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 QUARTERLY PERIOD ENDED APRIL 30, 1997

                                       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
                   April 30, 1997 and July 31, 1996 (Unaudited
                                 (In thousands)
                                     ASSETS

                                                        April 30      July 31
                                                        --------      -------

Investments in Debt Securities:
     Mortgage-Backed Securities 
        available for sale                             $  5,603       $  6,280
     Participating Insured Mortgage 
        Loans available for sale                         18,387         18,539
                                                       --------       --------
                                                         23,990         24,819

Cash and cash equivalents                                 1,061          3,637
Interest and other receivables                              168            172
Deferred expenses, net                                      552            615
                                                       --------       --------
                                                       $ 25,771       $ 29,243
                                                       ========       ========

                        LIABILITIES AND PARTNERS' CAPITAL

Accounts payable - affiliates                          $     29       $     30
Accounts payable and accrued expenses                        35             51
Partners' capital                                        25,707         29,162
                                                       --------       --------
                                                       $ 25,771       $ 29,243
                                                       ========       ========


                   STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
          For the nine months ended April 30, 1997 and 1996 (Unaudited)
                                 (In thousands)
                                                               Corporate
                                                               Limited
                                             General           Partner and
                                             Partner           Unitholders
                                             -------           -----------

Balance at July 31, 1995                     $    1             $ 30,244
Net unrealized holding losses 
  on debt securities                              -                  (48)
Cash distributions                              (14)              (2,110)
Net income                                       14                1,327
                                             ------             --------
Balance at April 30, 1996                    $    1             $ 29,413
                                             ======             ========

Balance at July 31, 1996                     $    1             $ 29,161
Net unrealized holding losses
  on debt securities                              -                  (81)
Cash distributions                              (14)              (4,652)
Net income                                       13                1,279
                                             ------             --------
Balance at April 30, 1997                    $    0             $ 25,707
                                             ======             ========





                             See accompanying notes.


<PAGE>


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

                              STATEMENTS OF INCOME
     For the three and nine months ended April 30, 1997 and 1996 (Unaudited)
                      (In thousands, except per Unit data)

                                      Three Months Ended     Nine Months Ended
                                          April 30,               April 30,
                                      ------------------    -------------------
                                        1997      1996       1997        1996
                                        ----      ----       ----        ----

Revenues:
     Interest income - Investments     $  497    $  521      $1,506     $1,580
     Interest income - Money Market        31        45         131        144
                                       ------    ------      ------     ------
                                          528       566       1,637      1,724


Expenses:
     Management fees                       53        55         161        168
     General and administrative            36        52         121        152
     Amortization expense                  21        21          63         63
                                       ------    ------      ------     ------
                                          110       128         345        383
                                       ------    ------      ------     ------
Net income                             $  418    $  438      $1,292     $1,341
                                       ======    ======      ======     ======

Net income per Unit of
  Depositary Receipt                   $0.75     $ 0.79      $ 2.32     $ 2.41
                                       =====     ======      ======     ======

Cash distributions per Unit
  of Depositary Receipt                $5.94     $ 1.26      $ 8.43     $ 3.82
                                       =====     ======      ======     ======

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 CASH FLOWS
         For the nine months ended April 30, 1997 and 1996 (Unaudited)
                Increase (Decrease) in Cash and Cash Equivalents
                                 (In thousands)

                                                         1997            1996
                                                         ----            ----
Cash flows from operating activities:
   Net income                                          $ 1,292         $  1,341
   Adjustments to reconcile net income to
     net cash provided by operating activities:
     Amortization expense                                   63               63
     Amortization of discount/premium on debt
      securities                                            13               13
     Changes in assets and liabilities:
       Interest and other receivables                        4                8
       Accounts payable - affiliates                        (1)               -
       Accounts payable and accrued expenses               (16)              (4)
                                                       -------         --------
         Total adjustments                                  63               80
                                                       -------         --------
         Net cash provided by operating activities       1,355            1,421
                                                       -------         --------

Cash flows from investing activities:
   Principal collections on Mortgage-Backed Securities     678              885
   Principal collections on Participating Insured
     Mortgage Loans                                         57               52
                                                       -------         --------
         Net cash provided by investing activities         735              937
                                                       -------         --------

Cash flows from financing activities:
   Distributions to Unitholders and partners            (4,666)          (2,124)
                                                       -------         --------

Net (decrease) increase in cash and cash equivalents    (2,576)             234

Cash and cash equivalents, beginning of period           3,637            3,274
                                                      --------         --------

Cash and cash equivalents, end of period               $ 1,061          $ 3,508
                                                       =======          =======



















                             See accompanying notes.


<PAGE>


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


1. Organization 

          The  accompanying  financial  statements,  footnotes  and  discussions
     should be read in conjunction  with the financial  statements and footnotes
     contained in the  Partnership's  Annual  Report for the year ended July 31,
     1996. 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.  The  accounting  adjustments
     included 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 require  management to make estimates and assumptions that
     affect the reported  amounts of assets and  liabilities  and disclosures of
     contingent  assets and  liabilities  as of April 30, 1997 and July 31, 1996
     and  revenues  and  expenses  for the three and nine months ended April 30,
     1997  and  1996.  Actual  results  could  differ  from  the  estimates  and
     assumptions used.

