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 NoItem 1. FINANCIAL STATEMENTS
This Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Actual results could differ materially from those projected in the forward-looking statements as a result of a number of factors, including those identified herein.
KRUPP GOVERNMENT INCOME TRUST
BALANCE SHEETS
ASSETS
March 31, December 31,
2002 2001
--------------- --------------
Participating Insured Mortgage Investments
("PIMIs") (Note 2)
Insured Mortgages $ 32,426,124 $ 50,811,558
Additional Loans, net of impairment provision
of $1,698,811 3,871,180 3,871,180
Participating Insured Mortgages ("PIMs")(Note 2) 39,677,819 46,416,493
Mortgage-Backed Securities and insured mortgage loan ("MBS") (Note 3) 14,616,100 14,971,348
--------------- --------------
Total mortgage investments 90,591,223 116,070,579
Cash and cash equivalents 5,619,881 13,154,231
Interest receivable and other assets 576,530 756,832
Prepaid acquisition fees and expenses, net
of accumulated amortization of $5,868,356
and $6,249,229 respectively 359,161 541,044
Prepaid participation servicing fees, net of
accumulated amortization of $1,906,433 and
$1,999,913, respectively 169,355 263,455
--------------- --------------
Total assets $ 97,316,150 $ 130,786,141
=============== ==============
LIABILITIES AND SHAREHOLDERS' EQUITY
Deferred income on Additional Loans $ 2,256,063 $ 2,336,154
Other liabilities 51,731 20,485
--------------- --------------
Total liabilities 2,307,794 2,356,639
--------------- --------------
Shareholders' equity (Note 4):
Common stock, no par value; 17,510,000
Shares authorized; 15,053,135 Shares issued and outstanding 94,412,289 127,850,874
Accumulated comprehensive income 596,067 578,628
--------------- --------------
Total Shareholders' equity 95,008,356 128,429,502
--------------- --------------
Total liabilities and Shareholders' equity $ 97,316,150 $ 130,786,141
=============== ==============
The accompanying notes are an integral
part of the financial statements.
KRUPP GOVERNMENT INCOME TRUST
STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
For the Three Months
Ended March 31,
----------------------------------
2002 2001
-------------- -------------
Revenues:
Interest income - PIMs and PIMIs:
Basic interest $ 1,372,488 $ 2,074,614
Additional loan interest (Note 5) 80,091 185,939
Participation interest (Note 5) 871,625 132,882
Interest income - MBS 291,986 325,589
Interest income - cash and cash equivalents 55,620 76,721
------------- -------------
Total revenues 2,671,810 2,795,745
------------- -------------
Expenses:
Asset management fee to an affiliate 170,484 246,076
Expense reimbursements to affiliates 36,811 46,509
Amortization of prepaid fees and expenses 275,983 257,434
General and administrative 101,719 105,347
------------- --------------
Total expenses 584,997 655,366
------------- -------------
Net income 2,086,813 2,140,379
Other comprehensive income:
Net change in unrealized gain on MBS 17,439 51,878
------------- -------------
Total comprehensive income $ 2,104,252 $ 2,192,257
============= =============
Basic earnings per Share $ .14 $ .14
============= =============
Weighted average Shares outstanding 15,053,135 15,053,135
============= =============
The accompanying notes are an integral
part of the financial statements.
KRUPP GOVERNMENT INCOME TRUST
STATEMENTS OF CASH FLOWS
For the Three Months
Ended March 31,
-------------------------------
2002 2001
------------ ------------
Operating activities:
Net income $ 2,086,813 $ 2,140,379
Adjustments to reconcile net income to
net cash provided by operating activities:
Amortization of (discounts) and premiums (788) 1,185 Amortization of prepaid
fees and expenses 275,983 257,434
Changes in assets and liabilities:
Decrease in interest receivable and other assets 180,302 220,560
Decrease in deferred income on Additional Loans (80,091) (91,884)
Increase (decrease) in other liabilities 31,246 (14,166)
------------ ------------
Net cash provided by operating activities 2,493,465 2,513,508
------------ ------------
Investing activities:
Principal collections on MBS 373,475 383,000
Principal collections on PIMs and Insured Mortgages 25,124,108 214,732
------------ ------------
Net cash provided by investing activities 25,497,583 597,732
------------ ------------
Financing activity:
Dividends (35,525,398) (2,559,033)
------------ ------------
Net increase (decrease) in cash and cash equivalents (7,534,350) 552,207
Cash and cash equivalents, beginning of period 13,154,231 5,359,041
------------ ------------
Cash and cash equivalents, end of period $ 5,619,881 $ 5,911,248
============ ============
Non cash activities:
Increase in Fair Value of MBS $ 17,439 $ 51,878
============ ============
The accompanying notes are an integral
part of the financial statements.
