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, 1995
------------------

Commission file number 1-12704
-----------------

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

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

Name of each exchange on
Title of each class which registered
- -------------------------------- ---------------------------
Depositary Units of Limited American Stock Exchange
Partnership Interest

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

NONE
- -----------------------------------------------------------------
(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
---- ----

2

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 22, 1996, 9,576,290 Depositary Units of Limited Partnership
Interest were outstanding and the aggregate market value of such units held by
non-affiliates of the Registrant on such date was $125,682,244.

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AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 86

1995 ANNUAL REPORT ON FORM 10-K

TABLE OF CONTENTS

PART I
------
Page
----
Item 1. Business . . . . . . . . . . . . . . . . . . 4
Item 2. Properties . . . . . . . . . . . . . . . . . 5
Item 3. Legal Proceedings . . . . . . . . . . . . . . 5
Item 4. Submission of Matters to a Vote of
Security Holders . . . . . . . . . . . . . 6

PART II
-------
Item 5. Market for Registrant's Securities and
Related Security Holder Matters . . . . . . 7
Item 6. Selected Financial Data . . . . . . . . . . . 8
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of
Operations . . . . . . . . . . . . . . . . 9
Item 8. Financial Statements and Supplementary
Data . . . . . . . . . . . . . . . . . . . 18
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure . . 18

PART III
--------
Item 10. Directors and Executive Officers of the
Registrant . . . . . . . . . . . . . . . . 19
Item 11. Executive Compensation . . . . . . . . . . . 20
Item 12. Security Ownership of Certain Beneficial
Owners and Management . . . . . . . . . . . 20
Item 13. Certain Relationships and Related
Transactions . . . . . . . . . . . . . . . 20

PART IV
-------
Item 14. Exhibits, Financial Statement Schedules and
Reports on Form 8-K . . . . . . . . . . . . 21

Signatures . . . . . . . . . . . . . . . . . . . . . . 24

4

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 and 4 of the notes to the financial statements of the Partnership (filed
in response to Item 8 hereof), which is incorporated herein by reference. Also
see Schedule IV-Mortgage Loans on Real Estate, for the table of the Insured
Mortgages (as defined below), invested in by the Partnership as of December 31,
1995.

Employees
- ---------
The Partnership has no 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) pursuant to an
advisory agreement (the Advisory Agreement). CRIIMI, Inc. is a wholly owned
subsidiary of CRIIMI MAE Inc. (CRIIMI MAE).

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. is a wholly owned subsidiary of CRIIMI MAE Inc.
(CRIIMI MAE). From inception through June 30, 1995, CRIIMI MAE was managed by
an adviser whose general partner is C.R.I., Inc. (CRI). However, effective June
30, 1995, CRIIMI MAE became a self-managed and self-administered real estate
investment trust (REIT) and, as a result, the adviser no longer advises CRIIMI
MAE. In addition, the General Partner acquired the shares of the company which
acted 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 advisor to 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 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.

Effective September 6, 1991 and through June 30, 1995, a sub-advisory
agreement (the Sub-advisory Agreement) existed whereby CRI/AIM Management, Inc.,
an affiliate of CRI, managed the Partnership's portfolio. On June 30, 1995, in
connection with a merger transaction approved by CRIIMI MAE's shareholders, an
affiliate of CRIIMI MAE acquired the Sub-advisory Agreement, and, as a result,
CRIIMI MAE Services Limited Partnership acts as the sub-advisor to the
Partnership effective June 30, 1995.

Competition
- -----------
In disposing of 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 in disposing of Insured
Mortgages than the Partnership.

5

PART I

ITEM 1. BUSINESS - Continued

CRIIMI MAE and its affiliates also may serve as general partners, sponsors
or managers of real estate limited partnerships, REITs or other entities in the
future. The Partnership may attempt to dispose of mortgages at or about the
same time that one or more of the other AIM Partnerships and/or other entities
sponsored or managed by CRIIMI MAE, including CRI Liquidating REIT Inc., are
attempting to dispose of mortgages. As a result of market conditions that could
limit dispositions, CRIIMI MAE Services Limited Partnership and its affiliates
could be faced with conflicts of interest in determining which mortgages would
be disposed of. Both CRIIMI MAE Services Limited Partnership 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
mortgages underlying the Partnership's mortgage investments are non-recourse
first liens on the respective multifamily residential developments or retirement
homes.

ITEM 3. LEGAL PROCEEDINGS

Reference is made to Note 4 of the notes to the financial statements on
pages 41 through 46.

6

PART I

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 1995.

PART II

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

Principal Market and Market Price for Units
- -------------------------------------------
Effective January 1, 1994 the United States Congress 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 cleared away the major
impediment standing in the way of listing the Partnership's Depositary Units of
Limited Partnership Interest (Units) for trading on a national stock exchange.
In an effort to allow pension funds and other tax-exempt organizations to invest
in publicly-traded partnerships, the Revenue Reconciliation Act of 1993 repealed
the rule that automatically treated income from publicly-traded partnerships as
gross income that is derived from an unrelated trade or business. As a result,
investments in publicly-traded partnerships such as the Partnership are now
treated the same as investments in other partnerships for purposes of the
unrelated business taxable income rules. 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."

The high and low bid prices for the Units as reported on AMEX for each
quarterly period in 1995 and 1994 were as follows:

1995
Quarter Ended High Low
------------------- ------- -------

March 31, $12 1/4 $11 3/8

June 30, 12 7/8 11 3/4

September 30, 13 1/4 12 5/8

December 31, 13 3/8 12 3/4

1994
Period Ended High Low
------------------- ------- -------
January 18 through
March 31, $14 $12 1/4
April 1 through June 30, 12 5/8 12 1/8
July 1 through
September 30, 12 3/4 12
October 1 through
December 31, 12 11 1/8

7

PART II

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

Prior to listing the Partnership's Units for trading on 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 1995 and 1994 were as follows:

Distributions for the Amount of Distribution
Quarter Ended Per Unit
--------------------- ----------------------

March 31, 1995 $ 0.26(1)
June 30, 1995 0.34(1)(2)
September 30, 1995 0.31(1)
December 31, 1995 0.33(1)
--------
$ 1.24
========

March 31, 1994 $ 0.41 (3)(4)
June 30, 1994 0.29 (4)
September 30, 1994 0.30 (4)
December 31, 1994 0.34 (4)
--------
$ 1.34
========

(1) This amount includes $0.03 per Unit representing previously
undistributed accrued interest receivable from St. Charles Place -
Phase II and The Villas.

(2) This amount includes $0.08 per Unit representing previously
undistributed accrued interest receivable from Carmen Drive Estates
(The Forest), Woodland Hills Apartments, and Woodbine at Lakewood
Apartments.

(3) This amount includes approximately $0.18 per Unit representing
previously undistributed accrued interest received from the
disposition of the mortgage on One East Delaware.

(4) This amount includes approximately $0.01, $0.04, $0.03 and $0.03 per
Unit representing previously undistributed accrued interest received
from St. Charles Place-Phase II and The Villas for the quarters ended
March 31, 1994, June 30, 1994, September 30, 1994 and December 31,
1994, respectively.

Approximate Number of Unitholders
Title of Class as of December 31, 1995
- --------------------------- -------------------------------
Depositary Units of Limited
Partnership Interest 13,400

8

PART II

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

For the Years Ended December 31,

1995 1994 1993 1992 1991
-------- -------- -------- -------- --------

Income $ 13,927 $ 13,644 $ 14,430 $ 12,096 $ 13,776

Loan losses -- (115) (63) (107) (4,922)

Gain on mortgage disposition 5 1,130 -- -- --

Net earnings 11,640 12,450 12,170 9,536 6,086

Net earnings per Limited
Partnership Unit (1) 1.16 1.24 1.21 0.95 0.60

Distributions per Limited
Partnership Unit(1)(2) 1.24 1.34 1.01 1.14 1.262

As of December 31,

1995 1994 1993 1992 1991
-------- -------- -------- -------- --------

Total assets $174,538 $165,694 $180,776 $179,146 $181,103

Partners' equity 170,582 161,591 176,007 174,007 175,950

(1) Calculated based upon the weighted average number of Units outstanding.

(2) Includes distributions due the Unitholders for the Partnership's fiscal quarters ended December 31, 1995, 1994, 1993, 1992 and
1991, which were paid subsequent to year end. See Notes 5 and 7 of the notes to the financial statements of the Partnership.

The selected statements of operations data presented above for the years
ended December 31, 1995, 1994 and 1993, and the balance sheet data as of
December 31, 1995 and 1994, 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, 1992 and 1991 and the balance sheet data as of December 31, 1993, 1992 and
1991 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.

9

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 offerings 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, as defined in
the Partnership Agreement, 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. In addition, the General Partner acquired the shares of the
company which acted 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. CRIIMI, Inc. is a wholly owned subsidiary of CRIIMI MAE Inc. (CRIIMI
MAE). From inception through June 30, 1995, CRIIMI MAE was managed by an
adviser whose general partner is C.R.I., Inc. (CRI). However, effective June
30, 1995, CRIIMI MAE became a self-managed and self-administered real estate
investment trust (REIT) and, as a result, the adviser no longer advises CRIIMI
MAE.

