AMERICAN INSURED MORTGAGE INVESTORS L P SERIES 86 - 10-K Annual Report

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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, 1993
------------------

Commission file number 0-15615
-----------------

AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 86
-----------------------------------------------------------------
(Exact name of registrant as specified in charter)

Delaware 13-2943272
------------------------------------- ----------------------
(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) 468-9200
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(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
-------------------------------- ---------------------------
Depository Units of Limited American Stock Exchange
Partnership Interest

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

NONE
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(Title of class)

Indicate by check mark whether the Registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the Registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
---- ----

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 March 4, 1994, 9,575,790 Depositary Units of Limited
Partnership Interest with an aggregate market value of
$124,485,720 were outstanding and held by nonaffiliates of the
Registrant on such date.

DOCUMENTS INCORPORATED BY REFERENCE
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Form 10-K Parts Document
---------------- ---------

II and IV Prospectus of Registrant dated
March 7, 1986

2
AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 86

1993 ANNUAL REPORT ON FORM 10-K

TABLE OF CONTENTS

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

PART II
-------
Item 5. Market for Registrant's Securities and
Related Security Holder Matters . . . . . . 4
Item 6. Selected Financial Data . . . . . . . . . . . 6
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of
Operations . . . . . . . . . . . . . . . . 8
Item 8. Financial Statements and Supplementary
Data . . . . . . . . . . . . . . . . . . . 23
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure . . 23

PART III
--------
Item 10. Directors and Executive Officers of the
Registrant . . . . . . . . . . . . . . . . 24
Item 11. Executive Compensation . . . . . . . . . . . 25
Item 12. Security Ownership of Certain Beneficial
Owners and Management . . . . . . . . . . . 25
Item 13. Certain Relationships and Related
Transactions . . . . . . . . . . . . . . . 25

PART IV
-------
Item 14. Exhibits, Financial Statement Schedules and
Reports on Form 8-K . . . . . . . . . . . . 26

Signatures . . . . . . . . . . . . . . . . . . . . . . 28

3

PART I

ITEM 1. BUSINESS

Development and Description of Business
---------------------------------------
Information concerning the business of American Insured
Mortgage Investors L.P.-Series 86 (the Partnership) is contained
in Part II, Item 7, Management's Discussion and Analysis of
Financial Condition and Results of Operations and in Notes 1, 4
and 5 of the notes to the financial statements of the Partnership
contained in Part IV (filed in response to Item 8 hereof), which
is incorporated herein by reference. Also see Schedule XII-
Mortgage Loans on Real Estate, contained in Item 14, for the
table of the Insured Mortgages (as defined below), including
Assets Held for Sale Under Coinsurance Program (as defined
below), invested in by the Partnership as of December 31, 1993.

Employees
---------
The business of the Partnership is managed by CRIIMI, Inc.
(the General Partner), while its portfolio of mortgages is
managed by AIM Acquisition Partners, L. P. (the Advisor) and
CRI/AIM Management, Inc. (the Sub-advisor). CRIIMI, Inc. is a
wholly-owned subsidiary of CRIIMI MAE Inc. (CRIIMI MAE), formerly
CRI Insured Mortgage Association, Inc., which is managed by an
adviser whose general partner is C.R.I., Inc. (CRI). CRI is also
an affiliate of the Sub-advisor. The Partnership has no
employees.

Competition
-----------
In acquiring Insured Mortgages, the Partnership competes
with private investors, mortgage banking companies, mortgage
brokers, state and local government agencies, lending
institutions, trust funds, pension funds, and other entities,
some with similar objectives to those of the Partnership and some
of which are or may be affiliates of the Partnership, its General
Partner, the Advisor or their respective affiliates. Some of
these entities may have substantially greater capital resources
and experience than the Partnership in acquiring mortgages which
are fully insured or guaranteed by the Federal National Mortgage
Association, the Government National Mortgage Association (GNMA),
the Federal Housing Administration (FHA) or the Federal Home Loan
Mortgage Corporation.

Pursuant to the Sub-advisory Agreements, the Advisor
retained the Sub-advisor to perform the services required of the
Advisor under the Advisory Agreements. The Sub-advisor performs
advisory services for American Insured Mortgage Investors (AIM
84), American Insured Mortgage Investors - Series 85, L.P. (AIM
85) and American Insured Mortgage Investors L.P.-Series 88 (AIM
88), as well as the Partnership (collectively, the AIM
Partnerships). CRI also serves as a general partner of the
advisers to CRIIMI MAE and CRI Liquidating REIT, Inc., which have
investment objectives similar to those of the AIM Partnerships.
CRI and its affiliates are also general partners of a number of
other real estate limited partnerships. CRI and its affiliates
also may serve as general partners, sponsors or managers of real
estate limited partnerships, real estate investment trusts
(REITs) or other entities in the future. With respect to
mortgage acquisitions, CRI may from time to time be faced with a
conflict in determining whether to place a particular mortgage
with the Partnership, one of the other AIM Partnerships, or other
entities which CRI and its affiliates may sponsor or manage.
CRIIMI, Inc., as General Partner, may also face a similar
conflict. Both CRI and CRIIMI, Inc., however, are subject to
their fiduciary duties in evaluating the appropriate action to be
taken when faced with such conflicts.

ITEM 2. PROPERTIES

Although the Partnership does not own the underlying real
estate, the Insured Mortgages in which the Partnership has
invested are first liens on the respective multifamily
residential developments or retirement homes.

4

PART I

ITEM 3. LEGAL PROCEEDINGS

There are no material legal proceedings to which the
Partnership is a party.

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 1993.

PART II

ITEM 5. MARKET FOR REGISTRANT'S SECURITIES AND RELATED SECURITY
HOLDER MATTERS

Principal Market and Market Price for Units
-------------------------------------------
The United States Congress recently repealed portions of the
Federal tax code which have had an adverse impact on tax-exempt
investors in "publicly traded partnerships." This tax code
change, effective January 1, 1994, cleared away the major
impediment standing in the way of listing the Partnership's
Depository Units of Limited Partnership Interest ("Units") for
trading on a national stock exchange. As a result, the General
Partner listed the Partnership's Units for trading on the
American Stock Exchange (AMEX) on January 18, 1994 in order to
provide investment liquidity as contemplated in the Partnership's
original prospectus. The Units are traded under the symbol
"AIJ."

Prior to listing of the Partnership's Units for trading on
the AMEX, the Units were only tradable through an informal market
called the "secondary market".

Distribution Information
------------------------
Distributions per Unit, payable out of the cash flow of the
Partnership during 1993 and 1992 were as follows:

Distributions for the Amount of Distribution
Quarter Ended Per Unit
--------------------- ----------------------
March 31, 1993 $ .23
June 30, 1993 .21
September 30, 1993 .29(1)
December 31, 1993 .28(2)
--------
$ 1.01
========

March 31, 1992 $ .30
June 30, 1992 .22
September 30, 1992 .30
December 31, 1992 .32
--------
$ 1.14
========

(1) In September 1993, the Partnership received $591,872
(approximately $.06 per Unit) from the mortgage on
Victoria Pointe Apartments-Phase II, representing
mortgage interest from October 1991 through June 1992,
and a partial payment for July 1992. The Partnership
distributed approximately $.03 per Unit of this
previously undistributed interest and reserved
approximately $.03 per Unit for the continued funding
of coinsurance expenses. The Partnership distributed
the remaining interest of approximately $.03 per Unit
to Unitholders as part of the fourth quarter
distribution, as discussed below.

5

PART II

ITEM 5. MARKET FOR REGISTRANT'S SECURITIES AND RELATED SECURITY
HOLDER MATTERS - Continued

(2) Includes a special distribution of approximately $.10
per Unit comprised of (i) $.03 per Unit of previously
undistributed accrued interest from the mortgage on
Victoria Pointe Apartments-Phase II which was reserved
as part of the third quarter distribution, described
above, and (ii) $.07 per Unit representing previously
undistributed accrued interest received in December
1993 resulting from the disposition of the mortgage on
Victoria Pointe Apartments-Phase II.

Approximate Number of Unitholders
Title of Class as of December 31, 1993
--------------------------- -------------------------------

Depository Units of Limited 15,000
Partnership Interest

6

PART II

ITEM 6. SELECTED FINANCIAL DATA
(Dollars in thousands, except per Unit amounts)

For the Years Ended December 31,

1993 1992 1991 1990 1989
-------- -------- -------- -------- --------

Income $ 14,430 $ 12,235 $ 13,776 $ 15,396 $ 16,339

Loan losses (63) (107) (4,922) (1,747) --

Net earnings 12,170 9,536 6,086 10,944 13,484

Net earnings per Limited
Partnership Unit (1) 1.21 .95 .60 1.09 1.34

Distributions per Limited
Partnership Unit(1)(2) 1.01 1.14 1.262 1.35 1.405

Total assets 180,776 179,146 181,103 186,973 188,619

Partners' equity 176,007 174,007 175,950 182,612 185,276

(1) Calculated based upon the weighted average number of Units outstanding. See Note 2 of the notes to the
financial statements of the Partnership contained in Item 8 "Financial Statements and Supplementary Data."

(2) Includes distributions due the Unitholders for the Partnership's fiscal quarters ended December 31, 1993, 1992,
1991, 1990 and 1989, which were paid subsequent to year end. See Notes 5 and 7 of the notes to the financial
statements of the Partnership contained in Item 8 "Financial Statements and Supplementary Data."

7

PART II

ITEM 6. SELECTED FINANCIAL DATA - Continued

The selected statements of operations data presented above
for the years ended December 31, 1993, 1992 and 1991, and the
balance sheet data as of December 31, 1993 and 1992, are derived
from and are qualified by reference to the Partnership's
financial statements which have been included elsewhere in this
Form 10-K. The statements of operations data for the years ended
December 31, 1990 and 1989 and the balance sheet data as of
December 31, 1991, 1990 and 1989 are derived from audited
financial statements not included in this Form 10-K. This data
should be read in conjunction with the financial statements and
the notes thereto.

8

PART II

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

General
-------
American Insured Mortgage Investors L.P. - Series 86 (the
Partnership) was formed under the Uniform Limited Partnership Act
of the State of Delaware on October 31, 1985. During the period
from May 2, 1986 (the initial closing date of the Partnership's
public offering) through June 6, 1987 (the termination date of
the offering), the Partnership, pursuant to its public offering
of Units, raised a total of $191,523,300 in gross proceeds. In
addition, the initial limited partner contributed $2,500 to the
capital of the Partnership and received 125 units of limited
partnership interest in exchange therefor.

From inception through September 6, 1991, AIM Capital
Management Corp. served as managing general partner (with a
partnership interest of 4.8%), IRI Properties Capital Corp.
served as corporate general partner (with a partnership interest
of 0.1%) and Second Group Partners, an affiliate of the former
general partners, served as the associate general partner (with a
partnership interest of 0.1%). All of the foregoing general
partners are sometimes collectively referred to as former general
partners.

At a special meeting of the limited partners and Unitholders
of the Partnership held on September 4, 1991, a majority of these
interests approved, among other items, the assignment of the
general partner interests and the shares of the company which
acts as the assignor limited partner in the Partnership.

Effective September 6, 1991, CRIIMI, Inc. (the General
Partner) succeeded the former general partners to become the sole
general partner of the Partnership. CRIIMI, Inc. purchased the
interests of the former managing general partner and the former
corporate general partner pursuant to the terms of the
Partnership Agreement. CRIIMI, Inc. is a wholly-owned subsidiary
of CRIIMI MAE Inc. (CRIIMI MAE), formerly CRI Insured Mortgage
Association, Inc., which is managed by an adviser whose general
partner is C.R.I., Inc. (CRI). In addition, the General Partner
acquired the shares of the company which acts as the assignor
limited partner in the Partnership. The interest of the former
associate general partner (0.1%) was purchased by the Partnership
on September 6, 1991, pursuant to the terms of the Partnership
Agreement.

Also, on September 6, 1991, AIM Acquisition Partners, L.P.
(the Advisor) succeeded Integrated Funding, Inc. (IFI) as the
adviser of the Partnership. AIM Acquisition Corporation (AIM
Acquisition) is the general partner of the Advisor and the
limited partners include, but are not limited to, AIM
Acquisition, The Goldman Sachs Group, L.P., Broad Inc. and a
limited partnership formed by CRI and CRIIMI MAE. Pursuant to
the terms of certain amendments to the Partnership Agreement, as
discussed below, the General Partner is required to receive the
consent of the Advisor prior to taking certain significant
actions which affect the management and policies of the
Partnership. The limited partners and Unitholders of the
Partnership approved the execution of a Sub-advisory Agreement
with CRI/AIM Management, Inc., an affiliate of CRI, pursuant to
which CRI/AIM Management, Inc. manages the Partnership's
portfolio and directs the acquisition and disposition of the
Partnership's mortgages.

