company and use its best efforts to have Mortgage Certificates issued backed by
such Mortgage Loans which meet all underwriting and other requirements for such
issuance.  In connection therewith, the Manager shall, directly or indirectly
and on behalf of the Company, apply to the respective issuer for a commitment to
issue the related Mortgage Certificates and, once such commitment has been
approved, contract to pool such Mortgage Loans and cause to be issued Mortgage
Certificates backed by such Mortgage Loans, which Mortgage Certificates shall be
owned by and registered in the name, or deposited into a depository institution
for the account, of the Company.  After the issuance of such Mortgage
Certificates, unless otherwise specified by the Company, the servicer of the
related Mortgage Loans shall have all responsibilities and duties to the issuer
of such Mortgage Certificates with respect to such Mortgage Loans and Mortgage
Certificates, and shall service such Mortgage Loans after the issuance of the
Mortgage Certificates which they back in accordance with the requirements of the
issuer of such Mortgage Certificates.

          In connection therewith, the Manager shall apply conditions of the
Servicing Agreement, and, if deemed appropriate, recommend to the Company the
termination of such


<PAGE>

                                                                              43

Servicing Agreement; acting as a liaison between servicers and the Company and
working with servicers to the extent necessary to improve their servicing
performance; review of and recommendations as to fire losses, easement problems
and condemnation, delinquency and foreclosure procedures with regard to the
Mortgage Loans; review of servicers' delinquency, foreclosing and other reports
on Mortgage Loans; supervising claims filed under any mortgage insurance
policies; and enforcing the obligation of any servicer to repurchase
Mortgage Loans from the Company.

          Section 15.  NO JOINT VENTURE.  The Company and the Manager are not
partners or joint venturers with each other and nothing herein shall be
construed to make them such partners or joint venturers or impose any liability
as such on either of them.

          Section 16.  TERM.  This Agreement shall continue in force until
December 31, 1994 unless otherwise renewed or extended.

          Section 17.  TERMINATION OF AGREEMENT.

               (a)  Notwithstanding any other provision of this Agreement to the
contrary, this Agreement may be terminated by either party with or without cause
upon 60 days' written notice.  In addition, this Agreement may be terminated at
any time by a majority vote of (i) the Independent Directors or (ii) the holders
of the Common Stock of the Company.


<PAGE>

                                                                              44

               (b)  This Agreement may be immediately terminated by the Company
by written notice of termination from the Company to the Manager upon the
occurrence of any of the following events:

                    (i)  if the Manager shall violate any material provision of
     this Agreement which, after written notice of such violation, is not cured
     within 30 days;

                   (ii)  if the Manager or any of its Affiliates shall be
     adjudged bankrupt or insolvent by a court of competent jurisdiction, or any
     order shall be made by a court of competent jurisdiction for the
     appointment of a receiver, liquidator or trustee of the Manager or any of
     its Affiliates or of all or substantially all of its property by reason of
     the foregoing or approving any petition filed against the Manager or any of
     its Affiliates for its reorganization and such adjudication, order or
     petition has not been stayed or discharged pending appeal within 60 days of
     its entry;

                  (iii)  if the Manager or any of its Affiliates shall institute
     proceedings for voluntary bankruptcy or shall file a petition seeking
     reorganization under the federal bankruptcy laws, or for relief under any
     law for the relief of debtors, or shall consent to the appointment of a
     receiver, or shall make a general assignment for the benefit of its
     creditors,


<PAGE>

                                                                              45

     or shall admit in writing its inability to pay its debts generally as they
     become due;

                   (iv)  if any governmental authority, court or self-regulatory
     authority shall withdraw, suspend or revoke or declare invalid any license,
     charter, authorization or, registration required or necessary for the
     conduct by the Manager or any of its Affiliates of any material portion of
     its business or businesses and such adjudication, order or petition has not
     been stayed or discharged pending appeal within 60 days of its entry; or

                    (v)  if any event or circumstances shall occur which
     materially impairs the financial condition of the Manager or any of its
     Affiliates or the ability of the Manager to perform its obligations
     hereunder.

               The Manager agrees that if any of the events specified in
subsection (b) of this Section 17 shall occur, it will give written notice
thereof to the Board of Directors within five days after the occurrence of such
event.

          Section 18.  ASSIGNMENTS.

               (a)  Except as set forth in Section 18(b) of this Agreement, this
Agreement shall terminate automatically in the event of its assignment, in whole
or in part, by the Manager, unless such assignment is consented to in writing by
the Company with the consent of a majority of the Independent Directors.  Any
such assignment shall bind the assignee hereunder in the same manner as the
Manager is


<PAGE>

                                                                              46

bound.  In addition, the assignee shall execute and deliver to the
Company a counterpart of this Agreement naming such assignee as Manager.  This
Agreement shall not be assigned by the Company without the prior written consent
of the Manager, except in the case of assignment by the Company to a REIT or
other organization which is a successor (by merger, consolidation or purchase of
assets) to the Company, in which case such successor organization shall be bound
hereunder and by the terms of such assignment in the same manner as the Company
is bound hereunder.

