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

FORM 10-K

|X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE

SECURITIES EXCHANGE ACT OF 1934

FOR FISCAL YEAR ENDED: JULY 31, 1997

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)

For the transition period from _______to _____.

Commission File Number: 0-18076

PAINEWEBBER INSURED MORTGAGE PARTNERS 1-B, L.P.
-----------------------------------------------
(Exact name of registrant as specified in its charter)

Delaware 04-3038480
- ----------------------- -------------------
(State of organization) (I.R.S. Employer
Identification No.)

265 Franklin Street, Boston, Massachusetts 02110
- ------------------------------------------ -----
(Address of principal executive office) (Zip Code)

Registrant's telephone number, including area code (617) 439-8118
--------------

Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
- ------------------- ------------------------
None None

Securities registered pursuant to Section 12(g) of the Act:
Units of Depositary Receipts representing
Units of Limited Partner Interests

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

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 |_|.

State the aggregate market value of the voting stock held by non-affiliates of
the registrant. Not applicable.

DOCUMENTS INCORPORATED BY REFERENCE
Documents Form 10-K Reference
- --------- -------------------
The Prospectus of the registrant Parts II and IV
dated April 23, 1987, as supplemented

PAINEWEBBER INSURED MORTGAGE PARTNERS 1-B, L.P.
1997 FORM 10-K

TABLE OF CONTENTS

Part I Page

Item 1 Business I-1

Item 2 Properties I-3

Item 3 Legal Proceedings I-3

Item 4 Submission of Matters to a Vote of Security Holders I-4

Part II

Item 5 Market for the Registrant's Depositary Units of Limited
Partnership Interest and Related Security Holder
Matters II-1

Item 6 Selected Financial Data II-1

Item 7 Management's Discussion and Analysis of Financial
Condition and Results of Operations II-2

Item 8 Financial Statements and Supplementary Data II-5

Item 9 Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure II-5

Part III

Item 10 Directors and Executive Officers of the Partnership III-1

Item 11 Executive Compensation III-3

Item 12 Security Ownership of Certain Beneficial Owners
and Management III-3

Item 13 Certain Relationships and Related Transactions III-3

Part IV

Item 14 Exhibits, Financial Statement Schedules and Reports
on Form 8-K IV-1

Signatures IV-2

Index to Exhibits IV-3

Financial Statements and Supplementary Data F-1 to F-13

This Form 10-K contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. The Partnership's actual results could differ materially
from those set forth in the forward-looking statements. Certain factors that
might cause such a difference are discussed in Item 7 in the section entitled
"Certain Factors Affecting Future Operating Results" beginning on page II-4 of
this Form 10-K.

PART I

Item 1. Business

PaineWebber Insured Mortgage Partners 1-B, L.P. (the "Partnership") is a
Delaware limited partnership formed primarily for the purpose of investing in a
diversified portfolio of federally insured or coinsured mortgage loans
("Participating Insured Mortgage Loans") through the purchase of certain
mortgage-backed securities ("GNMA Securities") guaranteed as to their payment of
principal and interest by the Government National Mortgage Association ("GNMA").
On May 16, 1988, the Partnership commenced the sale of Limited Partner Interests
(the "Units"), which are evidenced by Depositary Receipts (at $100 per Unit).
Depositary Receipts were offered to the public by PaineWebber Incorporated
("PWI"), as sales agent, pursuant to a Registration Statement on Form S-11 filed
under the Securities Act of 1933 (Registration No. 33-11911). The Partnership
sold 551,604 Units of Depositary Receipts from May 16, 1988 to May 1, 1989,
representing capital contributions of approximately $55,160,000. Unitholders
will not be required to make any additional capital contributions.

The Units represent an interest assigned to persons who purchased Units
("Unitholders") from the initial limited partner of the Partnership pursuant to
the Partnership Agreement, which interest is the equivalent of a limited
partnership interest. Although Unitholders are not limited partners of the
Partnership, as Unitholders they are entitled to the same economic benefits,
including the same share of income, gains, losses, deductions, credits and cash
distributions, as if they were limited partners holding the number of limited
partnership interests represented by their Units.

The Partnership originally invested in three Participating Insured Mortgage
Loans, which were originated under or in connection with Federal Housing
Administration ("FHA") insurance programs to finance or refinance the
acquisition, construction or substantial rehabilitation of privately owned and
operating multi-family residential rental projects, (the "Projects"). The
Partnership purchased each of the GNMA Securities with proceeds raised through
its public offering from an FHA-approved mortgagee/coinsurer and GNMA
issuer/servicer. The Partnership was expected to make an investment in a fourth
Participating Insured Mortgage Loan and entered into a commitment to fund a $4.5
million loan on a to-be-built project in Orlando, Florida. During fiscal 1991,
the prospective borrower elected not to proceed with the Orlando development
and, as a result, the commitment to purchase the related GNMA securities
subsequently expired. The efforts of the General Partner to obtain a suitable
investment to replace the expired commitment were not successful, in large part
due to changes instituted by the Department of Housing and Urban Development
which made the type of insured financing that the Partnership can invest in very
difficult to obtain. As a result, the General Partner decided to return the
majority of the previously committed funds to the Unitholders. A distribution of
approximately $4 million was paid to the Unitholders in June of 1991. The
remainder of the previously committed funds was added to the Partnership's cash
reserves. As discussed further below, one of the Partnership's Insured Mortgage
Loans was repaid in full during fiscal 1992, and the proceeds were distributed
to the Unitholders in June of 1993.

Each Participating Insured Mortgage Loan has two components, a base
component consisting of the principal amount of the mortgage loan plus interest
at a stated rate thereon and a contingent component providing for the payment of
contingent interest ("Contingent Interest") from net cash flow from Project
operations and from capital appreciation, if any, realized as a result of a
Project sale or refinancing. The principal of and the stated interest on each
Participating Insured Mortgage Loan is coinsured by the FHA ("FHA Insurance")
and is represented by a GNMA Security, the interest rate on which (the "Base
Interest") is equal to the stated interest rate on the Participating Insured
Mortgage Loan minus certain fixed fees payable to GNMA and the FHA mortgagee.
Neither FHA Insurance nor any GNMA security will provide for or support the
payment of Contingent Interest.

The Partnership has also invested in non-participating mortgage-backed
securities ("MBS") backed by single-family or multi-family mortgage loans issued
or originated in connection with the housing programs of GNMA. Investments in
non-participating MBS were limited to no more than 30% of the original net
offering proceeds.

Until May 1992, the Partnership held a Participating Insured Mortgage loan
with respect to an apartment complex known as the Casablanca Apartments in
Boynton Beach, Florida. During fiscal 1992, the owner of the Casablanca
Apartments complex defaulted on the scheduled debt service payments to the GNMA
issuer. The default triggered the prepayment provisions of the Partnership's
GNMA mortgage-backed security. Consequently, on May 26, 1992, GNMA prepaid the
outstanding balance of the principal and accrued interest to the Partnership
pursuant to the terms of the mortgage-backed security agreement. The Partnership
distributed the proceeds received from the Casablanca prepayment, which
aggregated $12,521,000, to the Unitholders concurrent with the regular quarterly
distribution paid on June 15, 1993.

The objectives of the Partnership are to protect and preserve the
Partnership's capital, to make quarterly distributions of cash attributable to
payments of principal and interest (including Contingent Interest) on
Participating Insured Mortgage Loans and MBS and to provide gains through the
appreciation of properties financed with Participating Insured Mortgage Loans.

Cumulative cash distributions to the Unitholders through July 31, 1997
have totalled approximately $48,940,000, or $897 per original $1,000 investment
for the Partnership's earliest investors. Such distributions include a return of
capital totalling approximately $455 per $1,000 investment resulting from the
expired commitment and the prepayment discussed above, along with the scheduled
amortization of mortgage principal and principal prepayments from the
Partnership's mortgage-backed securities. The return of capital to date includes
a special distribution of $47.13 per original $1,000 investment paid on March
14, 1997 which resulted from excess Partnership reserves which had accumulated
from prepayment activity on the non-participating MBS. Quarterly distributions
had been paid at a rate of 8.25% per annum on Unitholders' remaining invested
capital from inception through the distribution made on March 14, 1997 for the
quarter ended January 31, 1997. Beginning with the distribution made on June 13,
1997 for the quarter ended April 30, 1997, the Partnership reduced the regular
distribution rate to 6.5% per annum due to a decline in the rate of principal
prepayments on the non-participating MBS. Unitholders' remaining capital
accounts as of July 31, 1997 totalled approximately $545 per $1,000 investment.
Through July 31, 1997, the Partnership had received $132,000 of Contingent
Interest payments from its Participating Insured Mortgage Loans.

As of July 31, 1997, the Partnership holds Participating Insured Mortgage
Loans secured by GNMA securities as described below.

GNMA
Certificate Property Name, Size Date of Interest Maturity
Number and Location (1) Acquisition Rate Date
- ------ ---------------- ----------- ---- ----

279985 Quarter Mill Apartments
266 Units
Richmond, VA 08/02/89 8.50% 10/15/31

279119 Emerald Cove Apartments
276 Units
Charlotte, NC 10/16/89 8.75% 08/15/31

(1) See Notes to the Financial Statements filed with this Annual Report for a
description of the agreements through which the Partnership has acquired
these investments.

