<PAGE>



             UNITED STATES SECURITIES AND EXCHANGE COMMISSION

                          Washington, D.C. 20549
                    ----------------------------------

                                 FORM 10-Q

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

                 FOR THE QUARTER ENDED JANUARY 31, 2000

                                    OR

       |_| 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 or other jurisdiction of                             (I.R.S.Employer
incorporation or organization)                             Identification No.)


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


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

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 |_|.


<PAGE>

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

                                 BALANCE SHEETS
                 January 31, 2000 and July 31, 1999 (Unaudited)
                                 (In thousands)

                                     ASSETS

                                                   January 31     July 31
                                                   ----------     -------

Investments in Debt Securities:
   Mortgage-Backed Securities available
      for sale                                      $  2,340      $  2,715
   Participating Insured Mortgage Loans
      available for sale                              10,717        17,930
                                                    --------      --------
                                                      13,057        20,645

Cash and cash equivalents                              9,270         1,420
Interest and other receivables                            93           145
Deferred expenses, net                                    70           177
                                                    --------      --------
                                                    $ 22,490      $ 22,387
                                                    ========      ========


                        LIABILITIES AND PARTNERS' CAPITAL

Accounts payable - affiliates                       $     25      $     25
Accounts payable and accrued expenses                     55            39
Partners' capital                                     22,410        22,323
                                                    --------      --------
                                                    $ 22,490      $ 22,387
                                                    ========      ========


















                             See accompanying notes.


<PAGE>
<TABLE>


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

                  STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
    For the three and six months ended January 31, 2000 and 1999 (Unaudited)
                      (In thousands, except per Unit data)
<CAPTION>

                                         Three Months Ended         Six Months Ended
                                              January 31,               January  31,
                                         -------------------        ------------------
                                           2000       1999           2000       1999
                                           ----       ----           ----       ----
<S>                                     <C>         <C>             <C>        <C>

Revenues:
   Interest income - Debt Securities    $   405     $   438         $   823    $  885
   Interest income - Money Market            29          27              49        53
                                        -------     -------         -------    ------
                                            434         465             872       938

Expenses:

   Management fees                           45          47              90        96
   General and administrative                64          48             102        92
   Amortization expense                      44          44              88        88
                                         ------     -------         -------    ------
                                            153         139             280       276
                                        -------     -------         -------    ------
Operating income                            281         326             592       662

Gain on sale of Participating
   Insured Mortgage Loan                    519           -             519         -
                                        -------     -------         -------    ------
Net income                                  800         326           1,111       662

Other comprehensive income (loss):
   Unrealized holding gains (losses)
    on debt securities                      328         129             392      (120)
   Reclassification adjustment for
    gain on sale of debt security
    included in net income                 (519)          -            (519)        -
                                        -------     -------         -------    ------
                                           (191)        129            (127)     (120)
                                        -------     -------         -------    ------
Comprehensive income                    $   609     $   455         $   984    $  542
                                        =======     =======         =======    ======

Net income per Unit of Depositary
  Receipt                               $  1.43     $  0.58         $  1.99    $ 1.19
                                        =======     =======         =======    ======

Cash distributions per Unit of
  Depositary Receipt                    $  0.80     $  0.86         $  1.61    $ 1.72
                                        =======     =======         =======    ======
</TABLE>


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

                             See accompanying notes.


<PAGE>


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

              STATEMENTS OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)
         For the six months ended January 31, 2000 and 1999 (Unaudited)
                                 (In thousands)

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

Balance at July 31, 1998                            $    (4)      $ 24,764

Comprehensive income:
    Net income                                            7            655
    Net unrealized holding loss on debt
      securities                                          -           (120)
                                                    -------       --------
                                                          7            535

Cash distributions                                       (8)          (946)
                                                    -------       --------
Balance at January 31, 1999                         $    (5)      $ 24,353
                                                    =======       ========

Balance at July 31, 1999                            $    (6)      $ 22,329

Comprehensive income:
    Net income                                           11          1,100
    Net unrealized holding gain on debt
      securities                                          -            392
    Reclassification adjustment for
      gain on sale of debt security
      included in net income                              -           (519)
                                                    -------       --------
                                                         11            973

Cash distributions                                       (7)          (890)
                                                    -------       --------
Balance at January 31, 2000                         $    (2)      $ 22,412
                                                    =======       ========









                             See accompanying notes.