Also on September 6, 1991, AIM Acquisition Partners, L.P., (the Advisor)
succeeded Integrated Funding, Inc. (IFI) as the advisor to 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 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.

Effective September 6, 1991 and through June 30, 1995, a sub-advisory
agreement (the Sub-advisory Agreement) existed whereby CRI/AIM Management, Inc.,
an affiliate of CRI, managed the Partnership's portfolio. On June 30, 1995, in
connection with a merger transaction approved by CRIIMI MAE's shareholders, an
affiliate of CRIIMI MAE acquired the Sub-advisory Agreement, and, as a result,
CRIIMI MAE Services Limited Partnership acts as the sub-advisor to the
Partnership effective June 30, 1995.

10

PART II

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

Prior to the expiration of the Partnership's reinvestment period on
December 31, 1994, the Partnership was engaged 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). After the expiration of the
reinvestment period, the Partnership is required (subject to the conditions set
forth in the Partnership Agreement) to distribute such proceeds to its
Unitholders. The Partnership Agreement states that the Partnership will
terminate on December 31, 2020, unless previously terminated under the
provisions of the Partnership Agreement.

As of December 31, 1995, the Partnership had invested in 27 Insured
Mortgages, with an aggregate amortized cost of approximately $166 million, a
face value of approximately $163 million and a fair value of approximately $162
million, as discussed below.

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

1995 versus 1994
- ----------------

Net earnings decreased for 1995 as compared to 1994 primarily as a result
of the gain recognized on the disposition of the Insured Mortgage on One East
Delaware in January 1994. Also contributing to the decrease in net earnings was
a decrease in interest and other income, as discussed below. Partially
offsetting these decreases was an increase in mortgage investment income, as
discussed below.

Mortgage investment income increased for 1995 as compared to 1994 due to
increases in total invested assets throughout 1994, the full benefit which was
realized in 1995. The increase in total invested assets is attributable to the
reinvestment of net proceeds from the disposition of the Insured Mortgages on
One East Delaware and Victoria Pointe Apartments-Phase II, which were received
in December 1993 and January 1994 and reinvested during the first three quarters
of 1994.

Interest and other income decreased for 1995 as compared to 1994 primarily
due to the short-term investment of net disposition proceeds in early 1994 prior
to reinvestment in Acquired Insured Mortgages, as previously discussed.

Asset management fees increased for 1995 as compared to 1994 as a result of
the increase in total invested assets.

General and administrative expenses increased for 1995 as compared to 1994
primarily due to an increase in legal and professional fees related to
litigation involving the transfer of mortgage servicing rights, as discussed in
Note 4 to the financial statements. Partially offsetting this increase was a
decrease in payroll and payroll-related expenses, as a result of the
stabilization of the mortgage portfolio during 1994. Also offsetting this
increase was a decrease in fees related to the initial listing of the
Partnership's units on the American Stock Exchange.

Interest expense to affiliate decreased for 1995 as compared to 1994 as a
result of the paydown of the note payable to the Partnership's affiliate,
American Insured Mortgage Investors-L.P. Series 85 (AIM 85) during 1994,
partially offset by the execution of a note payable to AIM 88. The note payable
to AIM 88 is in the approximate amount of $479,000, at an annual interest rate

11

PART II

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

of 7.25%, as compared to the note payable to AIM 85 of approximately $1.7
million at an annual interest rate of 8%.

1994 versus 1993
- ----------------

Net earnings increased for 1994 as compared to 1993 primarily due to the
gain recognized from the disposition of the Insured Mortgage on One East
Delaware in January 1994. Also contributing to this increase was an increase in
interest and other income as discussed below. Partially offsetting these
increases was a decrease in mortgage investment income, as described below.

Mortgage investment income decreased for 1994 as compared to 1993. This
decrease was primarily due to the disposition of the mortgages on One East
Delaware and Victoria Pointe Apartments, the proceeds of which were not
reinvested until the first three quarters of 1994. Also contributing to the
decrease in mortgage investment income was a reduction in mortgage interest
rates on Acquired Insured Mortgages purchased during 1994 as compared to the
mortgage interest rates on those Insured Mortgages which were disposed of in
late 1993 and early 1994.

Interest and other income increased for 1994 as compared to 1993 primarily
due to the short-term investment of net disposition proceeds prior to
reinvestment in Acquired Insured Mortgages, as previously discussed.

Asset management fees decreased for 1994 as compared to 1993 primarily due
to the decrease in total invested assets, as discussed above.

General and administrative expenses increased for 1994 as compared to 1993.
This increase was due primarily to an increase in payroll and payroll-related
expenses incurred in connection with the mortgage dispositions, mortgage
acquisitions, and mortgages with performance problems, as described below, and
due to the payment in 1994 of a one-time fee in connection with the listing of
the Partnership's units on AMEX. Also contributing to the increase in general
and administrative expenses was an amendment to the expense reimbursement
agreement between the AIM Partnerships and IFI, effective April 1, 1994. The
effect of this amendment was to reduce the expense reimbursement the Partnership
receives from IFI to reflect the reduction in the Partnership's coinsured loans
since the execution of the original reimbursement agreement in 1992. This
reimbursement is presented as a reduction of general and administrative expenses
on the accompanying statements of operations for the years ended December 31,
1995, 1994 and 1993. The decrease in the expense reimbursement is offset by a
decrease in interest expense to affiliate, as discussed below.

Interest expense to affiliate decreased for 1994 as compared to 1993, as a
result of the paydown of the note payable to AIM 85 during the second quarter of
1994, offset by the execution of a note payable to AIM 88. The note payable to
AIM 88 is in the approximate amount of $479,000, at an annual interest rate of
7.25%, as compared to the note payable to AIM 85 of approximately $1.7 million
at an annual interest rate of 8%. The reduction in the principal amount of the
notes reflects the reduction in the Partnership's coinsured loans since the
initial capitalization of IFI in 1991.

Investment in Insured Mortgages
- -------------------------------

The Partnership's investment in Insured Mortgages is comprised of
participation certificates evidencing a 100% undivided beneficial interest in

12

PART II

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

government insured multifamily mortgages issued or sold pursuant to programs of
the Federal Housing Administration (FHA) (FHA-Insured Certificates), mortgage-
backed securities guaranteed by the Government National Mortgage Association
(GNMA) (GNMA Mortgage-Backed Securities) and FHA-insured mortgage loans (FHA-
Insured Loans). The mortgages underlying the FHA-Insured Certificates, GNMA
Mortgage-Backed Securities, and FHA-Insured Loans are non-recourse first liens
on multifamily residential developments or retirement homes.

The following is a discussion of the Partnership's mortgage investments,
along with the risks related to each type of investment:

A. Fully Insured Originated Insured Mortgages and
Acquired Insured Mortgages
----------------------------------------------
The Partnership's investment in fully insured Originated Insured
Mortgages consisted of seven and eight FHA-Insured Loans, as of December
31, 1995 and 1994, respectively. As of December 31, 1995, these
investments had an aggregate amortized cost of $62,595,492, an aggregate
face value of $60,306,932, and an aggregate fair value of $62,183,025. As
of December 31, 1994, these investments had an aggregate amortized cost of
$69,162,106, an aggregate face value of $66,602,806, and an aggregate fair
value of $63,422,100.

The Partnership's investment in fully insured Acquired Insured
Mortgages consisted of 10 GNMA Mortgage-Backed Securities, 2 FHA-Insured
Certificates and 1 FHA-Insured Loan as of December 31, 1995 and 1994. As
of December 31, 1995, these investments had an aggregate amortized cost of
$42,122,606, an aggregate face value of $42,066,176, and an aggregate fair
value of $42,479,072. As of December 31, 1994, these investments had an
aggregate amortized cost of $42,473,748, an aggregate face value of
$42,415,356 and an aggregate fair value of $37,875,856. As of March 1,
1996, all of the Partnership's fully insured mortgage investments are
current with respect to the payment of principal and interest.

In December, 1995, the Partnership received net proceeds of
$6,169,529 from the prepayment of the mortgage on Lakewood Villas, a fully
insured FHA-Insured Loan, and recognized a gain of $5,208, as shown on the
accompanying statement of operations for the year ended December 31,
1995. The net proceeds are expected to be distributed May 1, 1996.

In addition to base interest payments from fully insured Originated
Insured Mortgages, the Partnership is entitled to additional interest based
on a percentage of the net cash flow from the underlying development and of
the net proceeds from the refinancing, sale or other disposition of the
underlying development (referred to as Participations). During the years
ended December 31, 1995, 1994 and 1993, the Partnership received additional
interest of $73,357, $33,431 and $62,843, respectively, from the fully
insured Participations. These amounts are included in mortgage investment
income on 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 acquisition fees and closing costs paid in
connection with the acquisition of the Insured Mortgage and the loss of
approximately 30-days accrued interest.

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

13

PART II

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

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
certain 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.

As of December 31, 1995 and 1994, the former managing general partner,
on behalf of the Partnership, had invested in seven FHA-Insured
Certificates secured by coinsured mortgages. As of December 31, 1995, two
of the seven FHA-Insured Certificates secured by coinsured mortgages are
coinsured by an unaffiliated third party coinsurance lender under the HUD
coinsurance program. The following is a discussion of actual and potential
performance problems with respect to the Partnership's coinsured mortgage
investments.