KRUPP GOVERNMENT INCOME TRUST
NOTES TO FINANCIAL STATEMENTS
1. Accounting Policies
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with accounting principles
generally accepted in the United States of America have been condensed or
omitted in this report on Form 10-Q pursuant to the Rules and Regulations
of the Securities and Exchange Commission. However, in the opinion of
Berkshire Mortgage Advisors Limited Partnership (the "Advisor"), which is
the advisor to Krupp Government Income Trust (the "Trust"), the
disclosures contained in this report are adequate to make the information
presented not misleading. See Notes to Financial Statements in the Trust's
Form 10-K for the year ended December 31, 2001 for additional information
relevant to significant accounting policies followed by the Trust.
In the opinion of the Advisor of the Trust, the accompanying unaudited
financial statements reflect all adjustments (consisting of only normal
recurring accruals) necessary to present fairly the Trust's financial
position as of March 31, 2002 and the results of its operations and its
cash flows for the three months ended March 31, 2002 and 2001.
The results of operations for the three months ended March 31, 2002 are
not necessarily indicative of the results which may be expected for the
full year. See Management's Discussion and Analysis of Financial Condition
and Results of Operations included in this report.
2. PIMs and PIMIs
At March 31, 2002, the Trust's PIMs and PIMIs, including Additional Loans,
had a fair value of $78,552,670 and gross unrealized gains of $2,577,547.
The PIMs and PIMIs have maturities ranging from 2002 to 2034. At March 31,
2002, there are no insured mortgage loans within the Trust's portfolio
that are delinquent of principal or interest.
Lifestyles and Mountain View have been adversely affected by their
competitive rental housing markets. Based on the Advisor's analysis of
market conditions and property operations, the Trust maintains a valuation
allowance of $1,032,272 for Mountain View and $666,539 for Lifestyles.
On January 3, 2002, the Trust received $18,330,825 representing the
principal proceeds on the first mortgage loan from the Red Run PIMI. On
December 31, 2001 the Trust received a prepayment of the Red Run
Additional Loan and Subordinated Promissory Note. The Trust received
$2,900,000 of Additional Loan Principal, $238,369 of Shared Appreciation
Interest, $3,506,952 of Preferred Interest and $67,667 of Base Interest on
the Additional Loan. On January 16, 2002, the Trust paid a special
dividend of $1.68 per share from the proceeds of the Red Run PIMI
prepayment.
On January 2, 2002, the Trust received a prepayment of the Waterford
Apartments Subordinate Promissory Note. The Trust received $379,725 of
Minimum Additional Interest and $425,643 of Shared Appreciation Interest.
On January 17, 2002, the Trust received $6,625,742 representing the
principal proceeds on the first mortgage loan. In addition, the Trust
received a prepayment premium of $66,257 from the payoff. On March 1,
2002, the Trust paid a special dividend of $0.51 per share from the
proceeds of the Waterford Apartments PIM prepayment.
3. MBS
At March 31, 2002, the Trust's MBS portfolio had an amortized cost of
$9,179,802 and unrealized gains of $596,067. At March 31, 2002, the
Trust's insured mortgage loan had an amortized cost of $4,840,231. The
portfolio has maturities ranging from 2008 to 2035.