The future performance of the Partnership will depend, in part, upon
future interest rate fluctuations, which cannot be predicted. In addition, the
Partnership's overall operating performance is subject to all of the risks
normally associated with real estate investments, including: reliance on the
owners' operating skills, including their ability to maintain occupancy levels,
meet operating expenses, maintain the property and maintain adequate insurance
coverage; adverse changes in general and/or local economic conditions; changes
in governmental regulations, real estate zoning laws, or tax laws; and other
circumstances over which the Partnership may have little or no control.

The Partnership is engaged solely in the business of investing in real
estate through Participating Insured Mortgage Loans and conventional MBS,
therefore, presentation of information about industry segments is not
applicable. The Partnership has no employees. Subject to the General Partner's
overall authority, the business of the Partnership is managed by PaineWebber
Properties Incorporated ("PWPI"), a wholly-owned subsidiary of PWI.

The General Partner of the Partnership (the "General Partner") is First
Insured Mortgage Partners, L.P., a Delaware limited partnership. First Insured
Mortgage Partners, Inc. (the "Managing General Partner"), a wholly-owned
subsidiary of PaineWebber Group, Inc. ("PaineWebber"), is the Managing General
Partner of the General Partner. PWI and Properties Associates 1988, L.P.
("PA1988"), a Virginia limited partnership, are the limited partners of the
General Partner. Certain officers and directors of the Managing General Partner
and certain limited partners of PA1988 are also officers and directors of PWI
and PWPI. The initial limited partner of the Partnership is PaineWebber
Depositary Corporation, a wholly-owned subsidiary of PaineWebber.

The terms of transactions between the Partnership and affiliates of the
General Partner of the Partnership are set forth in Items 11 and 13 below to
which reference is hereby made for a description of such terms and transactions.

Item 2. Properties

The Partnership owns no real estate. The Partnership has acquired
Participating Insured Mortgage Loans secured by the properties referred to under
Item 1 above to which reference is made for the name, location and description
of each property.

Occupancy figures for the properties securing the Partnership's
Participating Insured Mortgage Loans for each fiscal quarter during 1997, along
with an average for the year, are presented below:

Percent Occupied At
----------------------------------------------
Fiscal
1997
10/31/96 1/31/97 4/30/97 7/31/97 Average
-------- ------- ------- ---------------

Quarter Mill Apartments 98% 98% 98% 99% 98%

Emerald Cove Apartments 96% 90% 91% 94% 93%

Item 3. Legal Proceedings

In November 1994, a series of purported class actions (the "New York
Limited Partnership Actions") were filed in the United States District Court for
the Southern District of New York concerning PaineWebber Incorporated's sale and
sponsorship of various limited partnership and REIT investments, including those
offered by the Partnership. The lawsuits were brought against PaineWebber
Incorporated and Paine Webber Group, Inc. (together "PaineWebber"), among
others, by allegedly dissatisfied partnership investors. In March 1995, after
the actions were consolidated under the title In re PaineWebber Limited
Partnership Litigation, the plaintiffs amended their complaint to assert claims
against a variety of other defendants, including First Insured Mortgage
Partners, Inc. and Properties Associates 1988 ("PA1988"), which are the General
Partners of the Partnership and affiliates of PaineWebber. On May 30, 1995, the
court certified class action treatment of the claims asserted in the litigation.

The amended complaint in the New York Limited Partnership Actions alleged
that, in connection with the sale of interests in PaineWebber Insured Mortgage
Partners 1-B, L.P., PaineWebber, First Insured Mortgage Partners, Inc. and
PA1988 (1) failed to provide adequate disclosure of the risks involved; (2) made
false and misleading representations about the safety of the investments and the
Partnership's anticipated performance; and (3) marketed the Partnership to
investors for whom such investments were not suitable. The plaintiffs, who
purported to be suing on behalf of all persons who invested in PaineWebber
Insured Mortgage Partners 1-B, L.P., also alleged that following the sale of the
partnership interests, PaineWebber, First Insured Mortgage Partners, Inc. and
PA1988 misrepresented financial information about the Partnerships value and
performance. The amended complaint alleged that PaineWebber, First Insured
Mortgage Partners, Inc. and PA1988 violated the Racketeer Influenced and Corrupt
Organizations Act ("RICO") and the federal securities laws. The plaintiffs
sought unspecified damages, including reimbursement for all sums invested by
them in the partnerships, as well as disgorgement of all fees and other income
derived by PaineWebber from the limited partnerships. In addition, the
plaintiffs also sought treble damages under RICO.

In January 1996, PaineWebber signed a memorandum of understanding with the
plaintiffs in the New York Limited Partnership Actions outlining the terms under
which the parties have agreed to settle the case. Pursuant to that memorandum of
understanding, PaineWebber irrevocably deposited $125 million into an escrow
fund under the supervision of the United States District Court for the Southern
District of New York to be used to resolve the litigation in accordance with a
definitive settlement agreement and plan of allocation. On July 17, 1996,
PaineWebber and the class plaintiffs submitted a definitive settlement agreement
which provides for the complete resolution of the class action litigation,
including releases in favor of the Partnership and PWPI, and the allocation of
the $125 million settlement fund among investors in the various partnerships and
REITs at issue in the case. As part of the settlement, PaineWebber also agreed
to provide class members with certain financial guarantees relating to some of
the partnerships and REITs. The details of the settlement are described in a
notice mailed directly to class members at the direction of the court. A final
hearing on the fairness of the proposed settlement was held in December 1996,
and in March 1997 the court announced its final approval of the settlement. The
release of the $125 million of settlement proceeds had been delayed pending the
resolution of an appeal of the settlement agreement by two of the plaintiff
class members. In July 1997, the United States Court of Appeals for the Second
Circuit upheld the settlement over the objections of the two class members. As
part of the settlement agreement, PaineWebber agreed not to seek indemnification
from the related partnerships and real estate investment trusts at issue in the
litigation (including the Partnership) for any amounts that it is required to
pay under the settlement.

In February 1996, approximately 150 plaintiffs filed an action entitled
Abbate v. PaineWebber Inc. in Sacramento, California Superior Court against
PaineWebber Incorporated and various affiliated entities concerning the
plaintiffs' purchases of various limited partnership interests, including those
offered by the Partnership. The complaint alleged, among other things, that
PaineWebber and its related entities committed fraud and misrepresentation and
breached fiduciary duties allegedly owed to the plaintiffs by selling or
promoting limited partnership investments that were unsuitable for the
plaintiffs and by overstating the benefits, understating the risks and failing
to state material facts concerning the investments. The complaint sought
compensatory damages of $15 million plus punitive damages against PaineWebber.
In July 1996, approximately 15 plaintiffs filed an action entitled Barstad v.
PaineWebber Inc. in Maricopa County, Arizona Superior Court against PaineWebber
Incorporated and various affiliated entities concerning the Plaintiffs'
purchases of various limited partnership interests, including those offered by
the Partnership. The complaint is substantially similar to the complaint in the
Abbate action described above, and sought compensatory damages of $752,000 plus
punitive damages. In September 1996, the court dismissed many of the plaintiffs'
claims in both the Abbate and Barstad actions as barred by applicable securities
arbitration regulations. Mediation with respect to the Abbate and Barstad
actions was held in December 1996. As a result of such mediation, a settlement
between PaineWebber and the plaintiffs was reached which provided for the
complete resolution of both actions. Final releases and dismissals with regard
to these actions were received during fiscal 1997.

Based on the settlement agreements discussed above covering all of the
outstanding unitholder litigation, management does not expect that the
resolution of these matters will have a material impact on the Partnership's
financial statements, taken as a whole.

The Partnership is not subject to any other material pending legal
proceedings.

Item 4. Submission of Matters to a Vote of Security Holders
None.

PART II

Item 5. Market for the Registrant's Depositary Units of Limited Partnership
Interest and Related Security Holder Matters

At July 31, 1997, there were 3,391 investors holding Depositary Receipts
in the Partnership. There is currently no public market for the resale of Units,
and it is not anticipated that a public market for Units will develop. The
General Partner will not redeem or repurchase Units.

Effective with the distribution made on September 15, 1997 for the quarter
ended July 31, 1997, the Partnership's Distribution Reinvestment Plan (DRP) has
been terminated and all distributions to Unitholders will be in made in cash.
The Partnership's DRP, which had been in effect since inception, was designed to
enable Unitholders to have their distributions from the Partnership invested in
additional Units of the Partnership. The terms under which the Plan operated
prior to its termination are outlined in detail in the Prospectus, a copy of
which Prospectus, as supplemented, is incorporated herein by reference.

Reference is made to Item 6 below for a discussion of cash distributions
made to the Unitholders during fiscal 1997.

Item 6. Selected Financial Data

PaineWebber Insured Mortgage Partners 1-B, L.P.
For the years ended July 31, 1997, 1996, 1995, 1994 and 1993
(In thousands, except per Unit data)

1997 1996 1995 1994 1993
---- ---- ---- ---- ----

Revenues $ 2,193 $ 2,331 $ 2,410 $ 2,447 $ 3,283

Gain on sale of
investments - - - - $ 386

Net income $ 1,709 $ 1,806 $ 1,898 $ 1,885 $ 3,058

Net income per Unit of
Depositary Receipt $ 3.07 $ 3.24 $ 3.41 $ 3.38 $ 5.49

Regular quarterly cash
distributions per Unit
of Depositary Receipt $ 4.61 $ 5.08 $ 5.22 $ 5.34 $ 7.33

Special cash distributions
from excess reserves and
investment prepayment
transactions per Unit
of Depositary Receipt $ 4.71 - - - $ 22.70

Total assets $25,971 $29,243 $30,315 $30,888 $31,639

The above selected financial data should be read in conjunction with the
financial statements and related notes appearing elsewhere in this Annual
Report.