1. Coinsured by third party
------------------------
The Originated Insured Mortgages on The Villas and St. Charles Place -
Phase II are coinsured by Patrician. As of December 31, 1995 and
December 31, 1994, the Partnership's investment in the mortgage on The
Villas had an amortized cost of $15,635,379 and $15,732,782,
respectively, a face value of $15,869,089 and $15,966,491,
respectively, and a fair value of $15,173,465 and $14,012,209,
respectively. As of March 1, 1996, the mortgagor has made payments of
principal and interest due on the original mortgage through July 1995,
and has made payments of principal and interest due under a
modification agreement through August 1993. Patrician is litigating
the case in bankruptcy court while negotiating a modification
agreement with the borrower.

The Partnership's investment in the mortgage on St. Charles Place -
Phase II had an amortized cost equal to its face value of $3,068,173
and $3,082,440, as of December 31, 1995 and 1994, respectively. As of
December 31, 1995 and 1994, this mortgage had a fair value of
$2,933,205 and $2,703,780, respectively. These amounts represent the

14

PART II

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

Partnership's approximate 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 affiliate of the Partnership.
As of March 1, 1996, the mortgagor has made payments of principal and
interest due on the mortgage through May 1995 to the Partnership.
Patrician is litigating the case in bankruptcy court while negotiating
a modification agreement with the borrower.

The General Partner intends to continue to oversee the Partnership's
interests 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 the most recent information available, and to the
extent these 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
----------------------
As of December 31, 1995 and 1994, the Partnership held investments in
five and two FHA-Insured Certificates secured by coinsured mortgages,
respectively, where the coinsurance lender is IFI, an affiliate of the
Partnership. Two of these mortgage investments were originated by the
former managing general partner. 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.

The Originated Insured Mortgages on Carmen Drive Estates (The Forest),
Woodbine at Lakewood Apartments and Woodland Hills Apartments were
previously coinsured by M-West Mortgage Corporation (M-West), a third
party coinsurance lender. During the fourth quarter of 1994, the
Partnership was informed that M-West was liquidating its assets and
intended to assign the mortgage servicing rights related to these
mortgages to another coinsurance lender, Whitehall Funding, Inc.
(Whitehall). The Partnership successfully contested this transfer and
obtained a court order mandating the transfer of the mortgage
servicing rights related to these three coinsured loans to IFI. This
transfer was completed during the second quarter of 1995. The
Partnership bears the risk of loss upon default for IFI's portion of
the coinsurance loss. As of December 31, 1995, receivables and other
assets, as shown on the accompanying balance sheet, includes
approximately $70,000 due from M-West with respect to these loans. As
of March 1, 1996, claims for damages against M-West and Whitehall are
still pending.

As of March 1, 1996, these five IFI coinsured mortgages, as shown in
the table below, were current with respect to the payment of principal
and interest, except for the mortgage on Spring Lake Village, for
which the Mortgagor has made payments of principal and interest
through July 1995. In February 1996, this mortgage was modified a
second time to reduce the interest rate to 6% through December 1996,
increasing to 6.75% for 1997 and 7.0% for all subsequent years. The
General Partner does not anticipate that this modification will have a
material adverse impact on the Partnership's financial statements.

15

PART II

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

The General Partner believes there is adequate collateral value
underlying these coinsured mortgages. Accordingly, no loan losses
were recognized on these mortgages during the years ended December 31,
1995 and 1994, except as described below in connection with a mortgage
modification during the year ended December 31, 1994. As of December
31, 1995 and 1994, these five investments had an aggregate fair value
of $39,670,264 and $36,466,663, respectively.

16

PART II

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

Amortized Face Amortized Face Loan Losses Recognized
Cost Value Cost Value for the year ended
December 31, December 31, December 31, December 31, December 31, December 31,
1995 1995 1994 1994 1995 1994
------------ ------------ ------------ ------------ ------------ ------------

Pembrook Apartments $ 15,521,458 $ 14,918,958 $ 15,606,087 $ 14,992,832 $ -- $ --
Spring Lake Village(a) 4,984,151 4,984,151 5,022,918 5,022,919 -- 115,301(a)
Carmen Drive Estates(b) 4,966,036 4,875,403 4,992,884 4,900,599 -- --
Woodbine at Lakewood
Apartments(b) 5,211,526 5,021,478 5,243,651 5,049,840 -- --
Woodland Hills
Apartments(b) 12,246,715 11,819,789 12,320,708 11,885,577 -- --

(a) In March 1994, the mortgage note was amended to reduce the mortgage interest rate from 8.75% to 7.00%. In connection with the
refinancing, the Partnership recognized a loan loss of $115,301 on the accompanying statement of operations for the year ended
December 31, 1994, primarily representing the unamortized balance of acquisition and closing costs paid in connection with the
origination of this mortgage. As discussed above, the General Partner negotiated a second modification of this mortgage during
February 1996.

(b) As discussed above, these mortgages were coinsured by a third party coinsurance lender as of December 31, 1994.

In connection with the FHA-Insured Certificates secured by coinsured
mortgages, the Partnership has sought, in addition to base interest
payments, additional interest (commonly termed Participations) based
on a percentage of the net cash flow from the development and the net
proceeds from the refinancing, sale or other disposition of the
underlying development. All of the FHA-Insured Certificates secured
by coinsured mortgages contain such Participations. During the years
ended December 31, 1995, 1994 and 1993, the Partnership received
additional interest of $76,431, $7,628 and $50,979, respectively, from
the coinsured Participations. These amounts are included in mortgage
investment income on the accompanying statements of operations.

b. Asset Held for Sale Under Coinsurance Program

As of December 31, 1993, the former managing general partner, on
behalf of the Partnership, had invested in one coinsured mortgage, One
East Delaware, which was accounted for as an asset held for sale under
coinsurance program (AHFS). In January 1994, the Partnership received
net proceeds of $33,233,501 from the prepayment of this mortgage and
recognized a gain of $1,129,973, as shown on the accompanying
statement of operations for the year ended December 31, 1994. The
Partnership reinvested the net disposition proceeds in fully insured
Acquired Insured Mortgages during 1994.

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 1995 to meet operating
requirements.

The basis for paying distributions to Unitholders is net proceeds from
mortgage dispositions and cash flow from operations, which includes regular
interest income and principal from Insured Mortgages. Although Insured

17

PART II

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

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 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). However, the Partnership 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 initiate foreclosure. 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 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 to the Partnership. As of December 31, 1995 and 1994, the
Partnership had not set aside any reserves.

Cash flow - 1995 versus 1994
- ----------------------------
Net cash provided by operating activities decreased for 1995 as compared to
1994. This decrease was primarily due to a reduction in receivables and other
assets during 1994 as a result of the receipt in January 1994 of the remaining
net disposition proceeds related to the disposition of the mortgage on Victoria
Pointe Apartments - Phase II and receipt of accrued interest related to the
mortgage on One East Delaware.

Net cash provided by investing activities increased for 1995 as compared to
1994, primarily due to the investment in 1994 of approximately $39.7 million in
Insured Mortgages, which was partially offset by the receipt in 1994 of net
disposition proceeds of approximately $33.2 million from the disposition of the
Insured Mortgage on One East Delaware. No Insured Mortgages were acquired
during 1995. Also contributing to the increase in net cash provided by
investing activities, was the receipt in 1995 of net proceeds of approximately
$6.2 million related to the prepayment of the mortgage on Lakewood Villas during
1995.

Net cash used in financing activities decreased for 1995 as compared to
1994. This decrease was primarily due to the 1994 distribution of accrued, but

18

PART II

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

previously undistributed, interest from the disposition of the mortgage on One
East Delaware.

Cash flow - 1994 versus 1993
- ----------------------------
Net cash provided by operating activities increased for 1994 as compared to
1993. This increase was primarily due to the receipt in January 1994 of the
remaining net disposition proceeds related to the December 1993 disposition of
the insured mortgage on Victoria Pointe Apartments-Phase II and receipt of
accrued interest related to the One East Delaware disposition. Also
contributing to the increase in 1994 were non-recurring payments made in 1993 on
certain loans accounted for as AHFS loans and an increase in interest and other
income and a decrease in asset management fees, as previously discussed. These
increases were partially offset by a decrease in mortgage investment income and
an increase in general and administrative expenses, as discussed above.

Net cash used in investing activities increased for 1994 as compared to
1993 due to the 1994 investment of approximately $39.7 million in Acquired
Insured Mortgages, which was partially offset by the receipt of net disposition
proceeds of approximately $33.2 million from the disposition of the Insured
Mortgage on One East Delaware.

Net cash used in financing activities increased for the year ended December
31, 1994 as compared to 1993 as a result of an increase in distributions paid to
Unitholders. This increase was primarily due to the 1994 distribution of
proceeds from the disposition of the Insured Mortgage on One East Delaware.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The information required by this item is contained on pages 29 through 56.

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

None.