Until the change in the Partnership's investment policy, as
discussed below, the Partnership was in the business of
originating mortgage loans (Originated Insured Mortgages) and
acquiring mortgage loans (Acquired Insured Mortgages, and
together with Originated Insured Mortgages, referred to herein as
Insured Mortgages). As of December 31, 1993, the Partnership had
invested in either Originated Insured Mortgages which are insured
or guaranteed, in whole or in part, by the FHA or Acquired

9

PART II

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

Insured Mortgages which are fully insured (as more fully
described below).

The Partnership's reinvestment period expires on December
31, 1994 and the Partnership Agreement states that the
Partnership will terminate on December 31, 2020, unless
previously terminated under the provisions of the Partnership
Agreement. The Partnership's principal investment objectives are
to invest in Insured Mortgages which (i) preserve and protect the
Partnership's invested capital; (ii) provide quarterly
distributions of adjusted cash from operations which may be
increased over time as a result of Participations (as defined
below), when obtainable, on Originated Insured Mortgages; and
(iii) provide appreciation by selecting Acquired Insured
Mortgages which present the possibility of early prepayment.

Effective September 19, 1991, the General Partner changed,
at the Advisor's recommendation, the investment policies of the
Partnership to invest only in Acquired Insured Mortgages which
are fully insured or guaranteed by the Federal National Mortgage
Association, the Government National Mortgage Association (GNMA),
FHA or the Federal Home Loan Mortgage Corporation.

The Partnership had invested in 18 Insured Mortgages,
including Mortgages Held for Disposition and Assets Held for Sale
under Coinsurance Program (AHFS), with an aggregate carrying
value of $167,145,316 and a face value of $165,972,392 as of
December 31, 1993, as discussed below. As of December 31, 1993,
the Partnership had available approximately $7.5 million for
reinvestment in Acquired Insured Mortgages.

Results of Operations
---------------------

1993 versus 1992
----------------
Net earnings for 1993 increased as compared to 1992
primarily due to an increase in mortgage investment income, as
discussed below.

Mortgage investment income increased during 1993 as compared
to 1992 primarily as a result of the Partnership beginning,
effective January 1, 1993, to recognize mortgage investment
income for the mortgages classified as AHFS in the amount
coinsured by the United States Department of Housing and Urban
Development (HUD). Given the improved financial performance of
the borrowers and the General Partner's assessment of the
collateral underlying the mortgages, the General Partner
determined that it was appropriate to begin recognizing interest
income at least to the level of insurance provided by HUD. To the
extent the borrower remits interest in excess of the HUD insured
amount, this excess amount is recognized as income on the cash
basis.

Interest and other income decreased during 1993 as compared
to 1992 primarily due to a reduction in funds available for
short-term investment and a reduction in short-term interest
rates. In 1992, the Partnership had proceeds from a December
1991 mortgage disposition approximating $3 million which were
invested in short-term investments pending the acquisition of two
Acquired Insured Mortgages during the first quarter of 1992.

General and administrative expenses decreased for 1993 as
compared to 1992 due primarily to reductions in payroll
reimbursements and nonrecurring professional fees incurred in
1992, in connection with the mortgages with performance problems,
as discussed below. Also contributing to the decrease in general
and administrative expenses was a reduction in quarterly and
annual reporting expense resulting from reduced mailing costs.

10

PART II

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

The following is a discussion of the types of Insured
Mortgages, along with the risks related to each type of
investment:

Fully Insured Originated Insured Mortgages and Acquired
Insured Mortgages
-------------------------------------------------------

The former managing general partner, on behalf of the
Partnership, had invested in eight fully insured Originated
Insured Mortgages with an aggregate carrying value of
$69,539,851 and $69,888,943 as of December 31, 1993 and
1992, respectively, and an aggregate face value of
$66,934,689 and $67,240,257 as of December 31, 1993 and
1992, respectively. As of December 31, 1993 and 1992, the
Partnership had invested in two fully insured Acquired
Insured Mortgages with an aggregate carrying value of
$3,012,158 and $3,026,972, respectively, and an aggregate
face value of $3,034,084 and $3,049,283, respectively. As of
December 31, 1993, all of the fully insured Originated
Insured Mortgages and Acquired Insured Mortgages are current
with respect to the payment of principal and interest.

In connection with Originated Insured Mortgages, the
Partnership has sought, in addition to base interest pay-
ments, additional interest (commonly termed Participations)
based on a percentage of the net cash flow from the develop-
ment and of the net proceeds from the refinancing, sale or
other disposition of the underlying development. All eight
of the Originated Insured Mortgages made by the Partnership
contain such Participations. During the years ended December
31, 1993, 1992 and 1991, the Partnership received additional
interest of $113,822, $104,350 and $52,816, respectively,
from the Participations. These amounts are included in
mortgage investment income in the accompanying statements of
operations.

In the case of fully insured Originated Insured
Mortgages and Acquired Insured Mortgages, the Partnership's
maximum exposure for purposes of determining loan losses
would generally be approximately 1% of the unpaid principal
balance of the Originated Insured Mortgage or Acquired
Insured Mortgage (an assignment fee charged by FHA) at the
date of a default, plus the unamortized balance of acquisi-
tion fees and closing costs paid in connection with the
acquisition of the Insured Mortgages and the loss of
approximately 30-days accrued interest.

11

PART II

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

Coinsured Mortgages
-------------------
Under the HUD coinsurance program, both HUD and the
coinsurance lender are responsible for paying a portion of
the insurance benefits if a mortgagor defaults and the sale
of the development collateralizing the mortgage produces
insufficient net proceeds to repay the mortgage obligation.
In such case, the coinsurance lender will be liable to the
Partnership for the first part of such loss in an amount up
to 5% of the outstanding principal balance of the mortgage
as of the date foreclosure proceedings are instituted or the
deed is acquired in lieu of foreclosure. For any loss
greater than 5% of the outstanding principal balance, the
responsibility for paying the insurance benefits will be
borne on a pro-rata basis, 85% by HUD and 15% by the
coinsurance lender.

While the Partnership is due payment of all amounts
owed under the mortgage, the coinsurance lender is
responsible for the timely payment of principal and interest
to the Partnership. The coinsurance lender is prohibited
from entering into any workout arrangement with the borrower
without the Partnership's consent and must file a claim for
coinsurance benefits with HUD, upon default, if the
Partnership so directs. As an ongoing HUD-approved
coinsurance lender, and under the terms of the participation
documents, the coinsurance lender is required to satisfy
minimum net worth requirements as set forth by HUD.
However, it is possible that the coinsurance lender's
potential liability for loss on these developments, and
others, could exceed its HUD-required minimum net worth. In
such case, the Partnership would bear the risk of loss if
the coinsurance lenders were unable to meet their
coinsurance obligations. In addition, HUD's obligation for
the payment of its share of the loss could be diminished
under certain conditions, such as the lender not adequately
pursuing regulatory violations of the borrower or the
failure to comply with other terms of the mortgage. However,
the General Partner is not aware of any conditions or
actions that would result in HUD diminishing its insurance
coverage.

1. Coinsured by third parties
--------------------------
As of December 31, 1993 and 1992, the former managing
general partner, on behalf of the Partnership, had
invested in eight and nine coinsured mortgages
respectively, five of which are coinsured by an
unaffiliated third party coinsurance lender under the
HUD coinsurance program. Two of the coinsured
mortgages which are coinsured by an unaffiliated third
party are classified as Mortgages Held for Disposition
as of December 31, 1993 and are discussed below. The
remaining three coinsured mortgages which are coinsured
by unaffiliated third parties are current with respect
to the payment of principal and interest and are
classified as investment in mortgages as of December
31, 1993 and 1992. As of December 31, 1993 and 1992,
these three coinsured mortgages had an aggregate
carrying value of $22,680,052 and $22,792,326,
respectively, and an aggregate face value of
$21,945,884 and $22,047,027 respectively.

The following is a discussion of actual and potential
performance problems with respect to certain mortgage
investments coinsured by an unaffiliated third party:

The Originated Insured Mortgage on The Villas, a
405-unit apartment complex located in Lauderhill,
Florida, is coinsured by the Patrician Mortgage Company

12

PART II

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

(Patrician) and had a carrying value equal to its face
value of $15,856,842 and $15,878,027 as of December 31,
1993 and 1992, respectively. Since August 1, 1990, the
mortgagor has not made the full monthly payments of
principal and interest to Patrician. Patrician began
collecting rents from the project and continued to make
the monthly debt service payments to the Partnership
through February 1992. The Partnership and Patrician
entered into a modification agreement which provided
for reduced payments through July 1992, regular
scheduled payments from August 1992 to December 1992,
and then increased payments for a period lasting
approximately 10 years.

The mortgagor of the mortgage on The Villas was unable
to comply with the terms of the modification. As a
result, Patrician filed a foreclosure action on October
14, 1993. On November 2, 1993, the mortgagor of The
Villas filed for protection under Chapter 11 of the
Federal Bankruptcy Code. If Patrician and the
mortgagor are unable to negotiate a settlement,
Patrician intends to litigate the case in bankruptcy
court and to subsequently acquire and dispose of the
property. As of March 4, 1994, Patrician had made
payments of principal and interest due through November
1993.

The mortgagor of The Villas mortgage is also the
mortgagor of the Originated Insured Mortgage on St.
Charles Place-Phase II, a 156-unit apartment complex
located in Miramar, Florida, which is also coinsured by
Patrician. The St. Charles Place-Phase II mortgage had
a carrying value and a face value of $3,098,630 and
$3,107,542 as of December 31, 1993 and December 31,
1992, respectively. These amounts represent the
Partnership's approximately 45% ownership interest in
the mortgage. The remaining 55% ownership interest is
held by AIM 88, an affiliated entity.

During 1993, the mortgagor of St. Charles Place-Phase
II paid its monthly principal and interest payments to
Patrician in arrears, and did not make the monthly
payment of principal and interest due to Patrician for
the period of October 1993 through December 1993.
However, Patrician has remitted monthly payments of
principal and interest due for these months to the
Partnership. As the mortgagor was unable to bring the
loan current, Patrician filed a foreclosure action on
October 14, 1993. On November 2, 1993, the mortgagor
of the mortgage on St. Charles Place-Phase II filed for
protection under Chapter 11 of the Federal Bankruptcy
Code. If Patrician and the mortgagor are unable to
negotiate a settlement, Patrician intends to litigate
the case in bankruptcy court and to subsequently
acquire and dispose of the property.

The General Partner is overseeing Patrician's efforts
to complete the foreclosure action, including the
subsequent acquisition and disposition of the above two
properties. As the coinsurance lender, Patrician is
liable to the Partnership for the outstanding principal
balance of both mortgages plus all accrued but unpaid
interest through the date of such payment. If the sale
of the properties collateralizing the mortgages
produces insufficient net proceeds to repay the
mortgage obligations to the Partnership, Patrician will
be liable to the Partnership for the coinsurance
lender's share of the deficiency. Based on the General
Partner's assessment of the collateral underlying the
mortgages, including information related to the

13

PART II

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

financial condition of Patrician, the General Partner
believes the carrying value of these assets is
realizable. As a result of Patrician's coinsurance
obligation these mortgages were classified as Mortgages
Held for Disposition as of December 31, 1993. The
Partnership intends to reinvest any net disposition
proceeds from these mortgages in Acquired Insured
Mortgages.

The General Partner intends to continue to oversee the
Partnership's interest in these mortgages to ensure
that Patrician meets its coinsurance obligations. The
General Partner's assessment of the realizability of
The Villas and St. Charles Place-Phase II mortgages is
based on current information, and to the extent current
conditions change or additional information becomes
available, then the General Partner's assessment may
change. However, the General Partner does not believe
that there would be a material adverse impact on the
Partnership's financial condition or its results of
operations should Patrician be unable to comply with
its full coinsurance obligation.