The regular quarterly cash distributions shown above include a return of
capital component resulting from the normal principal amortization on all debt
securities and principal prepayments on the non-participating MBS.

The above net income and cash distributions per Unit of Depositary Receipt
are based upon the 551,604 Units of Depositary Receipt of the Partnership
outstanding during each year.

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

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

The Partnership offered depositary units (at $100 per Unit) representing
limited partnership interests to the public from May 16, 1988 to May 1, 1989
pursuant to a Registration Statement filed under the Securities Act of 1933.
Gross proceeds of approximately $55,160,000 were received by the Partnership
from the offering and, after deducting selling expenses and offering costs,
approximately $42,908,000 was invested in mortgage securities. Approximately $4
million of uninvested offering proceeds was returned to the Unitholders in June
of 1991 after a proposed investment, for which such funds had been committed,
could not be completed. The Partnership originally invested approximately
$30,697,000 in three Participating Insured Mortgage Loans originated in
connection with Federal Housing Administration ("FHA") insurance to finance the
construction of multi-family residential rental projects. The Partnership also
originally invested approximately $12,211,000 in non-participating
mortgage-backed securities ("MBS") collateralized by pools of single-family or
multi-family mortgage loans that are guaranteed by GNMA. In May 1992, one of the
Participating Insured Mortgage Loans was prepaid at par as a result of a default
by the underlying property owner. Proceeds from this prepayment were distributed
to the Unitholders in June 1993 after an examination of reinvestment
alternatives failed to identify any suitable replacement investments.

The Partnership's non-participating MBS have coupon interest rates ranging
from 7.5% to 9.5%. Based on current market interest rate levels, the aggregate
market value of these securities at the present time is slightly above both the
aggregate face value and amortized cost, which includes any unamortized
discounts or premiums. As of July 31, 1997, the Partnership's two remaining
Participating Insured Mortgage Loans, which carry coupon interest rates of 8.5%
and 8.75%, had estimated market values slightly above their face values due to a
variety of factors, including the participation features. Increases in market
interest rates and/or deterioration in general real estate market conditions in
the near term could cause the aggregate market value of the Participating
Insured Mortgage Loans and the portfolio of MBS investments to fall below face
value and/or amortized cost. However, fluctuating market conditions will not
result in realized gains or losses unless the Partnership's investments are
prepaid or sold prior to maturity. Secondary market sales of the Partnership's
investments would likely only occur as part of a formal plan of liquidation for
the Partnership.

Over the past several years, generally low market interest rates have
prompted a high level of refinancing activity, resulting in significant
prepayments on the Partnership's non-participating mortgage-backed securities.
Such prepayments had the effect of reducing the Partnership's investment income
and cash flows from operating activities and increasing the outstanding balance
of the Partnership's cash reserves. Since it was deemed unlikely that there
would be a default on either of the Partnership's two remaining multi-family
participating loans, and since the current rates of return available on
non-participating mortgage-backed security investments did not warrant
reinvestment by the Partnership, management concluded during fiscal 1997 that it
would be in the best interests of the Unitholders to return the portion of the
Partnership's cash reserves which exceeded expected future requirements.
Consequently, the Partnership distributed approximately $2,600,000 of its excess
reserves, or $47.13 per original $1,000 investment, in a special distribution
made on March 14, 1997. The distribution of excess reserves resulted in an
increase in net cash used in financing activities compared to the prior year.
Regular quarterly distributions are comprised of investment income and return of
capital which results from the scheduled amortization of mortgage principal on
all of the debt securities as well as principal prepayments from the
non-participating GNMA mortgage-backed securities. Such principal prepayments
are unpredictable and, as noted above, have been high during recent years but
declined during fiscal 1997, resulting in a reduction in cash flows from
investing activities. Based on this decline in the rate of principal prepayments
and the expectation that this decline will continue in the future, the
Partnership reduced the regular quarterly distribution rate effective for the
payment made on June 13, 1997 for the third quarter of fiscal 1997. The
distribution rate declined from 8.25% per annum to 6.5%, of which approximately
5.5% is expected to represent net investment income and 1% is expected to be a
return of capital. If the actual prepayment levels exceed anticipated levels
through the second quarter of fiscal 1998, the Partnership is expected to make a
Special Distribution of these excess amounts in March 1998, and each subsequent
March, if warranted by future principal prepayment levels.

The Partnership's two remaining Participating Insured Mortgage Loans are
secured by the Emerald Cove and Quarter Mill apartment complexes. The occupancy
level at Emerald Cove averaged 93% for the year ended July 31, 1997 compared to
96% for fiscal 1996. The decline in average occupancy is mainly due to the
competition from several newly developed properties which have opened in its
local Charlotte, North Carolina submarket during fiscal 1997 and which have
offered rental concessions in order to accelerate their leasing progress. During
the second quarter of fiscal 1997, the property's leasing team initiated a
program which offered rental concessions on selected unit types in order to
increase occupancy levels which decreased to an average of 90% for that quarter.
There continues to be a substantial amount of new competition in the northeast
section of the Charlotte market where Emerald Cove is located. With over 1,000
additional apartment units completed in the property's local market area during
fiscal 1997 and 246 new apartment units under construction as of the fiscal
year-end, as well as an additional 627 apartment units proposed, the property's
management and leasing team anticipates that occupancy levels may remain in the
low-to-mid 90% range in the short term. In light of these competitive market
conditions, there are no rental rate increases currently planned for Emerald
Cove, and it is likely that rental concessions will remain necessary in order to
maintain occupancy levels. The property had an average occupancy level of 94%
for the fourth quarter of fiscal 1997. Prepayment of the Partnership's Emerald
Cove Participating Insured Mortgage Loan was restricted through March 1997 and
then requires a prepayment penalty which declines ratably, from 5% to 2%, over
the next four years. Although the owner of Emerald Cove has initiated
discussions of prepayment on several occasions over the past three fiscal years,
no viable prepayment transaction has materialized from such discussions. There
are no ongoing prepayment discussions with the Emerald Cove owner at the present
time.

The Quarter Mill Apartments continued its strong operating performance
during fiscal 1997, with an average occupancy level of 98%, compared to 96% for
fiscal 1996. Because Quarter Mill Apartments participates in the Low Income
Housing Tax Credit Program, its rental rates are based on the metropolitan
area's median family income, rather than on market rent levels. A strong local
rental market, combined with below market rental rates at Quarter Mill, has
resulted in consistently high occupancy levels at the property. Although there
has been new multi-family construction activity in the Richmond area, there is
no new directly competitive development under construction or planned in the
property's immediate market area. Property operations continue to generate small
amounts of excess cash flow, a portion of which is payable to the Partnership as
Contingent Interest. During fiscal 1997, 1996 and 1995, the Partnership received
approximately $49,000, $46,000 and $37,000, respectively, representing its 30%
share of the surplus cash, as defined. The Quarter Mill Participating Insured
Mortgage Loan became open to prepayment in February 1996 with a specified
prepayment penalty which declines ratably, from 10% to 2%, over five years. To
date, no proposals to prepay the loan have been received from the owner of
Quarter Mill.

At July 31, 1997, the Partnership had cash and cash equivalents of
approximately $1,310,000. Such amounts will be utilized for distributions to the
Unitholders and for the working capital requirements of the Partnership. The
source of future liquidity and distributions to the Unitholders is expected to
be primarily through interest income and principal repayments from the
Partnership's mortgage securities, money-market interest income from invested
cash reserves, and to a lesser extent from Contingent Interest from
Participating Insured Mortgage Loans and Net Project Residuals from the sale or
refinancing of the properties securing such investments.

Results of Operations
1997 Compared to 1996
- ---------------------

For the year ended July 31 1997, the Partnership reported net income of
$1,709,000, compared to net income of $1,806,000 for fiscal 1996. This $97,000
decrease in net income resulted from a $138,000 decline in total revenues which
was partially offset by a $41,000 reduction in operating expenses. The decline
in total revenues can be attributed to a $97,000 decline in interest income from
Participating Insured Mortgage Loans and non-participating MBS and a $44,000
decline in money market interest income. The decline in interest income from
Participating Insured Mortgage Loans and non-participating MBS resulted from a
reduction in the average outstanding principal balances of such investments due
to scheduled principal amortization on all of the debt securities and
prepayments on the MBS. This was offset slightly by an increase in Contingent
Interest. As noted above, Contingent Interest received from the Quarter Mill
investment increased from $46,000 in fiscal 1996 to $49,000 in fiscal 1997. The
decrease in money market interest income was mainly the result of a decline in
the average outstanding balance of the Partnership's invested cash reserves
subsequent to the $2.6 million special distribution of excess cash reserves made
on March 14, 1997, as discussed further above. The decrease in operating
expenses resulted from a $32,000 reduction in general and administrative
expenses and a $9,000 decline in management fees. General and administrative
expenses decreased due to a reduction in certain required professional services.
The decrease in management fees reflects the declining principal balances of the
Partnership's outstanding mortgage securities, upon which such fees are
primarily based. 1996 Compared to 1995

For the year ended July 31, 1996, the Partnership reported net income of
$1,806,000, which represents a decrease in net income of $92,000 when compared
to fiscal 1995. This decrease was primarily due to a decrease in total revenues
of $79,000. The decrease in total revenues can be attributed to the decrease in
interest income from Participating Insured Mortgage Loans and non-participating
MBS which aggregated $94,000. This decrease resulted from a decline in the
average outstanding principal balances of such investments due to scheduled
principal amortization on all of the debt securities and prepayments on the MBS.
Partially offsetting this decrease in total revenues was an increase in money
market interest of $15,000. The increase in money market interest was mainly due
to an increase in the average outstanding balance of the Partnership's cash
reserves resulting from the MBS prepayment activity. The decrease in net income
was also partly due to an increase in general and administrative expenses of
$24,000 which resulted mainly from an increase in certain required professional
services during fiscal 1996. Management fees decreased by $11,000 during fiscal
1996 due to the lower outstanding principal balances of the Partnership's debt
securities on which the fees are partially based. Such decreases have occurred
since the Partnership was fully invested due to scheduled principal amortization
and prepayment activity in the non-participating MBS pools.