19

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 managed by the General Partner, which is wholly owned by CRIIMI
MAE, a company whose shares are listed on the New York Stock Exchange. Prior to
June 30, 1995, CRIIMI MAE was managed by an adviser whose general partner was
CRI. However, effective June 30, 1995, CRIIMI MAE became a self-managed and
self-administered REIT and, as a result, the adviser no longer advises CRIIMI
MAE.

Effective September 6, 1991, 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. 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, the Advisor succeeded IFI as the advisor of the
Partnership. 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 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.

Effective September 6, 1991, and through June 30, 1995, a sub-advisory
agreement (the Sub-advisory Agreement) existed whereby CRI/AIM Management, Inc.,
an affiliate of CRI, managed the Partnership's portfolio. In connection with
the transaction in which CRIIMI MAE became a self-managed and self-administered
REIT, an affiliate of CRIIMI MAE acquired the Sub-advisory Agreement. As a
consequence of this transaction, effective June 30, 1995, CRIIMI MAE Services
Limited Partnership, an affiliate of CRIIMI MAE, manages the Partnership's
portfolio.

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, 1995.

20

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.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT

As of December 31, 1995, no person was known by the Partnership to be the
beneficial owner of more than five percent (5%) of the outstanding Units of the
Partnership.

As of December 31, 1995, 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 outstanding 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 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.

21

PART IV

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

(a)(1) Financial Statements:

Page
Description Number
- ----------- --------------

Balance Sheets as of December 31, 1995
and 1994 27
Statements of Operations for the years
ended December 31, 1995, 1994 and 1993 28

Statements of Changes in Partners' Equity
for the years ended December 31, 1995,
1994 and 1993 29

Statements of Cash Flows for the years ended
December 31, 1995, 1994 and 1993 30

Notes to Financial Statements 31

(a)(2) Financial Statement Schedules:

IV - 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.

22

PART IV

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

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.

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.

10.(i) Pages A-1 - A-5 of the Partnership Agreement of Registrant,
incorporated by reference to Exhibit 28 to the Partnership's
Annual Report on Form 10-K for the year ended December 31,
1990.

10.(j) 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, incorporated by reference to
Exhibit 28(a) to the Partnership's Annual Report on Form 10-
K for the year ended December 31, 1990.

10.(k) 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, incorporated by
reference to Exhibit 28(b) to the Partnership's Annual
Report on Form 10-K for the year ended December 31, 1990.

10.(l) Amendment to Partnership Agreement dated September 4, 1991,
incorporated by reference to Exhibit 28(c), to the
Partnership's Annual Report on Form 10-K for the year ended
December 31, 1991.

10.(m) Non-negotiable promissory note to American Insured Investors
- Series 85, L.P. in the amount of $1,737,722 dated December
31, 1991, incorporated by reference to Exhibit 28(d) to the
Partnership's Annual Report on Form 10-K for the year ended
December 31, 1991.

10.(n) Sub-Management Agreement by and between AIM Acquisition and
CRI/AIM Management, Inc., dated as of March 1, 1991,
incorporated by reference to Exhibit 28(e) to the

23

PART IV

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

Partnership's Annual Report on Form 10-K for the year ended
December 31, 1992.

10.(o) Expense Reimbursement Agreement by Integrated Funding Inc.
and the AIM Funds, effective December 31, 1992, incorporated
by reference to Exhibit 28(f) to the Partnership's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1993.

10.(p) Non-negotiable promissory note to American Insured Mortgage
Investors L.P. - Series 88 in the amount of $478,612.00
dated April 1, 1994, incorporated by reference to Exhibit
10(p) to the Partnership's Annual Report on Form 10-K for
the year ended December 31, 1994.

10.(q) Amendment to Reimbursement Agreement by Integrated Funding,
Inc. and the AIM Funds, effective April 1, 1994,
incorporated by reference to Exhibit 10(q) to the
Partnership's Annual Report on Form 10-K for the year ended
December 31, 1994.

27. Financial Data Schedule (filed herewith).

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

All other items are not applicable.

24

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 27, 1996 /s/ William B. Dockser
- --------------------------- -------------------------
DATE William B. Dockser
Chairman of the Board and
Principal Executive Officer

March 27, 1996 /s/ H. William Willoughby
- --------------------------- -------------------------
DATE H. William Willoughby
President and Director

March 27, 1996 /s/ Cynthia O. Azzara
- --------------------------- -------------------------
DATE Cynthia O. Azzara
Principal Financial and
Accounting Officer

March 27, 1996 /s/ Garrett G. Carlson, Sr.
- --------------------------- --------------------------
DATE Garrett G. Carlson, Sr.
Director

March 27, 1996 /s/ Larry H. Dale
- --------------------------- -------------------------
DATE Larry H. Dale
Director

March 27, 1996 /s/ G. Richard Dunnells
- --------------------------- -------------------------
DATE G. Richard Dunnells
Director

March 27, 1996 /s/ Robert F. Tardio
- --------------------------- -------------------------
DATE Robert F. Tardio
Director

25

AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 86

Financial Statements as of December 31, 1995 and 1994

and for the Years Ended December 31, 1995, 1994 and 1993

26

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, 1995
and 1994, and the related statements of operations, changes in partners' equity
and cash flows for the years ended December 31, 1995, 1994 and 1993. 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, 1995 and 1994, and the results of its operations and its cash flows
for the years ended December 31, 1995, 1994 and 1993, in conformity with
generally accepted accounting principles.

As explained in Note 2 of the notes to financial statements, effective
January 1, 1994, the Partnership changed its method of accounting for its
investment in insured mortgages.

Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. Schedule IV-Mortgage Loans on Real
Estate as of December 31, 1995 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.

Arthur Andersen LLP

Washington, D.C.
March 22, 1996

27

AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 86

BALANCE SHEETS

As of December 31,
1995 1994
------------ ------------
ASSETS

Investment in FHA-Insured
Certificates and GNMA Mortgage-
Backed Securities, at fair value:
Originated insured mortgages $ 57,776,934 $ 53,182,652
Acquired insured mortgages 41,449,297 36,919,453
------------ ------------
99,226,231 90,102,105

Investment in FHA-Insured Loans, at
amortized cost, net of unamortized
discount and premium:
Originated insured mortgages 62,595,492 69,162,106
Acquired insured mortgage 995,255 1,000,856
------------ ------------
63,590,747 70,162,962

Cash and cash equivalents 8,774,654 2,833,820

Investment in affiliate 475,726 478,612

Receivables and other assets 2,470,604 2,116,387
------------ ------------
Total assets $174,537,962 $165,693,886
============ ============

LIABILITIES AND PARTNERS' EQUITY

Distributions payable $ 3,323,003 $ 3,423,700

Note payable to affiliate 478,612 478,612

Accounts payable and accrued expenses 153,998 200,987
------------ ------------
Total liabilities 3,955,613 4,103,299
------------ ------------
Partners' equity:
Limited partners' equity 174,986,113 175,790,599
General partner's deficit (869,206) (827,755)
Net unrealized losses on
investment in insured
mortgages (3,534,558) (13,372,257)
------------ ------------
Total partners' equity 170,582,349 161,590,587
------------ ------------
Total liabilities and
partners' equity $174,537,962 $165,693,886
============ ============

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

28

AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 86

STATEMENTS OF OPERATIONS

For the years ended December 31,
1995 1994 1993
------------ ------------ ------------

Income:
Mortgage investment income $ 13,797,980 $ 13,311,387 $ 14,387,837
Interest and other income 129,166 332,966 42,419
------------ ------------ ------------
13,927,146 13,644,353 14,430,256
------------ ------------ ------------
Expenses:
Asset management fee to related
parties 1,640,904 1,573,895 1,694,280
General and administrative 616,254 574,694 363,463
Interest expense to affiliate 34,699 60,779 139,018
------------ ------------ ------------
2,291,857 2,209,368 2,196,761
------------ ------------ ------------
Earnings before loan losses and gain on
mortgage disposition 11,635,289 11,434,985 12,233,495

Loan losses -- (115,301) (63,488)

Gain on mortgage disposition 5,208 1,129,973 --
------------ ------------ ------------
Net earnings $ 11,640,497 $ 12,449,657 $ 12,170,007
============ ============ ============

Net earnings allocated to:
Limited partners - 95.1% $ 11,070,113 $ 11,839,624 $ 11,573,677
General partner - 4.9% 570,384 610,033 596,330
------------ ------------ ------------
$ 11,640,497 $ 12,449,657 $ 12,170,007
============ ============ ============
Net earnings per Limited
Partnership Unit $ 1.16 $ 1.24 $ 1.21
============ ============ ============

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

29

AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 86
STATEMENTS OF CHANGES IN PARTNERS' EQUITY

For the years ended December 31, 1995, 1994 and 1993

Unrealized Unrealized
Gains on Losses on
Investment Investment
General Limited in Insured in Insured
Partner Partners Mortgages Mortgages Total
------------- ------------- ------------ ------------ -------------

Balance, January 1, 1993 $ (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 (498,350) (9,672,053) -- -- (10,170,403)

------------- ------------- ------------ ------------ ------------

Balance, December 31, 1993 (776,611) 176,783,204 -- -- 176,006,593

Net earnings 610,033 11,839,624 -- -- 12,449,657

Distributions paid or accrued of
$1.34, including return of
capital of $0.10 per Unit (661,177) (12,832,229) -- -- (13,493,406)

