<PAGE>1
                                    FORM 10-K
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549


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

For the fiscal year ended     December 31, 1996
                              ------------------

Commission file number             1-10359
                              -----------------

                           CRI LIQUIDATING REIT, INC.
-----------------------------------------------------------------
               (Exact name of registrant as specified in charter)

             Maryland                            52-1647537
-------------------------------------      ----------------------
  (State or other jurisdiction of           (I.R.S. Employer
  incorporation or organization)            Identification No.)

11200 Rockville Pike, Rockville, Maryland           20852
-----------------------------------------  ----------------------
(Address of principal executive offices)          (Zip Code)

                                 (301) 816-2300
-----------------------------------------------------------------
              (Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

                                     Name of each exchange on
      Title of each class                 which registered
--------------------------------   -----------------------------
         Common Stock              New York Stock Exchange, Inc.

           Securities registered pursuant to Section 12(g) of the Act:

                                      NONE
-----------------------------------------------------------------
                                (Title of class) 

<PAGE>2

     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 and (2) has been subject to such filing
requirements for the past 90 days.  Yes [X]   No [ ]  

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

     As of February 7, 1997, 30,422,711 shares of common stock were outstanding.


                       DOCUMENTS INCORPORATED BY REFERENCE
-----------------------------------------------------------------

     Form 10-K Parts                     Document
     ----------------                    ---------

  I, II, III and IV           1996 Annual Report to Shareholders
                          

<PAGE>3
                           CRI LIQUIDATING REIT, INC.

                         1996 ANNUAL REPORT ON FORM 10-K


                                TABLE OF CONTENTS

                                     PART I
                                     ------

                                                         Page 
                                                         ----

Item 1.   Business  . . . . . . . . . . . . . . . . . .     4
Item 2.   Properties  . . . . . . . . . . . . . . . . .     4
Item 3.   Legal Proceedings . . . . . . . . . . . . . .     4
Item 4.   Submission of Matters to a Vote
            of Security Holders . . . . . . . . . . . .     4

                                     PART II
                                     -------
Item 5.   Market for the Registrant's Common Stock
            and Related Stockholder Matters . . . . . .     5
Item 6.   Selected Financial Data . . . . . . . . . . .     5
Item 7.   Management's Discussion and Analysis
            of Financial Condition and Results
            of Operations . . . . . . . . . . . . . . .     5
Item 8.   Financial Statements and Supplementary Data .     5
Item 9.   Changes in and Disagreements with Accountants
            on Accounting and Financial Disclosure  . .     5

                                    PART III
                                    --------
Item 10.  Directors and Executive Officers
            of the Registrant . . . . . . . . . . . . .     6
Item 11.  Executive Compensation  . . . . . . . . . . .     8
Item 12.  Security Ownership of Certain Beneficial  
            Owners and Management . . . . . . . . . . .     9
Item 13.  Certain Relationships and Related Transactions   10

                                     PART IV
                                     -------

Item 14.  Exhibits, Financial Statement Schedules, and
            Reports on Form 8-K . . . . . . . . . . . .    11

Signatures  . . . . . . . . . . . . . . . . . . . . . .    14

Cross Reference Sheet . . . . . . . . . . . . . . . . .    16

Exhibit Index . . . . . . . . . . . . . . . . . . . . .    17 

<PAGE>4

                                     PART I

ITEM 1.   BUSINESS

Development and Description of Business
---------------------------------------
     Information concerning the business of CRI Liquidating REIT, Inc. (the
Liquidating Company) is contained in Part II, Item 7, Management's Discussion
and Analysis of Financial Condition and Results of Operations, and in Notes 1
and 5 of the notes to the financial statements of the Liquidating Company
contained in Part IV (filed in response to Item 8 hereof), which is incorporated
herein by reference.

Employees
---------
     The Liquidating Company has no employees. Services are performed for the
Liquidating Company by CRI Insured Mortgage Associates Adviser Limited
Partnership (the Adviser) and agents retained by it.  As discussed in Note 3 of
the notes to the financial statements, the Adviser has entered into a
reimbursement agreement (the Reimbursement Agreement) with an affiliate of
CRIIMI MAE Inc. (CRIIMI MAE), a self-managed, full service commercial mortgage
company which owns approximately 57% of the outstanding common stock of the
Liquidating Company.  Pursuant to the Reimbursement Agreement, the employees of
CRIIMI MAE Management, Inc. (CRIIMI Management) perform certain functions on
behalf of the Adviser under the advisory agreement.  Neither CRIIMI Management
nor CRIIMI MAE receive advisory fees under the advisory agreement.  However,
CRIIMI Management is reimbursed, at cost, for its employees' time and expenses
pursuant to the Reimbursement Agreement.

ITEM 2.   PROPERTIES

     The Liquidating Company maintains its corporate offices at 11200 Rockville
Pike, Rockville, Maryland.

ITEM 3.   LEGAL PROCEEDINGS

     None.

ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     No matters were submitted to the security holders to be voted on during the
fourth quarter of 1996. 

<PAGE>5

                                     PART II

ITEM 5.   MARKET FOR THE REGISTRANT'S COMMON STOCK AND
            RELATED STOCKHOLDER MATTERS

     (a), (b) and (c)     The information required in these sections is included
                          in Selected Financial Data on pages 19 through 21 of
                          the 1996 Annual Report to Shareholders, which section
                          is incorporated herein by reference.

ITEM 6.   SELECTED FINANCIAL DATA

     Reference is made to Selected Financial Data on pages 19 through 21 of the
1996 Annual Report to Shareholders, which section is incorporated herein by
reference.

ITEM 7.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
            CONDITION AND RESULTS OF OPERATIONS

     Reference is made to Management's Discussion and Analysis of Financial
Condition and Results of Operations on pages 22 through 26 of the 1996 Annual
Report to Shareholders, which section is incorporated herein by reference.

ITEM 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     Reference is made to pages 28 through 44 of the 1996 Annual Report to
Shareholders for the financial statements of the Liquidating Company, which are
incorporated herein by reference.  See also Item 14 of this report for
information concerning financial statements and financial statement schedules.

ITEM 9.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
            ACCOUNTING AND FINANCIAL DISCLOSURE

     None. 

<PAGE>6

                                    PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

     (a), (b), (c) and (e)

DIRECTORS

     Members of the Corporation's Board serve staggered three-year terms.  

<TABLE><CAPTION>

 Class I Directors
---------------------
                                                                       Year Term
        Name                   Principal Occupation            Age      Expires
---------------------      -----------------------------      -----    ---------
<S>                        <C>                                <C>      <C>
H. William Willoughby      Director and Secretary of the        50        1999
                           Corporation and of CRIIMI MAE
                           since 1989; President of the 
                           Corporation and of CRIIMI MAE 
                           since 1990; Director and share-
                           holder of C.R.I, Inc. ("CRI") 
                           an affiliate of the 
                           Corporation's adviser, since 
                           1974;  Secretary of CRI from 
                           1974 to 1990 and President of 
                           CRI since 1990.

Garrett G. Carlson, Sr.*   Director of the Corporation and      60        1999
                           of CRIIMI MAE since 1989; 
                           Chairman of the Board of SCA
                           Realty Holdings, Inc. since
                           1985; President of Can-
                           American Realty Corp. and 
                           Canadian Financial Corp. since 
                           1979 and 1974, respectively; 
                           Vice Chairman of Shelter 
                           Development Corporation Ltd. 
                           since 1983 and President of 
                           Garrett Real Estate Development 
                           since 1982.

Class II Directors
------------------
       Name
------------------
 Robert F. Tardio*         Director of the Corporation and      67        1997
                           of CRIIMI MAE since 1989; Chair-
                           man of the Tardio Corporation 
                           from 1986 to 1995;  Chairman 
                           of the Board and Chief Executive 
                           Officer of Sovran Bank/Maryland 
                           from April 1986 to June 1986; 
                           Chairman of the Board and Chief 
                           Executive Officer of Suburban 
                           Bancorp and Suburban Bank, 
                           Bethesda, MD, from 1979 to 1986; 
                           Independent Financial Consultant 
                           from 1986 to present; Washington 
                           Mutual Investors Fund 
                           (Advisory Board), AW Industries 
                           and Chairman of the Washington  

<PAGE>7

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT -
            Continued

                           Metropolitan Airports Authority.

 Class II Directors
---------------------
                                                                       Year Term
        Name                   Principal Occupation            Age      Expires
---------------------      -----------------------------      -----    ---------
<S>                        <C>                                <C>      <C>
Larry H. Dale*             Director of the Corporation and      51        1997
                           of CRIIMI MAE since January 1996; 
                           Senior Adviser, Housing Investment 
                           Fund, Federal National Mortgage 
                           Association ("Fannie Mae"); 
                           Executive Director of Fannie 
                           Mae's National Housing Impact 
                           Division from 1993 to 1995; 
                           Senior Vice President-marketing 
                           and mortgage-backed securities 
                           and Senior Vice President-
                           multifamily finance and housing 
                           initiatives for Fannie Mae from 
                           1987 and 1993; Vice President 
                           with Newman and Associates from 
                           1984 to 1987; President of Mid 
                           City Financial Corporation from 
                           1981 to 1983;  with HUD from 
                           1971 to 1981, serving as a 
                           deputy to the assistant secretary 
                           for Housing/FHA Commissioner from 
                           1979 to 1981.

Class III Directors
-------------------
       Name
-------------------
William B. Dockser         Chairman of the Board of the         60        1998
                           Corporation and of CRIIMI MAE 
                           since 1989; Chairman of the Board 
                           and shareholder of CRI since 1974.

G. Richard Dunnells*       Director of the Corporation          59        1998
                           and of CRIIMI MAE since 1991; 
                           Partner in the Washington, D.C. 
                           office and Director of the law 
                           firm of Holland & Knight since 
                           January 1994; Chairman of the 
                           Washington, D.C. law firm of 
                           Dunnells & Duvall from 1989 to 
                           1993; Senior Partner of such law 
                           firm from 1973 to 1993; Special 
                           Assistant to the Under-Secretary 
                           and Deputy Assistant Secretary for 
                           Housing and Urban Renewal and Deputy 
                           Assistant Secretary for Housing 
                           Management with the U.S. Department 
                           of Housing and Urban Development 
                           from 1969 to 1973; President's 
                           Commission on Housing from 1981  
                           to 1982.