<PAGE>
<TABLE>

                 PAINEWEBBER INSURED MORTGAGE PARTNERS 1-B, L.P.
                            STATEMENTS OF CASH FLOWS
               For the six months ended January 31, 2000 and 1999
          Increase (Decrease) in Cash and Cash Equivalents (Unaudited)
                                 (In thousands)
<CAPTION>
                                                                       2000        1999
                                                                       ----        ----
<S>                                                                    <C>        <C>

Cash flows from operating activities:
  Net income                                                          $ 1,111     $   662
  Adjustments to reconcile net income to
   net cash provided by operating activities:
   Gain on sale of Participating Insured Mortgage Loan                   (519)          -
   Amortization expense                                                    88          88
   Amortization of discount/premium on debt securities                     30          29
   Changes in assets and liabilities:
     Interest and other receivables                                        52           6
     Accounts payable - affiliates                                          -          (1)
     Accounts payable and accrued expenses                                 16          (3)
                                                                      -------     -------
      Total adjustments                                                  (333)        119
                                                                      -------     -------
      Net cash provided by operating activities                           778         781
                                                                      -------     -------

Cash flows from investing activities:
  Principal collections on Mortgage-Backed Securities                     307         781
  Principal collections on Participating Insured
    Mortgage Loans                                                         50          46
  Net proceeds from sale of Participating Insured Mortgage Loan         7,612           -
                                                                      -------     -------
      Net cash provided by investing activities                         7,969         827
                                                                      -------     -------

Cash flows from financing activities:
  Distributions to Unitholders and partners                              (897)       (954)
                                                                      -------     -------
Net increase in cash and cash equivalents                               7,850         654

Cash and cash equivalents, beginning of period                          1,420       1,702
                                                                      -------     -------

Cash and cash equivalents, end of period                              $ 9,270     $ 2,356
                                                                      =======     =======

</TABLE>





                             See accompanying notes.


<PAGE>


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

1.  General
    -------

      The accompanying financial statements,  footnotes and discussion should be
read in conjunction with the financial statements and footnotes contained in the
Partnership's  Annual Report for the year ended July 31, 1999. In the opinion of
management, the accompanying financial statements,  which have not been audited,
reflect all adjustments  necessary to present fairly the results for the interim
period. All of the accounting  adjustments reflected in the accompanying interim
financial statements are of a normal recurring nature.

      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 January  31,  2000 and July 31,  1999 and  revenues  and
expenses for each of the three- and six-month periods ended January 31, 2000 and
1999. Actual results could differ from the estimates and assumptions used.

      As previously  reported,  the  Partnership  has been  analyzing  potential
disposition  strategies for its remaining  investments.  As discussed further in
Note 3, on January 26, 2000 the  Partnership  received  total  consideration  of
approximately $7,747,000 for the sale of its Participating Insured Mortgage Loan
secured by the Quarter Mill Apartments, a 266-unit facility located in Richmond,
Virginia.  Subsequent  to the  disposition  of the  Partnership's  Quarter  Mill
investment,  management  began the  process  of  liquidating  the  Partnership's
portfolio of  non-participating  mortgage-backed  securities  through  secondary
market  sale  transactions.  As  discussed  further  in Note 2, such  sales were
completed in late February 2000, with the  Partnership  receiving total proceeds
of $2,318,000.  In addition,  the Partnership  continues to evaluate the current
economic  benefits it would receive if the owner of the Emerald Cove  Apartments
was to prepay its Participating Loan in the near term. If a near term prepayment
of the  Emerald  Cove  investment  is not  completed,  in  all  likelihood,  the
Partnership  will  conduct a secondary  market sale  process  similar to the one
completed for Quarter Mill. Under either scenario, management expects to be able
to complete a liquidation  of the  Partnership by early in the second quarter of
calendar year 2000.  There are no assurances,  however,  that the disposition of
the  remaining  asset and a  liquidation  of the  Partnership  will be completed
within this time frame.