Unrealized (losses) gains on
investment in insured mortgages -- -- -- (13,372,257) (13,372,257)
------------- ------------- ------------ ------------ ------------

Balance, December 31, 1994 (827,755) 175,790,599 -- (13,372,257) 161,590,587

Net earnings 570,384 11,070,113 -- -- 11,640,497

Distributions paid or accrued of
$1.24, including return of capital
of $0.08 per Unit (611,835) (11,874,599) -- -- (12,486,434)

Adjustment to unrealized
gains (losses) on investment
in insured mortgages -- -- 406,534 9,431,165 9,837,699
------------- ------------- ------------ ------------ ------------

Balance December 31, 1995 $ (869,206) $ 174,986,113 $ 406,534 $ (3,941,092) $170,582,349
============= ============= ============ ============ ============

Limited Partnership Units outstanding -
December 31, 1995, 1994 and 1993 9,576,290
=============

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

30

AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 86

STATEMENTS OF CASH FLOWS

For the years ended December 31,
1995 1994 1993
------------ ------------ ------------

Cash flows from operating activities:
Net earnings $ 11,640,497 $ 12,449,657 $ 12,170,007

Adjustments to reconcile net earnings to net cash
provided by operating activities:
Loan losses -- 115,301 63,488
Gain on mortgage disposition (5,208) (1,129,973) --
Payments made and treated as an addition to
Assets Held for Sale under Coinsurance Program/mortgage
investment income accrued/accreted on AHFS -- -- (3,106,783)
Changes in assets and liabilities:
(Decrease) increase in note payable to affiliate -- (1,259,111) 6,813
(Decrease) increase in accounts payable and
accrued expenses (46,989) (11,441) 26,722
(Increase) decrease in receivables and other assets (354,217) 689,217 (1,699,772)
Decrease in investment in affiliate 2,886 1,251,475 823
------------ ------------ ------------
Net cash provided by operating activities 11,236,969 12,105,125 7,461,298
------------ ------------ ------------
Cash flows from investing activities:
Proceeds from Disposition of Fully Insured
Mortgage 6,169,529 -- --
Proceeds from disposition of Assets Held for Sale
under Coinsurance Program -- 33,233,501 9,049,783
Investment in Acquired Insured Mortgages -- (39,730,658) --
Receipt of principal from scheduled payments 1,121,467 1,019,821 600,361
------------ ------------ ------------
Net cash provided by (used in)investing activities 7,290,996 (5,477,336) 9,650,144
------------ ------------ ------------

Cash flows from financing activities:
Distributions paid to partners (12,587,131) (12,889,224) (10,573,196)
------------ ------------ ------------
Net increase (decrease) in cash and cash equivalents 5,940,834 (6,261,435) 6,538,246

Cash and cash equivalents, beginning of year 2,833,820 9,095,255 2,557,009
------------ ------------ ------------
Cash and cash equivalents, end of year $ 8,774,654 $ 2,833,820 $ 9,095,255
============ ============ ============

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

31

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. is a wholly owned subsidiary of CRIIMI MAE Inc.
(CRIIMI MAE). From inception through June 30, 1995, CRIIMI MAE was managed by
an adviser whose general partner is C.R.I., Inc. (CRI). However, effective June
30, 1995, CRIIMI MAE became a self-managed and self-administered real estate
investment trust (REIT) and, as a result, the adviser no longer advises CRIIMI
MAE. In addition, the General Partner acquired the shares of the company which
acted 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 advisor to 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 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.

Effective September 6, 1991 and through June 30, 1995, a sub-advisory
agreement (the Sub-advisory Agreement) existed whereby CRI/AIM Management, Inc.,
an affiliate of CRI, managed the Partnership's portfolio.

Until the change in the Partnership's investment policy, as discussed
below, and through December 31, 1994, (the expiration of the Partnership's
reinvestment period) 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). After the expiration of the reinvestment period,
the Partnership is required (subject to the conditions set forth in the
Partnership Agreement) to distribute such proceeds to its Unitholders. The
Partnership Agreement states that the Partnership will terminate on December 31,
2020, unless previously terminated under the provisions of the Partnership
Agreement. As of December 31, 1995, 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).

32

AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 86

NOTES TO FINANCIAL STATEMENTS

1. ORGANIZATION - Continued

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.

Effective January 1, 1994, the United States Congress 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 cleared away the major
impediment standing in the way of listing the Partnership's Depositary Units of
Limited Partnership Interest (Units) for trading on a national stock exchange.
In an effort to allow pension funds and other tax-exempt organizations to invest
in publicly-traded partnerships, the Revenue Reconciliation Act of 1993 repealed
the rule that automatically treated income from publicly-traded partnerships as
gross income that is derived from an unrelated trade or business. As a result,
investments in publicly-traded partnerships such as the Partnership are now
treated the same as investments in other partnerships for purposes of the
unrelated business taxable income rules. The General Partner listed the
Partnership's Units for trading on the American Stock Exchange 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."

33

AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 86

NOTES TO FINANCIAL STATEMENTS

2. SIGNIFICANT ACCOUNTING POLICIES

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

Investment in Insured Mortgages
-------------------------------
The Partnership's investment in Insured Mortgages is comprised of
participation certificates evidencing a 100% undivided beneficial interest
in government insured multifamily mortgages issued or sold pursuant to FHA
programs (FHA-Insured Certificates), mortgage-backed securities guaranteed
by GNMA (GNMA Mortgage-Backed Securities) and FHA-insured mortgage loans
(FHA-Insured Loans). The mortgages underlying the FHA-Insured
Certificates, GNMA Mortgage-Backed Securities, and FHA-Insured Loans are
non-recourse first liens on multifamily residential developments or
retirement homes.

Payments of principal and interest on FHA-Insured Certificates and
FHA-Insured Loans are insured by the United States Department of Housing
and Urban Development (HUD) pursuant to Title 2 of the National Housing
Act. Payments of principal and interest on GNMA Mortgage-Backed Securities
are guaranteed by GNMA pursuant to Title 3 of the National Housing Act.

Prior to January 1, 1994, the Partnership accounted for its investment
in Insured Mortgages at amortized cost in accordance with Statement of
Financial Accounting Standards No. 65 "Accounting for Certain Mortgage
Banking Activities" (SFAS 65) since it had the ability and intent to hold
these assets for the foreseeable future. The difference between the cost
and the unpaid principal balance, at the time of purchase, is carried as a
discount or premium and amortized over the remaining contractual life of
the mortgage using the effective interest method. 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 payments received or accrued, less
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. The Partnership adopted this
statement as of January 1, 1994. 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.

34

AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 86

NOTES TO FINANCIAL STATEMENTS

2. SIGNIFICANT ACCOUNTING POLICIES - Continued

As of December 31, 1995, the weighted average remaining term of the
Partnership's investments in GNMA Mortgage-Backed Securities and FHA-
Insured Certificates is approximately 28 years. However, the Partnership
Agreement states that the Partnership will terminate in approximately 25
years, on December 31, 2020, unless previously terminated under the
provisions of the Partnership Agreement. As the Partnership is anticipated
to terminate prior to the weighted average remaining term of its
investments in GNMA Mortgage-Backed Securities and FHA-Insured
Certificates, the Partnership does not have the ability, at this time, to
hold these investments to maturity. Consequently, the General Partner
believes that the Partnership's investments in GNMA Mortgage-Backed
Securities and FHA-Insured Certificates should be included in the Available
for Sale category. Although the Partnership's investments in GNMA
Mortgage-Backed Securities and FHA-Insured Certificates are classified as
Available for Sale for financial statement purposes, the General Partner
does not intend to voluntarily sell these assets other than those which may
be sold as a result of a default or those which are eligible to be put to
FHA at the expiration of 20 years from the date of the final endorsement.

In connection with this classification, as of December 31, 1995, the
Partnership's investments in GNMA Mortgage-Backed Securities and FHA-
Insured Certificates are recorded at fair value, with the unrealized losses
on these assets reported as a separate component of partners' equity.
Subsequent increases or decreases in the fair value of GNMA Mortgage-Backed
Securities and FHA-Insured Certificates, classified as Available for Sale,
will be included as a separate component of partners' equity. Realized
gains and losses on GNMA Mortgage-Backed Securities and FHA-Insured
Certificates, classified as Available for Sale, will continue to be
reported in earnings. The amortized cost of the GNMA Mortgage-Backed
Securities and FHA-Insured Certificates in this category is adjusted for
amortization of discounts and premiums to maturity. Such amortization is
included in mortgage investment income.

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

Losses on dispositions of mortgage investments 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 representing 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).

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.

35

AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 86

NOTES TO FINANCIAL STATEMENTS

2. SIGNIFICANT ACCOUNTING POLICIES - Continued

Reclassification
----------------
Certain amounts in the financial statements for the years ended
December 31, 1994 and 1993 have been reclassified to conform with the 1995
presentation.

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

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.