----------------------
*Unaffiliated Director

</TABLE>

<PAGE>8

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT -
            Continued

     Executive Officers.  In addition to Messrs. Dockser and Willoughby, whose
business experience is set forth above, Jay R. Cohen, 56, has served as
Executive Vice President of the Corporation and of CRIIMI MAE since 1989, and as
Treasurer of the Corporation and of CRIIMI MAE since 1990.  Mr. Cohen was Senior
Vice President   Mortgages of CRI from 1983 to June 1995 and President of CRICO
Mortgage Company, Inc., from 1985 to June 1995, at which time it merged into
CRIIMI MAE Management, Inc, a wholly owned subsidiary of CRIIMI MAE.  Frederick
J. Burchill, 48, has served as Executive Vice President of the Corporation since
1995 and of CRIIMI MAE since 1991.  Mr. Burchill served as Senior Vice President
of CRI from 1990 to June 1995.  Cynthia O. Azzara, 37, has served as Chief
Financial Officer of the Corporation and of CRIIMI MAE since 1994 and as Senior
Vice President of the Corporation and of CRIIMI MAE since 1995.  Ms. Azzara
served in the Accounting and Finance Departments of CRI from 1985 to June 1995. 

     (d)  There is no family relationship between any of the foregoing directors
          and executive officers.

     (f)  Involvement in certain legal proceedings.

          None.

     (g)  Promoters and control persons.

          Not applicable.

ITEM 11.  EXECUTIVE COMPENSATION

     None of the Corporation's executive officers received cash or any other
form of compensation from the Corporation during the year ended December 31,
1996.  Reference is made to Item 10 of this report and to Note 3 of the notes to
the financial statements on page 34 of the 1996 Annual Report to Shareholders,
which is incorporated herein by reference.

DIRECTORS' REMUNERATION

     Each Unaffiliated Director receives an aggregate fee of $7,000 per year for
services as a director plus a fee of $500 (for telephonic meetings) and $1,000
(for in-person meetings) for each meeting in which they participate, including
committee meetings held on days when the Board is not meeting.  In addition, the
Corporation reimburses directors and officers (including those affiliated with
CRI) for travel and other expenses incurred in connection with their duties as
directors or officers of the Corporation.  Messrs. Carlson, Dale, Dunnells and
Tardio were each paid $7,000 by the Corporation for their services as
Unaffiliated Directors during the year ended December 31, 1996, plus traveling
expenses, $1,000 per day for meetings attended and $500 per telephonic meeting
in which they participated. 

<PAGE>9

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
            MANAGEMENT

     BENEFICIAL OWNERSHIP OF COMMON SHARES

     The following table sets forth certain information regarding the beneficial
ownership of Common Shares as of December 31, 1996 by each person known by the
Corporation to own beneficially more than 5% of the outstanding Common Shares,
as well as certain information concerning the ownership of Common Shares by
directors or officers of the Corporation.  Unless otherwise indicated, the
voting and investment powers for the Common Shares listed are held solely by the
named holder.

<TABLE>
<CAPTION>
                                                  Percentage of 
                                                   Outstanding
  Name                            Shares          Common Shares
--------                         ----------       -------------
<S>                              <C>              <C>
CRIIMI MAE Inc.                  17,199,307          56.5%
H. William Willoughby                     0            --
William B. Dockser                        0            --
Garrett G. Carlson, Sr.                   0            --
Larry H. Dale                         1,000       Less than 1%
G. Richard Dunnells                     615       Less than 1%
Robert F. Tardio                          0            --
Cynthia O. Azzara                         0            --
Jay R. Cohen                              0            --
Frederick J. Burchill                     0            --
All Directors and Executive 
  Officers as a Group (9 persons)     1,615          Less than 1%

</TABLE>

     To the best of the Corporation's knowledge, as of December 31, 1996, no
other person owned more than 5% of the outstanding Common Shares, and no other
officer or director of the Corporation owned any Common Shares.

     In connection with the incurrence by CRIIMI MAE of certain indebtedness,
CRIIMI MAE has pledged 2,447,500 of the Corporation's Common Shares owned by
CRIIMI MAE (the "Pledged Shares") to Signet Bank.  Under the agreements relating
to the foregoing indebtedness, Signet Bank is entitled to direct the voting of
the Pledged Shares on any fundamental change item (which excludes any election
of directors or other "housekeeping" matters, but includes any matter which may
adversely affect the rights of holders of Common Shares or their right to
receive distributions thereon or the timing of such distributions).  If CRIIMI
MAE defaults on its obligations under such agreements, Signet Bank may direct
the voting of the Pledged Shares on all matters.  Except as described above, the
voting and investment powers for the Common Shares owned by CRIIMI MAE are held
solely by CRIIMI MAE. 

<PAGE>10

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     (a)  Transactions with management and others.

          The Liquidating Company has six directors, two of whom are also
          executive officers.  Note 3 of the notes to the financial statements,
          included in the 1996 Annual Report to Shareholders, which contains a
          discussion of the amounts, fees and other compensation paid or accrued
          by the Liquidating Company to the directors and officers and their
          affiliates, are incorporated herein by reference.

     (b)  Certain business relationships.

          The Liquidating Company has no business relationship with entities of
          which the general and limited partners of the Adviser are officers,
          directors or equity owners other than as set forth in Item 10 above or
          in this Item 13.

     (c)  Indebtedness of management.

          None.

     (d)  Transactions with promoters.

          Not applicable. 

<PAGE>11

                                     PART IV

ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND
            REPORTS ON FORM 8-K

(a)  List of documents filed as part of this report:

     1 and 2.  Financial Statements and Financial Statement
                 Schedules

     The following financial statements are incorporated herein by reference in
     Item 8 from the indicated pages of the 1996 Annual Report to Shareholders:

                                                                         Page   
     Description                                                       Number(s)
     -----------                                                       ---------
     Balance Sheets as of December 31,
       1996 and 1995                                                       28   

     Statements of Income for the years ended
       December 31, 1996, 1995 and 1994                                    29   

     Statements of Changes in Shareholders' Equity
       for the years ended December 31, 1996, 1995
       and 1994                                                            30   

     Statements of Cash Flows for the years ended
       December 31, 1996, 1995 and 1994                                    31   

     Notes to financial statements                                         32   

     The report of the Liquidating Company's independent public accountants with
     respect to the above listed financial statements appears on page 27 of the
     1996 Annual Report to 
     Shareholders.

     All other financial statements and schedules have been omitted since the
     required information is included in the financial statements or the notes
     thereto, or is not applicable or required.

     (a) 3.    Exhibits (listed according to the number assigned in the table in
               Item 601 of Regulation S-K)

               Exhibit No. 3 - Articles of incorporation and bylaws.

               d.   Articles of Incorporation of CRI Liquidating Maryland REIT,
                    Inc. (Incorporated by reference from Exhibit 3(d) to the
                    Quarterly Report on Form 10-Q for the quarter ended June 30,
                    1993). 

<PAGE>12


ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND
            REPORTS ON FORM 8-K - Continued

               e.   Bylaws of CRI Liquidating Maryland REIT, Inc. (Incorporated
                    by reference from Exhibit 3(e) to the Quarterly Report on
                    Form 10-Q for the quarter ended June 30, 1993).

               f.   Agreement and Articles of Merger between CRI Liquidating
                    Maryland REIT, Inc. and CRI Liquidating REIT, Inc. as filed
                    with the Office of the Secretary of the State of Delaware. 
                    (Incorporated by reference from Exhibit 3(f) to the
                    Quarterly Report on Form 10-Q for the quarter ended June 30,
                    1993).

               g.   Agreement and Articles of Merger between CRI Liquidating
                    Maryland REIT, Inc. and CRI Liquidating REIT, Inc. as filed
                    with the State Department of Assessment and Taxation for the
                    State of Maryland.  (Incorporated by reference from Exhibit
                    3(g) to the Quarterly Report on Form 10-Q for the quarter
                    ended June 30, 1993).

               Exhibit No. 10 - Material contracts.

               a.   Revised Form of Advisory Agreement.  (Incorporated by
                    reference from Exhibit No. 10.2 to the Registration
                    Statement dated July 18, 1989 Registration No. 33-27502).

               b.   Registration Rights Agreement, dated November 27, 1989
                    between the Registrant and CRI Insured Mortgage Association,
                    Inc. (Incorporated by reference from Exhibit 10(b) to the
                    Annual Report on Form 10-K for 1989).

               c.   Reimbursement Agreement, dated June 30, 1995 between CRIIMI
                    MAE Management, Inc. and CRI Insured Mortgage Associates
                    Adviser Limited Partnership.  (Incorporated by reference
                    from Exhibit 10(c) to the Annual Report on Form 10-K for
                    1995).

               Exhibit No. 13 - Annual Report to security holders, Form 10-Q or
               Quarterly Report to security holders.

               a.   1996 Annual Report to Shareholders.

               Exhibit No. 27 - Financial Data Schedule

               a.   Financial Data Schedule (Filed herewith). 

<PAGE>13


ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND
            REPORTS ON FORM 8-K - Continued

     (b)       Reports on Form 8-K

               No reports on Form 8-K were filed during the fourth quarter of
               1996.

     (c)       Exhibits

               The list of Exhibits required by Item 601 of Regulation S-K is
               included in Item (a)(3) above.

     (d)       Financial Statement Schedules

               See Item (a) 1 and 2 above. 

<PAGE>14

                                   SIGNATURES


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


                                    CRI LIQUIDATING REIT, INC.