2. Coinsured by affiliate
----------------------
a. The former managing general partner, on behalf of the
Partnership, had invested in coinsured originated
mortgages where the coinsurance lender is IFI. As of
December 31, 1993 and 1992, the Partnership had
investments remaining in three and four coinsured
originated mortgages, respectively, where the
coinsurance lender is IFI. As structured by the former
managing general partner, with respect to these
mortgages, the Partnership bears the risk of loss upon
default for IFI's portion of the coinsurance loss. As
of December 31, 1993 and 1992, one and two of these
mortgages, respectively, were classified as AHFS and
are discussed below.

As of December 31, 1993, the remaining two IFI
coinsured mortgages, as shown in the table below, are
classified as investment in mortgages and are current
with respect to the payment of principal and interest.
The General Partner believes there is adequate
collateral value underlying the mortgages. Therefore,
no loan losses were recognized on these mortgages
during the years ended December 31, 1993, 1992 and
1991.

14

PART II

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

Carrying Face Carrying Face
Amount Amount Amount Amount
December 31, December 31, December 31, December 31,
1993 1993 1992 1992
------------ ------------ ------------ ------------

Pembrook Apartments $ 15,684,341 $ 15,060,875 $ 15,756,698 $ 15,123,548
Spring Lake Village 5,169,914 5,054,317 5,191,641 5,074,329

15

PART II

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

b. Assets Held for Sale Under Coinsurance Program

As of December 31, 1993 and 1992, the former managing
general partner, on behalf of the Partnership, had
invested in one and two coinsured mortgages which are
accounted for as AHFS, respectively. The coinsurer on
these mortgages is IFI and the Partnership bears the
risk of any coinsurance loss.

Coinsured mortgage loans are deemed to be AHFS when a
determination has been made that the borrower meets the
following criteria:

1. The borrower has little or no equity in the
collateral, considering the current fair value of
the collateral; and
2. proceeds for repayment of the loan can be expected
to come only from the operation or sale of the
collateral; and
3. the borrower has either:
a. formally or effectively abandoned control of
the collateral to the creditor; or,
b. retained control of the collateral, but
because of the current financial condition of
the borrower or the economic prospects for
the borrower and/or the collateral in the
foreseeable future, it is doubtful that the
borrower will be able to rebuild equity in
the collateral or otherwise repay the loan in
the foreseeable future.

AHFS represent the estimated cash flow to be received
from any claims filed with HUD, including the estimated
asset disposition proceeds. The disposition proceeds
are based on the estimated fair value of the collateral
underlying the mortgage which represents the amount
that could reasonably be expected to be received in a
current sale between a willing buyer and a willing
seller. The General Partner initially determined the
estimated fair values of the AHFS and the General
Partner periodically assesses the estimated current
fair value of the properties to determine whether
additional loan losses are appropriate due to, among
other factors, a change in market conditions affecting
the properties. The loan losses related to these AHFS
reduce the carrying value of the Originated Insured
Mortgages.

On the AHFS determination date for the applicable
mortgages and through December 31, 1993, the
Partnership discontinued accruing interest income in
accordance with the original terms of the mortgage.
For the years ended December 31, 1992 and 1991, the
Partnership recognized $1,170,700 and $572,572,
respectively, as interest income and received
$2,794,186 and $1,461,309, respectively, representing
the borrowers interest payments on the mortgages which
were applied to reduce the outstanding basis in the
mortgage investment. Beginning on January 1, 1993, the
Partnership began to recognize mortgage investment
income for the mortgages classified as AHFS in the
amount coinsured by HUD. Given the improved financial
performance of the borrowers and the General Partner's
assessment of the collateral underlying the mortgages,
the General Partner determined that it was appropriate
to begin recognizing interest income at least to the
level of insurance provided by HUD. To the extent the
borrower remits interest in excess of the HUD insured
amount, this excess amount is recognized as income on
the cash basis.

16

PART II

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

During 1993, the Partnership recognized $2,898,882 in
interest income. Cash totalling $639,756 was received
from mortgages classified as AHFS.

17

PART II

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

The following table summarizes the coinsured mortgages
accounted for as AHFS as of December 31, 1993 and 1992,
respectively:

Carrying Face Carrying Face
Amount Amount Amount Amount
Loan Losses Recognized
December 31, December 31, December 31, December 31,
1993 1993 1992 1992 1993 1992 1991
------------ ------------ ------------ ------------ ---------- ---------- ----------

One East Delaware $32,103,528 $34,987,071 $29,257,820 $34,987,071 $ -- $ -- $3,665,654
Victoria Pointe Apts.-
Phase II(a) -- -- 8,852,196 9,787,127 63,488 106,870 1,255,554
----------- ----------- ----------- ----------- ---------- ---------- ----------
$32,103,528 $34,987,071 $38,110,016 $44,774,198 $ 63,488 $ 106,870 $4,921,208
=========== =========== =========== =========== ========== ========== ==========

(a) The Partnership received settlement proceeds from the disposition of this mortgage in December 1993 and January
1994, as discussed below.

18

PART II

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

The following is a discussion of performance problems with
respect to those mortgage investments accounted for as AHFS:

1. In December 1993, the General Partner entered into a
Modification Agreement with the mortgagor of the
mortgage on One East Delaware wherein the mortgagor had
until April 30, 1994 to pay off the mortgage at a
discount. The mortgagor prepaid the loan in January
1994. Total proceeds received were approximately $33.6
million, which resulted in a financial statement gain
of approximately $1.2 million which was recognized in
1994. The Partnership intends to reinvest the net
disposition proceeds from this mortgage in Acquired
Insured Mortgages.

2. In December 1993, the Partnership settled, for
approximately $9,050,000, the mortgage on Victoria
Pointe Apartments-Phase II. As of December 31, 1993,
the Partnership recognized a loan loss amounting to
$63,488 which is reflected in the accompanying
statement of operations for the year ended December 31,
1993. As of December 31, 1993, the Partnership had
committed to reinvest the net disposition proceeds in
Acquired Insured Mortgages.

1992 versus 1991
----------------
Net earnings for 1992 increased compared to 1991 primarily
due to the recognition of loan losses of approximately $4.9
million in 1991 as a result of the General Partner's evaluation
of certain coinsured mortgages considered AHFS. This increase
was partially offset by a decrease in mortgage investment income
during 1992, as discussed below.

Mortgage investment income decreased for 1992 as compared to
1991 primarily due to the discontinuance of the accrual of
mortgage interest income for the two coinsured mortgages
classified as AHFS, partially offset by income from accreting the
discount on these two mortgages. Also contributing to the
reduction in mortgage investment income was temporarily reduced
interest payments from the mortgage on The Villas resulting from
a modification agreement. The decrease in mortgage investment
income was partially offset by the mortgage investment income
recognized on the two Acquired Insured Mortgages which the
Partnership purchased in January and March 1992.

The Asset Management Fee decreased during 1992 compared to
1991 primarily as a result of a reduction in the Asset Management
Fee percentage, effective October 1, 1991. At a special meeting
held on September 4, 1991, the limited partners and Unitholders
consented to, among other items, a reduction in the Asset
Management Fee payable by the Partnership to the Advisor from the
previous level of 1.25% to .95%, effective October 1, 1991
through December 31, 1991, and a reduction in the Asset
Management Fee payable from January 1, 1992 through December 31,
1996 from the previous level of 1.00% to .95%. As provided for
in the Partnership Agreement, the annual Asset Management Fee
will be reduced from the previous level of .95% to .75% as of
January 1, 1997 and will remain at that level thereafter. The
limited partners and Unitholders also consented to the
elimination of the subordinated fees.

General and administrative expenses increased during 1992 as
compared to 1991 primarily as a result of an increase in payroll
expense and professional fees incurred in connection with the
property issues, as previously discussed, partially offset by a
reduction in investor services expenses.

19

PART II

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

Fair Value of Financial Instruments
-----------------------------------
The following estimated fair values of the Partnership's
financial instruments are presented in accordance with generally
accepted accounting principles which define fair value as the
amount at which a financial instrument could be exchanged in a
current transaction between willing parties, other than in a
forced or liquidation sale. These estimated fair values,
however, do not represent the liquidation value or the market
value of the Partnership.

20

PART II

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

As of December 31, 1993
As of December 31, 1992
Carrying Fair Carrying Fair
Amount Value Amount Value
------------ ------------ ------------ ------------

Investment in Mortgages:
Originated Insured
Mortgages $113,074,158 $110,234,670 $132,615,177 $125,038,506
Acquired Insured
Mortgages 3,012,158
3,161,263 3,026,972 3,107,202
------------ ------------ ------------ ------------
$116,086,316 $113,395,933 $135,642,149 $128,145,708
------------ ------------ ------------ ------------
Mortgages Held for
Disposition $ 18,955,472 $ 18,555,559 $ -- $ --
------------ ------------ ------------ ------------

21

PART II

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

The following methods and assumptions were used to estimate
the fair value of each class of financial instruments:

Investment in mortgages and mortgages held for disposition
----------------------------------------------------------
The fair value of the fully insured mortgages is based
on the average of the quoted market prices from three
investment banking institutions which trade these
investments as part of their day-to-day activities.

In order to determine the fair value of the coinsured
mortgage portfolio, the Partnership valued the coinsured
mortgages as though they were fully insured (in the same
manner fully insured mortgages were valued). From this
amount, the Partnership deducted five percent of the face
value of the loan and fifteen percent of the difference
between the remaining face value and the value of these
loans as though they were uninsured. These deductions are
based on HUD's coinsurance limitations. The uninsured values
were based on the average of the quoted market prices from
two investment banking institutions which trade these types
of investments as part of their day-to-day activities.

Liquidity and Capital Resources
-------------------------------
The Partnership's operating cash receipts, derived from
payments of principal and interest on Insured Mortgages, plus
cash receipts from interest on short-term investments, were
sufficient during 1993 to meet operating requirements.

The basis for paying distributions to Unitholders is cash
flow from operations, which is comprised of regular interest
income and principal from Insured Mortgages and gain, if any,
from mortgage dispositions. Although Insured Mortgages yield a
fixed monthly mortgage payment once purchased, the cash
distributions paid to the Unitholders will vary during each
quarter 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
distributions, (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
attributable to the delinquency or default of Insured Mortgages
and professional fees and foreclosure and acquisition costs
incurred in connection with those Insured Mortgages and (4)
variations in the Partnership's operating expenses.

If necessary, the Partnership has the right to establish
reserves either from the Net Proceeds of the Offering or from
Cash Flow (as defined in the Partnership Agreement). It should
be noted, however, that the Partnership also has the right to
reinvest the Proceeds of Mortgage Prepayments, Sales and
Insurance in Acquired Insured Mortgages through December 31, 1994
and generally intends to distribute substantially all of its Cash
Flow from operations. If any reserves are deemed to be necessary
by the Partnership, they will be invested in short-term,
interest-bearing investments.

The Partnership anticipates that reserves generally would
only be necessary in the event the Partnership elected to
foreclose on an Originated Insured Mortgage insured by FHA and
take over the operations of the underlying development. In such
case, there may be a need for additional capital. Since
foreclosure proceedings can be expensive and time-consuming, the
Partnership expects that it will generally assign the fully
insured Originated Insured Mortgages to HUD for insurance
proceeds rather than foreclose. In the case of an Originated
Insured Mortgage insured under the HUD coinsurance program, the
likelihood of foreclosure (and the potential need for reserves)
exists since these coinsured mortgages generally cannot be

22

PART II

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

assigned to HUD and the coinsurance lender would be required to
acquire title to the property and hold the property for 12 months
or until an earlier sale in order to realize the benefit of HUD
insurance. The determination of whether to assign the mortgage
to HUD or institute foreclosure procedures or whether to set
aside any reserves will be made on a case-by-case basis by the
General Partner, the Advisor and the Sub-advisor. As of
December 31, 1993 and 1992, the Partnership had not set aside any
reserves.

Cash flow - 1993 versus 1992
----------------------------
Net cash provided by operating activities decreased during
1993 as compared to 1992 principally due to mortgage investment
income accrued for mortgages classified as AHFS. Also
contributing to the decrease was an increase in receivables and
other assets in 1993 due to the balance of disposition proceeds,
received in January 1994, from the disposition of the mortgage on
Victoria Pointe Apartments-Phase II.

Net cash provided by investing activities increased in 1993
as compared to 1992 principally due to disposition proceeds
received in 1993 of approximately $9.0 million from the mortgage
on Victoria Pointe Apartments-Phase II, partially offset by the
acquisition in 1992 of two Acquired Insured Mortgages of
approximately $3.0 million.