36

AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 86

NOTES TO FINANCIAL STATEMENTS

3. FAIR VALUE OF FINANCIAL INSTRUMENTS - Continued

As of December 31, 1995 As of December 31, 1994
Amortized Fair Amortized Fair
Cost Value Cost Value
------------ ------------ ------------ ------------

Investment in FHA-Insured
Certificates and GNMA
Mortgage-Backed Securities:
Originated Insured Mortgages $ 61,633,438 $ 57,776,934 $ 62,001,470 $ 53,182,652
Acquired Insured Mortgages 41,127,351 41,449,297 41,472,892 36,919,453
------------ ------------ ------------ ------------
$102,760,789 $ 99,226,231 $103,474,362 $ 90,102,105
============ ============ ============ ============
Investment in FHA-Insured
Loans:
Originated Insured Mortgages $ 62,595,492 $ 62,183,025 $ 69,162,106 $ 63,422,100
Acquired Insured Mortgage 995,255 1,029,775 1,000,856 956,403
------------ ------------ ------------ ------------
$ 63,590,747 $ 63,212,800 $ 70,162,962 $ 64,378,503
============ ============ ============ ============

Cash and cash equivalents $ 8,774,654 $ 8,774,654 $ 2,833,820 $ 2,833,820

Accrued interest receivable $ 2,168,158 $ 2,168,158 $ 1,910,398 $ 1,910,398

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

Investment in FHA-Insured Certificates, GNMA
Mortgage-Backed Securities and FHA-Insured Loans
--------------------------------------------------------
The fair value of the fully insured FHA-Insured Certificates, GNMA
Mortgage-Backed Securities and FHA-Insured Loans is based on quoted market
prices. In order to determine the fair value of the coinsured FHA-Insured
Certificates, the Partnership valued the coinsured FHA-Insured Certificates
as though they were fully insured (in the same manner fully insured FHA-
Insured Certificates were valued). From this amount, the Partnership
deducted a discount factor from the face value of the loan. This discount
factor is based on the Partnership's historical analysis of the difference
in fair value between coinsured FHA-Insured Certificates and fully insured
FHA-Insured Certificates.

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

37

AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 86

NOTES TO FINANCIAL STATEMENTS

4. INVESTMENT IN INSURED MORTGAGES

The following is a discussion of the Partnership's insured mortgage
investments, along with the risks related to each type of investment:

A. Fully Insured Originated Insured Mortgages and
Acquired Insured Mortgages
----------------------------------------------
The Partnership's investment in fully insured Originated Insured
Mortgages consisted of seven and eight FHA-Insured Loans, as of December
31, 1995 and 1994, respectively. As of December 31, 1995, these
investments had an aggregate amortized cost of $62,595,492, an aggregate
face value of $60,306,932, and an aggregate fair value of $62,183,025. As
of December 31, 1994, these investments had an aggregate amortized cost of
$69,162,106, an aggregate face value of $66,602,806, and an aggregate fair
value of $63,422,100.

The Partnership's investment in fully insured Acquired Insured
Mortgages consisted of 10 GNMA Mortgage-Backed Securities, 2 FHA-Insured
Certificates and 1 FHA-Insured Loan, as of December 31, 1995 and 1994. As
of December 31, 1995, these investments had an aggregate amortized cost of
$42,122,606, an aggregate face value of $42,066,176, and an aggregate fair
value of $42,479,072. As of December 31, 1994, these investments had an
aggregate amortized cost of $42,473,748, an aggregate face value of
$42,415,356 and an aggregate fair value of $37,875,856. As of March 1,
1996 all of the Partnership's fully insured mortgage investments are
current with respect to the payment of principal and interest.

In December, 1995, the Partnership received net proceeds of
$6,169,529 from the prepayment of the mortgage on Lakewood Villas, a fully
insured FHA-Insured Loan, and recognized a gain of $5,208, as shown on the
accompanying statement of operations for the year ended December 31, 1995.
The net proceeds are expected to be distributed May 1, 1996.

In addition to base interest payments from fully insured Originated
Insured Mortgages, the Partnership is entitled to additional interest based
on a percentage of the net cash flow from the underlying development and of
the net proceeds from the refinancing, sale or other disposition of the
underlying development (referred to as Participations). During the years
ended December 31, 1995, 1994 and 1993, the Partnership received additional
interest of $73,357, $33,431 and $62,843, respectively, from the fully
insured Participations. These amounts are included in mortgage investment
income on the accompanying statements of operations.

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.

38

AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 86

NOTES TO FINANCIAL STATEMENTS

4. INVESTMENT IN INSURED MORTGAGES - Continued

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
certain 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.

As of December 31, 1995 and 1994, the former managing general partner,
on behalf of the Partnership, had invested in seven FHA-Insured
Certificates secured by coinsured mortgages. As of December 31, 1995, two
of the seven FHA-Insured Certificates secured by coinsured mortgages are
coinsured by an unaffiliated third party coinsurance lender, The Patrician
Mortgage Company (Patrician), under the HUD coinsurance program. The two
coinsured mortgages which are coinsured by Patrician were delinquent with
respect to the payment of principal and interest. The following is a
discussion of actual and potential performance problems with respect to the
Partnership's coinsured mortgage investments.

1. Coinsured by third party
------------------------
The Originated Insured Mortgages on The Villas and St. Charles Place -
Phase II are coinsured by Patrician. As of December 31, 1995 and
1994, the Partnership's investment in the mortgage on The Villas had
an amortized cost of $15,635,379 and $15,732,782, respectively, a face
value of $15,869,089 and $15,966,491, respectively, and a fair value
of $15,173,465 and $14,012,209, respectively. As of March 1, 1996,
the mortgagor has made payments of principal and interest due on the
original mortgage through July 1995, and has made payments of
principal and interest due under a modification agreement through
August 1993. Patrician is litigating the case in bankruptcy court
while negotiating a modification agreement with the borrower.

The Partnership's investment in the mortgage on St. Charles Place -
Phase II had an amortized cost equal to its face value of $3,068,173
and $3,082,440, as of December 31, 1995 and 1994, respectively. As of
December 31, 1995 and 1994, this mortgage had a fair value of
$2,933,205 and $2,703,780, respectively. These amounts represent the
Partnership's approximate 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 affiliate of the Partnership.
As of March 1, 1996, the mortgagor has made payments of principal and
interest due on the mortgage through May 1995 to the Partnership.
Patrician is litigating the case in bankruptcy court while negotiating
a modification agreement with the borrower.

39

AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 86

NOTES TO FINANCIAL STATEMENTS

4. INVESTMENT IN INSURED MORTGAGES - Continued

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 the most recent information available, and to the extent
these conditions change or additional information becomes available,
then the General Partners' 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
----------------------
As of December 31, 1995 and 1994, the Partnership held investments in
five and two FHA-Insured Certificates secured by coinsured mortgages,
respectively, where the coinsurance lender is Integrated Funding, Inc.
(IFI), an affiliate of the Partnership. Two of these mortgage
investments were originated by the former managing general partner.
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.

The Originated Insured Mortgages on Carmen Drive Estates (The Forest),
Woodbine at Lakewood Apartments and Woodland Hills Apartments were
previously coinsured by M-West Mortgage Corporation (M-West), a third
party coinsurance lender. During the fourth quarter of 1994, the
Partnership was informed that M-West was liquidating its assets and
intended to assign the mortgage servicing rights related to these
mortgages to another coinsurance lender, Whitehall Funding, Inc.
(Whitehall). The Partnership successfully contested this transfer and
obtained a court order mandating the transfer of the mortgage
servicing rights related to these three coinsured loans to IFI. This
transfer was completed during the second quarter of 1995. The
Partnership bears the risk of loss upon default for IFI's portion of
the coinsurance loss. As of December 31, 1995, receivables and other
assets, as shown on the accompanying balance sheet, includes
approximately $70,000 due from M-West with respect to these loans. As
of March 1, 1996, claims for damages against M-West and Whitehall are
still pending.

As of March 1, 1996, these five IFI coinsured mortgages, as shown in
the table below, were current with respect to the payment of principal
and interest, except for the mortgage on Spring Lake Village, for
which the Mortgagor has made payments of principal and interest
through July 1995. In February 1996, this mortgage was modified a

40

AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 86

NOTES TO FINANCIAL STATEMENTS

4. INVESTMENT IN INSURED MORTGAGES - Continued

second time to reduce the interest rate to 6% through December 1996,
increasing to 6.75% for 1997 and 7.0% for all subsequent years. The
General Partner does not anticipate that this modification will have a
material adverse impact on the Partnership's financial statements.

The General Partner believes there is adequate collateral value
underlying these coinsured mortgages. Accordingly, no loan losses
were recognized on these mortgages during the years ended December 31,
1995 and 1994, except as described below in connection with a mortgage
modification during the year ended December 31, 1994. As of December
31, 1995 and December 31, 1994, these five investments had an
aggregate fair value of $39,670,264 and $36,466,663, respectively.