February 14, 1997                   /s/ William B. Dockser     
-----------------------             -----------------------
DATE                                William B. Dockser
                                    Chairman of the Board and
                                      Principal Executive
                                      Officer 

<PAGE>15

          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
Registrant and in the capacities and on the dates indicated:

February 14, 1997                   /s/ William B. Dockser
-----------------------             -----------------------
DATE                                William B. Dockser
                                    Chairman of the Board 
                                      and Principal Executive
                                      Officer


February 14, 1997                   /s/ H. William Willoughby
-----------------------             -------------------------
DATE                                H. William Willoughby
                                    Director, President, and
                                      Secretary



February 14, 1997                   /s/ Cynthia O. Azzara
-----------------------             -------------------------
DATE                                Cynthia O. Azzara
                                    Senior Vice President, Chief
                                      Financial Officer and
                                      Principal Accounting
                                      Officer



February 14, 1997                   /s/ Jay R. Cohen
-----------------------             -------------------------
DATE                                Jay R. Cohen
                                    Executive Vice President
                                      and Treasurer


February 14, 1997                   /s/ Garrett G. Carlson
-----------------------             -------------------------
DATE                                Garrett G. Carlson, Sr.
                                    Director


February 14, 1997                   /s/ Larry H. Dale
-----------------------             -------------------------
                                    Larry H. Dale
                                    Director

February 14, 1997                   /s/ G. Richard Dunnells
-----------------------             -------------------------
DATE                                G. Richard Dunnells
                                    Director

February 14, 1997                   /s/ Robert F. Tardio
-----------------------             -------------------------
DATE                                Robert F. Tardio
                                    Director 

<PAGE>16

                                                        CROSS REFERENCE SHEET

          The item numbers and captions in Parts I, II, III and IV hereof and
the page and/or pages in the referenced materials where the corresponding
information appears are as follows:

<TABLE><CAPTION>

Item                                          Referenced Materials               Page     
----                                          --------------------          ---------------
<S>                                           <C>                           <C>            
5.   Market for the Registrant's              1996 Annual Report            19 through 21
     Common Stock and Related
     Stockholder Matters

6.   Selected Financial Data                  1996 Annual Report            19 through 21

7.   Management's Discussion and              1996 Annual Report            22 through 26
     Analysis of Financial 
     Condition and Results of
     Operations

8.   Financial Statements,                    1996 Annual Report            27 through 44
     including Auditors' Report
     and Supplementary Data

11.  Executive Compensation                   1996 Annual Report            34 through 36

13.  Certain Relationships and                1996 Annual Report            34 through 36
     Related Transactions

</TABLE> 

<PAGE>17

                                  EXHIBIT INDEX

Exhibit

(13)       1996 Annual Report to Shareholders

(27)       Financial Data Schedule 

<PAGE>18


















                           CRI LIQUIDATING REIT, INC.

                          ANNUAL REPORT TO SHAREHOLDERS 

<PAGE>19

                           CRI LIQUIDATING REIT, INC.

Selected Consolidated Financial Data
<TABLE><CAPTION>
                                                                   For the years ended December 31,  
                                               1996            1995             1994             1993          1992    
                                           ------------    ------------     ------------     ------------  ------------
<S>                                        <C>             <C>              <C>              <C>           <C>         

TAX BASIS ACCOUNTING 

Tax basis income                           $ 19,151,447    $ 18,993,272     $ 33,311,906     $ 35,517,491  $ 36,104,737

                                           ============    ============     ============     ============  ============

Composition of dividends per
  share for income tax purposes:

  Ordinary income                          $        .15    $        .31     $        .49     $        .81  $        .86
  Long-term capital gains                           .48             .31              .60              .36           .33
  Non-taxable dividend                             1.42            1.38             1.64             1.61          1.21
                                           ------------    ------------     ------------     ------------  ------------
                                           $       2.05    $       2.00     $       2.73     $       2.78  $       2.40
                                           ============    ============     ============     ============  ============
ACCOUNTING UNDER GENERALLY
  ACCEPTED ACCOUNTING PRINCIPLES

Mortgage investment income                 $  4,816,538    $  9,609,652     $ 15,394,255     $ 21,663,403  $ 24,531,636
Other income                                  1,014,998         986,862          568,049        2,947,933     2,731,623
Operating expenses                             (830,799)     (1,073,814)      (1,590,592)      (2,822,703)   (2,852,565)
Interest expense                                     --              --               --       (2,242,347)     (966,679)
Loss on investment in
  limited partnership                                --              --               --               --      (731,951)
Net gains from mortgage
  dispositions                                9,692,244       1,569,455       12,553,281        8,089,840     6,097,102
                                           ------------    ------------     ------------     ------------  ------------
     Net income                            $ 14,692,981    $ 11,092,155     $ 26,924,993     $ 27,636,126  $ 28,809,166
                                           ============    ============     ============     ============  ============

Net income per weighted
  average share outstanding                $        .48    $        .36     $        .89     $        .91  $        .95
                                           ============    ============     ============     ============  ============
Dividends per weighted average
  share outstanding                        $       2.05    $       2.00     $       2.73     $       2.78  $       2.40
                                           ============    ============     ============     ============  ============



Composition of dividends per share
  for financial statement purposes:

     Net income                            $        .48    $        .36     $        .89     $        .91  $        .95
     Return of capital                             1.57            1.64             1.84             1.87          1.45
                                           ------------    ------------     ------------     ------------  ------------
                                           $       2.05    $       2.00     $       2.73     $       2.78  $       2.40
                                           ============    ============     ============     ============  ============ 

<PAGE>20

                           CRI LIQUIDATING REIT, INC.

                                                                         As of December 31,           
                                                                         ------------------           

                                               1996            1995             1994             1993          1992
                                           ------------    ------------     ------------     ------------  ------------

Investment in mortgages                    $ 54,448,533    $114,685,204     $154,373,576     $243,095,642  $231,808,424
                                           ============    ============     ============     ============  ============
Mortgages held for disposition             $         --    $         --     $         --     $         --  $ 15,463,528
                                           ============    ============     ============     ============  ============
Total assets                               $ 59,035,868    $119,511,571     $159,425,357     $248,927,134  $254,233,958
                                           ============    ============     ============     ============  ============
Shareholders' equity                       $ 58,888,551    $119,276,978     $159,271,081     $248,497,177  $254,065,662
                                           ============    ============     ============     ============  ============
</TABLE>

     The selected statement of income data presented above for the years ended
December 31, 1996, 1995 and 1994, and the balance sheet data as of December 31,
1996 and 1995, are derived from and are qualified by reference to the
Liquidating Company's financial statements which have been included elsewhere in
this Annual Report to Shareholders. The statement of income data for the years
ended December 31, 1993, 1992 and the balance sheet data as of December 31,
1994, 1993 and 1992 are derived from audited financial statements not included
in this Annual Report to Shareholders.  This data should be read in conjunction
with the financial statements and the notes thereto.

Market Data
-----------
     On November 28, 1989, the Liquidating Company was listed on the New York
Stock Exchange (Symbol CFR).  Prior to that date, there was no public market for
the Liquidating Company's shares.  As of December 31, 1996 and 1995, there were
30,422,711 shares held by approximately 8,800 and  9,000 investors,
respectively.  The following table sets forth the high and low closing sales
prices and the dividends per share for the Liquidating Company shares during the
periods indicated: 

<PAGE>21

                           CRI LIQUIDATING REIT, INC.

                                           1996                 
                           -----------------------------------
                               Sales Price          Dividends
      Quarter Ended          High        Low        per Share
      -------------        --------    -------      ----------

      March 31,            $  3 7/8    $ 3 1/2      $   1.94
      June 30,                2 1/8      1 5/8          0.04
      September 30,           1 7/8      1 3/4          0.03
      December 31,            1 7/8      1 3/4          0.04
                                                    --------
                                                    $   2.05
                                                    ========

                                         1995
                           ----------------------------------
                               Sales Price          Dividends
      Quarter Ended          High        Low        per Share
      -------------        --------    -------      ----------

      March 31,            $  5        $ 4 3/8      $   1.74
      June 30,                3 5/8      3 1/4          0.08
      September 30,           3 3/4      3 3/8          0.10
      December 31,            3 5/8      3 3/8          0.08
                                                    --------
                                                    $   2.00
                                                    ======== 

<PAGE>22

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

General and Plan of Liquidation
-------------------------------
     CRI Liquidating REIT, Inc. (the Liquidating Company), formed in November
1989, is a finite-life, self-liquidating real estate investment trust (REIT)
which made investments in United States government insured and guaranteed
mortgage investments secured by multifamily housing complexes located throughout
the United States.  Pursuant to its Board-approved business plan, the
Liquidating Company disposed of its remaining 11 mortgages in January 1997 and
does not intend to acquire any additional mortgage investments.  The Liquidating
Company shares trade on the New York Stock Exchange under the trading symbol
CFR.  However, as further discussed below, upon completion of the Plan of 
liquidation, it is anticipated that such shares will be delisted.

     The Liquidating Company's Board of Directors (the "Board of Directors") has
approved a plan of complete liquidation and dissolution (the "Plan") and has
recommended that the Liquidating Company's shareholders vote to approve the Plan
at a Special Meeting of shareholders.  The Liquidating Company has filed proxy
materials with the Securities and Exchange Commission to solicit shareholder
approval of the Plan.  If the plan is approved by the Liquidating Company's
shareholders, the Liquidating Company will, pursuant to the Plan, dissolve the
Liquidating Company and proceed to dispose of its assets after providing for its
liabilities.  There is no time period required by the Plan or law within which
the Liquidating Company must wind up its affairs and complete its liquidation. 
However, the Liquidating Company believes this process will be substantially
complete by December 31, 1997.