Net cash used in financing activities decreased during 1993
compared to 1992 as a result of a decrease in 1993 distributions
to Unitholders as compared to 1992 distributions. This decrease
in distributions to Unitholders was due, in part, to the
delinquencies and subsequent cessation of the receipt of
principal and interest from the mortgage on One East Delaware and
the delinquency of the monthly payments by the mortgagor of the
mortgages on The Villas and St. Charles Place-Phase II.

Cash flow - 1992 versus 1991
----------------------------
Net cash provided by operating activities decreased in 1992
as compared to 1991 principally due to a decrease in mortgage
investment income, partially offset by a net decrease in
expenses, as previously discussed. This decrease was partially
offset by payments received from the AHFS mortgages, principally
One East Delaware, during 1992 and the payment of the Accrued
Fees, as discussed below, in 1991.

Net cash used in investing activities increased in 1992 as
compared to 1991 principally due to the acquisition in 1992 of
two Acquired Insured Mortgages.

Net cash used in financing activities decreased during 1992
as compared to 1991 as a result of the decrease in distributions
paid to investors. This decrease was primarily the result of the
one to two month delay of monthly payments by the mortgagor of
the mortgage on One East Delaware and the modification agreement
entered into in May 1992 with the mortgagor on The Villas
mortgage which provided for a temporary reduction in the monthly
principal and interest payments during 1992. In addition, the
distributions for 1992 decreased from 1991 as a result of the
default by the mortgagor of the Victoria Pointe Apartments-Phase
II mortgage in 1991.

In May 1993, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 115 "Accounting
for Certain Investments in Debt and Equity Securities" (SFAS
115), effective for fiscal years beginning after December 15,
1993. This statement requires that investments in debt and
equity securities be classified into one of the following
investment categories based upon the circumstances under which
such securities might be sold: Held to Maturity, Available for

23

PART II

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

Sale, and Trading. Generally, certain debt securities for which
an enterprise has both the ability and intent to hold to maturity
should be accounted for using the amortized cost method and all
other securities must be recorded at their fair values. The
General Partner believes that the majority of securities held by
the Partnership will fall into either the Held to Maturity or
Available for Sale categories. However, the General Partner has
not yet determined the ultimate impact of the implementation of
this statement in the Partnership's financial statements.

Also in May 1993, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No. 114
"Accounting by Creditors for Impairment of a Loan" (SFAS 114),
effective for fiscal years beginning after December 15, 1994.
This statement requires that applicable loans which are impaired
be measured based on the present value of expected future cash
flows discounted at the loan's effective interest rate, or at the
loan's market price, or the fair value of the collateral for
impaired loans that are collateral dependent. The General
Partner does not believe the ultimate impact of the
implementation of this statement will materially affect the
Partnership's financial statements.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The information required by this item is contained in Part
IV.

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

None.

24

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

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

The Partnership has no officers or directors. The affairs of
the Partnership are generally managed by the General Partner,
which is wholly-owned by CRIIMI MAE, a company whose shares are
listed on the New York Stock Exchange. CRIIMI MAE is managed by
an adviser whose general partner is CRI.

Effective September 6, 1991, CRIIMI, Inc. (the General
Partner) succeeded the former general partners to become the sole
general partner of the Partnership. CRIIMI, Inc. purchased the
interests of the former managing general partner and the former
corporate general partner pursuant to the terms of the
Partnership Agreement. CRIIMI, Inc. is a wholly-owned subsidiary
of CRIIMI MAE Inc. (CRIIMI MAE), formerly CRI Insured Mortgage
Association, Inc., which is managed by an adviser whose general
partner is C.R.I., Inc. (CRI). In addition, the General Partner
acquired the shares of the company which acts as the assignor
limited partner in the Partnership. The interest of the former
associate general partner (0.1%) was purchased by the Partnership
on September 6, 1991, pursuant to the terms of the Partnership
Agreement.

Also, on September 6, 1991, AIM Acquisition Partners, L.P.
(the Advisor) succeeded Integrated Funding, Inc. (IFI) as the
adviser of the Partnership. AIM Acquisition Corporation (AIM
Acquisition) is the general partner of the Advisor and the
limited partners include, but are not limited to, AIM
Acquisition, The Goldman Sachs Group, L.P., Broad Inc. and a
limited partnership formed by CRI and CRIIMI MAE. Pursuant to
the terms of certain amendments to the Partnership Agreement, as
discussed below, the General Partner is required to receive the
consent of the Advisor prior to taking certain significant
actions which affect the management and policies of the
Partnership. The limited partners and Unitholders of the
Partnership approved the execution of a Sub-advisory Agreement
with CRI/AIM Management, Inc., an affiliate of CRI, pursuant to
which CRI/AIM Management, Inc. manages the Partnership's
portfolio and directs the acquisition and disposition of the
Partnership's mortgages.

The General Partner is also the general partner of AIM 84,
AIM 85 and AIM 88, limited partnerships with investment
objectives similar to those of the Partnership.

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

(f) Involvement in certain legal proceedings.

None.

(g) Promoters and control persons.

Not applicable.

(h) Based solely on its review of Forms 3 and 4 and
amendments thereto furnished to the Partnership,
and written representations from certain reporting
persons that no Form 5s were required for those
persons, the Partnership believes that all
reporting persons have filed on a timely basis
Forms 3, 4 and 5 as required in the fiscal year
ended December 31, 1993.

25

PART III

ITEM 11. EXECUTIVE COMPENSATION

The information required by Item 11 is incorporated herein
by reference to Note 7 of the notes to the financial statements
of the Partnership contained in Part IV.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT

As of December 31, 1993, no person was known by the Partner-
ship to be the beneficial owner of more than five percent (5%) of
the outstanding Units of the Partnership.

As of December 31, 1993, neither the officers and directors,
as a group, of the General Partner nor any individual director of
the General Partner, are known to own more than 1% of the out-
standing Units of the Partnership.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

(a) Transactions with management and others.

Note 7 of the notes to the Partnership's financial
statements contained in Part IV of this report which
contains a discussion of the amounts, fees and other
compensation paid or accrued by the Partnership to the
directors and executive officers of the General Partner
and their affiliates, is incorporated herein by
reference.

(b) Certain business relationships.

Other than as set forth in Item 11 of this report which
is incorporated herein by reference, the Partnership
has no business relationship with entities of which the
former general partners or the current General Partner
of the Partnership are officers, directors or equity
owners.

(c) Indebtedness of management.

None.

(d) Transactions with promoters.

Not applicable.

26

PART IV

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

(a)(1) Financial Statements:

See Item 8. "Financial Statements and Supplementary
Data."

(a)(2) Financial Statement Schedules:

XII - Mortgage Loans on Real Estate

All other schedules have been omitted because they
are inapplicable, not required, or the information is
included in the Financial Statements or Notes
thereto.

(a)(3) Exhibits:

3. Amended and Restated Certificate of Limited
Partnership is incorporated by reference to Exhibit
4(a) to Amendment No. 1 to the Partnership's
Registration Statement on Form S-11 (No. 33-1735)
dated March 6, 1986 (such Registration Statement, as
amended, is referred to herein as the "Amended
Registration Statement").

4. Second Amended and Restated Agreement of Limited
Partnership is incorporated by reference in Exhibit 3
to the Amended Registration Statement.

4.(a) Material Amendments to the Second Amended and
Restated Agreement of Limited Partnership are
incorporated by reference to Exhibit 4(a) to the
Annual Report on Form 10-K for the year ended
December 31, 1987.

4.(b) Amendment to the Second Amended and Restated
Agreement of Limited Partnership of the Partnership
dated February 12, 1990, incorporated by reference to
Exhibit 4(b) to the Partnership's Annual Report on
Form 10-K for the year ended December 31, 1989.

10.(a) Escrow Agreement is incorporated by reference to
Exhibit 10(a) to the Amended Registration Statement.

10.(b) Origination and Acquisition Services Agreement is
incorporated by reference to Exhibit 10(b) to the
Amended Registration Statement.

10.(c) Management Services Agreement is incorporated by
reference to Exhibit 10(c) to the Amended
Registration Statement.

10.(d) Disposition Services Agreement is incorporated by
reference to Exhibit 10(d) to the Amended
Registration Statement.

10.(e) Agreement among the former managing general partner,
the former associate general partner and Integrated
Resources, Inc. is incorporated by reference to
Exhibit 10(e) to the Amended Registration Statement.

10.(f) Reinvestment Plan is incorporated by reference to the
Prospectus contained in the Amended Registration
Statement.

27

PART IV

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

10.(g) Mortgagor-Participant Agreement regarding the One
East Delaware Originated Insured Mortgage is
incorporated by reference to Exhibit 10(g) to the
Annual Report on Form 10-K for the year ended
December 31, 1987.

10.(h) Mortgage, Assignment of Rents and Security Agreements
regarding One East Delaware Originated Insured
Mortgage is incorporated by reference to Exhibit
10(h) to the Annual Report on Form 10-K for the year
ended December 31, 1987.

28. Pages A-1 - A-5 of the Partnership Agreement of
Registrant.

28.(a) Purchase Agreement among AIM Acquisition, the former
managing general partner, the former corporate
general partner, IFI and Integrated dated as of
December 13, 1990, as amended January 9, 1991.

28.(b) Purchase Agreement among CRIIMI, Inc., AIM
Acquisition, the former managing general partner, the
former corporate general partner, IFI and Integrated
dated as of December 13, 1990 and executed as of
March 1, 1991.

28.(c) Amendment to Partnership Agreement dated September 4,
1991. Incorporated by reference to Exhibit 28.(a),
above.

28.(d) Non-negotiable promissory note to American Insured
Investors - Series 85, L.P. in the amount of
$1,737,722 dated December 31, 1991.

28.(e) Sub-Management Agreement by and between AIM
Acquisition and CRI/AIM Management, Inc., dated as of
March 1, 1991.

28.(f) Expenses Reimbursement Agreement by Integrated
Funding Inc. and the AIM Funds, effective
December 31, 1992.

(b) Reports on Form 8-K filed during the last quarter of the
fiscal year: None.

All other items are not applicable.

28

SIGNATURES

Pursuant to the requirements of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned thereunto duly
authorized.

AMERICAN INSURED MORTGAGE
INVESTORS L.P. - SERIES 86
(Registrant)

By: CRIIMI, Inc.
General Partner

March 16, 1994 /s/H. William Willoughby
--------------------------- -------------------------
DATE H. William Willoughby
President and Principal
Financial Officer and
Board Member

March 16, 1994 /s/William B. Dockser
--------------------------- -----------------------
DATE William B. Dockser
Chairman of the Board and
Principal Executive Officer

March 15, 1994 /s/Garrett G. Carlson, Sr.
--------------------------- -------------------------
DATE Garrett G. Carlson, Sr.
Director

March 10, 1994 /s/G. Richard Dunnells
--------------------------- -------------------------
DATE G. Richard Dunnells
Director

March 10, 1994 /s/Robert F. Tardio
--------------------------- -------------------------
DATE Robert F. Tardio
Director

29

AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 86

Financial Statements as of December 31, 1993 and 1992

and for the Years Ended December 31, 1993, 1992 and 1991

30

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Partners of
American Insured Mortgage Investors L.P. - Series 86:

We have audited the accompanying balance sheets of American
Insured Mortgage Investors L.P. - Series 86 (the Partnership) as
of December 31, 1993 and 1992, and the related statements of
operations, changes in partners' equity and cash flows for the
years ended December 31, 1993, 1992 and 1991. These financial
statements and the schedule referred to below are the
responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial
statements and the schedule based on our audits.

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

In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position
of the Partnership as of December 31, 1993 and 1992, and the
results of its operations and its cash flows for the years ended
December 31, 1993, 1992 and 1991, in conformity with generally
accepted accounting principles.

Our audits were made for the purpose of forming an opinion
on the basic financial statements taken as a whole. Schedule
XII-Mortgage Loans on Real Estate as of December 31, 1993 is
presented for purposes of complying with the Securities and
Exchange Commission's rules and regulations and is not a required
part of the basic financial statements. The information in this
schedule has been subjected to the auditing procedures applied in
our audits of the basic financial statements and, in our opinion,
is fairly stated in all material respects in relation to the
basic financial statements taken as a whole.