2.  Mortgage-Backed Securities
    -------------------------

      At  January   31,  2000  and  July  31,   1999,   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):
<TABLE>
<CAPTION>

                                  January 31, 2000                       July 31, 1999
                       ---------------------------------      -----------------------------------
                        Estimated                              Estimated
                        Market      Face       Amortized       Market        Face       Amortized
     Description        Value       Value      Cost            Value         Value      Cost
     ------------       ------      -----      ----            -----         -----      ----
     <S>               <C>          <C>        <C>             <C>            <C>          <C>

    9.5% GNMA Pool     $   893      $   856    $   854         $ 1,056       $   986    $   982

    9.0% GNMA Pool          57           57         59              78            76         79

    8.0% GNMA Pool       1,287        1,285      1,307           1,469         1,437      1,480

    7.5% GNMA Pool         103          106        105             112           112        111
                       -------      -------    -------         -------       -------    -------
                       $ 2,340      $ 2,304    $ 2,325         $ 2,715       $ 2,611    $ 2,652
                       =======      =======    =======         =======       =======    =======
</TABLE>


      The  Partnership's  investments  in MBS are  carried  at fair  value as of
January  31,  2000 and July 31,  1999.  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. Beginning in fiscal 1998,
the premiums and discounts are being amortized on a straight-line basis over the
expected  remaining holding periods of the investments of three years.  Prior to
fiscal 1998,  the premium and discounts  were being  amortized  over an original
estimated holding period of fifteen years.  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 loans included in these GNMA
pool programs may be prepaid, without penalty, at any time.

      As  discussed  in Note 1,  subsequent  to the  sale  of the  Quarter  Mill
Participating  Insured  Mortgage  Loan,  on January  26,  2000 (see Note 3), the
Partnership began the process of liquidating its portfolio of  non-participating
mortgage-backed   securities   through   secondary  market  sale   transactions.
Subsequent to the current  quarter-end,  the Partnership received total proceeds
of $2,318,000 in connection with these sale transactions, which included accrued
interest of $11,000.  All of the sale transactions  closed in February 2000. The
9.5% MBS,  which were  purchased at a discount on December  14, 1988,  carried a
coupon  interest  rate of 9.5% per  annum  and  included  loans  with  scheduled
maturities  between  June 2009 and  December  2009.  The 9.5% MBS were sold at a
premium with a settlement  date of February 22, 2000.  The 9.0% MBS,  which were
purchased at a premium on November 16, 1989,  carried a coupon  interest rate of
9.0% per annum and included  loans with scheduled  maturities  between June 2001
and  September  2002.  The 9.0% MBS were sold at par with a  settlement  date of
February 17, 2000.  The 8.0% MBS,  which were purchased at a premium on July 30,
1992,  carried a coupon  interest rate of 8.0% per annum and included loans with
scheduled  maturities in June 2022.  The 8.0% MBS were sold at a slight  premium
with a settlement  date of February 22, 2000. The 7.5% MBS, which were purchased
at a discount on October 30, 1992,  carried a coupon  interest rate of 7.50% per
annum and included loans with  scheduled  maturities in March 2022. The 7.5% MBS
were sold at a discount  with a settlement  date of February  22, 2000.  The net
proceeds of the MBS sale  transactions  are expected to be included in a Special
Distribution  to the  Unitholders  to be paid on or before March 15,  2000.  The
Partnership  will recognize a small net gain on these MBS sale  transactions  in
the third quarter of fiscal 2000.

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

      Participating   Insured   Mortgage   Loans  secured  by  GNMA   securities
outstanding at January 31, 2000 and July 31, 1999 are comprised of the following
(in thousands):
<TABLE>
<CAPTION>

                                            January 31, 2000                July 31, 1999
                                         ----------------------      ----------------------
    GNMA                                  Estimated                  Estimated
    Certificate                Interest   Market      Amortized      Market       Amortized
    Number      Property       Rate       Value       Cost           Value        Cost
    ------      --------       ----       -----       ----           -----        ----
    <S>         <C>            <C>        <C>         <C>            <C>          <C>

    279985      Quarter Mill   8.50%      $     -     $     -        $ 7,236      $ 7,094
    279119      Emerald Cove   8.75%       10,717      10,466         10,694       10,504
                                          -------     -------        -------      -------
                                          $10,717     $10,466        $17,930      $17,598
                                          =======     =======        =======      =======
</TABLE>


      The Partnership's  investments in Participating Insured Mortgage Loans are
carried at fair value as of January 31, 2000 and July 31, 1999.  Investments  in
Participating  Insured  Mortgage  Loans,  for which quoted market prices are not
available, are valued by a pricing service which determines the valuations based
on  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  $53,553  were  due  through
maturity, on October 15, 2031.