     The Liquidating Company is governed by the Board of Directors which
includes the two shareholders of C.R.I., Inc. (CRI).  The Board of Directors has
engaged CRI Insured Mortgage Associates Adviser Limited Partnership (the
Adviser) to act in the capacity of adviser to the Liquidating Company.  The
Adviser's general partner is CRI, and its limited partners include the
shareholders of CRI.  The Adviser (i) manages the Liquidating Company's assets
with the goal of maximizing the returns to shareholders and (ii) conducts the
day-to-day operations of the Liquidating Company.  The Adviser receives fees in
connection with the administration and operation of the Liquidating Company. 
The Adviser also formerly acted in a similar capacity for CRIIMI MAE Inc.
(CRIIMI MAE), a REIT which owns approximately 57% of the Liquidating Company's
outstanding common stock.  However, effective June 30, 1995, CRIIMI MAE became a
self-managed, self-administered company and, as a result, the Adviser no longer
advises CRIIMI MAE.

     As part of the Liquidating Company's Business Plan, during the year ended
December 31, 1996, the Liquidating Company disposed of 11 mortgage investments
(all Voluntary Dispositions) which constituted approximately 52% of the December
31, 1995 tax basis carrying value.  As of December 31, 1996, the Liquidating
Company's portfolio consisted of 11 government insured multifamily mortgages
with face values ranging from approximately $1.5 million to $10.4 million with
an average balance of approximately $4.9 million.  The 11 mortgages had a coupon
rate of 7.50%.  As of December 31, 1996, the remaining portfolio had a weighted
average net coupon rate of approximately 7.4% and a weighted average net
effective interest rate of approximately 11.3%.  Maturities in the portfolio
ranged from approximately 22 to 27 years with a weighted average remaining term
based on amortized cost of approximately 25 years.

     In January 1997, the Liquidating Company sold the 11 remaining mortgage
assets, generating proceeds of approximately $54 million and resulting in
financial statement and tax basis gains of approximately $14 million.  The
Liquidating Company expects to distribute to shareholders the net disposition
proceeds from the recent sale as part of the first quarter 1997 dividend. 
Pending distribution to shareholders, the proceeds have been invested in short-
term interest bearing investments.  After this sale of mortgages, the Company's

<PAGE>23

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

remaining assets consist primarily of cash and equity investments in three
limited partnerships.   These equity investments have no remaining book value
for Generally Accepted Accounting Principle (GAAP) purposes and have a tax basis
of approximately $3.7 million at December 31, 1996.  In February 1997, the 
Liquidating Company received $1.2 million in cash from one of the equity
investments.

Liquidity
---------
     Because the Liquidating Company is a liquidating entity, a substantial
portion of the dividends paid to shareholders represents return of capital.  For
the years 1996, 1995 and 1994, the Liquidating Company paid dividends of $2.05,
$2.00 and $2.73 per share, respectively, of which approximately $1.57, $1.64 and
$1.84 per share, respectively, represented return of capital for financial
statement purposes.  For tax purposes, the portion representing a non-taxable
dividend for 1996, 1995 and 1994 was approximately $1.42, $1.38 and $1.64,
respectively.  As of December 31, 1996, there were no commitments for capital
expenditures.

     Although the mortgage investments yielded a fixed monthly mortgage payment
once purchased, the cash dividends paid to shareholders have varied during each
year due to (1) the fluctuating yields in the short-term money market where the
monthly mortgage payments received  are temporarily invested prior to the
payment of quarterly dividends, (2) the reduction in the asset base and monthly
mortgage payments due to monthly mortgage payments received or mortgage
dispositions, (3) variations in the cash flow received from the Participations,
and (4) changes in the Liquidating Company's operating expenses.

REIT Status
-----------
     The Liquidating Company has qualified and intends to continue to qualify as
a REIT under Sections 856-860 of the Internal Revenue Code.  As a REIT, the
Liquidating Company does not pay taxes at the corporate level.  Qualification
for treatment as a REIT requires the Liquidating Company to meet certain
criteria, including certain requirements regarding the nature of its ownership,
assets, income and distributions of taxable income.

Results of Operations
---------------------
1996 Versus 1995
----------------
     Total income decreased by $4.8 million or 45% to $5.8 million for 1996 from
$10.6 million for 1995.  This decrease was due primarily to a reduction in
mortgage investment income, as discussed below.

     Mortgage investment income decreased by $4.8 million or 50% to $4.8 million
for 1996 from $9.6 million for 1995.  This decrease was principally the result
of a reduction in the mortgage base resulting from the disposition of mortgage
investments during 1996.

     Total expenses decreased by approximately $243,000 or 24% to $831,000 for
1996 from $1.1 million for 1995. This decrease was principally due to decreases
in general and administrative expenses, amortization of deferred costs, mortgage
servicing fees and annual fees paid to the Adviser, as discussed below.

     General and administrative expenses decreased by approximately $167,000 or
30% from approximately $552,000 for 1995 to approximately $385,000 for 1996
primarily as a result of a reduction in payroll and related expenses and
professional fees resulting from a reduction in the mortgage base during 1996.

     Annual Fees are paid to the Adviser for managing the Liquidating Company
portfolio.  These fees include a base component equal to a percentage of average

<PAGE>24

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

invested assets.  In addition, Annual Fees paid to the Adviser by the
Liquidating Company may include a performance-based component that is referred
to as the deferred component.  The deferred component, which is also calculated
as a percentage of average invested assets, is computed each quarter but paid
(and expensed) only upon meeting certain cumulative performance goals.  If these
goals are not met, the deferred component accumulates and may be paid in the
future if cumulative goals are met.  In addition, certain incentive fees are
paid by the Liquidating Company on a current basis if certain performance goals
are met.

     Annual Fees decreased by approximately $34,000 or 8% to approximately
$382,000 for 1996 from approximately $416,000 for 1995.  This decrease was
primarily a result of the reduction in the Liquidating Company's mortgage base
which is a component used in determining the Annual Fees payable by the
Liquidating Company.  The required yield was achieved during all four quarters
of 1996 as compared to the first quarter of 1995 only, resulting in an increase
in deferred management fees paid from $28,467 in 1995 to $168,307 in 1996.  The
$168,307 paid in 1996 included deferred management fees of $86,759 from 1995.

     Mortgage servicing fees decreased by approximately $32,000 or 46% to
approximately $38,000 for 1996 from approximately $70,000 for 1995.  This
decrease resulted from the reduction in the Liquidating Company's mortgage base.

     Amortization of deferred costs decreased by approximately $10,000 or 28% to
approximately $26,000 for 1996 from approximately $36,000 for 1995.  This
decrease resulted from the reduction in the Liquidating Company's mortgage base.

     Net gains on mortgage dispositions increased by approximately $8.1 million
to $9.7 million in 1996 from $1.6 million in 1995.  The gains or losses on
mortgage dispositions are based on the number, carrying amounts and proceeds of
mortgage investments disposed of during the period.  The increase in gains from
mortgage dispositions was primarily due to the sale of 11 mortgage investments
in 1996, all of which resulted in both financial statement and tax basis gains. 
The 11 dispositions resulted in net financial statement gains of approximately
$9.7 million and tax basis gains of approximately $14.5 million.  This compares
to the disposition of 22 mortgage investments during 1995 that generated
financial statement gains of approximately $1.6 million and tax basis gains of
approximately $9.5 million.

1995 Versus 1994
----------------
     Total income decreased by $5.4 million or 34% to $10.6 million for 1995
from $16.0 million for 1994.  This decrease was due primarily to a reduction in
mortgage investment income, partially offset by an increase in other investment
income, as discussed below.

     Mortgage investment income decreased by $5.8 million or 38% to $9.6 million
for 1995 from $15.4 million for 1994.  This decrease was principally the result
of a reduction in the mortgage base resulting from the disposition of mortgage
investments during 1995.

     Other income increased by approximately $419,000 or 74% to approximately
$987,000 for 1995 from approximately $568,000 for 1994.  This increase was
primarily attributable to income earned in 1995 from the short-term investment
of proceeds from the January 1995 mortgage dispositions pending the distribution
to shareholders on March 31, 1995.

     Total expenses decreased by approximately $517,000 or 32% to $1.1 million
for 1995 from $1.6 million for 1994. This decrease was principally due to
decreases in general and administrative expenses, amortization of deferred 

<PAGE>25

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

costs, mortgage servicing fees and annual fees paid to the Adviser, as discussed
below.

     General and administrative expenses decreased by approximately $54,000 or
9% from approximately $606,000 for 1994 to approximately $552,000 for 1995
primarily as a result of a reduction in payroll and related expenses and
professional fees resulting from a reduction in the mortgage base during 1995. 

     Annual Fees are paid to the Adviser for managing the Liquidating Company
portfolio.  These fees include a base component equal to a percentage of average
invested assets.  In addition, Annual Fees paid to the Adviser by the
Liquidating Company may include a performance-based component that is referred
to as the deferred component.  The deferred component, which is also calculated
as a percentage of average invested assets, is computed each quarter but paid
(and expensed) only upon meeting certain cumulative performance goals.  If these
goals are not met, the deferred component accumulates and may be paid in the
future if cumulative goals are met.  In addition, certain incentive fees are
paid by the Liquidating Company on a current basis if certain performance goals
are met.

     Annual Fees decreased by approximately $280,000 or 40% to approximately
$416,000 for 1995 from approximately $696,000 for 1994.  This decrease was
primarily a result of the reduction in the Liquidating Company's mortgage base
which is a component used in determining the Annual Fees payable by the
Liquidating Company.  The mortgage base has been decreasing as the Liquidating
Company effects the Business Plan to liquidate by 1997.  Additionally, the
required yield was achieved during the first quarter of 1995 only, as compared
to all four quarters of 1994, resulting in a decrease in deferred management
fees paid from $118,659 in 1994 to $28,467 in 1995.

     Mortgage servicing fees decreased by approximately $67,000 or 49% to
approximately $70,000 for 1995 from approximately $137,000 for 1994.  This
decrease resulted from the reduction in the Liquidating Company's mortgage base.

     Amortization of deferred costs decreased by approximately $115,000 or 76%
to approximately $36,000 for 1995 from approximately $151,000 for 1994.  This
decrease resulted from the reduction in the Liquidating Company's mortgage base.