2.  Mortgage-Backed Securities

         At  April  30,  1997  and  July  31,   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):
<TABLE>
<CAPTION>


                                   April 30, 1997                             July 31, 1996
                        -------------------------------          --------------------------------------
                        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    $ 1,943      $ 1,807       $ 1,794           $ 2,228    $ 2,071      $ 2,055

      9.0% GNMA Pool        291          281           291               362        347          358

      8.0% GNMA Pool      3,071        3,009         3,142             3,363      3,326        3,468

      7.5% GNMA Pool        298          299           296               327        330          328
                        -------     --------     ---------           -------    -------      -------
                        $ 5,603      $ 5,396       $ 5,523           $ 6,280    $ 6,074      $ 6,209
                        =======      =======       =======           =======    =======      =======
</TABLE>


            As  discussed  further  in  the  Annual  Report,  the  Partnership's
      investments in MBS are carried at fair value as of April 30, 1997 and July
      31, 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.
<PAGE>
3.    Investments in Participating Insured Mortgage Loans

            Participating  Insured  Mortgage  Loans  secured by GNMA  securities
      outstanding  at April  30,  1997 and July 31,  1996 are  comprised  of the
      following (in thousands):
<TABLE>
<CAPTION>

                                                           April 30, 1997                    July 31, 1996
                                                   --------------------------      -----------------------------
      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%          $ 7,390          $ 7,175         $ 7,441         $ 7,198
      279119      Emerald Cove        8.75%           10,997           10,658          11,098          10,697
                                                     -------          -------         -------         -------
                                                     $18,387          $17,833         $18,539         $17,895
                                                     =======          =======         =======         =======
</TABLE>

           As  discussed  further  in  the  Annual  Report,   the  Partnership's
      investments in  Participating  Insured  Mortgage Loans are carried at fair
      value as of April 30, 1997 and July 31, 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.

           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.  Scheduled principal repayments of $142,020 have been received
      through April 30, 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  $10,783,900.  The  Partnership  paid a premium  of
      approximately  $108,000  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  included  in the  balance of the  Participating  Insured
      Mortgage Loan on the accompanying balance sheets and is being amortized on
      the  straight-line  method,  which  approximates  the  effective  interest
      method,  over 15 years.  Scheduled  principal  repayments of $184,774 have
      been received through April 30, 1997.
<PAGE>

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
      $161,000  and  $168,000 for the nine months ended April 30, 1997 and 1996,
      respectively.  Such management fees include an Asset  Management Fee equal
      to  0.75%  per  annum  of  the  outstanding   principal   balance  of  the
      Partnership's  mortgage  securities and additional  asset  management fees
      equal to 2% of the Partnership's  distributable  cash, as defined.  Of the
      total  management  fees  incurred for the nine months ended April 30, 1997
      and 1996,  $29,000 in each period  represents  additional asset management
      fees paid to PWPI.  Accounts  payable -  affiliates  at April 30, 1997 and
      July 31, 1996 consists of $29,000 and $30,000, respectively, of management
      fees payable to the General Partner and its affiliates.

            Included in general and administrative  expenses for the nine months
      ended  April  30,  1997 and 1996 is  $72,000  and  $71,000,  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
      nine-month  periods  ended  April 30,  1997 and 1996 is $4,000 and $9,000,
      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

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

      The  Partnership's   investments  are  structured  to  provide  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  market 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 overall  real
estate  market  conditions  and by the specific  performance  of the  properties
securing  the   Partnership's   participation   interests.   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 would be expected to be slightly above both
their  aggregate face value and amortized  cost,  which includes any unamortized
discounts or premiums.  As of April 30, 1997,  the  Partnership's  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.

      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.  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  reduced  the
Partnership's  investment  income and increased the  outstanding  balance of the
Partnership's  cash reserves.  Since it is unlikely that there will 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 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  capital  distribution  made on March  14,  1997,  in
addition to the regular  quarterly  distribution  of $12.31 per original  $1,000
investment paid on the same date for the quarter ended January 31, 1997.

      Regular  quarterly  distributions  are comprised of investment  income and
return of capital  which  results from the  scheduled  amortization  of mortgage
principal  as well as  principal  prepayments  from the  non-participating  GNMA
mortgage-backed  securities.  Such principal  prepayments are  unpredictable and
have been high during recent years,  but have declined during fiscal 1997. Based
on this decline in the rate of principal  prepayments and the  expectation  that
this  decline  will  continue in the  future,  the  Partnership  has 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 has changed
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 during the next twelve
months,  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.
<PAGE>
        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  91% for the  quarter  ended  April 30,  1997,
compared to 90% for the prior  quarter and 96% for the same  quarter a year ago.
The 1% increase in average  occupancy  over the prior quarter  resulted from new
tenants  attracted  by the rental  concessions  currently  being  offered by the
property's  leasing team on certain unit types. When compared to the same period
in the prior year,  average  occupancy has declined due to the competition  from
several newly developed  properties  which have opened in this submarket  during
fiscal 1997 and which have offered  rental  concessions  in order to  accelerate
their  leasing  progress.  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 under construction and an
additional 600 apartment  units under  proposal,  the property's  management and
leasing team  anticipates that vacancy levels may increase 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.  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.  There  are no  ongoing
prepayment discussions with the Emerald Cove owner at the present time.