      As  discussed  in Note 1, on January 26, 2000,  the  Partnership  received
total   consideration   of   approximately   $7,747,000  for  the  sale  of  its
Participating Insured Mortgage Loan secured by the Quarter Mill Apartments.  The
Quarter Mill Participating  Insured Mortgage Loan consists of a GNMA Certificate
with  an  8.5%  coupon  interest  rate  and a  subordinated  note  securing  the
Contingent Component of the Partnership's interest in the Quarter Mill property.
The Contingent Component of the Participating Insured Mortgage Loan provides for
the payment of Contingent Interest equal to 30% of the Net Project Cash Flow, if
any, and 25% of the Net Project  Residuals,  if any, derived from the applicable
Project.  The face value of the GNMA  Certificate as of the date of the sale was
approximately $7,074,000.  The excess of the total proceeds over the face amount
of the GNMA  Certificate  reflects a premium of $108,000 on the GNMA Certificate
itself,  accrued interest of $40,000 through the date of the sale and a value of
$525,000 attributed to the Contingent  Component.  As previously  reported,  the
Partnership  had  engaged  the  services  of a  nationally  recognized  mortgage
brokerage firm to market the Quarter Mill  Participating  Loan for sale. Initial
marketing  materials  were  distributed  to over 100  buyers  of these  types of
investments in the secondary market. All offers were due by January 19, 2000 and
a sale was  expected  to close  shortly  thereafter  if the  offers  equaled  or
exceeded a specified  minimum  price.  As a result of these  marketing  efforts,
several  offers were  received  and the  minimum  sale price was  exceeded.  The
winning  bidder funded a  non-refundable  deposit of $105,000 on January 20, and
the remainder of the proceeds were received on January 26. The Partnership  paid
a commission  of $95,000 to the  mortgage  broker in  connection  with this sale
transaction. As a result of this transaction,  the Partnership no longer has any
interest in the Quarter Mill property. As a result of the disposition on January
26,  2000  of  the  Partnership's   investments  secured  by  the  Quarter  Mill
Apartments,  the Partnership  expects to make a Special  Distribution of the net
proceeds of this transaction to the Unitholders on or before March 15, 2000. The
Partnership  recognized  a gain of  $519,000  on the  sale of the  Quarter  Mill
Participating Insured Mortgage Loan.

      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.  Prior to fiscal 1998, the premium had
been amortized on the straight-line  method over a 15-year  amortization period.
Beginning in fiscal 1998, the amortization  rate has been increased to reflect a
reduction in the expected  remaining  holding period of the investment.  Monthly
payments of  principal  and  interest  totalling  approximately  $81,141 are due
through maturity, on August 15, 2031. Scheduled principal repayments of $327,784
have been received through January 31, 2000.

4.  Related Party Transactions
    --------------------------

      Management  fees earned by the  General  Partner  and its  affiliates  for
services rendered in managing the business of the Partnership aggregated $90,000
and $96,000 for the six months  ended  January 31, 2000 and 1999,  respectively.
Included in these two amounts is $15,000 and $17,000, respectively, representing
additional   asset  management  fees  paid  to  PWPI  which  are  based  on  the
Partnership's  cash  distributions of operating  income, as discussed further in
the Partnership's  Annual Report.  Accounts payable - affiliates at both January
31, 2000 and July 31, 1999  consist of  management  fees  payable to the General
Partner and its affiliates.

      Included in general and  administrative  expenses for the six months ended
January  31, 2000 and 1999 is $42,000 and  $48,000,  respectively,  representing
reimbursements  to an affiliate  of the General  Partner for  providing  certain
financial, accounting and investor communication services to the Partnership.

      Also  included in general and  administrative  expenses for the  six-month
period  ended  January  31,  2000 and 1999 is $1,000 and  $2,000,  respectively,
representing  fees  earned  by an  affiliate,  Mitchell  Hutchins  Institutional
Investors, Inc., for managing the Partnership's cash assets.


<PAGE>



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

                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Information Relating to Forward-Looking Statements
--------------------------------------------------

      The following  discussion of financial condition includes  forward-looking
statements  which  reflect  management's  current  views with  respect to future
events and  financial  performance  of the  Partnership.  These  forward-looking
statements  are  subject to certain  risks and  uncertainties,  including  those
identified  in Item 7 of the  Partnership's  Annual  Report on Form 10-K for the
year ended July 31, 1999 under the heading  "Certain  Factors  Affecting  Future
Operating  Results," which could cause actual results to differ  materially from
historical  results  or  those  anticipated.   The  words  "believe,"  "expect,"
"anticipate,"  and  similar  expressions  identify  forward-looking  statements.
Readers  are  cautioned  not to place undue  reliance  on these  forward-looking
statements,  which were made based on facts and conditions as they existed as of
the date of this report.  The  Partnership  undertakes no obligation to publicly
update or revise  any  forward-looking  statements,  whether  as a result of new
information, future events or otherwise.