1995 Compared to 1994
- ---------------------

For the year ended July 31, 1995, the Partnership reported net income of
$1,898,000, which represented an increase in net income of $13,000 when compared
to fiscal 1994. This increase in net income resulted from declines in general
and administrative and management fee expenses. Management fees decreased by
$27,000 during fiscal 1995 due to a decline in the average outstanding principal
balances of the Partnership's investments, upon which such fees are partially
based. General and administrative expenses declined by $22,000 in fiscal 1995
mainly due to certain non-recurring professional fees incurred in the prior
year. The decline in expenses during fiscal 1995 was partially offset by a
reduction in total revenues of $37,000. Interest income from the Partnership's
debt securities declined by $142,000, despite the receipt of contingent interest
of approximately $37,000 from the Quarter Mill investment during fiscal 1995.
The decrease in interest income from Participating Insured Mortgage Loans and
non-participating MBS resulted from a decline in the average outstanding
principal balances of such investments due to scheduled principal amortization
and prepayments on the MBS. The high level of MBS principal prepayments
experienced during fiscal 1994 substantially increased the balance of the
Partnership's cash reserves and contributed to an increase of $105,000 in money
market interest income for fiscal 1995. The increased earnings on invested cash
reserves was also partially attributable to the higher interest rates earned
during fiscal 1995.

Certain Factors Affecting Future Operating Results
- --------------------------------------------------

The following factors could cause actual results to differ materially from
historical results or those anticipated:

Interest Rate Risk. The Partnership's investments are structured to
provide maximum safety of principal. The Partnership's principal investments in
both Participating Insured Mortgage Loans and conventional mortgage-backed
securities are 100% guaranteed by GNMA in the event of defaults by the
underlying property owners. Obligations of GNMA are backed by the full faith and
credit of the Federal government. The Partnership does face potential interest
rate risk in the event that the Partnership, as expected, liquidates its
investments in Participating Insured Mortgage Loans and non-participating
mortgage-backed securities prior to the scheduled maturity dates of such
investments. Depending on the general level of market interest rates at the time
of the sale of any of the Partnership's mortgage security investments, the
market value of the investments may be higher or lower than the outstanding
principal balances. Nonetheless, since the Partnership is not required to be
liquidated prior to the scheduled maturity dates, management can limit the
exposure to market risk by attempting to time the liquidation of the
Partnership's investments to coincide with a period of favorable interest rates.
However, management is not prohibited from selling any security at a loss and
may do so if it is believed that such a sale would be in the best interests of
the Partnership. The market value of the Partnership's Participating Insured
Mortgage Loans is also affected by the value, if any, that is attributed to the
participation features of such loans. Such value is impacted by the real estate
investment and competitive risks outlined below. The Partnership is also subject
to possible reinvestment risk to the extent that its principal investments are
prepaid prior to the Partnership's expected liquidation period. Depending on the
general level of market interest rates at the time of such a prepayment, the
Partnership or an individual Unitholder might be unable to earn a comparable
yield on a similar low-risk investment upon the reinvestment of such funds.

Real Estate Investment Risks. Real property investments are subject to
varying degrees of risk. Revenues and property values may be adversely affected
by the general economic climate, the local economic climate and local real
estate conditions, including (i) the perceptions of prospective tenants of the
attractiveness of the property; (ii) the ability to retain qualified individuals
to provide adequate management and maintenance of the property; (iii) the
inability to collect rent due to bankruptcy or insolvency of tenants or
otherwise; and (iv) increased operating costs. Real estate values may also be
adversely affected by such factors as applicable laws, including tax laws,
interest rate levels and the availability of financing.

Competition. The financial performance of the real estate investments
securing the Partnership's debt securities will be significantly impacted by the
competition from comparable properties in their local market areas. The
occupancy levels and rental rates achievable at the properties are largely a
function of supply and demand in the markets. In many markets across the
country, development of new multi-family properties has surged in the past 12
months. Existing apartment properties in such markets have generally experienced
increased vacancy levels, declines in effective rental rates and, in some cases,
declines in estimated market values as a result of the increased competition.
There are no assurances that these competitive pressures will not adversely
affect the operations and/or market values of the properties securing the
Partnership's investments in the future.

Availability of a Pool of Qualified Buyers. The availability of a pool of
qualified and interested buyers for the Partnership's remaining assets is
critical to the Partnership's ability to realize the estimated fair market
values of such investments at the time of their final dispositions. Demand by
buyers of investments secured by multi-family apartment properties is affected
by many factors, including the size, quality, age, condition and location of the
subject property, potential environmental liability concerns, the liquidity in
the debt and equity markets for asset acquisitions, the general level of market
interest rates and the general and local economic climates.

Inflation
- ---------

The Partnership completed its eighth full year of operations in fiscal
1997. The effects of inflation and changes in prices on the Partnership's
operating results to date have not been significant.

Inflation in future periods is likely to cause increases in Partnership
operating expenses without a corresponding increase in revenues, which are
principally derived from fixed interest rates on debt securities.

Item 8. Financial Statements and Supplementary Data

The financial statements and supplementary data for the Partnership are
included under Item 14 of this Annual Report.

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

None.

PART III

Item 10. Directors and Executive Officers of the Partnership

Under the Partnership Agreement, exclusive management responsibility for
and control over the affairs of the Partnership rests with the General Partner,
First Insured Mortgage Partners, L.P., a Delaware limited partnership formed in
February 1987. The day-to-day operating responsibility for the Partnership is
delegated to PWPI by the General Partner. However, the General Partner retains
general responsibility for partnership business and oversees partnership
activities. The General Partner also supervises the registration and marketing
of the Units, approves all budgets for the Partnership prepared by PWPI and
makes all final decisions with respect to the Partnership's investments and
their acquisition and disposition.

Certain of the officers and directors of the Managing General Partner of
the General Partner, First Insured Mortgage Partners, Inc., a Delaware
corporation and a wholly-owned subsidiary of PaineWebber, are also officers
and/or directors of PWI and PWPI. Such officers and directors will devote only
so much of their time to the business of the Partnership as in their judgment is
reasonably required.

The directors of First Insured Mortgage Partners, Inc. had the primary
responsibility for selecting and negotiating investments on behalf of the
Partnership after consultation with the GNMA issuer. Before any investment was
consummated, it required approval by both a majority of the Board of Directors
of First Insured Mortgage Partners, Inc. and by a majority of the disinterested
directors of First Insured Mortgage Partners, Inc. For the purposes of this
section, "disinterested director" meant any member of the Board of Directors of
First Insured Mortgage Partners, Inc. who was not an officer or director of the
GNMA issuer.

(a) and (b) The names and ages of the directors and executive officers of
the Managing General Partner of the General Partner are as follows:
Date elected
Name Office Age to Office
---- ------ --- ---------

Bruce J. Rubin President, Chief Executive Officer
and Director 38 8/22/96
Terrence E. Fancher Director 44 9/10/96
Walter V. Arnold Senior Vice President and Chief
Financial Officer 50 2/23/87*
David F. Brooks First Vice President and Assistant
Treasurer 55 2/23/87*
Timothy J. Medlock Vice President and Treasurer 36 2/25/92
Thomas W. Boland Vice President and Controller 35 7/31/97
Dorothy F. Haughey Secretary 71 2/23/87*

* The date of incorporation of the Managing General Partner.

(c) There are no other significant employees of First Insured Mortgage
Partners, Inc. in addition to the directors and officers mentioned above.

(d) There is no family relationship among any of the foregoing directors and
officers of the Managing General Partner of the General Partner. All of the
foregoing directors and officers have been elected to serve until the next
annual meeting of the Managing General Partner.

(e) A number of the directors and officers of the Managing General Partner
hold similar positions in affiliates of the Managing General Partner, which are
the corporate general partners of other real estate limited partnerships
sponsored by PWI. The business experience of each of the directors and officers
of the Managing General Partner is as follows:

Bruce J. Rubin is President, Chief Executive Officer and Director of the
Managing General Partner. Mr. Rubin was named President and Chief Executive
Officer of PWPI in August 1996. Mr. Rubin joined PaineWebber Real Estate
Investment Banking in November 1995 as a Senior Vice President. Prior to
joining PaineWebber, Mr. Rubin was employed by Kidder, Peabody and served as
President for KP Realty Advisers, Inc. Prior to his association with Kidder,
Mr. Rubin was a Senior Vice President and Director of Direct Investments at
Smith Barney Shearson. Prior thereto, Mr. Rubin was a First Vice President
and a real estate workout specialist at Shearson Lehman Brothers. Prior to
joining Shearson Lehman Brothers in 1989, Mr. Rubin practiced law in the Real
Estate Group at Willkie Farr & Gallagher. Mr. Rubin is a graduate of
Stanford University and Stanford Law School.