        Occupancy at the Quarter Mill Apartments  during the quarter ended April
30, 1997 averaged 98%,  unchanged  from the prior quarter.  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 1996,  the
Partnership received  approximately  $46,000,  representing its 30% share of the
surplus  cash,  as defined,  generated by the Quarter Mill property for calendar
year 1995.  Effective in fiscal 1996,  the Quarter  Mill  Participating  Insured
Mortgage  Loan became open to  prepayment  with a specified  prepayment  penalty
which declines  ratably,  from 10% to 2%, over the next five years. To date, the
Quarter  Mill  owner  has  given  no  indication  of an  intent  to  prepay  the
outstanding loan in the near term.

        At April 30, 1997,  the  Partnership  had cash and cash  equivalents  of
approximately $1,061,000.  Such amounts will be utilized for the working capital
requirements of the Partnership and for  distributions to the  Unitholders.  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
Three Months Ended April 30, 1997
---------------------------------

        Net income  decreased  by $20,000 for the three  months  ended April 30,
1997,  when  compared  to the same  period in the prior  year,  due to a $38,000
decline in total revenues which was partially  offset by a $18,000  reduction in
operating expenses.  The decrease in revenues can be attributed primarily to the
$24,000 decline in interest income from Participating Insured Mortgage Loans and
non-participating MBS. This decline in interest income resulted from a reduction
in the  average  outstanding  principal  balances  of  such  investments  due to
scheduled principal  amortization and prepayments on the MBS. A $14,000 decrease
in  money  market  interest  income  in  the  current  three-month  period  also
contributed to the decline in the Partnership's total revenues.  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 $16,000  decline  in general  and  administrative  expenses  and a $2,000
reduction in management  fees.  General and  administrative  expenses  decreased
primarily due to a reduction in certain required  professional  services,  while
the decrease in management fees reflects the declining principal balances of the
Partnership's  outstanding  mortgage  securities,   upon  which  such  fees  are
primarily based. Nine Months Ended April 30, 1997

Nine Months Ended April 30, 1997
---------------------------------
     
   Net income  decreased  by $49,000  for the nine  months  ended April 30,
1997,  when  compared to the same  period in the prior  year,  due to an $87,000
decline in total revenues which was partially  offset by a $38,000  reduction in
operating  expenses.  The  decrease in revenues  can be  attributed  mainly to a
$74,000 decline in interest income from Participating Insured Mortgage Loans and
non-participating MBS. This decline in interest income resulted from a reduction
in the  average  outstanding  principal  balances  of  such  investments  due to
scheduled principal  amortization and prepayments on the MBS. A $13,000 decrease
in  money  market  interest  income  in  the  current   nine-month  period  also
contributed to the decline in the Partnership's total revenues.  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 $31,000 a reduction in general and  administrative  expenses and a $7,000
decline in  management  fees.  General  and  administrative  expenses  decreased
primarily due to a reduction in certain required  professional  services,  while
the decrease in management fees reflects the declining principal balances of the
Partnership's  outstanding  mortgage  securities,   upon  which  such  fees  are
primarily based.
<PAGE>



                                     PART I
                               Other Information

Item 1. Legal Proceedings

     As previously  disclosed,  the Partnership's General Partners were named as
defendants  in  a  class  action  lawsuit   against   PaineWebber   Incorporated
("PaineWebber") and a number of its affiliates relating to PaineWebber's sale of
70 direct  investment  offerings,  including  the  offering of  interests in the
various limited partnership investments and REIT stocks, including those offered
by the  Partnership.  In  January  1996,  PaineWebber  signed  a  memorandum  of
understanding  with the plaintiffs in the class action 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 a 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.  As
part  of  the  settlement   agreement,   PaineWebber  has  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  addition,  in  December  1996
PaineWebber agreed to settle the Abbate and Barstad actions discussed further in
the Annual Report.  Final  releases and dismissals  with regard to these actions
were received in April 1997. Based on the settlement  agreements discussed above
covering all of the  outstanding  shareholder  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.

Item 2. through 5.    NONE

Item 6. Exhibits and Reports on Form 8-K

(a)     Exhibits:     NONE

(b)     Reports on Form 8-K:

        No  reports  on Form 8-K have been  filed by the  registrant  during the
quarter for which this report is filed.



<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: June 9, 1997             By:     /s/ Walter V. Arnold
                                       --------------------
                                       Walter V. Arnold
                                       Vice President and
                                       Chief Financial Officer