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

      As previously  reported,  the  Partnership  has been  analyzing  potential
disposition strategies for its remaining investments.  As part of these efforts,
on  January  26,  2000  the   Partnership   received  total   consideration   of
approximately $7,747,000 for the sale of its Participating Insured Mortgage Loan
secured by the Quarter Mill Apartments, a 266-unit facility located in Richmond,
Virginia.  The Quarter Mill  Participating  Insured  Mortgage Loan consists of a
GNMA  Certificate  with an 8.5% coupon  interest  rate and a  subordinated  note
securing the Contingent  Component of the Partnership's  interest in the Quarter
Mill property.  The Contingent  Component of the Participating  Insured Mortgage
Loan  provides for the payment of  Contingent  Interest  equal to 30% of the Net
Project Cash Flow, if any, and 25% of the Net Project Residuals, if any, derived
from the applicable  Project.  The face value of the GNMA  Certificate as of the
date of the sale was approximately $7,074,000.  The excess of the total proceeds
over the face amount of the GNMA  Certificate  reflects a premium of $108,000 on
the GNMA Certificate itself, accrued interest of $40,000 through the date of the
sale  and a  value  of  $525,000  attributed  to the  Contingent  Component.  As
previously  reported,  the  Partnership had engaged the services of a nationally
recognized mortgage brokerage firm to market the Quarter Mill Participating Loan
for sale.  Initial  marketing  materials were  distributed to over 100 buyers of
these  types of  investments  in the  secondary  market.  All offers were due by
January 19,  2000 and a sale was  expected to close  shortly  thereafter  if the
offers  equaled or  exceeded a  specified  minimum  price.  As a result of these
marketing  efforts,  several offers were received and the minimum sale price was
exceeded.  The winning  bidder  funded a  non-refundable  deposit of $105,000 on
January 20, and the  remainder of the proceeds  were received on January 26. The
Partnership  paid a commission  of $95,000 to the mortgage  broker in connection
with this sale transaction. As a result of this transaction,  the Partnership no
longer  has any  interest  in the  Quarter  Mill  property.  As a result  of the
disposition on January 26, 2000 of the Partnership's  investments secured by the
Quarter Mill Apartments,  the Partnership expects to make a Special Distribution
of the net proceeds of this  transaction  to the  Unitholders on or before March
15, 2000.

      Subsequent to the sale of the Quarter Mill Participating  Insured Mortgage
Loan,  the  Partnership  began the  process  of  liquidating  its  portfolio  of
non-participating  mortgage-backed  securities,  which carried  coupon  interest
rates ranging from 7.5% to 9.5%.  The portfolio of MBS was sold at a net premium
subsequent to the quarter end, in February 2000. The Partnership  received total
proceeds  of  $2,318,000  in  connection  with  these sale  transactions,  which
included  accrued  interest  of  $11,000.  The  net  proceeds  of the  MBS  sale
transactions  are  expected  to be  included  in a Special  Distribution  to the
Unitholders  to be paid on or  before  March  15,  2000.  The  Partnership  will
recognize a small net gain on these MBS sale  transactions  in the third quarter
of fiscal 2000.

      In addition to the transactions described above, the Partnership continues
to evaluate the current  economic  benefits it would receive if the owner of the
Emerald  Cove  Apartments  were to prepay their  participating  loan in the near
term. The current  strength of the national real estate market and the favorable
interest rate environment for the sale or refinancing of multi-family  apartment
properties  make  the  prospect  of  a  prepayment   transaction  a  potentially
attractive  option  for  the  property  owner.  During  fiscal  year  1999,  the
Partnership  continued  to have  discussions  with the owner of the Emerald Cove
Apartments  about the  possibility of a prepayment of its loan before the end of
calendar  year  1999 or in  early  calendar  year  2000.  While,  to  date,  the
discussions  with the owner have not led to an agreement  for the  prepayment of
the participating  loan, the Partnership  continues to have discussions with the
owner of Emerald Cove. If a near term  prepayment of the Emerald Cove investment
is not completed,  in all likelihood,  the Partnership  will conduct a secondary
market sale process similar to the one completed for Quarter Mill.  Under either
scenario,  management  expects  to be  able to  complete  a  liquidation  of the
Partnership by early in the second  quarter of calendar year 2000.  There are no
assurances,  however,  that  the  disposition  of  the  remaining  asset  and  a
liquidation of the Partnership will be completed within this time frame.