     Net gains on mortgage dispositions decreased by $11.0 million or 87% to
$1.6 million in 1995 from $12.6 million in 1994.  The gains or losses on
mortgage dispositions are based on the number, carrying amounts and proceeds of
mortgage investments disposed of during the period.  The decrease in gains from
mortgage dispositions was primarily due to the sale of 21 mortgage investments
and prepayment of one mortgage investment in 1995, 10 of which resulted in
financial statement gains and all of which resulted in tax basis gains.  The 22
dispositions resulted in net financial statement gains of approximately $1.6
million and tax basis gains of approximately $9.5 million.  This compares to the
disposition of 19 mortgage investments during 1994 that generated financial
statement gains of approximately $12.6 million and tax basis gains of
approximately $18.4 million.

Cash Flow
---------
     Net cash provided by operating activities decreased for 1996 as compared to
1995 primarily as a result of the decrease in mortgage investment income, as
previously discussed.  Net cash provided by operating activities decreased in
1995 as compared to 1994, primarily as a result of a decrease in mortgage
investment income, partially offset by an increase in other investment income
and decreases in operating expenses, as previously discussed.  Partially
offsetting this decrease was an increase in accounts payable and accrued 

<PAGE>26

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

expenses in 1995, consisting primarily of accrued general and administrative
costs at December 31, 1995.

     Net cash provided by investing activities increased for 1996 as compared to
1995.  This increase was principally due to an increase in proceeds from
mortgage dispositions to approximately $57 million in 1996 from approximately
$50 million for 1995.  Net cash provided by investing activities decreased for
1995 as compared to 1994.  This decrease was principally due to a decrease in
proceeds from mortgage dispositions from approximately $66.8 million for 1994 to
approximately $50.4 million for 1995.  

     Net cash used in financing activities increased for 1996 as compared to
1995 due to an increase in dividends paid to shareholders as a result of the
increase in proceeds from mortgage dispositions.  Net cash used in financing
activities decreased for 1995 as compared to 1994 due to a decrease in dividends
paid to shareholders as a result of the decrease in proceeds from mortgage
dispositions and the reduction in the mortgage base.   

<PAGE>27

                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS


To the Shareholders of
  CRI Liquidating REIT, Inc.

     We have audited the accompanying balance sheets of CRI Liquidating REIT,
Inc. (the Liquidating Company) as of December 31, 1996 and 1995, and the related
statements of income, changes in shareholders' equity and cash flows for the
years ended December 31, 1996, 1995 and 1994.  These financial statements are
the responsibility of the Liquidating Company's management.  Our responsibility
is to express an opinion on these financial statements 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.

     As described in Note 1 to the financial statements, the Board of Directors
has approved a complete liquidation, pending shareholder approval.  If approved,
the plan will provide for an orderly liquidation of the Liquidating Company's
assets.  Management believes that such liquidation will be substantially
complete by December 31, 1997.

     In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of the Liquidating Company as
of December 31, 1996 and 1995, and the results of its operations and its cash
flows for the years ended December 31, 1996, 1995, and 1994, in conformity with
generally accepted accounting principles.


Arthur Andersen LLP


Washington, D.C.
February 13, 1997 

<PAGE>28

                           CRI LIQUIDATING REIT, INC.

                                 BALANCE SHEETS

                                     ASSETS
<TABLE>
<CAPTION>
                                                       December 31,
                                                  1996             1995    
                                              ------------     ------------
<S>                                           <C>              <C>         
Investment in mortgages, at fair value        $ 54,448,533     $114,685,204

Cash and cash equivalents                        4,058,080        3,740,437

Receivables and other assets                       529,255        1,085,930
                                              ------------     ------------
        Total assets                          $ 59,035,868     $119,511,571
                                              ============     ============


                      LIABILITIES AND SHAREHOLDERS' EQUITY

Liabilities:
  Accounts payable and accrued expenses       $    147,317     $    234,593
                                              ------------     ------------
Commitments and contingencies

Shareholders' equity:
  Common stock                                     304,227          304,227
  Net unrealized gains on investment 
    in mortgages                                15,296,990       28,011,840
  Additional paid-in capital                    43,287,334       90,960,911
                                              ------------     ------------
        Total shareholders' equity              58,888,551      119,276,978
                                              ------------     ------------
        Total liabilities and
          shareholders' equity                $ 59,035,868     $119,511,571
                                              ============     ============


                   The accompanying notes are an integral part
                         of these financial statements.
</TABLE> 

<PAGE>29

                                                     CRI LIQUIDATING REIT, INC.

<TABLE>                                                 STATEMENTS OF INCOME
<CAPTION>
                                                     For the years ended December 31,         
                                                  1996               1995            1994    
                                              ------------       ------------    ------------
<S>                                           <C>                <C>             <C>         
Income:
  
  Mortgage investment income                  $  4,816,538       $  9,609,652    $ 15,394,255
  Other income                                   1,014,998            986,862         568,049
                                              ------------       ------------    ------------
                                                 5,831,536         10,596,514      15,962,304
                                              ------------       ------------    ------------
Expenses:
  Annual fee to related party                      382,050            416,007         696,342
  General and administrative                       384,879            551,586         606,035
  Mortgage servicing fees                           37,552             69,829         137,201
  Amortization of deferred costs                    26,318             36,392         151,014
                                              ------------       ------------    ------------
                                                   830,799          1,073,814       1,590,592
                                              ------------       ------------    ------------
Income before mortgage dispositions              5,000,737          9,522,700      14,371,712

Mortgage dispositions:
  Gains                                          9,692,244          1,752,243      12,612,197
  Losses                                                --           (182,788)        (58,916)
                                              ------------       ------------    ------------
Net income                                    $ 14,692,981       $ 11,092,155    $ 26,924,993
                                              ============       ============    ============
Net income per share                          $        .48       $        .36    $        .89
                                              ============       ============    ============
Weighted average shares outstanding             30,422,711         30,422,711      30,422,711
                                              ============       ============    ============


                                             The accompanying notes are an integral part
                                                   of these financial statements.
</TABLE> 

<PAGE>30

                                          CRI LIQUIDATING REIT, INC.
                                STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

                          For the years ended December 31, 1996, 1995 and 1994
<TABLE>
<CAPTION>
                                                                         Net    
                                                                      Unrealized 
                                                                       Gains on       Additional                     Total    
                                                Common Stock          Investment       Paid-In    Undistributed   Shareholders'
                                           Shares        Par Value   in Mortgages      Capital      Net Income       Equity   
                                         -----------     ---------   ------------    ------------ -------------   ------------
<S>                                      <C>             <C>         <C>             <C>          <C>             <C>
Balance, December 31, 1993                30,422,711     $ 304,227   $ 51,349,764    $196,843,186            --   $248,497,177

  Net income                                      --            --             --              --    26,924,993     26,924,993
  Dividends of $.89 per share                     --            --             --              --   (26,924,993)   (26,924,993)
  Return of capital of $1.84
    per share                                     --            --             --     (56,129,008)           --    (56,129,008)
  Adjustment to net unrealized 
    gains on investment in mortgages              --            --    (33,097,088)             --            --    (33,097,088)
                                         -----------     ---------   ------------    ------------ -------------   ------------
Balance, December 31, 1994                30,422,711       304,227     18,252,676     140,714,178            --    159,271,081

  Net income                                      --            --             --              --    11,092,155     11,092,155
  Dividends of $.36 per share                     --            --             --              --   (11,092,155)   (11,092,155)
  Return of capital of $1.64
   per share                                      --            --             --     (49,753,267)           --    (49,753,267)
  Adjustment to net unrealized
    gains on investment in mortgages              --            --      9,759,164              --            --      9,759,164
                                         -----------     ---------   ------------    ------------ -------------   ------------
Balance, December 31, 1995                30,422,711       304,227     28,011,840      90,960,911            --    119,276,978

  Net income                                      --            --             --              --    14,692,981     14,692,981
  Dividends of $.48 per share                     --            --             --              --   (14,692,981)   (14,692,981)
  Return of capital of $1.57
   per share                                      --            --             --     (47,673,577)           --    (47,673,577)
  Adjustment to net unrealized
    gains on investment in mortgages              --            --    (12,714,850)             --            --    (12,714,850)
                                         -----------     ---------   ------------    ------------ -------------   ------------

Balance, December 31, 1996                30,422,711     $ 304,227   $ 15,296,990    $ 43,287,334 $          --   $ 58,888,551
                                         ===========     =========   ============    ============ =============   ============

                                             The accompanying notes are an integral part
                                                   of these financial statements.
</TABLE> 

<PAGE>31

<TABLE>
<CAPTION>

                                                      CRI LIQUIDATING REIT, INC.