               (b)  Notwithstanding any provision of this Agreement, the Manager
may subcontract and assign any or all of its responsibilities at no additional
cost to the Company under Sections 2(p), 2(q) and 2(r) of this Agreement to any
of its Affiliates, and the Company hereby consents to any such assignment and
subcontracting.

          Section 19.  ACTION UPON TERMINATION.

               (a)  Except as provided in Section 19(b) of this Agreement, from
and after the effective date of termination of this Agreement, pursuant to
Sections 16, 17 or 18 of this Agreement, the Manager shall not be entitled to
compensation for further services hereunder, but shall be paid all compensation
accruing to the date of termination.  Upon such termination, the Manager shall
forthwith:

                    (i)  Pay over to the Company or any subsidiary of the
     Company all money collected and held


<PAGE>

                                                                              47

     for the account of the Company or any subsidiary of the Company pursuant to
     this Agreement;

                   (ii)  Deliver to the Board of Directors a full accounting,
     including a statement showing all payments collected by it and a statement
     of all money held by it, covering the period following the date of the last
     ended fiscal quarter;

                  (iii)  Deliver to the Board of Directors all property and
     documents of the Company or any subsidiary of the Company then in the
     custody of the Manager;

                   (iv)  Present an accounting to the Independent Directors of
     any accrued compensation pursuant to Section 9 above and an accounting of
     any expenses for which it seeks reimbursement; and

                    (v)  If the Company so requests, sell the items listed on
     Exhibit B back to the Company at a price equal to the net book value of
     such items, computed in accordance with GAAP, as of the date of
     termination.

               (b)  Notwithstanding any provisions of this Agreement, if the
Manager is terminated pursuant to Section 17(a) of this Agreement within twelve
months after the occurrence of any of the events set forth in Section 19(c)
hereunder, the Manager shall be entitled to compensation as follows:


<PAGE>

                                                                              48

                    (i)  The Manager shall be paid all compensation to the date
     of termination; and

                   (ii)  On the final day of each fiscal quarter after the date
     of termination and ending one year thereafter, the Manager shall receive an
     amount equal to one-quarter of the average of the annual aggregate of all
     compensation incurred under this Agreement and its predecessors during the
     three fiscal years prior to the fiscal year in which termination occurred.

               (c)  The events referred to in Section 19(b) are as follows:

                    (i)  Any corporation, person or other entity (other than the
     Company, the Manager or their respective affiliates) makes a tender or
     exchange offer for shares of the Company's Common Stock pursuant to which
     such corporation, person or other entity acquires 15% or more of the issued
     and outstanding shares of the Company's Common Stock;

                   (ii)  The stockholders of the Company approve a definitive
     agreement to merge or consolidate the Company with or into another
     corporation or to sell or otherwise dispose of all or substantially all of
     its assets, except in the case of a merger or consolidation with, or sale
     to, the Manager or an affiliate of the Manager; or


<PAGE>

                                                                              49

                  (iii)  Any person, within the meaning of Section 3(a)(9) or
     Section 13(d)(3) of the Securities Exchange Act of 1934, acquires more than
     15% (30% in the case of a passive investor) of the Company's issued and
     outstanding voting securities.

          Section 20.  RELEASE OF MONEY OR OTHER PROPERTY UPON WRITTEN REQUEST.
The Manager agrees that any money or other property of the Company or any
subsidiary of the Company held by the Manager under this Agreement shall be held
by the Manager as custodian for the Company or such subsidiary, and the
Manager's records shall be appropriately marked clearly to reflect the ownership
of such money or other property by the Company or such subsidiary.  Upon the
receipt by the Manager of a written request signed by a duly authorized officer
of the Company requesting the Manager to release to the Company or any
subsidiary of the Company any money or other property then held by the Manager
for the account of the Company or any subsidiary of the Company under this
Agreement, the Manager shall forthwith release such money or other property to
the Company or such subsidiary.  The Manager shall not be liable to the Company,
any subsidiary of the Company, the Independent Directors, or the Company's or
its subsidiary's stockholders for any acts performed or omissions to act by the
Company or any subsidiary of the Company in connection with the money or other
property released to the Company or any subsidiary of the Company in accordance
with this Section.  The Company and


<PAGE>

                                                                              50

any subsidiary of the Company shall indemnify the Manager, its directors,
officers and employees against any and all expenses, losses, damages,
liabilities, demands, charges and claims of any nature whatsoever, which arise
in connection with the Manager's release of such money or other property to the
Company or any subsidiary of the Company in accordance with the terms of this
Section 20 of this Agreement, except insofar as such expenses, losses, damages,
liabilities, demands, charges and claims arise out of acts of the Manager, its
directors, officers and employees constituting bad faith, willful misconduct,
gross negligence or reckless disregard of their duties.  Indemnification
pursuant to this provision shall be in addition to any right of the Manager to
indemnification under Section 13 of this Agreement.