41

AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 86

NOTES TO FINANCIAL STATEMENTS

4. INVESTMENT IN INSURED MORTGAGES - Continued

Amortized Face Amortized Face Loan Losses Recognized
Cost Value Cost Value for the year ended
December 31, December 31, December 31, December 31, December 31, December 31,
1995 1995 1994 1994 1995 1994
------------ ------------ ------------ ------------ ------------ ------------

Pembrook Apartments $ 15,521,458 $ 14,918,958 $ 15,606,087 $ 14,992,832 $ -- $ --
Spring Lake Village(a) 4,984,151 4,984,151 5,022,918 5,022,919 -- 115,301(a)
Carmen Drive Estates(b) 4,966,036 4,875,403 4,992,884 4,900,599 -- --
Woodbine at Lakewood
Apartments(b) 5,211,526 5,021,478 5,243,651 5,049,840 -- --
Woodland Hills
Apartments(b) 12,246,715 11,819,789 12,320,708 11,885,577 -- --

(a) In March 1994, the mortgage note was amended to reduce the mortgage interest rate from 8.75% to 7.00%. In connection with the
refinancing, the Partnership recognized a loan loss of $115,301 on the accompanying statement of operations for the year ended
December 31, 1994, primarily representing the unamortized balance of acquisition and closing costs paid in connection with the
origination of this mortgage. As discussed above, the General Partner negotiated a second modification of this mortgage during
February 1996.

(b) As discussed above, these mortgages were coinsured by a third party coinsurance lender as of December 31, 1994.

42

AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 86

NOTES TO FINANCIAL STATEMENTS

4. INVESTMENT IN INSURED MORTGAGES - Continued

In connection with the FHA-Insured Certificates secured by coinsured
mortgages, the Partnership has sought, in addition to base interest
payments, additional interest (commonly termed Participations) based
on a percentage of the net cash flow from the development and the net
proceeds from the refinancing, sale or other disposition of the
underlying development. All of the FHA-Insured Certificates secured
by coinsured mortgages contain such Participations. During the years
ended December 31, 1995, 1994 and 1993, the Partnership received
additional interest of $76,431, $7,628 and $50,979, respectively,
from the coinsured Participations. These amounts, if any, are
included in mortgage investment income on the accompanying statements
of operations.

b. Asset Held for Sale Under Coinsurance Program

As of December 31, 1993, the former managing general partner, on
behalf of the Partnership, had invested in one coinsured mortgage, One
East Delaware, which was accounted for as an asset held for sale under
coinsurance program (AHFS). In January 1994, the Partnership received
net proceeds of $33,233,501 from the prepayment of this mortgage and
recognized a gain of $1,129,973, as shown on the accompanying
statement of operations for the year ended December 31, 1994. The
Partnership reinvested the net disposition proceeds in fully insured
Acquired Insured Mortgages during 1994.

5. DISTRIBUTIONS TO UNITHOLDERS

The distributions paid or accrued to Unitholders on a per Unit basis for
the years ended December 31, 1995, 1994 and 1993 are as follows:

1995 1994 1993
------ ------ ------

Quarter ended March 31, $ 0.26(1) $ 0.41(3)(4) $ 0.23
Quarter ended June 30, 0.34(1)(2) 0.29(4) 0.21
Quarter ended September 30, 0.31(1) 0.30(4) 0.29(5)
Quarter ended December 31, 0.33(1) 0.34(4) 0.28(6)
------ ------ ------
$ 1.24 $ 1.34 $ 1.01
====== ====== ======

(1) This amount includes $0.03 per Unit representing previously undistributed
accrued interest receivable from St. Charles Place - Phase II and The
Villas.

(2) This amount includes $0.08 per Unit representing previously undistributed
accrued interest receivable from Carmen Drive Estates (The Forest),
Woodland Hills Apartments, and Woodbine at Lakewood Apartments.

(3) This amount includes approximately $0.18 per Unit representing previously
undistributed accrued interest received from the disposition of the
mortgage on One East Delaware.

(4) This amount includes approximately $0.01, $0.04, $0.03 and $0.03 per Unit
representing previously undistributed accrued interest received from St.
Charles Place-Phase II and The Villas for the quarters ending March 31,

43

AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 86

NOTES TO FINANCIAL STATEMENTS

5. DISTRIBUTIONS TO UNITHOLDERS - Continued

1994, June 30, 1994, September 30, 1994 and December 31, 1994,
respectively.

(5) In September 1993, the Partnership received $591,872 (approximately $0.06
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
$0.03 per Unit of this previously undistributed interest and reserved
approximately $0.03 per Unit for the continued funding of coinsurance
expenses. The Partnership distributed the remaining interest of
approximately $0.03 per Unit to Unitholders as part of the fourth quarter
distribution, as discussed below.

(6) This includes a special distribution of approximately $0.10 per Unit
comprised of (i) $0.03 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, as described above, and
(ii) $0.07 per Unit representing previously undistributed accrued interest
received in December 1993 resulting from the disposition of the mortgage on
Victoria Pointe Apartments-Phase II.

The basis for paying distributions to Unitholders is net proceeds from
mortgage dispositions and cash flow from operations, which includes regular
interest income and principal from Insured Mortgages. 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 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), an affiliated entity, transferred a GNMA Mortgage-Backed Security
(the GNMA security) in the amount of approximately $4.7 million to IFI in order
to capitalize IFI with sufficient net worth under HUD regulations. The
Partnership and its affiliate, 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. AIM Mortgage, Inc. is
jointly owned by AIM 85, AIM 88 and the Partnership. The Partnership accounts
for its investment in IFI under the equity method of accounting. Interest
expense on the note payable was based on an interest rate of 8% per annum.

In 1992, IFI entered into an expense reimbursement agreement with the
Partnership, AIM 85 and AIM 88 (collectively, 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 mortgage investments. The
expense reimbursement, along with the Partnership's equity interest in IFI's net
income or loss, substantially equals the Partnership's interest expense on the
note payable.

44

AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 86

NOTES TO FINANCIAL STATEMENTS

6. INVESTMENT IN AFFILIATE AND NOTE PAYABLE TO AFFILIATE -
Continued

In April 1994, IFI received net proceeds of approximately $4.7 million from
the prepayment of the GNMA security, which IFI distributed to the AIM Funds. On
June 30, 1994, the Partnership repaid its note payable to AIM 85.

As a result of this distribution, in April 1994, AIM 88 transferred a GNMA
Mortgage-Backed Security in the amount of approximately $2.0 million to IFI in
order to recapitalize IFI with sufficient net worth under HUD regulations. The
Partnership and AIM 85 each issued a demand note payable to AIM 88 and recorded
an investment in IFI through AIM Mortgage, Inc., in proportion to each entity's
coinsured mortgages for which IFI was the mortgagee of record as of April 1,
1994. Interest expense on the note payable to AIM 88 is based on an annual
interest rate of 7.25%

In connection with these transactions, the expense reimbursement agreement
was amended as of April 1, 1994 to adjust the allocation of the expense
reimbursement to the AIM Funds to an amount proportionate to each entity's
coinsured mortgage investments as of April 1, 1994. The expense reimbursement,
as amended, along with the Partnership's equity interest in IFI's net income or
loss, substantially equals the Partnership's 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, and certain affiliated entities, during the years ended
December 31, 1995, 1994 and 1993, earned or received compensation or payments
for services from the Partnership as follows:

45

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 1995 1994 1993
- ----------------- ---------------------------- ---------- ---------- ----------

CRIIMI, Inc. General Partner/Distribution $ 611,835 $ 661,177 $ 498,350

AIM Acquisition Advisor/Asset Management Fee 1,640,904 1,573,895 1,694,280
Partners, L.P.(1)

CRI(2) Affiliate of General Partner/ 58,659 161,509 142,495
Expense Reimbursement

CRIIMI MAE
Management, Inc.(2) Affiliate of General Partner/ 27,512 -- --
Expense Reimbursement

(1) The Advisor, pursuant to the Partnership Agreement, effective October 1, 1991, is entitled to an Asset Management Fee
equal to 0.95% of Total Invested Assets (as defined in the Partnership Agreement). The sub-advisor to the Partnership (the Sub-
advisor) is entitled to a fee of 0.28% of the Advisor's Asset Management Fee. CRI/AIM Management, Inc., which acted as the Sub-
advisor through June 30, 1995, earned a fee equal to $241,800, $463,853 and $499,332, for the six months ended June 30, 1995 and for
the years ended December 31, 1994 and 1993, respectively. As discussed in Note 1 above, effective June 30, 1995, CRIIMI MAE
Services Limited Partnership now serves as the Sub-advisor. Of the amounts paid to the Advisor, CRIIMI MAE Services Limited
Partnership earned a fee equal to $241,800, $0 and $0, for the six months ended December 31, 1995 and for the years ended December
31, 1994 and 1993, respectively.

(2) Prior to CRIIMI MAE becoming a self-administered REIT, amounts were paid to CRI as reimbursement for expenses incurred
prior to June 30, 1995 on behalf of the General Partner and Partnership. As discussed in Note 1, the transaction in which CRIIMI
MAE became a self-managed and self-administered REIT has no impact on the payments required to be made by the Partnership, other
than that the expense reimbursement previously paid by the Partnership to CRI in connection with the provision of services by the
Sub-advisor are, effective June 30, 1995, paid to a wholly-owned subsidiary of CRIIMI MAE, CRIIMI MAE Management, Inc. The amounts
paid to CRI during the year ended December 31, 1995 represent reimbursement of expenses incurred prior to June 30, 1995.

8. PARTNERS' EQUITY

Depositary Units representing economic rights in limited partnership
interests (Units) were issued at a stated value of $20. A total of 9,576,165
Units 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 in exchange therefor and the former general
partners contributed a total of $1,000 to the Partnership.