                                                      STATEMENTS OF CASH FLOWS

                                                                           For the years ended December 31,     
                                                                        1996               1995              1994    
                                                                    ------------       ------------      ------------
<S>                                                                 <C>                <C>               <C>         
Cash flows from operating activities:
  Net income                                                        $  14,692,981      $ 11,092,155      $ 26,924,993
  Adjustments to reconcile net income to net
    cash provided by operating activities:
      Amortization of deferred costs                                       26,318            36,392           151,014
      Mortgage discount/premium amortization                             (440,447)         (644,042)         (952,806)
      Gains on mortgage dispositions                                   (9,692,244)       (1,569,455)      (12,553,281)
      Other operating activities                                         (253,292)         (119,526)           49,032

      Changes in assets and liabilities:
        Decrease in receivables and other assets                          517,338           485,068           650,122
        (Decrease) increase in accounts payable and accrued
          expenses                                                       (87,276)            80,317          (275,681)
        Decrease in deferred costs                                        13,019             16,464            63,265
                                                                    ------------       ------------      ------------
      Net cash provided by operating activities                        4,776,397          9,377,373        14,056,658
                                                                    ------------       ------------      ------------
Cash flows from investing activities:
  Proceeds from mortgage dispositions                                 56,948,053         50,427,785        66,837,015
  Receipt of mortgage and other short-term investment
    principal from scheduled payments                                    706,459          1,233,248         2,294,050
  Annual return from investment in limited partnerships                  253,292            253,292           253,292
                                                                    ------------       ------------      ------------
      Net cash provided by investing activities                       57,907,804         51,914,325        69,384,357
                                                                    ------------       ------------      ------------
Cash flows from financing activities:
  Dividends and return of capital paid to shareholders               (62,366,558)       (60,845,422)      (83,054,001)
                                                                    ------------       ------------      ------------
      Net cash used in financing activities                          (62,366,558)       (60,845,422)      (83,054,001)
                                                                    ------------       ------------      ------------
Net increase in cash and cash equivalents                                317,643            446,276           387,014

Cash and cash equivalents, beginning of year                           3,740,437          3,294,161         2,907,147
                                                                    ------------       ------------      ------------
Cash and cash equivalents, end of year                              $  4,058,080       $  3,740,437      $  3,294,161
                                                                    ============       ============      ============

                                             The accompanying notes are an integral part
                                                   of these financial statements.
</TABLE> 

<PAGE>32

                           CRI LIQUIDATING REIT, INC.
                          NOTES TO FINANCIAL STATEMENTS


1.   Organization

     CRI Liquidating REIT, Inc. (the Liquidating Company) is a finite-life,
self-liquidating real estate investment trust (REIT).  The Liquidating Company
was created in November 1989 in connection with the merger (the Merger) of three
funds which owned government insured multifamily mortgages (the CRIIMI Funds),
all of which were sponsored by C.R.I., Inc. (CRI).  The Merger resulted in two
new REITs:  (i) the Liquidating Company, a finite-life, self-liquidating REIT,
and (ii) CRIIMI MAE Inc. (CRIIMI MAE), a self-managed, full service mortgage
company, which owns 57% of the Liquidating Company's outstanding common stock. 
In the Merger, the Liquidating Company acquired the assets of the CRIIMI Funds. 


     The Merger was accounted for at historical cost in a manner similar to the
pooling-of-interests method.  However, for tax purposes, the Merger was treated
as a taxable event resulting in a new basis being assigned to the assets.
Specifically, the merger of CRI Insured Mortgage Investment Limited Partnership
(CRIIMI I) into the Liquidating Company resulted in a taxable gain, while the
merger of CRI Insured Mortgage Investments II, Inc. (CRIIMI II) and CRI Insured
Mortgage Investments III Limited Partnership (CRIIMI III) into the Liquidating
Company resulted in taxable losses. As a result, the tax bases of the CRIIMI I
assets were adjusted upward and the tax bases of the CRIIMI II and CRIIMI III
assets were adjusted downward.

     The Board of Directors has engaged CRI Insured Mortgage Associates Adviser
Limited Partnership (the Adviser) to act in the capacity of adviser to the
Liquidating Company.  The Adviser's general partner is CRI, and its limited
partners include the shareholders of CRI.  The Adviser (1) manages the
Liquidating Company's assets with the goal of maximizing the returns to
shareholders and (2) conducts the day-to-day operations of the Liquidating
Company.  The Adviser receives fees in connection with the administration and
operation of the Liquidating Company.  The Adviser also formerly acted in a
similar capacity for CRIIMI MAE.  However, effective June 30, 1995 CRIIMI MAE
became a self-managed, self-administered company and as a result, the Adviser no
longer advises CRIIMI MAE.

     The Liquidating Company's Board of Directors (the Board of Directors) has
approved a plan of complete liquidation and dissolution (the Plan) and has
recommended that the Liquidating Company's shareholders vote to approve the Plan
at a Special Meeting of shareholders.  The Liquidating Company has filed proxy
materials with the Securities and Exchange Commission to solicit shareholder
approval of the Plan.  If the Plan is approved by the Liquidating Company's
shareholders, the Liquidating Company will, pursuant to the Plan, dissolve the
Liquidating Company and proceed to dispose of its assets after providing for its
liabilities.  There is no time period required by the Plan or law within which
the Liquidating Company must wind up its affairs and complete its liquidation. 
However, the Liquidating Company believes this process will be substantially
complete by December 31, 1997.

     In accordance with the Company's Business Plan, during the year ended
December 31, 1996, the Liquidating Company disposed of 11 mortgage investments
which constituted approximately 52% of the December 31, 1995 tax basis carrying
value.  In January 1997, in accordance with the Business Plan, the Liquidating
Company sold the 11 remaining mortgage assets generating proceeds of
approximately $54 million which resulted in financial statement gains and tax
basis gains of approximately $14 million.  The Liquidating Company expects to
distribute to shareholders the net disposition proceeds from this recent sale as
part of the first quarter 1997 dividend.  The remaining assets consist primarily
of cash and equity interests in three limited partnerships.  The equity 
interests have no remaining book value for GAAP purposes and a tax basis of 
approximately $3.7 million.  In February 1997, the Liquidating Company received
$1.2 million from one of these equity investments.

<PAGE>33

                           CRI LIQUIDATING REIT, INC.
                          NOTES TO FINANCIAL STATEMENTS


2.   Summary of Significant Accounting Policies

     Method of accounting
     --------------------
          The financial statements of the Liquidating Company are prepared on
     the accrual basis of accounting in accordance with generally accepted
     accounting principles.  The preparation of financial statements in
     conformity with generally accepted accounting principles requires
     management to make estimates and assumptions that effect the reported
     amounts of assets and liabilities at the date of the financial statements
     and the reported amounts of revenues and expenses during the reporting
     period.  Actual results could differ from those estimates.

     Cash and cash equivalents
     -------------------------
          Cash and cash equivalents consist of money market funds, time and
     demand deposits, commercial paper and repurchase agreements with original
     maturities of three months or less.

     Investment in Mortgages
     -----------------------
          The Liquidating Company's investment in mortgages were comprised of
     Federally Insured Mortgages (as defined below) and Mortgage-Backed
     Securities guaranteed by the Government National Mortgage Association
     (GNMA).  Payment of principal and interest on Federally Insured Mortgages
     is insured by the United States Department of Housing and Urban Development
     (HUD). Payment of principal and interest on Mortgage-Backed Securities is
     guaranteed by GNMA pursuant to Title 3 of the National Housing Act.  

          In accordance with the Liquidating Company's Business Plan, the
     Company sold its remaining mortgage assets in early 1997.  All of the
     Liquidating Company's mortgage investments were classified as Available for
     Sale and were recorded at fair value with the net unrealized gains on such
     mortgage investments reported as a separate component of shareholders'
     equity.  Subsequent increases or decreases in the fair value of these
     Available for Sale securities were included as a separate component of
     equity.  Realized gains and losses for these securities have been reported
     in earnings, as discussed below.

          The difference between the cost and the unpaid principal balance at
     the time of purchase is carried as a discount or premium and amortized over
     the remaining contractual life of the mortgage using the effective interest
     method which provides a constant yield of income over the term of the
     mortgage.  

          Mortgage investment income included amortization of the discount plus
     the stated mortgage interest payments received or accrued less amortization
     of the premium.

          Gains from dispositions of mortgages were recognized upon the receipt
     of funds or HUD debentures.  Losses on dispositions of mortgages were
     recognized when it became probable that a mortgage would be disposed of and
     that the disposition would result in a loss.

     Other Assets
     ------------
          Included in other assets are mortgage selection fees which were paid
     to the former general partners or adviser to the Liquidating Company. 
     These fees are being amortized using the effective interest method on a
     specific mortgage basis from the date of the acquisition of the related 

<PAGE>34 

                           CRI LIQUIDATING REIT, INC.
                          NOTES TO FINANCIAL STATEMENTS


2.   Summary of Significant Accounting Policies - Continued

     mortgage to the expected dissolution date of the Liquidating Company (see
     Note 1).  Upon disposition of a mortgage, the related unamortized fee is
     treated as part of the mortgage investment balance in order to measure the
     gain or loss on the disposition.  Accordingly, with the disposition of the
     remaining 11 mortgage assets in January 1997, all remaining unamortized
     fees were written off.

          Also included in other assets are the Liquidating Company's investment
     in limited partnerships which are accounted for under the equity method. 
     As of December 31, 1996, these investments had no remaining book value for
     GAAP purposes. 

     Income taxes
     ------------
          The Liquidating Company has qualified and intends to continue to
     qualify as a REIT as defined in the Internal Revenue Code.  As a REIT, the
     Liquidating Company does not pay taxes at the corporate level. 
     Qualification for treatment as a REIT requires the Liquidating Company to
     meet certain criteria, including certain requirements regarding the nature
     of its ownership, assets, income and distributions of taxable income.  The
     Liquidating Company intends to distribute substantially all of its taxable
     income and, accordingly, no provision for income taxes has been made in the
     accompanying financial statements.  The Liquidating Company, however, may
     be subject to tax at normal corporate rates on net income or capital gains
     not distributed.  

     Per share amounts
     -----------------
          Net income, dividends and return of capital per share amounts for
     1996, 1995 and 1994 represent net income, dividends and return of capital,
     respectively, divided by the weighted average equivalent shares outstanding
     during each year.  The per share amounts are based on the weighted  average
     shares outstanding, including shares held for issuance pending presentation
     of units in the CRIIMI Funds.

     Common stock
     ------------
          The Liquidating Company has authorized 30,425,901 shares of $0.01 par
     value common stock and issued 30,422,711 shares as of December 31, 1996 and
     1995.  All shares issued are outstanding.

     Reclassifications
     -----------------
          Certain amounts in the statement of cash flows for the years ended
     December 31, 1995 and 1994 have been reclassified to conform with the 1996
     presentation.

3.   Transactions with Related Parties

     Below is a summary of the amounts paid or accrued to related parties during
the years ended December 31, 1996, 1995 and 1994.  