          Section 21.  REPRESENTATIONS AND WARRANTIES.

               (a)  The Company hereby represents and warrants to the Manager as
follows:

                    (i)  The Company has been duly organized and is validly
     existing and in good standing under the laws of the State of Maryland; the
     Company has the corporate power to own its assets and to transact the
     business in which it is now engaged and is duly qualified as a foreign
     corporation and in good standing under the laws of each jurisdiction where
     its ownership or lease of property or the conduct of its business requires
     such qualification, except for failures to be so qualified, authorized or
     licensed that could not in


<PAGE>

                                                                              51

     the aggregate have a material adverse effect on the business operations,
     assets or financial condition of the Company and its subsidiaries, taken as
     a whole.  The Company does not do business under any fictitious business
     name.

                   (ii)  The Company has the corporate power and authority to
     execute, deliver and perform this Agreement and all obligations required
     hereunder and has taken all necessary corporate action to authorize the
     execution, delivery and performance of this Agreement and all obligations
     required hereunder.  No consent of any other person including, without
     limitation, directors, stockholders and creditors of the Company, and no
     license, permit, approval or authorization of, exemption by, notice or
     report to, or registration, filing or declaration with, any governmental
     authority is required by the Company in connection with this Agreement or
     the execution, delivery, performance, validity or enforceability of this
     Agreement and all obligations required hereunder.  This Agreement has been,
     and each instrument or document required hereunder will be, executed and
     delivered by a duly authorized officer of the Company, and this Agreement
     constitutes, and each instrument or document required hereunder when
     executed and delivered hereunder will constitute, the legally valid and
     binding obligation of


<PAGE>

                                                                              52

     the Company enforceable against the Company in accordance with its terms.

                  (iii)  The execution, delivery and performance of this
     Agreement and the documents or instruments required hereunder will not
     violate any provision of any existing law or regulation binding on the
     Company, or any order, judgment, award or decree of any court, arbitrator
     or governmental authority binding on the Company, or the Governing
     Instruments of, or any securities issued by, the Company or of any
     mortgage, indenture, lease, contract or other agreement, instrument or
     undertaking to which the Company is a party or by which the Company or any
     of its assets may be bound, the violation of which would have a material
     adverse effect on the business operations, assets or financial condition of
     the Company and its subsidiaries, taken as a whole, and will not result in,
     or require, the creation or imposition of any lien on any of its property,
     assets or revenues pursuant to the provisions of any such mortgage,
     indenture, lease, contract or other agreement, instrument or undertaking.

               (b)  The Manager hereby represents and warrants to the Company as
follows:

                    (i)  The Manager is duly organized, validly existing and in
     good standing under the laws of the State of Delaware; the Manager has the
     power to own its assets and to transact the business in which it is


<PAGE>

                                                                              53

     now engaged and is duly qualified to do business and is in good standing
     under the laws of each jurisdiction where its ownership or lease of
     property or the conduct of its business requires such qualification, except
     for failures to be so qualified, authorized or licensed that could not in
     the aggregate have a material adverse effect on the business operations,
     assets or financial condition of the Manager and its subsidiaries, taken as
     a whole.  The Manager does not do business under any fictitious business
     name.

                   (ii)  The Manager has the power and authority to execute,
     deliver and perform this Agreement and all obligations required hereunder
     and has taken all necessary corporate action to authorize the execution,
     delivery and performance of this Agreement and all obligations required
     hereunder.  No consent of any other person including, without limitation,
     directors and creditors of the Manager, and no license, permit, approval or
     authorization of, exemption by, notice or report to, or registration,
     filing or declaration with, any governmental authority is required by the
     Manager in connection with this Agreement or the execution, delivery,
     performance, validity or enforceability of this Agreement and all
     obligations required hereunder.  This Agreement has been, and each
     instrument or document required hereunder will be, executed and delivered
     by a duly autho-


<PAGE>

                                                                              54

     rized agent of the Manager, and this Agreement constitutes,
     and each instrument or document required hereunder when executed and
     delivered hereunder will constitute, the legally valid and binding
     obligation of the Manager enforceable against the Manager in accordance
     with its terms.