Terrence E. Fancher was appointed a Director of the Managing General
Partner in September 1996. Mr. Fancher is the Managing Director in charge of
PaineWebber's Real Estate Investment Banking Group. He joined PaineWebber as
a result of the firm's acquisition of Kidder, Peabody. Mr. Fancher is
responsible for the origination and execution of all of PaineWebber's REIT
transactions, advisory assignments for real estate clients and certain of the
firm's real estate debt and principal activities. He joined Kidder, Peabody
in 1985 and, beginning in 1989, was one of the senior executives responsible
for building Kidder, Peabody's real estate department. Mr. Fancher
previously worked for a major law firm in New York City. He has a J.D. from
Harvard Law School, an M.B.A. from Harvard Graduate School of Business
Administration and an A.B. from Harvard College.

Walter V. Arnold is a Senior Vice President and Chief Financial Officer of
the Managing General Partner and a Senior Vice President and Chief Financial
Officer of PWPI which he joined in 1985. Mr. Arnold joined PWI in 1983 with the
acquisition of Rotan Mosle, Inc. where he had been First Vice President and
Controller since 1978, and where he continued until joining PWPI. Mr. Arnold is
a Certified Public Accountant licensed in the State of Texas.

David F. Brooks is a First Vice President and Assistant Treasurer of the
Managing General Partner and a First Vice President and Assistant Treasurer of
PWPI. Mr. Brooks joined PWPI in March 1980. From 1972 to 1980, Mr. Brooks was an
Assistant Treasurer of Property Capital Advisors, Inc. and also, from March 1974
to February 1980, the Assistant Treasurer of Capital for Real Estate, which
provided real estate investment, asset management and consulting services.

Timothy J. Medlock is a Vice President and Treasurer of the Managing General
Partner and a Vice President and Treasurer of PWPI which he joined in 1986. From
1986 to August of 1989, Mr. Medlock served as the Controller of the Managing
General Partner and PWPI. From 1983 to 1986, Mr. Medlock was associated with
Deloitte Haskins & Sells. Mr. Medlock graduated from Colgate University in 1983
and received his Masters in Accounting from New York University in 1985.

Thomas W. Boland is a Vice President and Controller of the Managing General
Partner and a Vice President and Controller of the Adviser which he joined in
1988. From 1984 to 1987, Mr. Boland was associated with Arthur Young & Company.
Mr. Boland is a Certified Public Accountant licensed in the state of
Massachusetts. He holds a B.S. in Accounting from Merrimack College and an
M.B.A. from Boston University.

Dorothy F. Haughey is Secretary of the Managing General Partner, Assistant
Secretary of PaineWebber and Secretary of PWI. Ms. Haughey joined PaineWebber in
1962.

(f) None of the directors and officers were involved in legal proceedings
which are material to an evaluation of his or her ability or integrity as a
director or officer.

(g) Compliance With Exchange Act Filing Requirements: The Securities
Exchange Act of 1934 requires the officers and directors of the Managing General
Partner, and persons who own more than ten percent of the Partnership's limited
partnership units, to file certain reports of ownership and changes in ownership
with the Securities and Exchange Commission. Officers, directors and ten-percent
beneficial holders are required by SEC regulations to furnish the Partnership
with copies of all Section 16(a) forms they file.

Based solely on its review of the copies of such forms received by it, the
Partnership believes that, during the year ended July 31, 1997 all filing
requirements applicable to the officers and directors of the Managing General
Partner and ten-percent beneficial holders were complied with.

Item 11. Executive Compensation

The directors and officers of the Managing General Partner receive no
current or proposed remuneration from the Partnership.

The General Partner is entitled to receive a share of the Partnership's
cash distributions and a share of profits and losses. These items are described
under Item 13.

The Partnership paid cash distributions to the Unitholders on a quarterly
basis at a rate of 8.25% per annum on remaining invested capital from November
15, 1988 to March 14, 1997. Effective for the distribution payment made on June
13, 1997 for the quarter ended April 30, 1997, the distribution rate was lowered
to 6.5% per annum on remaining invested capital. However, the Partnership's
Units of Depositary Receipts are not actively traded on any organized exchange,
and, accordingly, no accurate price information exists for these Units.
Therefore, a presentation of historical Unitholder total returns would not be
meaningful.

Item 12. Security Ownership of Certain Beneficial Owners and Management

(a) The Partnership is a limited partnership issuing Depositary Units
which represent units of assigned limited partnership interest, not voting
securities. All the outstanding stock of the Managing General Partner of the
General Partner, First Insured Mortgage Partners, Inc., is owned by PaineWebber.
PA1988 is a Virginia limited partnership, the limited partners of which are also
officers of PWPI. PaineWebber Depositary Corporation (the "Corporate Limited
Partner"), a Delaware corporation and an affiliate of the General Partner, is
the Initial Limited Partner. No Unitholder is known by the Partnership to own
beneficially more than 5% of the outstanding interests of the Partnership.

(b) The directors and officers of the Managing General Partner do not
directly own any Units of limited partnership interest of the Partnership. No
director or officer of the Managing General Partner possesses a right to acquire
beneficial ownership of Units of limited partnership interest of the
Partnership.

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

Item 13. Certain Relationships and Related Transactions

The General Partner of the Partnership is First Insured Mortgage Partners,
L.P. (the "General Partner"), a wholly-owned subsidiary of PaineWebber Group
Inc. ("PaineWebber"). The Managing General Partner of the General Partner is
First Insured Mortgage Partners, Inc., (the "Managing General Partner") a
wholly-owned subsidiary of PaineWebber. Certain officers and directors of the
Managing General Partner are also officers and/or directors of PaineWebber
Properties Incorporated ("PWPI"). Properties Associates 1988, L.P. ("PA1988")
and PaineWebber Incorporated ("PWI") are the limited partners of the General
Partner. PA1988 is a Virginia limited partnership in which certain officers of
PWPI are the individual limited partners. Subject to the Managing General
Partner's overall authority, the business of the Partnership is managed by PWPI,
which is a wholly-owned subsidiary of PWI. The General Partner and other
PaineWebber affiliates will receive fees and compensation, determined on an
agreed-upon basis, in consideration of various services performed in connection
with the sale of the Units, the management of the Partnership and the
acquisition, management, financing and disposition of Partnership investments.

The Partnership entered into a Sales Agreement with PWI under which PWI
acted as sales agent for the offering of Units. In connection with the sale of
Units, PWI was to be paid sales commissions of up to 6% of the offering
proceeds. Sales commissions paid to PWI aggregated $3,278,000 through the end of
the offering period.

Origination fees were payable directly to the General Partner and its
affiliates by project owners in recognition of the participation feature of
their Participating Insured Mortgage Loans in an amount equal to 2% of the
principal balance of each Participating Insured Mortgage Loan.

In connection with the acquisition of mortgage securities, the General
Partner and its affiliates were to receive acquisition fees in an amount not to
exceed 1.5% of the gross offering proceeds for services rendered in connection
with the investment by the Partnership in mortgage securities. Acquisition fees
of $827,000 were paid by the Partnership to the General Partner and its
affiliates. The General Partner and its affiliates also received a
non-accountable acquisition expense allowance of 1.5% of the Gross Offering
Proceeds. Acquisition expenses in excess of 1.5% of the Gross Offering Proceeds
were to be paid by the General Partner. Acquisition expenses aggregating
$827,000 were paid to the General Partner and its affiliates.

For services rendered in managing the business of the Partnership, the
Partnership shall pay the General Partner and its affiliates an Asset Management
Fee equal to 0.75% per annum of the outstanding principal balance of the
mortgage securities of the Partnership. Asset management fees of $175,000 were
earned by the General Partner and its affiliates for the year ended July 31,
1997. PWPI also furnishes additional asset management and advisory services to
the Partnership and receives additional asset management fees as compensation
for such services. The additional management fees paid by the Partnership
totalled $38,000 for the year ended July 31, 1997.

Generally, all distributable cash, as defined, for each fiscal year shall
be distributed quarterly in the ratio of 97% to the Unitholders, 1% to the
General Partner and 2% to PWPI as the additional asset management fee referred
to above. Capital distributions (including distributions of principal
repayments) will be distributed 100% to the Unitholders until they have received
the return of their capital contributions and then to the General Partner until
it has received a return of its capital contribution. Thereafter, capital
distributions shall be distributed in varying proportions to the Unitholders and
General Partner, as specified in the Partnership Agreement.

Pursuant to the terms of the Partnership Agreement, taxable income or loss
of the Partnership will be allocated 98.98% to the Unitholders and 1.02% to the
General Partner. Income or loss arising from a sale or refinancing of investment
properties will be allocated to the Unitholders and the General Partner
generally as residual proceeds are distributed.

An affiliate of the General Partner performs certain accounting, tax
preparation, securities law compliance and investor communications and relations
services for the Partnership. The total costs incurred by this affiliate in
providing such services are allocated among several entities, including the
Partnership. Included in general and administrative expenses for the year ended
July 31, 1997 is $95,000, representing reimbursements to this affiliate of the
General Partner for providing such services to the Partnership.

The Partnership uses the services of Mitchell Hutchins Institutional
Investors, Inc. ("Mitchell Hutchins") for the managing of cash assets. Mitchell
Hutchins is a subsidiary of Mitchell Hutchins Asset Management, Inc., an
independently operated subsidiary of PaineWebber. Mitchell Hutchins earned fees
of $8,000 (included in general and administrative expenses) for managing the
Partnership's cash assets for the year ended July 31, 1997. Fees charged by
Mitchell Hutchins are based on a percentage of invested cash reserves which
varies based on the total amount of invested cash which Mitchell Hutchins
manages on behalf of PWPI.