      As previously reported,  generally low market interest rates have prompted
a high level of refinancing  activity over the past several years,  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.  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,  had 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 would continue in the future,  the  Partnership  had 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%.  During fiscal 1998 and fiscal 1999,  however,  actual  principal
prepayment  levels were higher than  projected  resulting in an increase in cash
flows from investing  activities.  As a result,  the Partnership  made a special
capital distribution of excess cash totalling  approximately $552,000, or $10.00
per original $1,000 investment,  to the Unitholders on March 13, 1998 concurrent
with the regular  quarterly  distribution for the period ended January 31, 1998.
During  fiscal  1999 a  special  distribution  of  $25.00  per  original  $1,000
investment  was paid to  Unitholders  of record as of  January  31,  1999.  This
special  capital  distribution,  which was made on March 15,  1999 and  totalled
approximately   $1,379,000,   represented  Partnership  reserves  that  exceeded
expected future  requirements.  Distributions will continue to be made at a rate
of 6.5% per annum on remaining  invested  capital through the payment to be made
on or before March 15, 2000 for the quarter  ended  January 31,  2000.  However,
since the Partnership  expects to be liquidated within the next three months, no
future regular  quarterly  distributions are planned.  The  Partnership's  final
distribution  would include the net proceeds from the disposition of the Emerald
Cove Participating Insured Mortgage Loan along with the Partnership's  remaining
cash reserves after the payment of all liquidation-related  expenses. Management
is currently  reassessing its cash reserve  requirements in light of the Quarter
Mill and  non-participating  MBS sale  transactions  and may  include  a capital
distribution  of excess cash reserves as part of the Special  Distribution to be
paid to the  Unitholders  on or before  March 15, 2000 from the  proceeds of the
aforementioned sale transactions.

     The Partnership's  remaining Participating Insured Mortgage Loan is secured
by the Emerald  Cove  apartment  complex.  The  occupancy  level at Emerald Cove
averaged  89% for the  quarter  ended  January 31,  2000,  down from 90% for the
quarter  ended October 31, 1999.  This average  occupancy  level still  compares
favorably to the average for the  properties  which compete with Emerald Cove in
the local market.  When necessary,  the property's  leasing team is matching the
rental  concessions  offered by competing  apartment  communities.  These rental
concessions  range from $500 to $900,  depending on the apartment unit type, for
those tenants signing a one year lease. As previously  reported,  there are four
new  apartment  communities  with a total of 1,246 units under  construction  in
Emerald  Cove's  overall  market.  While these  properties  are not  expected to
compete directly, the property's leasing team continues to monitor their leasing
progress.  Prepayment of the Partnership's  Emerald Cove  Participating  Insured
Mortgage Loan was  restricted  through March 1998 and then requires a prepayment
penalty  which  declines  ratably,  from 5% to 2%, from April 1998 through April
2002.  During the quarter ended April 30, 1998,  the Emerald Cove owner informed
the Partnership that the property was being actively marketed for sale and asked
that the Partnership  specify the terms upon which it would accept prepayment of
the participating loan. During the quarter ended July 31, 1998, the owner of the
Emerald Cove Apartments approached the Partnership regarding a prepayment of the
participating  mortgage  loan as part of a potential  sale of the  Emerald  Cove
property.  However, during the first quarter of fiscal 1999, the Partnership was
informed that the potential  buyer and the owner were not able to agree on final
terms and that a sale would not occur. As previously reported,  the owner of the
Emerald Cove  Apartments  has  initiated  discussions  of  prepayment on several
occasions over the past five years, but none of those  discussions have resulted
in a prepayment  transaction.  As a result,  as noted above,  the Partnership is
presently  reviewing  other  potential  disposition  options  for its  remaining
Participating Insured Mortgage Loan investment.

      At January 31, 2000,  the  Partnership  had cash and cash  equivalents  of
approximately $9,270,000. This amount includes the net proceeds from the sale of
the Quarter Mill Participating Insured Mortgage Loan of $7,612,000 which will be
distributed  to the  Unitholders  on or before  March  15,  2000.  Such  amounts
remaining  after the  distribution  of these sale  proceeds 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 the
remaining Participating Insured Mortgage Loan and Net Project Residuals from the
sale  or  refinancing  of the  property  securing  the  remaining  participating
mortgage loan investment.