Washington, D.C. Arthur Andersen & Co.
March 4, 1994

31

AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 86

BALANCE SHEETS

ASSETS

As of December 31,
1993 1992
------------ ------------
Investment in mortgages:
Originated insured mortgages $108,995,765 $128,470,730
Acquired insured mortgages 3,034,084 3,049,283
------------ ------------
112,029,849 131,520,013

Plus: unamortized premium, net
of unamortized discount 4,056,467 4,122,136
------------ ------------
116,086,316 135,642,149

Assets held for sale under
coinsurance program 32,103,528 38,110,016

Mortgages held for disposition,
at lower of cost or market 18,955,472 --

Cash and cash equivalents 9,095,255 2,557,009

Investment in affiliate 1,730,087 1,730,910

Receivables and other assets 2,805,604 1,105,832
------------ ------------
Total assets $180,776,262 $179,145,916
============ ============

LIABILITIES AND PARTNERS' EQUITY

Distributions payable $ 2,819,518 $ 3,222,311

Note payable to affiliate 1,737,723 1,730,910

Accounts payable and accrued
expenses 212,428 185,706
------------ ------------
Total liabilities 4,769,669 5,138,927
------------ ------------
Partners' equity:
Limited partners' equity 176,783,204 174,881,580
General partner's deficit (776,611) (874,591)
------------ ------------
Total partners' equity 176,006,593 174,006,989
------------ ------------
Total liabilities and
partners' equity $180,776,262 $179,145,916
============ ============

The accompanying notes are an integral part
of these financial statements.

32

AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 86

STATEMENTS OF OPERATIONS

For the years ended December 31,
1993 1992 1991
------------ ------------ ------------

Income:
Mortgage investment income $ 14,387,837 $ 11,995,704 $ 13,667,168
Interest and other income 42,419 99,931 108,494
------------ ------------ ------------
14,430,256 12,095,635 13,775,662
------------ ------------ ------------
Expenses:
Asset management fee to related
parties 1,694,280 1,688,681 2,101,026
General and administrative 363,463 624,639 666,884
Interest expense to affiliate 139,018 139,018 --
------------ ------------ ------------
2,196,761 2,452,338 2,767,910
------------ ------------ ------------
Earnings before loan losses 12,233,495 9,643,297 11,007,752

Loan losses (63,488) (106,870) (4,922,182)
------------ ------------ ------------
Net earnings $ 12,170,007 $ 9,536,427 $ 6,085,570
============ ============ ============

Net earnings allocated to:
Limited partners - 95.1% $ 11,573,677 $ 9,069,142 $ 5,787,377
General partner(s) - 4.9% 596,330 467,285 298,193
------------ ------------ ------------
$ 12,170,007 $ 9,536,427 $ 6,085,570
============ ============ ============
Net earnings per Limited
Partnership Unit $ 1.21 $ .95 $ .60
============ ============ ============

The accompanying notes are an integral part
of these financial statements.

33

AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 86
STATEMENTS OF CHANGES IN PARTNERS' EQUITY
For the years ended December 31, 1993, 1992 and 1991

Total
General Limited Partners'
Partner(s) Partners Equity
------------ ------------- ------------

Balance, December 31, 1990 $ (445,761) $ 183,057,383 $182,611,622

Net earnings 298,193 5,787,377 6,085,570

Distributions paid or accrued of
$1.262 per Unit, including
return of capital of $.66 per Unit (631,813) (12,115,327) (12,747,140)
------------ ------------- ------------
Balance, December 31, 1991 (779,381) 176,729,433 175,950,052

Net earnings 467,285 9,069,142 9,536,427

Distributions paid or accrued of
$1.14 per Unit, including return
of capital of $.19 per Unit (562,495) (10,916,995) (11,479,490)
------------ ------------- ------------
Balance, December 31, 1992 (874,591) 174,881,580 174,006,989

Net earnings 596,330 11,573,677 12,170,007

Distributions paid or accrued of
$1.01 per Unit (498,350) (9,672,053) (10,170,403)
------------ ------------- ------------
Balance, December 31, 1993 $ (776,611) $ 176,783,204 $176,006,593
============ ============= ============
Limited Partnership Units outstanding -
December 31, 1993, 1992 and 1991 9,576,290
=========
The accompanying notes are an integral part
of these financial statements.

34

AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 86

STATEMENTS OF CASH FLOWS

For the years ended December 31,
1993 1992 1991
------------ ------------ ------------

Cash flows from operating activities:

Net earnings $ 12,170,007 $ 9,536,427 $ 6,085,570

Adjustments to reconcile net earnings to net cash
provided by operating activities:
Loan losses 63,488 106,870 4,922,182
Payments (made) received and treated as (an addition)
a reduction of Assets Held for Sale under
Coinsurance Program/Mortgage investment income
accrued/accreted on AHFS (3,106,783) 1,623,486 888,737

Changes in assets and liabilities:
Increase in note payable to affiliate 6,813 -- --
Decrease in due to related parties -- -- (1,082,284)
Increase (decrease) in accounts payable and
accrued expenses 26,722 (46,037) 97,708
(Increase) decrease in receivables and other assets (1,699,772) 5,236 833,570
Decrease in investment in affiliate 823 -- --
------------ ------------ ------------
Net cash provided by operating activities 7,461,298 11,225,982 11,745,483
------------ ------------ ------------
Cash flows from investing activities:

Proceeds from disposition of Assets Held for Sale
under Coinsurance Program 9,049,783 -- --
Proceeds from disposition of Originated Insured Mortgage -- -- 3,463,266
Investment in Acquired Insured Mortgages -- (3,038,297) --
Receipt of principal from scheduled payments 600,361 573,537 715,929
------------ ------------ ------------
Net cash provided by (used in) investing activities 9,650,144 (2,464,760) 4,179,195
------------ ------------ ------------

35

AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 86

STATEMENTS OF CASH FLOWS (Continued)

For the years ended December 31,
1993 1992 1991
------------ ------------ ------------

Cash flows from financing activities:
Distributions paid to partners (10,573,196) (11,441,106) (12,708,331)
------------ ------------ ------------
Net increase (decrease) in cash and cash equivalents 6,538,246 (2,679,884) 3,216,347

Cash and cash equivalents, beginning of year 2,557,009 5,236,893 2,020,546
------------ ------------ ------------
Cash and cash equivalents, end of year $ 9,095,255 $ 2,557,009 $ 5,236,893
============ ============ ============

The accompanying notes are an integral part
of these financial statements.

36

AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 86

NOTES TO FINANCIAL STATEMENTS

1. ORGANIZATION

American Insured Mortgage Investors L.P. - Series 86 (the
Partnership) was formed under the Uniform Limited Partnership Act
of the state of Delaware on October 31, 1985.

From inception through September 6, 1991, AIM Capital
Management Corp. served as the managing general partner (with a
partnership interest of 4.8%), IRI Properties Capital Corp.
served as corporate general partner (with a partnership interest
of 0.1%) and Second Group Partners, an affiliate of the former
general partners, served as the associate general partner (with a
partnership interest of 0.1%). All of the foregoing general
partners are sometimes collectively referred to as former general
partners.

At a special meeting of the limited partners and Unitholders
of the Partnership held on September 4, 1991, a majority of these
interests approved, among other items, assignment of the general
partner interests and the shares of the company which acts as the
assignor limited partner in the Partnership.

Effective September 6, 1991, CRIIMI, Inc. (the General
Partner) succeeded the former general partners to become the sole
general partner of the Partnership. CRIIMI, Inc. purchased the
interests of the former managing general partner and the former
corporate general partner pursuant to the terms of the
Partnership Agreement. CRIIMI, Inc. is a wholly-owned subsidiary
of CRIIMI MAE Inc. (CRIIMI MAE), formerly CRI Insured Mortgage
Association, Inc., which is managed by an adviser whose general
partner is C.R.I., Inc. (CRI). In addition, the General Partner
acquired the shares of the company which acts as the assignor
limited partner in the Partnership. The interest of the former
associate general partner (0.1%) was purchased by the Partnership
on September 6, 1991, pursuant to the terms of the Partnership
Agreement.

Also, on September 6, 1991, AIM Acquisition Partners, L.P.
(the Advisor) succeeded Integrated Funding, Inc. (IFI) as the
adviser of the Partnership. AIM Acquisition Corporation (AIM
Acquisition) is the general partner of the Advisor and the
limited partners include, but are not limited to, AIM
Acquisition, The Goldman Sachs Group, L.P., Broad Inc. and a
limited partnership formed by CRI and CRIIMI MAE. Pursuant to
the terms of certain amendments to the Partnership Agreement, as
discussed below, the General Partner is required to receive the
consent of the Advisor prior to taking certain significant
actions which affect the management and policies of the
Partnership. The limited partners and Unitholders of the
Partnership approved the execution of a Sub-advisory Agreement
with CRI/AIM Management, Inc., an affiliate of CRI, pursuant to
which CRI/AIM Management, Inc. manages the Partnership's
portfolio and directs the acquisition and disposition of the
Partnership's mortgages.

Until the change in the Partnership's investment policy, as
discussed below, the Partnership was in the business of
originating mortgage loans (Originated Insured Mortgages) and
acquiring mortgage loans (Acquired Insured Mortgages, and
together with Originated Insured Mortgages, referred to herein as
Insured Mortgages). As of December 31, 1993, the Partnership had
invested in either Originated Insured Mortgages which are insured
or guaranteed, in whole or in part, by the Federal Housing
Administration (FHA) or Acquired Insured Mortgages which are
fully insured (as more fully described below).

The Partnership's reinvestment period expires on December
31, 1994 and the Partnership Agreement states that the
Partnership will terminate on December 31, 2020, unless
previously terminated under the provisions of the Partnership
Agreement. The Partnership's principal investment objectives are
to invest in Insured Mortgages which (i) preserve and protect the
Partnership's invested capital; (ii) provide quarterly
distributions of adjusted cash from operations which may be
increased over time as a result of Participations (as defined

37

AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 86

NOTES TO FINANCIAL STATEMENTS

1. ORGANIZATION - Continued

below), when obtainable, on Originated Insured Mortgages; and
(iii) provide appreciation by selecting Acquired Insured
Mortgages which present the possibility of early prepayment.

Effective September 19, 1991, the General Partner changed,
at the Advisor's recommendation, the investment policies of the
Partnership to invest only in Acquired Insured Mortgages which
are fully insured or guaranteed by the Federal National Mortgage
Association, the Government National Mortgage Association (GNMA),
FHA or the Federal Home Loan Mortgage Corporation.

The United States Congress recently repealed portions of the
Federal tax code which have had an adverse impact on tax-exempt
investors in "publicly traded partnerships." This tax code
change, effective January 1, 1994, cleared away the major
impediment standing in the way of listing the Partnership's Units
for trading on a national stock exchange. As a result, the
General Partner listed the Partnership's Units for trading on the
American Stock Exchange (AMEX) on January 18, 1994 in order to
provide investment liquidity as contemplated in the Partnership's
original prospectus. The Units are traded under the symbol
"AIJ."

2. SIGNIFICANT ACCOUNTING POLICIES

Method of Accounting
--------------------
The financial statements are prepared on the accrual
basis of accounting in accordance with generally accepted
accounting principles.

Investment in Mortgages
-----------------------
As of December 31, 1993 and 1992, the Partnership
accounted for its investment in mortgages at amortized cost.
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 term of
the mortgage using the effective interest method. The
effective interest method provides a constant yield of
income over the term of the mortgage. Mortgage investment
income is comprised of amortization of the discount plus the
stated mortgage interest received or accrued less the
amortization of the premium.

In May 1993, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No. 115
"Accounting for Certain Investments in Debt and Equity
Securities" (SFAS 115), effective for fiscal years beginning
after December 15, 1993. This statement requires that
investments in debt and equity securities be classified into
one of the following investment categories based upon the
circumstances under which such securities might be sold:
Held to Maturity, Available for Sale, and Trading.
Generally, certain debt securities for which an enterprise
has both the ability and intent to hold to maturity should
be accounted for using the amortized cost method and all
other securities must be recorded at their fair values. The
General Partner believes that the majority of securities
held by the Partnership will fall into either the Held to
Maturity or Available for Sale categories. However, the
General Partner has not yet determined the ultimate impact
of the implementation of this statement in the Partnership's
financial statements.

Also in May 1993, the Financial Accounting Standards
Board issued Statement of Financial Accounting Standards No.
114 "Accounting by Creditors for Impairment of a Loan" (SFAS
114), effective for fiscal years beginning after
December 15, 1994. This statement requires that applicable
loans which are impaired be measured based on the present
value of expected future cash flows discounted at the loan's

38

AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 86

NOTES TO FINANCIAL STATEMENTS

2. SIGNIFICANT ACCOUNTING POLICIES - Continued

effective interest rate, or at the loan's market price, or
the fair value of the collateral for impaired loans that are
collateral dependent. The General Partner does not believe
the ultimate impact of the implementation of this statement
will materially affect the Partnership's financial
statements.