PART IV

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

(a) The following documents are filed as part of this report:

(1) and (2) Financial Statements and Schedules:

The response to this portion of Item 14 is submitted as a separate
Section of this Report. See Index to Financial Statements and
Financial Statement Schedules at page F-1.

(3) Exhibits:

The exhibits listed on the accompanying index to exhibits at Page
IV-3 are filed as part of this Report.

(b) No reports on Form 8-K were filed during the last quarter of fiscal
1997.

See (a)(3) above.

(d) Financial Statement Schedules

The response to this portion of Item 14 is submitted as a separate
Section of this Report. See Index to Financial Statements and
Financial Statement Schedules at page F-1.

SIGNATURES

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

PAINEWEBBER INSURED MORTGAGE PARTNERS 1-B, L.P.

By: First Insured Mortgage Partners, Inc.
Managing General Partner

By:/s/Bruce J. Rubin
-----------------------
Bruce J. Rubin
President and
Chief Executive Officer

By:/s/Walter V. Arnold
-----------------------
Walter V. Arnold
Senior Vice President and
Chief Financial Officer

By:/s/ Thomas W. Boland
-----------------------
Thomas W. Boland
Vice President and Controller

Dated: October 27, 1997

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Partnership in
the capacity and on the dates indicated.

By /s/ Bruce J. Rubin Date: October 27, 1997
----------------------- ----------------
Bruce J. Rubin
Director

By:/s/ Terrence E. Fancher Date: October 27, 1997
----------------------- ----------------
Terrence E. Fancher
Director

ANNUAL REPORT ON FORM 10-K
Item 14(a)(3)

PAINEWEBBER INSURED MORTGAGE PARTNERS 1-B, L.P.

INDEX TO EXHIBITS

Page Number in the
Exhibit No. Description of Document Report or Other Reference
- --------------- ------------------------------- -------------------------

(3) and (4) Prospectus of the Registrant Filed with the
dated April 23, 1987, as Commission pursuant to
supplemented. Rule 424(c) and
incorporated herein by
reference.

(10) Material contracts previously Filed with the
filed as exhibits to Commission pursuant to
registration statements and Section 13 or 15(d) of
amendments thereto of the the Securities Exchange
registrant together with all Act of 1934 and
such contracts filed as incorporated herein by
exhibits of previously filed reference.
Forms 8-K and Forms 10-K are
hereby incorporated herein by
reference.

(13) Annual Reports to Unitholders No Annual Report for the
year ended July 31, 1997
has been sent to the
Unitholders. An Annual
Report will be sent to
the Unitholders subsequent
to this filing.

(27) Financial data schedule Filed as the last page
of EDGAR submission
following the Financial
Statements and Financial
Statement Schedule
required by Item 14.

ANNUAL REPORT ON FORM 10-K
Item 14(a) (1) and (2) and 14(d)

PAINEWEBBER INSURED MORTGAGE PARTNERS 1-B, L.P.

INDEX TO FINANCIAL STATEMENTS AND
FINANCIAL STATEMENT SCHEDULES

Reference

PaineWebber Insured Mortgage Partners 1-B, L.P.:

Report of independent auditors F-2

Balance sheets as of July 31, 1997 and 1996 F-3

Statements of income for the years ended July 31, 1997, 1996
and 1995 F-4

Statements of changes in partners' capital (deficit) for the
years ended July 31, 1997, 1996 and 1995 F-5

Statements of cash flows for the years ended July 31, 1997, 1996
and 1995 F-6

Notes to financial statements F-7

Schedule IV - Investments in Mortgage Loans on Real Estate F-13

Other schedules have been omitted since the required information is not
present or not present in amounts sufficient to require submission of the
schedule, or because the information required is included in the financial
statements, including the notes thereto.

REPORT OF INDEPENDENT AUDITORS

The Partners
PaineWebber Insured Mortgage Partners 1-B, L.P.:

We have audited the accompanying balance sheets of PaineWebber Insured
Mortgage Partners 1-B, L.P. as of July 31, 1997 and 1996, and the related
statements of income, changes in partners' capital (deficit), and cash flows for
each of the three years in the period ended July 31, 1997. Our audits also
included the financial statement schedule listed in the Index at Item 14(a).
These financial statements and schedule are the responsibility of the
Partnership's management. Our responsibility is to express an opinion on these
financial statements and schedule based on our audits.

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

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of PaineWebber Insured Mortgage
Partners 1-B, L.P. at July 31, 1997 and 1996, and the results of its operations
and its cash flows for each of the three years in the period ended July 31,
1997, in conformity with generally accepted accounting principles. Also, in our
opinion, the related financial statement schedule, when considered in relation
to the basic financial statements taken as a whole, presents fairly in all
material respects the information set forth therein.

/s/ ERNST & YOUNG LLP
-----------------
ERNST & YOUNG LLP

Boston, Massachusetts
October 22, 1997

PAINEWEBBER INSURED MORTGAGE PARTNERS 1-B, L.P.

BALANCE SHEETS
July 31, 1997 and 1996
(In thousands, except for per Unit data)

ASSETS

1997 1996
---- ----
Investments in Debt Securities:
Mortgage-Backed Securities available for sale $ 5,379 $ 6,280
Participating Insured Mortgage Loans available
for sale 18,586 18,539
-------- --------
23,965 24,819

Cash and cash equivalents 1,310 3,637
Interest and other receivables 165 172
Deferred expenses, net of accumulated
amortization of $619 ($535 in 1996) 531 615
-------- --------
$ 25,971 $ 29,243
======== ========

LIABILITIES AND PARTNERS' CAPITAL

Accounts payable - affiliates $ 29 $ 30
Accounts payable and accrued expenses 39 51
-------- --------
Total liabilities 68 81

Partners' capital:
General Partner:
Capital contributions 1 1
Cumulative net income 238 221
Cumulative cash distributions (241) (221)

Corporate Limited Partner and Unitholder
Interests ($100 per Unit, 551,604
Units issued):
Capital contributions, net of offering costs 50,779 50,779
Cumulative net income 23,158 21,466
Net unrealized holding gain on debt securities 908 715
Cumulative cash distributions (48,940) (43,799)
-------- --------
Total partners' capital 25,903 29,162
-------- --------
$ 25,971 $ 29,243
======== ========

See accompanying notes.

PAINEWEBBER INSURED MORTGAGE PARTNERS 1-B, L.P.

STATEMENTS OF INCOME
For the years ended July 31, 1997, 1996 and 1995
(In thousands, except per Unit data)

1997 1996 1995
---- ---- ----
Revenues:
Interest income - Debt Securities $ 2,045 $ 2,139 $ 2,233
Interest income - Money Market 148 192 177
------- -------- --------
2,193 2,331 2,410

Expenses:
General and administrative 187 219 195
Management fees 213 222 233
Amortization expense 84 84 84
------- -------- --------
484 525 512
------- -------- --------

Net income $ 1,709 $ 1,806 $ 1,898
======= ======== ========

Net income per Unit of Depositary
Receipt $ 3.07 $ 3.24 $ 3.41
======= ======= =======

Cash distributions per Unit of Depositary
Receipt $ 9.32 $ 5.08 $ 5.22
======= ======= =======

The above net income and cash distributions per Unit of Depositary Receipt are
based upon the 551,604 Units outstanding during each year.

See accompanying notes.

PAINEWEBBER INSURED MORTGAGE PARTNERS 1-B, L.P.

STATEMENTS OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)
For the years ended July 31, 1997, 1996 and 1995
(In thousands)

Corporate
Limited
General Partner and
Partner Unitholders Total
------- ----------- -----

Balance at July 31, 1994 $ 1 $ 30,818 $ 30,819

Net unrealized holding gain on debt
securities - 424 424

Net income 19 1,879 1,898

Cash distributions (19) (2,877) (2,896)
----- -------- --------

Balance at July 31, 1995 1 30,244 30,245

Net unrealized holding loss on debt
securities - (68) (68)

Net income 19 1,787 1,806

Cash distributions (19) (2,802) (2,821)
----- -------- --------
Balance at July 31, 1996 1 29,161 29,162

Net unrealized holding gain on debt
securities - 193 193

Net income 17 1,692 1,709

Cash distributions (20) (5,141) (5,161)
----- -------- --------

Balance at July 31, 1997 $ (2) $ 25,905 $ 25,903
===== ======== =========

See accompanying notes.

PAINEWEBBER INSURED MORTGAGE PARTNERS 1-B, L.P.

STATEMENTS OF CASH FLOWS
For the years ended July 31, 1997, 1996 and 1995
Increase (Decrease) in Cash and Cash Equivalents
(In thousands)

1997 1996 1995
---- ---- ----
Cash flows from operating activities:
Net income $ 1,709 $ 1,806 $ 1,898
Adjustments to reconcile net income to net
cash provided by operating activities:
Amortization expense 84 84 84
Amortization of discount/premium on
mortgage securities 17 17 17
Changes in assets and liabilities:
Interest and other receivables 7 10 7
Accounts payable - affiliates (1) (4) (2)
Accounts payable and accrued expenses (12) 15 3
------- ------- -------
Total adjustments 95 122 109
------- ------- -------
Net cash provided by
operating activities 1,804 1,928 2,007

Cash flows from investing activities:
Principal collections on Mortgage-Backed
Securities 953 1,185 1,049
Principal collections on Participating
Insured Mortgage Loans 77 71 64
------- ------- -------
Net cash provided by investing
activities 1,030 1,256 1,113
------- ------- -------

Cash flows from financing activities:
Distributions to Unitholders and partners (5,161) (2,821) (2,896)
------- ------- -------
Net cash used in financing activities (5,161) (2,821) (2,896)
------- ------- -------

Net (decrease) increase in cash and cash
equivalents (2,327) 363 224

Cash and cash equivalents, beginning of year 3,637 3,274 3,050
------- ------- -------

Cash and cash equivalents, end of year $ 1,310 $ 3,637 $ 3,274
======= ======= =======

See accompanying notes.