46

AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 86

NOTES TO FINANCIAL STATEMENTS

9. SUMMARY OF QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)

The following is a summary of unaudited quarterly results of operations for
the years ended December 31, 1995, 1994 and 1993:

(In Thousands, Except Per Unit Data)
1995
Quarter ended
March 31 June 30 September 30 December 31
---------- ---------- ------------ -----------

Income $ 3,475 $ 3,622 $ 3,434 $ 3,396
Gain on mortgage
disposition -- -- -- 5
Net earnings 2,922 3,003 2,874 2,841
Net earnings per Limited
Partnership Unit 0.29 0.30 0.28 0.29

1994
Quarter ended
March 31 June 30 September 30 December 31
---------- ---------- ------------ -----------

Income $ 3,294 $ 3,471 $ 3,454 $ 3,425
Loan losses (115) -- -- --
Gain on mortgage
disposition 1,130 -- -- --
Net earnings 3,715 2,889 2,912 2,934
Net earnings per Limited
Partnership Unit 0.37 0.29 0.29 0.29

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 0.31 0.31 0.34 0.25

47

AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 86
SCHEDULE IV - MORTGAGE LOANS ON REAL ESTATE
DECEMBER 31, 1995

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

ORIGINATED INSURED MORTGAGES
Coinsured Mortgages
- -------------------
Investment in FHA-Insured
Certificates (carried at fair value)
Woodland Apts.
Minnetonka, MN(7) 5/29 10/02 8.25% $ 11,819,789 $ 11,300,725 $ -- $1,043,897
Woodbine at Lakewood Apts.
Boise, ID(7) 5/29 10/02 8.25% 5,021,478 4,800,995 -- 443,917
Carmen Drive Estates
Lake Oswego, OR(7) 4/29 12/02 8.50% 4,875,403 4,661,142 -- 440,780
Pembrook Apts.
Gurnee, IL(7) 6/30 10/05 8.25% 14,918,958 14,263,037 -- 1,308,031
Spring Lake Village
St. Petersburg, FL(7) 7/29 5/03 7.00% 4,984,151(12) 4,644,365 115,301 463,225
The Villas
Lauderhill, FL (6) 7/29 8/02 8.75% 15,869,089(12) 15,173,465 842,709 1,491,805(13)
St. Charles Place-Phase II
Miramar, FL (6) 2/30 12/03 8.625% 3,068,173(8)(12) 2,933,205 106,000 279,571(8)
------------ ------------
Total investment in FHA-Insured
Certificates-Originated Insured
Mortgages 60,557,041 57,776,934
------------ ------------

48

AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 86
SCHEDULE IV - MORTGAGE LOANS ON REAL ESTATE
DECEMBER 31, 1995

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

ACQUIRED INSURED
MORTGAGES:
- -----------------------
Investment in FHA-Insured
Certificates (carried at fair value)
Southampton Apts.
Grove City, OH 4/27 -- 8.50% 2,000,770 2,063,150 -- 183,038
Pleasantview Nursing Home
Union, NJ 6/29 -- 7.75% 3,465,159 3,488,647 -- 290,532
------------ -------------
Total investment in FHA-Insured
Certificates - Acquired Insured
Mortgages 5,465,929 5,551,797
------------ -------------
Investment in GNMA Mortgage-Backed
Securities (carried at fair value)
Brighton Manor
Petersburg, VA 3/29 -- 7.50% 1,029,148 1,036,169 -- 84,243
Cyress Cove
Jacksonville, FL 2/28 -- 7.30% 6,985,261 7,033,475 -- 564,582
Hickory Tree Apts.
Indianapolis, IN 4/27 -- 7.375% 3,509,856 3,534,203 -- 287,772
Main Street Square
Roundrock, TX 9/29 -- 8.75% 1,365,294 1,420,909 -- 126,165
Maple Manor
Syracuse, NY 4/29 -- 7.375% 1,245,713 1,254,226 -- 100,599
Mountain Village Apts.
Tucson, AZ 5/29 -- 7.50% 1,350,728 1,359,931 -- 110,441
Oak Grove Apts.
Baltimore, MD 6/23 -- 7.50% 7,006,060 7,056,319 -- 603,107
Oakwood Garden Apts.
San Jose, CA 10/23 -- 7.75% 9,806,429 9,876,127 -- 860,914
Regency Park Apts.
North St. Paul, MN 4/24 -- 7.00% 1,472,616 1,483,210 -- 119,754
Sunflower Apts.
Tucson, AZ 5/29 -- 7.50% 1,830,459 1,842,931 -- 149,666
------------ ------------
Total investment in GNMA Mortgage-
Backed Securities-Acquired Insured
Mortgages 35,601,564 35,897,500
------------ ------------
Total investment in FHA-Insured Certificates
and GNMA Mortgage-Backed Securities $101,624,534 $ 99,226,231
============ ============

49

AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 86
SCHEDULE IV - MORTGAGE LOANS ON REAL ESTATE
DECEMBER 31, 1995

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

ORIGINATED INSURED
MORTGAGES:
- ------------------
Fully Insured Mortgages
- -----------------------
Investment in FHA-Insured
Loans (carried at amortized cost)(2)
Iroquois Club Apts.
Naperville, IL 3/29 12/03 8.25% 18,463,547 19,129,596 -- 1,629,873
Colony Square Apts.
Rocky Mount, NC 10/28 4/02 8.25% 4,207,791 4,377,164 -- 372,352
Argyle Place
Hickory, NC 4/29 7/03 8.25% 4,921,903 5,099,172 -- 434,902
Skyridge Club
Crystal Lake, IL 7/29 7/05 8.25% 8,840,692 9,204,785 -- 778,940
Arbor Station
Montgomery, AL 10/29 7/02 8.25% 8,737,108 9,073,551 -- 771,270
Greenbriar Place
Glen Ellyn, IL 4/29 7/02 8.25% 5,761,478 5,984,338 -- 508,353
Ridgeview Chase Apts.
Westminster, MD 2/30 10/04 8.375% 9,374,413 9,726,886 -- 833,588
------------ ------------
Total investment in FHA-Insured Loans -
Fully Insured Mortgages 60,306,932 62,595,492
------------ ------------
ACQUIRED INSURED MORTGAGE
- -------------------------
Investment in FHA-Insured
Loan - (carried at amortized cost)(2)

Winburn Square
Lexington, KY 1/27 -- 9.00% 998,683 995,255 -- 95,829
------------ ------------

Total investment in FHA-Insured Loans 61,305,615 63,590,747
============ ============

TOTAL INVESTMENT IN INSURED MORTGAGES $162,930,149 $162,816,978
============ ============

50

AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 86

NOTES TO SCHEDULE IV - MORTGAGE LOANS ON REAL ESTATE

DECEMBER 31, 1995

(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 FHA at the
expiration of 20 years from the date of final endorsement if the Insured
Mortgage is not in default at such time. Any insured 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 insured mortgages sold in a GNMA auction, was
sold in an auction prior to February 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, 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 insured 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
insured 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 December 31, 1995, 1994 and 1993, the
Partnership received additional interest of $149,788, $41,059 and $113,822,
respectively, from the Participations.

(5) In addition, the servicer or the sub-servicer of the Insured Mortgage,
primarily unaffiliated third parties, is entitled to receive compensation
for certain services rendered.

(6) These Insured Mortgages are insured under the HUD coinsurance program, as
previously discussed. The HUD-approved coinsurance lender for these
mortgages is The Patrician Mortgage Company.

51

AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 86

NOTES TO SCHEDULE IV - MORTGAGE LOANS ON REAL ESTATE

DECEMBER 31, 1995

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

(8) This amount represents the Partnership's 45% interest in this Insured
Mortgage. The remaining 55% interest was acquired by AIM 88.

(9) A reconciliation of the carrying value of the Insured Mortgages and Assets
Held for Sale Under Coinsurance Program, for the years ended December 31,
1995 and 1994, is as follows:

1995 1994
------------ ------------
Beginning balance $160,265,067 $167,145,316

Investment in Acquired
Insured Mortgages -- 39,730,658

Principal receipts on
Insured Mortgages (1,121,467) (1,019,821)

Loan losses -- (115,301)

Gain on mortgage
disposition 5,208 1,129,973

Disposition of mortgage
and AHFS (6,169,529) (33,233,501)

Uunrealized losses on
investment in
Insured Mortgages 9,431,165 (13,372,257)

Unrealized gains on
investment in
Insured Mortgages 406,534 --
------------ ------------
Ending balance $162,816,978 $160,265,067
============ ============

(10) The mortgages underlying the Partnership's investment in FHA-Insured
Certificates, GNMA Mortgage-Backed Securities, and FHA-Insured Loans are
non-recourse first liens on multifamily residential developments or
retirement homes.

52

AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 86

NOTES TO SCHEDULE IV - MORTGAGE LOANS ON REAL ESTATE

DECEMBER 31, 1995

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

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

(13) Annual payment reflects required principal and interest payments for 1995
as per the modification agreement.

(14) As of December 31, 1995 and 1994, the tax basis of the Insured Mortgages
was approximately $167.2 million and $174.3 million, respectively.