Continued
KRUPP GOVERNMENT INCOME TRUST
NOTES TO FINANCIAL STATEMENTS, continued
-------------
4. Changes in Shareholders' Equity
A summary of changes in shareholders' equity for three months ended March 31, 2002 is as follows:
Accumulated Total
Common Retained Comprehensive Shareholders'
Stock Earnings Income Equity
-------------- ----------- -------------- --------------
Balance at December 31, 2001 $ 127,850,874 $ - $ 578,628 $ 128,429,502
Net income - 2,086,813 - 2,086,813
Dividends (33,438,585) (2,086,813) - (35,525,398)
Change in unrealized
gain on MBS - - 17,439 17,439
-------------- ----------- -------------- ---------------
Balance at March 31, 2002 $ 94,412,289 $ - $ 596,067 $ 95,008,356
============== =========== ============== ===============
5. Related Party Transactions
The Trust received $86,609 of Additional Loan Interest during the first
quarter of 2001 from affiliates of the Advisor. The Trust also received
participation interest of $50,750 from an affiliate of the Advisor during
the three months ended March 31, 2001.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
- ------
Certain statements in this Management's Discussion and Analysis of Financial
Condition and Results of Operations and elsewhere in this report on Form 10-Q
constitute "forward-looking statements" within the meaning of the Federal
Private Securities Litigation Reform Act of 1995. These forward-looking
statements involve known and unknown risks, uncertainties and other factors
which may cause the Trust's actual results, performance or achievements to be
materially different from any future results, performance or achievements
expressed or implied by these forward-looking statements. These factors include,
among other things, federal, state or local regulations; adverse changes in
general economic or local conditions; the inability of the borrower to meet
financial obligations on additional loans; pre-payments of mortgages; failure of
borrowers to pay participation interests due to poor operating results at
properties underlying the mortgages; uninsured losses and potential conflicts of
interest between the Trust and its Affiliates, including the Advisor.
Liquidity and Capital Resources
At March 31, 2002, the Trust had liquidity consisting of cash and cash
equivalents of approximately $5.6 million as well as the cash inflows provided
by PIMs, PIMIs, MBS and cash and cash equivalents. The Trust may also receive
additional cash flow from the participation features of its PIMs and PIMIs. The
Trust anticipates that these sources will be adequate to provide the Trust with
sufficient liquidity to meet its obligations, including providing dividends to
its investors.
The most significant demands on the Trust's liquidity are quarterly dividends
paid to investors of approximately $2.6 million and special dividends. Funds for
dividends come from interest income received on PIMs, PIMIs, MBS and cash and
cash equivalents net of operating expenses, and the principal collections
received on PIMs, PIMIs and MBS. The portion of dividends funded from principal
collections reduces the capital resources of the Trust. As the capital resources
of the Trust decrease, the total cash flows to the Trust will also decrease
which may result in periodic adjustments to the dividends paid to the investors.
The Advisor periodically reviews the dividend rate to determine whether an
adjustment is necessary based on projected future cash flows. The current
dividend rate is $.17 per Share per quarter. The Trustees, based on the
Advisor's recommendations, generally set a dividend rate that provides for level
quarterly dividends. To the extent quarterly dividends do not fully utilize the
cash available for distribution and cash balances increase, the Trustees may
adjust the dividend rate or distribute such funds through a special dividend.
In addition to providing guaranteed or insured monthly principal and interest
payments, the Trust's investments in PIMs and PIMIs also may provide additional
income through the interest on the Additional Loan portion of the PIMIs as well
as participation interest based on operating cash flow and an increase in the
value realized upon the sale or refinance of the underlying properties. However,
these payments are neither guaranteed nor insured and depend upon the successful
operations of the underlying properties.
On January 3, 2002, the Trust received $18,330,825 representing the principal
proceeds on the first mortgage loan from the Red Run PIMI. On December 31, 2001
the Trust received a prepayment of the Red Run Additional Loan and Subordinated
Promissory Note. The Trust received $2,900,000 of Additional Loan Principal,
$238,369 of Shared Appreciation Interest, $3,506,952 of Preferred Interest and
$67,667 of Base Interest on the Additional Loan. On January 16, 2002, the Trust
paid a Special dividend of $1.68 per share from the proceeds of the Red Run PIMI
prepayment.