PAINEWEBBER INSURED MORTGAGE PARTNERS 1-B, L.P.
Notes to Financial Statements

1. Organization and Nature of Operations
-------------------------------------

PaineWebber Insured Mortgage Partners 1-B, L.P., a Delaware limited
partnership, was organized for the purpose of investing in a diversified
portfolio of federally insured or coinsured mortgage loans ("Participating
Insured Mortgage Loans") through the purchase of certain mortgage-backed
securities ("GNMA securities"). The Partnership has also invested in
non-participating mortgage-backed securities ("MBS") backed by single-family or
multi-family mortgage loans issued or originated in connection with the housing
programs of the Government National Mortgage Association ("GNMA"). Investments
in non-participating MBS were limited to no more than 30% of the original net
offering proceeds. On May 16, 1988, the Partnership commenced the sale of
Limited Partnership Interests (the "Units"), which are evidenced by Depositary
Receipts (at $100 per Unit). The Partnership's initial capital was $3,000,
representing capital contributions of $1,000 by the General Partner and $2,000
by the Corporate Limited Partner (PaineWebber Depositary Corporation). The
Partnership issued 551,604 Units from May 16, 1988 to May 1, 1989, representing
capital contributions of $55,160,425. The Units represent an interest assigned
to persons who purchased Units ("Unitholders") from the initial limited partner
of the Partnership pursuant to the Partnership Agreement, which interest is the
equivalent of a limited partnership interest. Although Unitholders are not
limited partners of the Partnership, as Unitholders they are entitled to the
same economic benefits, including the same share of income, gains, losses,
deductions, credits and cash distributions, as if they were limited partners
holding the number of limited partnership interests represented by their Units.

The Partnership originally invested in three Participating Insured
Mortgage Loans, which were originated under or in connection with Federal
Housing Administration ("FHA") insurance programs to finance or refinance the
acquisition, construction or substantial rehabilitation of privately owned and
operating multi-family residential rental projects, (the "Projects"). The
Partnership purchased each of the GNMA Securities with proceeds raised through
its public offering from an FHA-approved mortgagee/coinsurer and GNMA
issuer/servicer. The Partnership was expected to make an investment in a fourth
Participating Insured Mortgage Loan and entered into a commitment to fund a $4.5
million loan on a to-be-built project in Orlando, Florida. During fiscal 1991,
the prospective borrower elected not to proceed with the Orlando development
and, as a result, the commitment to purchase the related GNMA securities
subsequently expired. The efforts of the General Partner to obtain a suitable
investment to replace the expired commitment were not successful, in large part
due to changes instituted by the Department of Housing and Urban Development
which made the type of insured financing that the Partnership can invest in very
difficult to obtain. As a result, the General Partner decided to return the
majority of the previously committed funds to the Unitholders. A distribution of
approximately $4 million was paid to the Unitholders in June of 1991. The
remainder of the previously committed funds was added to the Partnership's cash
reserves. Until May 1992, the Partnership held a Participating Insured Mortgage
loan with respect to an apartment complex known as the Casablanca Apartments in
Boynton Beach, Florida. During fiscal 1992, the owner of the Casablanca
Apartments complex defaulted on the scheduled debt service payments to the GNMA
issuer. The default triggered the prepayment provisions of the Partnership's
GNMA mortgage-backed security. Consequently, on May 26, 1992, GNMA prepaid the
outstanding balance of the principal and accrued interest to the Partnership
pursuant to the terms of the mortgage-backed security agreement. The Partnership
distributed the proceeds received from the Casablanca prepayment, which
aggregated $12,521,000, to the Unitholders concurrent with the regular quarterly
distribution paid on June 15, 1993.

2. Use of Estimates and Summary of Significant Accounting Policies
---------------------------------------------------------------

The accompanying financial statements have been prepared on the accrual
basis of accounting in accordance with generally accepted accounting principles
which requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosures of contingent assets
and liabilities as of July 31, 1997 and 1996 and revenues and expenses for each
of the three years in the period ended July 31, 1997. Actual results could
differ from the estimates and assumptions used.

The Partnership accounts for investments in accordance with Statement of
Financial Accounting Standards No. 115, "Accounting for Certain Investments in
Debt and Equity Securities" (SFAS No. 115). Under the provisions of SFAS No.
115, investments in debt and equity securities are classified as either trading
securities, held-to-maturity, or available for sale based on management's
intentions as to their ultimate disposition. The Partnership's debt securities
have been classified as available for sale as of July 31, 1997 and 1996 and are
stated at fair value on the accompanying balance sheets at those dates. In
accordance with SFAS No. 115, the net unrealized holding gain or loss as of the
date that the statement was first applied was recorded as an adjustment of the
balance of a separate component of equity. Future unrealized holding gains or
losses on securities classified as available for sale are reported as a net
amount in the separate component of equity until realized. Information regarding
the fair value of the Partnership's debt securities is disclosed in Notes 4 and
5. The related discounts or premiums for these GNMA securities are being
amortized using the straight-line method, which approximates the effective
interest method, over a period of 15 years.

In addition to the debt securities which are carried at fair value on the
Partnership's balance sheets, the cash and cash equivalents appearing on the
accompanying balance sheets represent financial instruments for purposes of
Statement of Financial Accounting Standards No. 107, "Disclosures about Fair
Value of Financial Instruments." The carrying amount of cash and cash
equivalents approximates fair value as of July 31, 1997 and 1996 due to the
short-term maturities of these instruments.

Deferred expenses consist of legal fees incurred in connection with the
organization of the Partnership and acquisition fees and acquisition expenses
paid to the General Partner and its affiliates as compensation for analyzing,
structuring and negotiating the Partnership's investments. Organizational costs
have been amortized using the straight-line method over a five-year period.
Acquisition fees and expenses are being amortized using the straight-line method
over 15 years (the expected holding period of the investments).

For purposes of reporting cash flows, the Partnership considers all highly
liquid investments with original maturities of 90 days or less to be cash
equivalents. The Partnership's cash reserves and excess cash flow are generally
invested in money market instruments, principally overnight investment-grade
commercial paper.

No provision for income taxes has been made as the liability for such
taxes is that of the partners and Unitholders rather than the Partnership.

3. The Partnership Agreement and Related Party Transactions
--------------------------------------------------------

For services rendered in managing the business of the Partnership, the
Partnership shall pay the General Partner and its affiliates an Asset Management
Fee equal to 0.75% per annum of the outstanding principal balance of the
mortgage securities of the Partnership. Asset management fees of $175,000,
$184,000 and $193,000 were earned by the General Partner and its affiliates for
the years ended July 31, 1997, 1996 and 1995, respectively. PWPI also furnishes
additional asset management and advisory services to the Partnership and
receives additional asset management fees as compensation for such services. The
additional management fees paid by the Partnership totalled $38,000, $38,000 and
$40,000 for the years ended July 31, 1997, 1996 and 1995, respectively. Accounts
payable - affiliates at July 31, 1997 and 1996 consists of $29,000 and $30,000,
respectively, of management fees payable to the General Partner and its
affiliates.

Pursuant to the terms of the Partnership Agreement, taxable income or tax
loss of the Partnership will be allocated 98.98% to the Unitholders and 1.02% to
the General Partner. Income or loss arising from a sale or refinancing of
investment properties will be allocated to the Unitholders and the General
Partner generally as residual proceeds are distributed. Allocations of income or
loss for financial reporting purposes have been made in conformity with
allocations of taxable income or tax loss set forth in the Partnership
Agreement.

Included in general and administrative expenses for the years ended July
31, 1997, 1996 and 1995 is $95,000, $88,000 and $100,000, respectively,
representing reimbursements to an affiliate of the General Partner for providing
certain financial, accounting and investor communication services to the
Partnership.

The Partnership uses the services of Mitchell Hutchins Institutional
Investors, Inc. ("Mitchell Hutchins") for the managing of cash assets. Mitchell
Hutchins is a subsidiary of Mitchell Hutchins Asset Management, Inc., an
independently operated subsidiary of PaineWebber. Mitchell Hutchins earned fees
of $8,000, $18,000 and $14,000 (included in general and administrative expenses)
for managing the Partnership's cash assets during fiscal 1997, 1996 and 1995,
respectively.

4. Mortgage-Backed Securities
--------------------------

At July 31, 1997 and 1996 the Partnership held non-participating
mortgage-backed securities ("MBS") backed by single-family or multi-family
mortgage loans issued or originated in connection with the housing programs of
the Government National Mortgage Association ("GNMA"), and guaranteed by GNMA,
as follows (in thousands):
July 31, 1997 July 31, 1996
------------------------------- --------------------------
Estimated Estimated
Market Face Amortized Market Face Amortized
Description Value Value Cost Value Value Cost
------------ ------ ----- ---- ----- ----- ----
9.5% GNMA Pool $ 1,799 $ 1,664 $ 1,652 $ 2,228 $ 2,071 $ 2,055

9.0% GNMA Pool 268 260 270 362 347 358

8.0% GNMA Pool 3,016 2,907 3,037 3,363 3,326 3,468

7.5% GNMA Pool 296 290 287 327 330 328
------- ------- ------- ------- ------- -------
$ 5,379 $ 5,121 $ 5,246 $ 6,280 $ 6,074 $ 6,209
======= ======= ======= ======= ======= =======

As discussed further in Note 2, the Partnership's investments in MBS are
carried at fair value as of July 31, 1997 and 1996. Investments in MBS are
valued based on quoted market prices. The amortized cost of the MBS represents
the face value of the securities net of unamortized premium or discount.
Investments in non-participating MBS were limited to no more than 30% of the
original net offering proceeds per the terms of the Partnership's offering
prospectus.