                  (iii)  The execution, delivery and performance of this
     Agreement and the documents or instruments required hereunder, will not
     violate any provision of any existing law or regulation binding on the
     Manager, or any order, judgment, award or decree of any court, arbitrator
     or governmental authority binding on the Manager, or the Governing
     Instruments of, or any securities issued by, the Manager or of any
     mortgage, indenture, lease, contract or other agreement, instrument or
     undertaking to which the Manager is a party or by which the Manager or any
     of its assets may be bound, the violation of which would have a material
     adverse effect on the business operations, assets or financial condition of
     the Manager and its subsidiaries, taken as a whole, and will not result in,
     or require, the creation or imposition of any lien on any of its property,
     assets or revenues pursuant to the provisions of any such mortgage,
     indenture, lease, contract or other agreement, instrument or undertaking.

          Section 22.  NOTICES.  Unless expressly provided otherwise herein, all
notices, requests, demands and other


<PAGE>

                                                                              55

communications required or permitted under this Agreement shall be in writing
and shall be deemed to have been duly given, made and received when delivered
against receipt or upon actual receipt of registered or certified mail, postage
prepaid, return receipt requested, addressed as set forth below:

               (a)  If to the Company:

                    3600 South Yosemite Street
                    Suite 900
                    Denver, Colorado 80237
                    Attention: President

                    with a copy given in the manner prescribed above, to the
                    Chief Operating Officer/Chief Financial Officer, Chief
                    Accounting Officer and each member of the Board of Directors
                    at their addresses as set forth in the records of the
                    Company.

                    If to the Manager:

                    3600 South Yosemite Street
                    Suite 900
                    Denver, Colorado 80237
                    Attention: President

                    with a copy given in the manner prescribed above, to the
                    General Counsel at the same address.

          Either party may alter the address to which communications or copies
are to be sent by giving notice of such change of address in conformity with the
provisions of this Section 22 for the giving of notice.

          Section 23.  BINDING NATURE OF AGREEMENT; SUCCESSORS AND ASSIGNS.
This Agreement shall be binding upon and inure to the benefit of the parties
hereto and


<PAGE>

                                                                              56

their respective heirs, personal representatives, successors and assigns as
provided herein.

          Section 24.  ENTIRE AGREEMENT.  This Agreement contains the entire
agreement and understanding between the parties hereto with respect to the
subject matter hereof.  The express terms hereof control and supersede any
course of performance and/or usage of the trade inconsistent with any of the
terms hereof.  This Agreement may not be modified or amended other than by an
agreement in writing.

          Section 25.  CONTROLLING LAW.  This Agreement and all questions
relating to its validity, interpretation, performance and enforcement shall be
governed by and construed, interpreted and enforced in accordance with the laws
of the State of Colorado, notwithstanding any Colorado or other conflict-of-law
provisions to the contrary.

          Section 26.  COUNTERPARTS.  This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
shall constitute one and the same instrument.

          Section 27.  COMPUTATION OF INTEREST.  Interest will be computed on
the basis of a 360-day year consisting of twelve months of thirty days each.

          Section 28.  INDULGENCES, NOT WAIVERS.  Neither the failure nor any
delay on the part of a party to exercise any right, remedy, power or privilege
under this Agreement shall operate as a waiver thereof, nor shall any single or
partial exercise of any right, remedy, power or privilege


<PAGE>

                                                                              57

preclude any other or further exercise of the same or of any other right,
remedy, power or privilege, nor shall any waiver of any right, remedy, power or
privilege with respect to any occurrence be construed as a waiver of such right,
remedy, power or privilege with respect to any other occurrence.  No waiver
shall be effective unless it is in writing and is signed by the party asserted
to have granted such waiver.

          Section 29.  COSTS AND EXPENSES.  Each party hereto shall bear its own
costs and expenses (including the fees and disbursements of counsel and
accountants) incurred in connection with the negotiations and preparation of and
the closing under this Agreement, and all matters incident thereto.

          Section 30.  SCHEDULES AND EXHIBITS.  All Schedules and Exhibits
referred to herein or attached hereto are hereby incorporated by reference into,
and made a part of, this Agreement.



<PAGE>

                                                                              58


     IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.

                              ASSETS INVESTORS CORPORATION




                              By:
                                 ----------------------------------
                                   Spencer I. Browne
                                   President and Chief
                                   Executive Officer



                              FINANCIAL ASSET MANAGEMENT
                                CORPORATION



                              By:
                                  ---------------------------------




<PAGE>

                      INDEPENDENT AUDITORS' CONSENT



We consent to the incorporation by reference in the Registration Statement
on Form S-8 of Asset Investors Corporation of our report dated March 17, 1995,
appearing on Page F-2 of the Annual Report on Form 10-K on the consolidated
financial statements of Asset Investors Corporation appearing on Pages F-3
through F-30 of the Annual Report on Form 10-K for the year ended
December 31, 1994.

                                           /s/ Kenneth Leventhal & Company



Phoenix, Arizona
May 10, 1995


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<PERIOD-START>                             JAN-01-1995
<PERIOD-END>                               MAR-31-1995
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                                0
                                        242
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