Mortgages Held for Disposition
------------------------------
At any point in time, the Partnership may be aware of
certain mortgages which have been (i) assigned to the United
States Department of Housing and Urban Development (HUD) or
(ii) for which the servicer has received proceeds from a
prepayment or (iii) in the case of mortgages coinsured by
unaffiliated third parties, the borrower is displaying
continuous operating difficulties and the realization of the
mortgage is dependent on a third party coinsurer (see Notes
4 B.1). In these cases, the Partnership will classify these
mortgages as Mortgages Held for Disposition.

Gains from dispositions of mortgages are recognized
upon the receipt of cash or HUD debentures.

Losses on dispositions of mortgages are recognized when
it becomes probable that a mortgage will be disposed of and
that the disposition will result in a loss. In the case of
Insured Mortgages fully insured by HUD, the Partnership's
maximum exposure for purposes of determining the loan losses
would generally be an assignment fee charged by HUD repre-
senting approximately 1% of the unpaid principal balance of
the Insured Mortgage at the date of default, plus the
unamortized balance of acquisition fees and closing costs
paid in connection with the acquisition of the Insured
Mortgage and the loss of approximately 30-days accrued
interest (see discussion below for losses on mortgages
accounted for as AHFS, as defined below).

Assets Held for Sale Under Coinsurance Program (AHFS)
-----------------------------------------------------
As of December 31, 1993 and 1992, the former managing
general partner, on behalf of the Partnership, had invested
in one and two coinsured mortgages which are accounted for
as AHFS, respectively. The coinsurer on these mortgages is
IFI and the Partnership bears the risk of any coinsurance
loss.

Coinsured mortgage loans are deemed to be AHFS when a
determination has been made that the borrower meets the
following criteria:

1. The borrower has little or no equity in the collateral,
considering the current fair value of the collateral;
and
2. proceeds for repayment of the loan can be expected to
come only from the operation or sale of the collateral;
and
3. the borrower has either:
a. formally or effectively abandoned control of the
collateral to the creditor; or,
b. retained control of the collateral, but because of
the current financial condition of the borrower or
the economic prospects for the borrower and/or the
collateral in the foreseeable future, it is
doubtful that the borrower will be able to rebuild
equity in the collateral or otherwise repay the
loan in the foreseeable future.

AHFS represent the estimated cash flow to be received
from any claims filed with HUD, including the estimated
asset disposition proceeds. The disposition proceeds are
based on the estimated fair value of the collateral
underlying the mortgage which represents the amount that

39

AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 86

NOTES TO FINANCIAL STATEMENTS

2. SIGNIFICANT ACCOUNTING POLICIES - Continued

could reasonably be expected to be received in a current
sale between a willing buyer and a willing seller. The
General Partner initially determined the estimated fair
values of the AHFS and the General Partner periodically
assesses the estimated current fair value of the properties
to determine whether additional loan losses are appropriate
due to, among other factors, a change in market conditions
affecting the properties. The loan losses related to these
AHFS reduce the carrying value of the Originated Insured
Mortgages.

The Partnership accounts for the AHFS at the lower of
cost or market since its intent is to dispose of the assets
in the short term and file coinsurance claims with HUD.

Cash and Cash Equivalents
-------------------------
Cash and cash equivalents consist of time and demand
deposits and commercial paper with original maturities of
three months or less.

Reclassification
----------------
Certain amounts in the statements of operations for the
year ended December 31, 1992 have been reclassified to
conform with the 1993 presentation.

Income Taxes
------------
No provision has been made for Federal, state or local
income taxes since they are the personal responsibility of
the Unitholders.

Net Earnings Per Limited Partnership Unit
-----------------------------------------
Net earnings per Limited Partnership Unit are computed
based upon the weighted average number of Units outstanding
of 9,576,290 for each of the years ended December 31, 1993,
1992 and 1991.

3. FAIR VALUE OF FINANCIAL INSTRUMENTS

The following estimated fair values of the Partnership's
financial instruments are presented in accordance with generally
accepted accounting principles which define fair value as the
amount at which a financial instrument could be exchanged in a
current transaction between willing parties, other than in a
forced or liquidation sale. These estimated fair values,
however, do not represent the liquidation value or the market
value of the Partnership.

40

AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 86

NOTES TO FINANCIAL STATEMENTS

3. FAIR VALUE OF FINANCIAL INSTRUMENTS - Continued

As of December 31, 1993
As of December 31, 1992
Carrying Fair Carrying Fair
Amount Value Amount Value
------------ ------------ ------------ ------------

Investment in mortgages:
Originated insured
mortgages $113,074,158 $110,234,670 $132,615,177 $125,038,506
Acquired insured
mortgages 3,012,158
3,161,263 3,026,972 3,107,202
------------ ------------ ------------ ------------
116,086,316 113,395,933 135,642,149 128,145,708
------------ ------------ ------------ ------------
Mortgages held for
disposition 18,955,472 18,555,559 -- --

Cash and cash equivalents 9,095,255 9,095,255 2,557,009 2,557,009

Accrued interest receivable 1,311,345 1,311,345 1,037,102 1,037,102

41

AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 86

NOTES TO FINANCIAL STATEMENTS

3. FAIR VALUE OF FINANCIAL INSTRUMENTS - Continued

The following methods and assumptions were used to estimate
the fair value of each class of financial instruments:

Investment in mortgages and mortgages held for disposition
----------------------------------------------------------
The fair value of the fully insured mortgages is based
on the average of the quoted market prices from three
investment banking institutions which trade these
investments as part of their day-to-day activities.

In order to determine the fair value of the coinsured
mortgage portfolio, the Partnership valued the coinsured
mortgages as though they were fully insured (in the same
manner fully insured mortgages were valued). From this
amount, the Partnership deducted five percent of the face
value of the loan and fifteen percent of the difference
between the remaining face value and the value of these
loans as though they were uninsured. These deductions are
based on HUD's coinsurance limitations. The uninsured values
were based on the average of the quoted market prices from
two investment banking institutions which trade these types
of investments as part of their day-to-day activities.

Cash and cash equivalents and accrued interest receivable
---------------------------------------------------------
The carrying amount approximates fair value because of
the short maturity of these instruments.

4. INVESTMENT IN MORTGAGES

The following is a discussion of the types of Insured
Mortgages, along with the risks related to each type of
investment:

A. Fully Insured Originated Insured Mortgages and
Acquired Insured Mortgages
----------------------------------------------
The former managing general partner, on behalf of the
Partnership, had invested in eight fully insured Originated
Insured Mortgages with an aggregate carrying value of
$69,539,851 and $69,888,943 as of December 31, 1993 and
1992, respectively, and an aggregate face value of
$66,934,689 and $67,240,257 as of December 31, 1993 and
1992, respectively. As of December 31, 1993 and 1992, the
Partnership had invested in two fully insured Acquired
Insured Mortgages with an aggregate carrying value of
$3,012,158 and $3,026,972, respectively, and an aggregate
face value of $3,034,084 and $3,049,283, respectively. As of
December 31, 1993, all of the fully insured Originated
Insured Mortgages and Acquired Insured Mortgages are current
with respect to the payment of principal and interest.

In connection with Originated Insured Mortgages, the
Partnership has sought, in addition to base interest pay-
ments, additional interest (commonly termed Participations)
based on a percentage of the net cash flow from the develop-
ment and of the net proceeds from the refinancing, sale or
other disposition of the underlying development. All eight
of the Originated Insured Mortgages made by the Partnership
contain such Participations. During the years ended December
31, 1993, 1992 and 1991, the Partnership received additional
interest of $113,822, $104,350 and $52,816, respectively,
from the Participations. These amounts are included in
mortgage investment income in the accompanying statements of
operations.

In the case of fully insured Originated Insured
Mortgages and Acquired Insured Mortgages, the Partnership's
maximum exposure for purposes of determining loan losses
would generally be approximately 1% of the unpaid principal
balance of the Originated Insured Mortgage or Acquired
Insured Mortgage (an assignment fee charged by FHA) at the

42

AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 86

NOTES TO FINANCIAL STATEMENTS

4. INVESTMENT IN MORTGAGES - Continued

date of a default, plus the unamortized balance of acquisi-
tion fees and closing costs paid in connection with the
acquisition of the Insured Mortgages and the loss of
approximately 30-days accrued interest.

B. Coinsured Mortgages
-------------------
Under the HUD coinsurance program, both HUD and the
coinsurance lender are responsible for paying a portion of
the insurance benefits if a mortgagor defaults and the sale
of the development collateralizing the mortgage produces
insufficient net proceeds to repay the mortgage obligation.
In such case, the coinsurance lender will be liable to the
Partnership for the first part of such loss in an amount up
to 5% of the outstanding principal balance of the mortgage
as of the date foreclosure proceedings are instituted or the
deed is acquired in lieu of foreclosure. For any loss
greater than 5% of the outstanding principal balance, the
responsibility for paying the insurance benefits will be
borne on a pro-rata basis, 85% by HUD and 15% by the
coinsurance lender.

While the Partnership is due payment of all amounts
owed under the mortgage, the coinsurance lender is
responsible for the timely payment of principal and interest
to the Partnership. The coinsurance lender is prohibited
from entering into any workout arrangement with the borrower
without the Partnership's consent and must file a claim for
coinsurance benefits with HUD, upon default, if the
Partnership so directs. As an ongoing HUD-approved
coinsurance lender, and under the terms of the participation
documents, the coinsurance lender is required to satisfy
minimum net worth requirements as set forth by HUD.
However, it is possible that the coinsurance lender's
potential liability for loss on these developments, and
others, could exceed its HUD-required minimum net worth. In
such case, the Partnership would bear the risk of loss if
the coinsurance lenders were unable to meet their
coinsurance obligations. In addition, HUD's obligation for
the payment of its share of the loss could be diminished
under certain conditions, such as the lender not adequately
pursuing regulatory violations of the borrower or the
failure to comply with other terms of the mortgage. However,
the General Partner is not aware of any conditions or
actions that would result in HUD diminishing its insurance
coverage.

1. Coinsured by third parties
--------------------------
As of December 31, 1993 and 1992, the former managing
general partner, on behalf of the Partnership, had
invested in eight and nine coinsured mortgages,
respectively, five of which are coinsured by an
unaffiliated third party coinsurance lender under the
HUD coinsurance program. Two of the coinsured
mortgages which are coinsured by an unaffiliated third
party are classified as Mortgages Held for Disposition
as of December 31, 1993 and are discussed below. The
remaining three coinsured mortgages which are coinsured
by unaffiliated third parties are current with respect
to the payment of principal and interest and are
classified as investment in mortgages as of December
31, 1993 and 1992. As of December 31, 1993 and 1992,
these three coinsured mortgages had an aggregate
carrying value of $22,680,052 and $22,792,326,
respectively, and an aggregate face value of
$21,945,884 and $22,047,027, respectively.

The following is a discussion of actual and potential
performance problems with respect to certain mortgage
investments coinsured by an unaffiliated third party:

43

AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 86

NOTES TO FINANCIAL STATEMENTS

4. INVESTMENT IN MORTGAGES - Continued

The Originated Insured Mortgage on The Villas, a
405-unit apartment complex located in Lauderhill,
Florida, is coinsured by the Patrician Mortgage Company
(Patrician) and had a carrying value equal to its face
value of $15,856,842 and $15,878,027 as of December 31,
1993 and 1992, respectively. Since August 1, 1990, the
mortgagor has not made the full monthly payments of
principal and interest to Patrician. Patrician began
collecting rents from the project and continued to make
the monthly debt service payments to the Partnership
through February 1992. The Partnership and Patrician
entered into a modification agreement which provided
for reduced payments through July 1992, regular
scheduled payments from August 1992 to December 1992,
and then increased payments for a period lasting
approximately 10 years.

The mortgagor of the mortgage on The Villas was unable
to comply with the terms of the modification. As a
result, Patrician filed a foreclosure action on October
14, 1993. On November 2, 1993, the mortgagor of The
Villas filed for protection under Chapter 11 of the
Federal Bankruptcy Code. If Patrician and the
mortgagor are unable to negotiate a settlement,
Patrician intends to litigate the case in bankruptcy
court and to subsequently acquire and dispose of the
property. As of March 4, 1994, Patrician had made
payments of principal and interest due through November
1993.