Results of Operations
Three Months Ended January 31, 2000
-----------------------------------

      The Partnership reported net income of $800,000 for the three months ended
January 31,  2000,  as compared to net income of $326,000 for the same period in
the prior year.  This  increase in net income is a result of the  $519,000  gain
realized in the current period on the sale of the Participating Insured Mortgage
Loan secured by the Quarter Mill  Apartments.  The gain  realized on the Quarter
Mill sale was partially offset by a $45,000 decrease in operating  income.  This
decrease in operating income for the second quarter of fiscal 2000 resulted from
a decrease in total  revenues  of $31,000  and an increase in total  expenses of
$14,000. The decrease in revenues was the result of a decline in interest income
from debt  securities.  The  decrease  in interest  income from debt  securities
resulted  from a reduction  in the  average  outstanding  principal  balances of
Participating  Insured Mortgage Loans and non-participating MBS due to scheduled
principal amortization on all of the debt securities, prepayments on the MBS and
the sale of the Quarter  Mill loan on January 26,  2000.  The  increase in total
expenses  was the result of a $16,000  increase  in general  and  administrative
expenses.  General and  administrative  expenses  increased  primarily due to an
increase in certain required  professional  fees incurred in connection with the
potential  liquidation of the Partnership.  The decrease in interest income from
debt  securities  and the increase in general and  administrative  expenses were
partially  offset by a decrease  in  management  fee  expense and an increase in
money market interest income. Management fee expense declined by $2,000 due to a
decrease in the outstanding balances of the debt securities upon which such fees
are based.  Money market interest income  increased by $2,000 due to the receipt
and temporary  investment of the proceeds  received from the sale of the Quarter
Mill loan.

Six Months Ended January 31, 2000
---------------------------------

      The Partnership reported net income of $1,111,000 for the six months ended
January 31,  2000,  as compared to net income of $662,000 for the same period in
the prior year.  This  increase in net income is a result of the  $519,000  gain
realized in the current period on the sale of the Participating Insured Mortgage
Loan secured by the Quarter Mill  Apartments.  The gain  realized on the Quarter
Mill sale was partially offset by a $70,000 decrease in operating  income.  This
decrease in  operating  income  resulted  from a decrease  in total  revenues of
$66,000 and an increase in total  expenses of $4,000.  The  decrease in revenues
was the result of a $62,000  decline in interest income from debt securities and
a $4,000  decrease in money  market  interest  income.  The decrease in interest
income from debt securities resulted from a reduction in the average outstanding
principal balances of Participating Insured Mortgage Loans and non-participating
MBS due to  scheduled  principal  amortization  on all of the  debt  securities,
prepayments  on the MBS and the sale of the  Quarter  Mill loan on  January  26,
2000. The decrease in money market  interest  income resulted from a decrease in
the average  outstanding  balance of the  Partnership's  invested  cash reserves
compared  to the  same  period  in the  prior  year as a result  of the  special
distribution  of excess  reserves  which was made in March  1999,  as  discussed
further  above.  The  increase  in total  expenses  was the  result of a $10,000
increase  in general and  administrative  expenses.  General and  administrative
expenses increased primarily due to an increase in certain required professional
fees incurred in connection with the potential  liquidation of the  Partnership.
The increase in general and  administrative  expenses was partially  offset by a
decrease in management fee expense of $6,000.  Management  fee expense  declined
due to a decrease in the outstanding  balances of the debt securities upon which
such fees are based.


<PAGE>
                                     PART II
                                Other Information




Item 1. through 5.    NONE
------------------

Item 6. Exhibits and Reports on Form 8-K

(a)  Exhibits:        NONE

(b)  Reports on Form 8-K:

     A  Current  Report  on Form 8-K  dated  January  26,  2000 was filed by the
registrant  subsequent  to the  current  quarter  end to report  the sale of the
Participating  Insured  Mortgage Loan secured by the Quarter Mill Apartments and
is hereby incorporated herein by reference.


<PAGE>


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

                                   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



Date:   February 29, 2000       By:   /s/ Walter V. Arnold
                                      --------------------
                                      Walter V. Arnold
                                      Senior Vice President and
                                      Chief Financial Officer