<PAGE>35 

                           CRI LIQUIDATING REIT, INC.
                          NOTES TO FINANCIAL STATEMENTS


3.   Transactions with Related Parties - Continued

<TABLE><CAPTION>
                                                           For the years ended December 31,        
                                                         1996               1995             1994    
                                                     ------------       ------------     ------------
<S>                                                  <C>                <C>              <C>         
     Adviser:
     -------
     Annual fee(c)                                   $    382,050       $    416,007     $    696,342
     Incentive fee (a)                                    568,638                 --          394,812
                                                     ------------       ------------     ------------
          Total                                      $    950,688       $    416,007     $  1,091,154
                                                     ============       ============     ============

     Expense reimbursement (b)(d):

     CRI                                             $        --        $   125,482      $    285,423
     CRIIMI Management                                   115,920            122,938                --
                                                     -----------        -----------      ------------
                                                     $   115,920        $   248,420      $    285,423
                                                     ===========        ============     ============

     (a)  Included as a component of net gains from mortgage dispositions on the accompanying statements of income.
     (b)  Included as general and administrative expenses on the accompanying statements of income.
     (c)  As a result of reaching the required yield during 1996, 1995 and 1994, the Liquidating Company paid deferred annual fees
          during 1996, 1995 and 1994 of $168,307 (which included $86,739 for 1995), $28,467 and $118,659, respectively.
     (d)  Effective June 30, 1995, pursuant to the Reimbursement Agreement and the CRIIMI MAE Merger described below, the
          reimbursements previously paid to CRI in connection with services provided by the Adviser, are paid to CRIIMI MAE
          Management.  The amounts paid by CRI Liquidating to CRI during the year ended December 31, 1995, represent the
          reimbursement of expenses incurred through June 30, 1995.
</TABLE>

     The Liquidating Company has entered into an agreement with the Adviser (see
Note 1) (the Advisory Agreement) under which the Adviser is obligated to
evaluate and negotiate voluntary mortgage dispositions, provide administrative
services for the Liquidating Company and conduct the Liquidating Company's
day-to-day affairs.  The Advisory Agreement may be terminated solely for
cause, as defined in the Advisory Agreement, by the Liquidating Company or 
the Adviser.  Notice of non-renewal must be given at least 180 days prior to
the expiration date of the Advisory Agreement.  If the Liquidating Company
terminates the Advisory Agreement other than for cause, or the Adviser
 terminates the Advisory Agreement for cause, in addition to compensation 
otherwise due, the Liquidating Company will be required to pay the Adviser a 
fee equal to the Annual Fee (as described below) payable for the previous 
fiscal year.  If the Advisory Agreement is not renewed, no termination fee 
will be payable.

     Under the Advisory Agreement, the Adviser receives compensation from the
Liquidating Company as follows:

     o    An Annual Fee for managing the Liquidating Company's portfolio of
          mortgages.  The Annual Fee is calculated separately based on specific
          criteria for each of the remaining mortgage pools from the former
          CRIIMI Funds. 

     o    The Adviser is also entitled to certain Incentive Fees (the Incentive
          Fee) in connection with the disposition of certain mortgage
          investments. Like the Annual Fee, the Incentive Fees are calculated
          separately with respect to mortgage investments transferred in the 

<PAGE>36 

                           CRI LIQUIDATING REIT, INC.
                          NOTES TO FINANCIAL STATEMENTS


3.   Transactions with Related Parties - Continued

          Merger by CRIIMI I and CRIIMI II.  No Incentive Fees are payable with
          respect to mortgage investments transferred by CRIIMI III.

          During any quarter in which specified yields have been achieved on a
          cumulative basis and the Adviser has been paid any deferred amounts of
          the Annual Fee, the Incentive Fee will equal approximately 9.08% of
          net disposition proceeds representing the financial statement gain on
          the related CRIIMI I or CRIIMI II mortgage investments disposed of.   

     In addition to the fees payable pursuant to the Advisory Agreement, from
inception through June 30, 1995, the Adviser and its affiliates were reimbursed
for expenses incurred in connection with the administration and operation of the
Liquidating Company.  In connection with the transaction in which CRIIMI MAE
became a self-managed and self-administered REIT (the CRIIMI MAE Merger),
effective June 30, 1995, the Adviser and its affiliates are no longer reimbursed
for expenses, as these reimbursements are paid to CRIIMI MAE Management, Inc.
(CRIIMI Management), a wholly owned subsidiary of CRIIMI MAE.  Pursuant to a
reimbursement agreement (the Reimbursement Agreement), the employees of CRIIMI
Management perform certain functions on behalf of the Adviser under the advisory
agreement.  Neither CRIIMI Management nor CRIIMI MAE receive advisory fees under
the advisory agreement.  However, CRIIMI Management is reimbursed at cost for
its employees' time and expenses pursuant to the Reimbursement Agreement.

4.   Fair Value of Financial Instruments

     As discussed in Note 2, the Liquidating Company's Investment in Mortgages
is recorded at fair value.  The difference between the amortized cost and the
fair value of the mortgage investments represents the net unrealized gains on
the Liquidating Company's mortgage investments and is reported as a separate
component of shareholders' equity.  These estimated fair values, however, do not
represent the liquidation value or the market value of the Liquidating Company.

     The fair value of the mortgage investments is based on quoted market prices
from an investment banking institution which trades insured mortgage loans as
part of its day-to-day activities.  The carrying amount of cash and cash
equivalents and accrued interest receivable approximates fair value because of
the short maturity of these instruments.

5.   Investment in Mortgages

     As of December 31, 1996, the Liquidating Company owned 11 mortgage
investments.  These mortgage investments have a weighted average net coupon rate
of approximately 7.4%, a weighted average net effective interest rate of
approximately 11.3%, and a weighted average remaining term based on amortized
cost of approximately 25 years.  All of these mortgage investments were
purchased at a discount (Discount Mortgage Investments).  As previously
discussed, in January 1997 all remaining mortgages were sold for proceeds of
approximately $54 million, which resulted in a gain for financial statement and
tax purposes of approximately $14 million.

     The Liquidating Company made investments in participating certificates
which evidence a 100% undivided beneficial interest in Federally Insured
Mortgages which were acquired at a discount to face on the belief that based on
economic, market, legal and other factors, such Discount Mortgage Investments
might be sold for cash, converted to condominium housing or otherwise disposed
of or refinanced in a manner requiring prepayment or permitting other profitable
disposition three to twelve years after acquisition by the predecessor CRIIMI
Funds.  The Liquidating Company's investment in mortgages previously included 

<PAGE>37 

                           CRI LIQUIDATING REIT, INC.
                          NOTES TO FINANCIAL STATEMENTS


5.   Investment in Mortgages - Continued

Mortgage-Backed Securities issued by a private entity for which the monthly
principal and interest payments of the underlying mortgage was guaranteed by
GNMA.

     General
     -------
          Descriptions of the mortgage investments owned by the Liquidating
     Company as of December 31, 1996, summarized information regarding other
     mortgage investments and mortgage investment income earned in 1996, 1995
     and 1994, including interest earned on the disposed mortgage investments,
     are as follows: 

<PAGE>38 

                           CRI LIQUIDATING REIT, INC.
                          NOTES TO FINANCIAL STATEMENTS


5.   Investment in Mortgages - Continued

<TABLE><CAPTION>
                                                                        Mortgage       Mortgage      Mortgage
                                              Carrying                 Investment     Investment    Investment
                                   Face       Value of      Effective    Income         Income        Income               Final
                                Amount of     Mortgages     Interest     Earned         Earned        Earned            Maturity
Complex Name                   Mortgages(B)  (A),(C),(D)       Rate      in 1996        in 1995       in 1994               Date
------------                   ------------  ------------   ---------  ------------   ------------  ------------ ---------------
<S>                            <C>           <C>            <C>        <C>            <C>           <C>          <C>            
Federally Insured
 Mortgages (FHA)
-----------------
Discount
--------
Cinnamon Run I                 $ 10,189,880  $ 10,368,203      11.18%  $    846,212   $    851,220  $   855,700    November 2022
Crestwood Villas                  6,475,478     6,588,799      10.21%       529,966        533,875      537,407        July 2022
Villa de Mission                  7,322,433     7,450,576      11.12%       614,358        618,830      622,834       March 2021
Firethorn I                       6,650,556     6,766,941      12.28%       556,649        559,039      561,154   September 2023
Windrush Apts.                    6,539,639     6,654,082      12.29%       548,421        550,847      552,993        July 2024
Willowcrest Prel G                4,206,232     4,279,841      12.48%       365,064        367,624      369,884      August 2019
Havenside Terrace                 1,462,585     1,488,180      12.05%       125,062        125,891      126,627      August 2020
Mountain View Apts.               3,160,521     3,215,830      12.09%       272,156        274,129      275,878    November 2019
Riverwood Apts.                   2,435,960     2,478,589      10.94%       202,621        204,003      205,242     January 2022
Tanglewood Apts.                  2,023,880     2,059,298      11.67%       172,077        173,297      174,384   September 2020
Sleepy Hollow Apts.               3,044,908     3,098,194      10.11%       250,294        252,427      254,356         May 2021

                               ------------  ------------              ------------   ------------  -----------
   Subtotal                      53,512,072    54,448,533                 4,482,880      4,511,182    4,536,459
                               ------------  ------------              ------------   ------------  -----------

Mortgage Dispositions:
    1994                                 --            --      8.44%-            --             --    1,591,108
                                                              12.12%
    1995                                 --            --      8.35%-            --        272,455    4,408,626
                                                              10.79%
                                                             
    1996                                 --            --      8.81%-       333,658      4,826,015    4,858,062
                                                              11.31%
                               ------------  ------------              ------------   ------------  -----------
Investment in Mortgages        $ 53,512,072  $ 54,448,533              $  4,816,538   $  9,609,652  $15,394,255
                               ============  ============              ============   ============  ===========
Investment in Limited
  Partnerships                 $         --  $         --              $    253,292*  $   119,526*  $   (49,032)*
                               ============  ============              ============   ===========   ===========

*  Income from investments in limited partnerships is included in other income on the accompanying statements of income for the
years ended December 31, 1996, 1995 and 1994.

</TABLE> 

<PAGE>39 

                           CRI LIQUIDATING REIT, INC.
                          NOTES TO FINANCIAL STATEMENTS


5.   Investment in Mortgages - Continued

(A)  All mortgages are collateralized by first liens on residential apartment or
townhouse complexes which have diverse geographic locations and are Federally
Insured Mortgages.  The investment in limited partnerships is not federally
insured or guaranteed. 