The mortgagor of The Villas mortgage is also the
mortgagor of the Originated Insured Mortgage on St.
Charles Place-Phase II, a 156-unit apartment complex
located in Miramar, Florida, which is also coinsured by
Patrician. The St. Charles Place-Phase II mortgage had
a carrying value and a face value of $3,098,630 and
$3,107,542 as of December 31, 1993 and December 31,
1992, respectively. These amounts represent the
Partnership's approximately 45% ownership interest in
the mortgage. The remaining 55% ownership interest is
held by American Insured Mortgage Investors L.P. -
Series 88 (AIM 88), an affiliated entity.

During 1993, the mortgagor of St. Charles Place-Phase
II paid its monthly principal and interest payments to
Patrician in arrears, and did not make the monthly
payment of principal and interest due to Patrician for
the period of October 1993 through December 1993.
However, Patrician has remitted monthly payments of
principal and interest due for these months to the
Partnership. As the mortgagor was unable to bring the
loan current, Patrician filed a foreclosure action on
October 14, 1993. On November 2, 1993, the mortgagor
of the mortgage on St. Charles Place-Phase II filed for
protection under Chapter 11 of the Federal Bankruptcy
Code. If Patrician and the mortgagor are unable to
negotiate a settlement, Patrician intends to litigate
the case in bankruptcy court and to subsequently
acquire and dispose of the property.

The General Partner is overseeing Patrician's efforts
to complete the foreclosure action, including the
subsequent acquisition and disposition of the above two
properties. As the coinsurance lender, Patrician is
liable to the Partnership for the outstanding principal
balance of both mortgages plus all accrued but unpaid
interest through the date of such payment. If the sale
of the properties collateralizing the mortgages
produces insufficient net proceeds to repay the
mortgage obligations to the Partnership, Patrician will
be liable to the Partnership for the coinsurance
lender's share of the deficiency. Based on the General

44

AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 86

NOTES TO FINANCIAL STATEMENTS

4. INVESTMENT IN MORTGAGES - Continued

Partner's assessment of the collateral underlying the
mortgages, including information related to the
financial condition of Patrician, the General Partner
believes the carrying value of these assets is
realizable. As a result of Patrician's coinsurance
obligation these mortgages were classified as Mortgages
Held for Disposition as of December 31, 1993. The
Partnership intends to reinvest any net disposition
proceeds from these mortgages in Acquired Insured
Mortgages.

The General Partner intends to continue to oversee the
Partnership's interest in these mortgages to ensure
that Patrician meets its coinsurance obligations. The
General Partner's assessment of the realizability of
The Villas and St. Charles Place-Phase II mortgages is
based on current information, and to the extent current
conditions change or additional information becomes
available, then the General Partner's assessment may
change. However, the General Partner does not believe
that there would be a material adverse impact on the
Partnership's financial condition or its results of
operations should Patrician be unable to comply with
its full coinsurance obligation.

2. Coinsured by affiliate
----------------------
a. The former managing general partner, on behalf of the
Partnership, had invested in coinsured originated
mortgages where the coinsurance lender is IFI. As of
December 31, 1993 and 1992, the Partnership had
investments remaining in three and four coinsured
originated mortgages, respectively, where the
coinsurance lender is IFI. As structured by the former
managing general partner, with respect to these
mortgages, the Partnership bears the risk of loss upon
default for IFI's portion of the coinsurance loss. As
of December 31, 1993 and 1992, one and two of these
mortgages, respectively, were classified as AHFS and
are discussed below.

As of December 31, 1993, the remaining two IFI
coinsured mortgages, as shown in the table below, are
classified as investment in mortgages and are current
with respect to the payment of principal and interest.
The General Partner believes there is adequate
collateral value underlying the mortgages. Therefore,
no loan losses were recognized on these mortgages
during the years ended December 31, 1993, 1992 and
1991.

45

AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 86

NOTES TO FINANCIAL STATEMENTS

4. INVESTMENT IN MORTGAGES - Continued

Carrying Face Carrying Face
Amount Amount Amount Amount
December 31, December 31, December 31, December 31,
1993 1993 1992 1992
------------ ------------ ------------ ------------

Pembrook Apartments $ 15,684,341 $ 15,060,875 $ 15,756,698 $ 15,123,548
Spring Lake Village 5,169,914 5,054,317 5,191,641 5,074,329

46

AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 86

NOTES TO FINANCIAL STATEMENTS

4. INVESTMENT IN MORTGAGES - Continued

b. Assets Held for Sale Under Coinsurance Program

On the AHFS determination date for the applicable
mortgages and through December 31, 1993, the
Partnership discontinued accruing interest income in
accordance with the original terms of the mortgage.
For the years ended December 31, 1992 and 1991, the
Partnership recognized $1,170,700 and $572,572,
respectively, as interest income and received
$2,794,186 and $1,461,309, respectively, representing
the borrowers interest payments on the mortgages which
were applied to reduce the outstanding basis in the
mortgage investment. Beginning on January 1, 1993, the
Partnership began to recognize mortgage investment
income for the mortgages classified as AHFS in the
amount coinsured by HUD. Given the improved financial
performance of the borrowers and the General Partner's
assessment of the collateral underlying the mortgages,
the General Partner determined that it was appropriate
to begin recognizing interest income at least to the
level of insurance provided by HUD. To the extent the
borrower remits interest in excess of the HUD insured
amount, this excess amount is recognized as income on
the cash basis.

During 1993, the Partnership recognized $2,898,882 in
interest income. Cash totalling $639,756 was received
from mortgages classified as AHFS.

47

AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 86

NOTES TO FINANCIAL STATEMENTS

4. INVESTMENT IN MORTGAGES - Continued

The following table summarizes the coinsured mortgages
accounted for as AHFS as of December 31, 1993 and 1992,
respectively:

Carrying Face Carrying Face
Amount Amount Amount Amount
Loan Losses Recognized
December 31, December 31, December 31, December 31,
1993 1993 1992 1992 1993 1992 1991
------------ ------------ ------------ ------------ ---------- ---------- ----------

One East Delaware $32,103,528 $34,987,071 $29,257,820 $34,987,071 $ -- $ -- $3,665,654
Victoria Pointe Apts.-
Phase II(a) -- -- 8,852,196 9,787,127 63,488 106,870 1,255,554
----------- ----------- ----------- ----------- ---------- ---------- ----------
$32,103,528 $34,987,071 $38,110,016 $44,774,198 $ 63,488 $ 106,870 $4,921,208
=========== =========== =========== =========== ========== ========== ==========

(a) The Partnership received settlement proceeds from the disposition of this mortgage in December 1993 and January
1994, as discussed below.

48

AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 86

NOTES TO FINANCIAL STATEMENTS

4. INVESTMENT IN MORTGAGES - Continued

The following is a discussion of performance problems with
respect to those mortgage investments accounted for as AHFS:

1. In December 1993, the General Partner entered into a
Modification Agreement with the mortgagor of the
mortgage on One East Delaware wherein the mortgagor had
until April 30, 1994 to pay off the mortgage at a
discount. The mortgagor prepaid the loan in January
1994. Total proceeds received were approximately $33.6
million, which resulted in a financial statement gain
of approximately $1.2 million which was recognized in
1994. The Partnership intends to reinvest any net
disposition proceeds from this mortgage in Acquired
Insured Mortgages.

2. In December 1993, the Partnership settled, for
approximately $9,050,000, the mortgage on Victoria
Pointe Apartments-Phase II. As of December 31, 1993,
the Partnership recognized a loan loss amounting to
$63,488 which is reflected in the accompanying
statement of operations for the year ended December 31,
1993. As of December 31, 1993 the Partnership had
committed to reinvest the net disposition proceeds in
Acquired Insured Mortgages.

5. DISTRIBUTIONS TO UNITHOLDERS

The composition of distributions paid or accrued to
Unitholders on a per Limited Partnership Unit basis for the years
ended December 31, 1993, 1992 and 1991 are as follows:

1993 1992 1991

Quarter ended March 31, $ .230 $ .300 $ .325
Quarter ended June 30, .210 .220 .325
Quarter ended September 30, .290(1) .300 .285
Quarter ended December 31, .280(2) .320 .327
------ ------ ------
$1.010 $1.140 $1.262
====== ====== ======

(1) In September 1993, the Partnership received $591,872
(approximately $.06 per Unit) from the mortgage on
Victoria Pointe Apartments-Phase II, representing
mortgage interest from October 1991 through June 1992,
and a partial payment for July 1992. The Partnership
distributed approximately $.03 per Unit of this
previously undistributed interest and reserved
approximately $.03 per Unit for the continued funding
of coinsurance expenses. The Partnership distributed
the remaining interest of approximately $.03 per Unit
to Unitholders as part of the fourth quarter
distribution, as discussed below.

(2) This includes a special distribution of approximately
$.10 per Unit comprised of (i) $.03 per Unit of
previously undistributed accrued interest from the
mortgage on Victoria Pointe Apartments-Phase II which
was reserved as part of the third quarter distribution,
described above, and (ii) $.07 per Unit representing
previously undistributed accrued interest received in
December 1993 resulting from the disposition of the
mortgage on Victoria Pointe Apartments-Phase II.

49

AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 86

NOTES TO FINANCIAL STATEMENTS

5. DISTRIBUTIONS TO UNITHOLDERS - Continued

The basis for paying distributions to Unitholders is cash
flow from operations, which is comprised of regular interest
income and principal from Insured Mortgages and gain, if any,
from mortgage dispositions. Although Insured Mortgages yield a
fixed monthly mortgage payment once purchased, the cash
distributions paid to the Unitholders will vary during each
quarter 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
distributions, (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
attributable to the delinquency or default of Insured Mortgages
and professional fees and foreclosure and acquisition costs
incurred in connection with those Insured Mortgages and (4)
variations in the Partnership's operating expenses.

6. INVESTMENT IN AFFILIATE AND NOTE PAYABLE TO AFFILIATE

Effective December 31, 1991, American Insured Mortgage
Investors-Series 85, L.P. (AIM 85) transferred a GNMA security in
the amount of $4,696,548 to IFI in order to capitalize IFI with
sufficient net worth under HUD regulations. The Partnership and
AIM 88 each issued a demand note payable to AIM 85 and recorded
an investment in IFI through an affiliate (AIM Mortgage, Inc.) at
an amount proportionate to each entity's coinsured mortgages for
which IFI was the mortgagee of record as of December 31, 1991.
The Partnership accounts for its investment in IFI on the equity
method of accounting. Interest expense on the note, based on an
interest rate of 8% per annum, was $139,018 for each of the years
ended December 31, 1993 and 1992.

In 1992, IFI entered into an expense reimbursement agreement
with the Partnership, AIM 85 and AIM 88 (the AIM Funds) whereby
IFI reimburses the AIM Funds for general and administrative
expenses incurred on behalf of IFI. The expense reimbursement is
allocated to the AIM Funds based on an amount proportionate to
each entity's coinsured mortgages. The expense reimbursement,
along with the Partnership's equity interest in IFI's net income
or loss, substantially equals the interest expense on the note
payable.

7. TRANSACTIONS WITH RELATED PARTIES

In addition to the related party transactions described
above in Note 6, the General Partner, former general partners and
certain affiliated entities, during the years ended December 31,
1993, 1992 and 1991, earned or received compensation or payments
for services from the Partnership as follows:

50

AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 86

NOTES TO FINANCIAL STATEMENTS

7. TRANSACTIONS WITH RELATED PARTIES - Continued

COMPENSATION PAID OR ACCRUED TO RELATED PARTIES
----------------------------------------------

Capacity in Which
For the years ended December 31,
Name of Recipient Served/Item 1993 1992 1991
----------------- ---------------------------- ---------- ---------- ----------

CRIIMI, Inc.(1) General Partner/Distribution $ 498,350 $ 562,495 $ 198,031

AIM Acquisition Advisor/Asset Management Fee 1,694,280 1,688,681 573,694
Partners, L.P.(2)

CRI(5) Affiliate of General Partner/ 142,495 209,880 69,604
Expense Reimbursement

AIM Capital Management Former general partners/ -- -- 433,782
Corp.; IRI Properties Distribution
Capital Corp.; and January 1, 1991 through
Second Group Partners(3) September 6, 1991

IFI(4) Former advisor/ -- -- 1,527,332
Asset Management Fee
January 1, 1991 through
September 6, 1991

51

AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 86

NOTES TO FINANCIAL STATEMENTS

7. TRANSACTIONS WITH RELATED PARTIES - Continued

(1) The General Partner, pursuant to amendments to the
Partnership Agreement, effective September 6, 1991, is entitled
to receive 4.9% of the Partnership's income, loss, capital and
distributions including, without limitation, the Partnership's
Adjusted Cash from Operations and Proceeds of Mortgage
Prepayments, Sales or Insurance (both as defined in the
Partnership Agreement).