The 9.5% MBS, which were purchased at a discount on December 14, 1988,
carry a coupon interest rate of 9.5% per annum and include loans with scheduled
maturities between June 2009 and December 2009. The 9.0% MBS, which were
purchased at a premium on November 16, 1989, carry a coupon interest rate of
9.0% per annum and include loans with scheduled maturities between June 2001 and
September 2002. The 8.0% MBS, which were purchased at a premium on July 30,
1992, carry a coupon interest rate of 8.0% per annum and include loans with
scheduled maturities in June 2022. The 7.5% MBS, which were purchased at a
discount on October 30, 1992, carry a coupon interest rate of 7.50% per annum
and include loans with scheduled maturities in March 2022. The loans included in
these GNMA pool programs may be prepaid, without penalty, at any time.

5. Investments in Participating Insured Mortgage Loans
---------------------------------------------------

Participating Insured Mortgage Loans secured by GNMA securities
outstanding at July 31, 1997 and 1996 are comprised of the following (in
thousands):

July 31, 1997 July 31, 1996
-------------------- -------------------
GNMA Estimated Estimated
Certificate Interest Market Amortized Market Amortized
Number Property Rate Value Cost Value Cost
------ -------- ---- ----- ---- ----- ----

279985 Quarter Mill 8.50% $ 7,417 $ 7,166 $ 7,441 $ 7,198
279119 Emerald Cove 8.75% 11,169 10,645 11,098 10,697
-------- -------- -------- --------
$ 18,586 $ 17,811 $ 18,539 $ 17,895
======== ======== ======== ========

As discussed further in Note 2, the Partnership's investments in
Participating Insured Mortgage Loans are carried at fair value as of July 31,
1997 and 1996. Investments in Participating Insured Mortgage Loans, for which
quoted market prices are not available, are valued by an independent pricing
service which determines the valuations based on the reported financial results
of the underlying properties and a comparison of recent market trades of
securities with similar characteristics. Because of the inherent uncertainty of
valuations, estimated values, as reflected herein, may differ from the values
that would have been used had a ready market for the securities existed.
Descriptions of the properties financed by the Partnership's loans and the loan
agreements themselves are summarized below:

Quarter Mill Apartments
-----------------------

The Partnership acquired a Participating Insured Mortgage Loan with
respect to a 266-unit apartment complex known as Quarter Mill Apartments located
in Richmond, Virginia (the "Virginia Project"). Construction of the Virginia
Project was completed in November of 1990. Initial closing of this Participating
Insured Mortgage loan took place on August 2, 1989. The project owner is Amurcon
Corporation. The Base Component of this Participating Insured Mortgage Loan is
coinsured by FHA and represented by GNMA Securities with an initial face value
of $7,316,600, which GNMA Securities bore interest at the rate of 10.25% during
construction of the Virginia Project and 8.50% thereafter. Effective May 1,
1991, the construction loan was converted to a permanent loan with a principal
balance of $6,525,000. On June 21, 1991 an additional $791,600 was funded,
completing the Partnership's investment of $7,316,600. Monthly payments of
principal and interest totalling approximately $53,533 are due through maturity,
on October 15, 2031. Scheduled principal repayments of $150,236 have been
received through July 31, 1997.

Emerald Cove Apartments
-----------------------

The Partnership acquired a Participating Insured Mortgage Loan with
respect to a 276-unit apartment complex known as Emerald Cove Apartments in
Charlotte, North Carolina (the "North Carolina Project"). Initial closing of
this Participating Insured Mortgage Loan took place on October 16, 1989. The
project owners are Ronald Curry and Ralph Abercia. The Base Component of this
Participating Insured Mortgage Loan is coinsured by FHA and represented by GNMA
Securities with an initial face value of $10,783,900 at closing, which GNMA
Securities bore interest at the rate of 10.25% during construction of the North
Carolina Project and 8.75% thereafter. During fiscal 1992, the Partnership
funded its remaining commitment on the investment of approximately $1,184,000
and, effective May 1, 1992, the investment was converted to a permanent loan
with a principal balance of $10,776,500. The Partnership paid a premium of
$107,840 to the GNMA issuer to obtain the original loan commitment due to the
fact that the permanent loan interest rate was higher than comparable market
rates at the time of the initial closing. The premium is being amortized on the
straight-line method, which approximates the effective interest method, over 15
years. Monthly payments of principal and interest totalling approximately
$81,114 are due through maturity, on August 15, 2031. Scheduled principal
repayments of $196,367 have been received through July 31, 1997.

Provisions Applicable to Both of the Participating Insured Mortgage Loans of
the Partnership:

The closing of the Participating Insured Mortgage Loans was subject to
conditions with respect to satisfactory completion of construction. The
Partnership purchased the GNMA Securities representing each of the above
Participating Insured Mortgage Loans with proceeds raised through its public
offering from an FHA-approved mortgagee/coinsurer and GNMA issuer/servicer.

As required by the Partnership's investment criteria, the Participating
Insured Mortgage Loans may not be repaid by the applicable project owner, in
whole or in part, for a period of five years from the date of initial
endorsement of each such Loan for FHA Insurance (unless required or permitted by
HUD or as a result of the partial or total destruction or condemnation of the
Project). The Participating Insured Mortgage Loans may thereafter be prepaid at
various premiums which decline over the next four-to-five-year period. After
nine or ten years from the date of initial endorsement of a Participating
Insured Mortgage Loan for FHA Insurance, such loan may be prepaid without
premium. Although the permanent phase of each such Participating Insured
Mortgage Loan will have a term of approximately 40 years, payable in
substantially equal installments consisting of principal and interest over such
term, each loan provides the Partnership with the option to require such loan be
repaid in full beginning not later than the twelfth anniversary of its date of
initial endorsement for FHA Insurance.

The Contingent Component of the Participating Insured Mortgage Loans
provides for the payment of Contingent Interest equal to 25% of the Net Project
Cash Flow, if any, (30% for the Virginia Project) and 25% of the Net Project
Residuals, if any, derived from the applicable Project; provided, however, that
to the extent the applicable Project fails to generate certain minimum amounts
of Net Project Cash Flow, the share of Net Project Residuals to which the
Partnership is entitled may be increased to up to 50%. In addition to the
deduction for the outstanding principal balance of the first mortgage relating
to each Participating Insured Mortgage Loan, Net Project Residuals shall also be
reduced by certain FHA-approved development costs and by certain amounts
advanced by the applicable project owner from its own funds to fund operating
deficits or provide working capital for the applicable Project. The obligation
of a project owner to pay Contingent Interest will be evidenced by a
Subordinated Promissory Note of such project owner which will in turn be secured
by a second mortgage on the applicable Project. The obligations of each project
owner to pay Contingent Interest is or will be secured by a lien on all of the
interests in such project owner. Neither FHA Insurance nor any GNMA Security
will provide for the payment of Contingent Interest with respect to any
Participating Insured Mortgage Loan. No Contingent Interest has been earned with
respect to the Emerald Cove Participating Insured Mortgage Loan to date. During
fiscal 1997, 1996 and 1995, the Partnership received approximately $49,000,
$46,000 and $37,000, respectively, representing its 30% share of the surplus
cash generated by the Quarter Mill property. Such amounts are included in
interest income on the accompanying 1997, 1996 and 1995 statements of income. No
amounts of Contingent Interest were received prior to fiscal 1995.

6. Subsequent Event
----------------

On September 15, 1997, the Partnership distributed $488,000 to the
Unitholders, $4,000 to the General Partner and $9,000 to PWPI as an asset
management fee for the quarter ended July 31, 1997.

Schedule IV - Investments in Mortgage Loans on Real Estate

PAINEWEBBER INSURED MORTGAGE PARTNERS 1-B, L.P.
July 31, 1997
(In thousands)

Carrying Amount of loans
Coupon Final maturity Periodic Face amount amount of subject to delinquent
Description Interest rate date payment terms of mortgages mortgages principal or interest
- ----------- ------------- -------------- ------------- ------------ --------- ---------------------

GNMA Single Loan Pool:

Quarter Mill Apts. 8.50% 10/15/2031 Interest and $ 7,166 $ 7,417 N/A
Apartment Complex principal payable
Richmond, VA monthly ($53,533)
Pool #279985 through maturity.

Emerald Cove Apts. 8.75% 8/15/2031 Interest and 10,587 11,169 N/A
Apartment Complex principal payable
Charlotte, NC monthly ($81,114)
Pool #279119 through maturity.
-------- --------
TOTALS $ 17,753 $ 18,586
======== ========

1997 1996 1995
---- ---- ----

Balance at beginning of year $18,539 $18,639 $18,374
Collections of principal (77) (71) (64)
Amortization of premium (7) (7) (7)
Net unrealized holding gains (losses) 131 (22) 336
------- ------- -------
Balance at close of year $18,586 $18,539 $18,639
======= ======= =======