(B)  Principal and interest are payable at level amounts over the life of the
mortgage investment.

(C)  Reconciliations of the carrying amount of the mortgage investments for the
years ended December 31, 1996 and 1995 follow: 

<PAGE>40 

                           CRI LIQUIDATING REIT, INC.
                          NOTES TO FINANCIAL STATEMENTS


5.   Investment in Mortgages - Continued

<TABLE><CAPTION>
                                                    For the year ended                  For the year ended
                                                    December 31, 1996                   December 31, 1995
                                             -----------------------------       ------------------------------
<S>                                          <C>              <C>                <C>              <C>
Balance at beginning of year                                  $114,685,204                        $ 154,373,576
Additions during year:
  Amortization of discount                                         440,447                              650,392
  Adjustment to net unrealized gains on
    investment in mortgages                                             --                            9,759,164
     
Deductions during year:
  Principal payments                             706,459                         $  1,233,248
  Mortgage dispositions                       47,255,809                           48,858,330       
  Adjustment to net unrealized
    gains on investment in mortgages          12,714,850                                   --       
  Amortization of premium                             --         60,677,118             6,350       50,097,928   
                                             -----------      -------------      ------------     -------------
Balance at end of year                                        $  54,448,533                       $114,685,204
                                                              =============                       =============
</TABLE>

(D)  Principal Amount of Loans Subject to Delinquent Principal or Interest is
not presented since all required payments with respect to these Federally
Insured Mortgages are current and none of these mortgages is delinquent as of
December 31, 1996. 

<PAGE>41 

                           CRI LIQUIDATING REIT, INC.
                          NOTES TO FINANCIAL STATEMENTS


5.   Investment in Mortgages - Continued

Historical Dispositions
-----------------------
     A summary of the Liquidating Company's mortgage dispositions from 1994 to 
1996 is as follows:

<TABLE><CAPTION>
                                                                Net Gain   
                                                              Recognized for     Net Gain 
                                                                Financial       Recognized
                      Type of Dispositions                      Statement         For Tax 
Year         Assignment      Sale     Prepayment     Total       Purposes       Purposes(2)
----         ------------    ----   ----------       -----    --------------    -----------
<S>          <C>             <C>    <C>              <C>      <C>               <C>        
1994          3(1)            14         2             19      12,553,281         18,354,126
1995         --               21         1             22       1,569,455          9,531,027
1996         --               11        --             11       9,692,244         14,482,248


(1)  Two of the three assignments were sales of government insured multifamily mortgages then in default and resulted in the
     Liquidating Company receiving face value or near face value.
(2)  In connection with the Merger, the Liquidating Company recorded its investment in mortgages at the lower of cost or fair value,
     which resulted in an overall net write down for tax purposes.  For financial statement purposes, carryover basis of accounting
     was used.  Therefore, since the Merger, the net gain for tax purposes was greater than the net gain recognized for financial
     statement purposes.  As a REIT, dividends to the Liquidating Company's shareholders are based on net gains recognized for tax
     purposes.

</TABLE>

6.   Reconciliation of Financial Statement Net Income to Tax
          Basis Income

     On an annual basis, the Liquidating Company expects to distribute to its
shareholders virtually all of its tax basis income. 

<PAGE>42 

                           CRI LIQUIDATING REIT, INC.
                          NOTES TO FINANCIAL STATEMENTS


6.   Reconciliation of Financial Statement Net Income to Tax
          Basis Income - Continued

     Reconciliations of the financial statement net income to the tax basis
income for the years ended December 31, 1996, 1995 and 1994 are as follows:

<TABLE><CAPTION>
                                                   1996              1995             1994
                                                -----------       -----------     -----------
<S>                                             <C>               <C>             <C>
Financial statement net income                  $14,692,981       $11,092,155     $26,924,993

Adjustments:
  Nondeductible expense:
    Amortization of deferred costs                   17,088            27,156         122,750
  Additional income (loss) due to basis
   differences:
    Mortgage dispositions                         4,790,004         7,961,572       5,800,845
    Reamortization of mortgages                      15,579           145,431         477,071
    Loss from investment in
      limited partnerships                         (364,205)         (233,042)        (13,753)
                                                -----------       -----------     -----------
Tax basis income                                $19,151,447       $18,993,272     $33,311,906
                                                ===========       ===========     ===========

Tax basis income per share                      $       .63       $       .62     $      1.09
                                                ===========       ===========     ===========
</TABLE>

     Differences in the financial statement net income and the tax basis income
principally relate to differences in the tax bases of assets and liabilities and
their related financial reporting amounts resulting from the Merger and the
acquisition of other short-term investments. 

     Dividends to shareholders consist of ordinary income, capital gain and
return of capital.  Shareholders should expect distributions representing
ordinary income and the market price of the Liquidating Company shares to
decrease as the Liquidating Company liquidates its assets and distributes return
of capital over time to its shareholders. For the year ended December 31, 1996,
dividends of $2.05 per share were paid to shareholders. The nature of these
dividends for income tax purposes on a per share basis is as follows: 

<PAGE>43 

                           CRI LIQUIDATING REIT, INC.
                          NOTES TO FINANCIAL STATEMENTS


6.   Reconciliation of Financial Statement Net Income to Tax
          Basis Income - Continued

<TABLE><CAPTION>
                            Non-taxable        Capital     Ordinary
                             Dividend           Gain        Income       Total         Record Date
                            -----------        -------     --------      -------    ------------------
<S>                         <C>                <C>         <C>           <C>        <C>
Quarter ended
   March 31, 1996          $      1.34         $  0.45      $  0.15      $  1.94       March 18, 1996
Quarter ended
   June 30, 1996                  0.03            0.01         0.00         0.04       June 17, 1996
Quarter ended
   September 30, 1996             0.02            0.01         0.00         0.03       September 20, 1996
Quarter ended
   December 31, 1996              0.03            0.01         0.00         0.04       December 19, 1996
                           -----------         -------      -------      -------
Year ended
  December 31, 1996        $      1.42         $ 0.48       $  0.15      $  2.05
                           ===========         =======      =======      =======
</TABLE>

7.   Summary of Quarterly Results of Operations (Unaudited)

     The following is a summary of unaudited quarterly results of operations for
the years ended December 31, 1996, 1995 and 1994: 

<PAGE>44

                           CRI LIQUIDATING REIT, INC.
                          NOTES TO FINANCIAL STATEMENTS


<TABLE><CAPTION>
                                                             1996
                                                         Quarter ended
                                    March 31        June 30       September 30    December 31
                                  ------------   ------------     ------------    ------------
<S>                               <C>            <C>              <C>             <C>         
Income (primarily mortgage
  investment income)              $  2,107,269   $  1,242,392     $  1,241,113    $  1,240,762
Net gain on mortgage 
  dispositions                       9,692,244             --               --              --
Net income                          11,490,811      1,041,090        1,093,383       1,067,697
Net income per share                      0.38           0.03             0.04            0.03

</TABLE>

<TABLE><CAPTION>
                                                             1995
                                                         Quarter ended
                                    March 31        June 30       September 30    December 31
                                  ------------   ------------     ------------    ------------
<S>                               <C>            <C>              <C>             <C>         
Income (primarily mortgage
  investment income)              $  3,270,320   $  2,456,116     $  2,443,131    $  2,426,947
Net gain (loss) on mortgage 
  dispositions                       1,578,864             --           (9,409)             --
Net income                           4,538,258      2,230,902        2,175,012       2,147,983
Net income per share                      0.15           0.07             0.07            0.07
</TABLE>

<TABLE><CAPTION>
                                                             1994
                                                         Quarter ended
                                    March 31        June 30       September 30    December 31
                                  ------------   ------------     ------------    ------------
<S>                               <C>            <C>              <C>             <C>         
Income (primarily mortgage
  investment income)              $  4,521,596   $  3,956,781     $  3,821,785    $  3,662,142
Net gain (loss) on
  mortgage dispositions             11,826,341        456,640             (782)        271,082
Net income                          15,787,800      4,042,601        3,474,928       3,619,664
Net income per share                       .52            .13              .11             .13
</TABLE> 

<PAGE>45

<TABLE><CAPTION>

Directors and Executive Officers
--------------------------------

                                Liquidating Company
        Name                          Position                      Principal Occupation          
----------------------         ---------------------       ---------------------------------------
<S>                            <C>                         <C>
William B. Dockser             Chairman of the Board       Chairman of the Board and Shareholder -
                                                             CRIIMI MAE

H. William Willoughby          Director, President         President, Secretary and Shareholder -
                                 and Secretary               CRIIMI MAE 

Garrett G. Carlson, Sr.        Director                    Chairman of the Board-SCA Realty Holdings, Inc.;
                                                             President - Can-American Realty
                                                             Corporation and Canadian Financial
                                                             Corporation

G. Richard Dunnells            Director                    Partner - Holland & Knight

Larry H. Dale                  Director                    Senior Advisor of Fannie Mae's Housing
                                                             Investment Fund

Robert F. Tardio               Director                    Independent Financial Consultant

Frederick J. Burchill          Executive Vice President    Executive Vice President - CRIIMI MAE

Jay R. Cohen                   Executive Vice              Executive Vice President and Treasurer - 
                                 President and               CRIIMI MAE 
                                 Treasurer

Cynthia O. Azzara              Senior Vice President       Senior Vice President and Chief Financial Officer -
                                 and Chief                   CRIIMI MAE 
                                 Financial Officer 


</TABLE> 

<PAGE>46

Annual Report to the Securities and Exchange Commission on Form 10-K is
available to Shareholders and may be obtained by writing:

Investor Services/CRI Liquidating REIT, Inc.
The CRI Building
11200 Rockville Pike
Rockville, Maryland  20852

CRI Liquidating REIT, Inc. shares are traded on the New York Stock Exchange
under the symbol CFR. <PAGE>