The principal officers of the General Partner for the period
September 7, 1991 through December 31, 1993 did not receive fees
for serving as officers of the General Partner, nor are any fees
expected to be paid to the officers in the future.

(2) The Advisor, pursuant to the Purchase Agreement and
amendments to the Partnership Agreement, is entitled to an Asset
Management Fee equal to .95% of Total Invested Assets (as defined
in the Partnership Agreement), effective October 1, 1991. The
Asset Management Fee was based on 1.25% of Total Invested Assets
from September 7, 1991 through September 30, 1991.

Of the amounts paid to the Advisor, the Sub-advisor earned a
fee equal to $499,332, $497,716 and $158,545, or .28% of Total
Invested Assets, for the years ended December 31, 1993 and 1992
and for the period September 7, 1991 through December 31, 1991,
respectively.

(3) The former general partners were entitled to receive an
aggregate 5% of the Partnership's income, loss, capital and
distributions through September 6, 1991 (4.8% to the former
managing general partner, 0.1% to the former corporate general
partner and 0.1% to the former associate general partner).

(4) Asset management fees for managing the Partnership's
mortgage portfolio for the period January 1, 1991 through
September 6, 1991 were based on 1.25% of Total Invested Assets.

(5) These amounts are paid to CRI as reimbursement for
expenses incurred on behalf of the General Partner and the
Partnership.

8. PARTNERS' EQUITY

Depository Units representing economic rights in limited
partnership interests were issued at a stated value of $20. A
total of 9,576,165 depository Units of limited partnership
interest were issued for an aggregate capital contribution of
$191,523,300. In addition, the initial limited partner
contributed $2,500 to the capital of the Partnership and received
125 Units of limited partnership interests in exchange therefor
and the former general partners contributed a total of $1,000 to
the Partnership.

52

AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 86

NOTES TO FINANCIAL STATEMENTS

9. SUMMARY OF QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
(In Thousands, Except Per Unit Data)

The following is a summary of unaudited quarterly results of
operations for the years ended December 31, 1993 and 1992:

1993

Quarter ended
March 31 June 30 September 30 December 31
---------- ---------- ------------ -----------

Income $ 3,677 $ 3,625 $ 3,989 $ 3,139
Loan losses -- -- -- (63)
Net earnings 3,109 3,092 3,410 2,559
Net earnings per Limited
Partnership Unit .31 .31 .34 .25

1992

Quarter ended
March 31 * June 30 * September 30* December 31
---------- ---------- ------------ -----------

Income $ 3,163 $ 2,792 $ 2,930 $ 3,211
Loan losses -- -- -- (107)
Net earnings 2,532 2,144 2,352 2,508
Net earnings per Limited
Partnership Unit .25 .21 .23 .26

* Certain amounts in the statements of operations for the three months ended March 31, 1992, June 30, 1992 and
September 30, 1992 were reclassified to conform with the 1993 presentation. These reclassifications are
reflected herein.

53

AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 86
SCHEDULE XII - MORTGAGE LOANS ON REAL ESTATE
DECEMBER 31, 1993

Annual
Payment
Interest Net (Principal
Rate on Face Carrying and
Development Name/ Maturity Put Mortgage Amount of Value(2)(3) Cumulative Interest)
Location Date Date (1) (4)(5) Mortgage (9)(10)(14) Loan Losses (4)(11)
----------------------- -------- -------- -------- ------------ ------------ ----------- -----------

ORIGINATED INSURED
MORTGAGES:
------------------
Fully Insured Mortgages
-----------------------
Iroquois Club Apts.
Naperville, IL 3/29 12/03 8.25% $ 18,659,525 $ 19,350,811 $ -- $ 1,629,873
Colony Square Apts.
Rocky Mount, NC 10/28 4/02 8.25% 4,254,123 4,430,098 -- 372,352
Lakewood Villas
Vernon Hills, IL 6/28 5/02 8.50% 5,998,867 6,229,864 -- 539,123
Argyle Place
Hickory, NC 4/29 7/03 8.25% 4,974,917 5,158,984 -- 434,902
Skyridge Club
Crystal Lake, IL 7/29 7/05 8.25% 8,931,821 9,309,444 -- 778,940
Arbor Station
Montgomery, AL 10/29 7/02 8.25% 8,829,846 9,179,063 -- 771,270
Greenbriar Place
Glen Ellyn, IL 4/29 7/02 8.25% 5,822,185 6,053,458 -- 508,353
Ridgeview Chase Apts.
Westminster, MD 2/30 10/04 8.375% 9,463,405 9,828,129 -- 833,588
----------- -----------
66,934,689 69,539,851
----------- -----------

54

AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 86
SCHEDULE XII - MORTGAGE LOANS ON REAL ESTATE
DECEMBER 31, 1993

Annual
Payment
Interest Net (Principal
Rate on Face Carrying and
Development Name/ Maturity Put Mortgage Amount of Value(2)(3) Cumulative Interest)
Location Date Date (1) (4)(5) Mortgage (9)(10)(14) Loan Losses (4)(11)
----------------------- -------- -------- -------- ------------ ------------ ----------- -----------

Coinsured Mortgages
-------------------
Woodland Apts.
Minnetonka, MN(6) 5/29 10/02 8.25% $ 11,946,172 $ 12,389,101 $ -- $1,043,897
Woodbine at Lakewood Apts.
Boise, ID(6) 12/28 10/02 8.25% 5,075,963 5,273,352 -- 443,917
Carmen Drive Estates
Lake Oswego, OR(6) 4/29 12/02 8.50% 4,923,749 5,017,599 -- 440,780
Pembrook Apts.
Gurnee, IL(7) 6/30 10/05 8.25% 15,060,875 15,684,341 -- 1,308,031
Spring Lake Village
St. Petersburg, FL(7) 7/29 5/03 8.75% 5,054,317 5,169,914 -- 463,226
------------ -----------
Total Investment in 42,061,076 43,534,307
Originated Insured Mortgages ------------ -----------

ACQUIRED INSURED
MORTGAGES:
-----------------------
Southampton Apts.
Grove City, OH 4/27 -- 8.50% $ 2,024,552 $ 2,006,185 -- $ 183,038
Winburn Square
Lexington, KY 1/27 -- 9.00% 1,009,532 1,005,973 -- 95,829
------------ ------------
Total Investment in
Acquired Insured Mortgages $ 3,034,084 $ 3,012,158
============ ============
TOTAL INSURED MORTGAGES
$112,029,849 $116,086,316
============ ============

55

AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 86
SCHEDULE XII - MORTGAGE LOANS ON REAL ESTATE
DECEMBER 31, 1993

Annual
Payment
Interest Net (Principal
Rate on Face Carrying and
Development Name/ Maturity Put Mortgage Amount of Value(2)(3) Cumulative Interest)
Location Date Date (1) (4)(5) Mortgage (9)(10)(14) Loan Losses (4)(11)
----------------------- -------- -------- -------- ------------ ----------- ----------- -----------

ASSET HELD FOR SALE
UNDER COINSURANCE
PROGRAM:
-----------------------
One East Delaware
Chicago, IL(7) 4/30 8/04 8.125% $34,987,071(12) $32,103,528 $ 4,550,654 $ 2,987,041
=========== ===========

MORTGAGES HELD FOR
DISPOSITION:
-----------------------
The Villas
Lauder Hill, FL (6) 7/29 8/02 8.75% $15,856,842(12) $15,856,842 $ 609,000 $ 1,491,805(13)
St. Charles Place-Phase II
Miramer, FL (6) 2/30 12/03 8.625% 3,098,630(8,12) 3,098,630 106,000 279,571(8)
----------- -----------
TOTAL MORTGAGES HELD
FOR DISPOSITION $18,955,472 $18,955,472
=========== ===========

56

AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 86

NOTES TO SCHEDULE XII - MORTGAGE LOANS ON REAL ESTATE

DECEMBER 31, 1993

(1) Under the Section 221 program of the National Housing Act of
1937, as amended, a mortgagee has the right to assign a
mortgage (put) to the Federal Housing Administration (FHA)
at the expiration of 20 years from the date of final
endorsement, if the mortgage is not in default at such time.
Any mortgagee electing to assign an FHA insured mortgage to
FHA will receive in exchange HUD debentures having a total
face value equal to the then outstanding principal balance
of the FHA insured mortgage plus accrued interest to the
date of assignment. These HUD debentures will mature 10
years from the date of assignment and will bear interest at
the "going Federal" rate at such date. This assignment
procedure is applicable to a mortgage which had a firm or
conditional FHA commitment for insurance on or before
November 30, 1983 and, in the case of mortgages sold in a
GNMA auction, was sold in an auction prior to February of
1984. Certain of the Partnership's mortgages may have the
right of assignment under this program. Certain mortgages
that do not qualify under this program possess a special
assignment option, in certain mortgage documents, which
allows the Partnership, anytime after this date, the option
to require payment of the unpaid principal balance of the
mortgages. At such time, the borrowers must make payment to
the Partnership or the Partnership may cancel the FHA
insurance and institute foreclosure proceedings.

(2) Inclusive of closing costs and acquisition fees.

(3) Prepayment of these mortgages would be based upon the unpaid
principal balance at the time of prepayment.

(4) This represents the base interest rate during the permanent
phase of this mortgage loan. Additional interest (referred
to as Participations) measured as a percentage of the net
cash flow from the development and of the net proceeds from
sale, refinancing or other disposition of the underlying
development (as defined in the Participation Agreements),
will also be due. During the years ended 1993, 1992 and
1991, the Partnership received additional interest of
$113,822, $104,350 and $52,816, respectively, as a result of
the Participations.

(5) In addition, the servicer or the sub-servicer of the
mortgage, primarily unaffiliated third parties, is entitled
to receive compensation for certain services rendered.
Effective January 1993, CRICO Mortgage Company, Inc., an
affiliate of CRI, became the sub-servicer of 3 of the 8
coinsured mortgages.

(6) These mortgages are insured under the HUD coinsurance
program, as previously discussed. The HUD-approved
coinsurance lenders for these mortgages are Patrician
Mortgage Company (The Villas and St. Charles Place-Phase II)
and M-West Mortgage Corporation (Woodland Apartments,
Woodbine at Lakewood Apartments and Carmen Drive Estates).

(7) These mortgages are insured under the HUD coinsurance
program. IFI is the HUD-approved coinsurance lender, and
the Partnership bears the risk of any principal loss, as
previously discussed.

(8) These amounts represent the Partnership's 45% interest in
these mortgages. The remaining 55% interest was acquired by
AIM 88.

57

AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 86

NOTES TO SCHEDULE XII - MORTGAGE LOANS ON REAL ESTATE

DECEMBER 31, 1993

(9) A reconciliation of the carrying value of the Insured
Mortgages, including Mortgages Held for Disposition and
Assets Held for Sale Under Coinsurance Program, for the
years ended December 31, 1993 and 1992 is as follows:

1993 1992
------------ ------------
Beginning balance $173,752,165 $173,017,756

Investment in Acquired
Insured Mortgages -- 3,032,831

Principal receipts on
mortgages (600,361) (573,537)

Mortgage acquisition costs -- 5,471

Payments made (received) for
AHFS/mortgage investment
income accrued/accreted
on AHFS 3,106,783 (1,623,486)

Loan losses (63,488) (106,870)

Disposition of AHFS (9,049,783) --
------------ ------------
Ending balance $167,145,316 $173,752,165
============ ============

(10) The Partnership's mortgages are non-recourse first liens on
multifamily residential developments or retirement homes.

(11) Principal and interest are payable at level amounts over the
life of the mortgages.

(12) Represents principal amount subject to delinquent principal
or interest. See Note 4 to financial statements.

(13) Annual payment reflects required principal and interest
payments for 1993 as per the modification agreement.

(14) As of December 31, 1993 and 1992, the tax basis of the
Insured Mortgages, including Mortgages Held for Disposition
and Assets Held for Sale Under Coinsurance Program, was
approximately $168.0 million and $176.1 million,
respectively.