On January 2, 2002, the Trust received a prepayment of the Waterford Apartments
Subordinate Promissory Note. The Trust received $379,725 of Minimum Additional
Interest and $425,643 of Shared Appreciation Interest. On January 17, 2002, the
Trust received $6,625,742 representing the principal proceeds on the first
mortgage loan. In addition, the Trust received a prepayment premium of $66,257
from the payoff. On March 1, 2002, the Trust paid a special dividend of $0.51
per share from the proceeds of the Waterford Apartments PIM prepayment.
The three remaining PIMI investments all operate under workout agreements with
the Trust. Those agreements have modified the borrowers' obligations to make
Additional Loan interest payments, regardless of whether the property generated
sufficient revenues to do so, to an obligation to pay Additional Loan interest
only if the property generates Surplus Cash, as defined by HUD. For the period
ending December 31, 2001, Mountain View did not generate any Surplus Cash,
although both Windward Lakes and Lifestyles did generate some Surplus Cash.
However, due to the need to complete capital projects at both properties, the
Trust agreed that the Surplus Cash generated by the two properties will not be
used to pay Additional Loan interest. Consequently, the Trust does not expect to
receive any Additional Loan interest during 2002. Beginning in 2002, the Trust
has amortized and recognized Additional Loan income previously deferred with
respect to Windward Lakes as the property generated Surplus Cash during 2001.
Windward Lakes' operating results deteriorated during 1995 and 1996, and in
early 1997 the independent Trustees approved a workout with the borrower of the
Windward Lakes PIMI, an affiliate of the Advisor of the Trust. In the workout,
the Trust agreed to reduce the effective basic interest rate on the insured
first mortgage by 2% per annum for 1997 and 1% per annum for 1998, 1999 and
2000. The borrower made an equity contribution of $133,036 to the property and
agreed to cap the annual management fee paid to an affiliate at 3% of revenues.
The Trust's participation in current operations is 50% of any Surplus Cash as
determined under HUD guidelines, and the Additional Loan interest is payable out
of its share of Surplus Cash. Any unpaid Additional Loan interest accrues at
7.5% per annum. When the property is sold or refinanced, the Trust will receive
50% of any net proceeds remaining after repayment of the insured mortgage, the
Additional Loan, the interest rate relief, accrued and unpaid Additional Loan
interest and the Borrower's equity up to the point that the Trust has received a
cumulative, non-compounded 10% preferred return on its investment in the PIMI.
The Additional Loan matures in July of 2002. The Trust anticipates that another
workout agreement will be negotiated with the borrower that will extend the
maturity date.
In May 1998, the borrower on the Lifestyles PIMI defaulted on its debt service
payment on the insured first mortgage. The Trust agreed to a new workout that
runs through 2007. Under its terms, the Trust agreed to reduce the effective
interest rate on the insured first mortgage by 1.75% retroactively for 1998 to
clear the default, by 1.75% for 1999, and by 1.5% each year thereafter until
2007. An affiliate of the Advisor refunds approximately .25% per annum to the
Trust related to the interest reduction. The borrower made a $550,000 equity
contribution, which was escrowed, for the exclusive purpose of correcting
deferred maintenance and making capital improvements to the property. The escrow
has been used up for paint, building repairs, parking lot repairs, a new fitness
facility, clubhouse remodeling and landscaping. Any Surplus Cash that is
generated by property operations will be split evenly between the Trust and the
borrower. When the property is sold or refinanced, the first $1,100,000 of any
proceeds remaining after the insured mortgage is paid off will be split 50% /
50% between the Trust and the borrower; the next $1,690,220 of proceeds will be
split 75% to the Trust and 25% to the borrower; and any remaining proceeds will
be split 50% / 50%. The borrower's new equity and the reduction in the effective
interest rate on the insured first mortgage have provided funds for repairs and
improvements that have helped reposition Lifestyles. As a result of the
performance of the property, the Trust had initially established a valuation
allowance of $1,130,346 on the Additional Loan in 1998. During 2001, the Trust
received a payment of $118,968 which was recorded as a reduction in the
principal balance of the Additional Loan and related impairment provision. Based
on improved market conditions and property operations, the Trust has further
reduced the impairment provision by $344,839 to $666,539 in the fourth quarter
of 2001.
Mountain View is similar to Lifestyles with respect to competitive market
conditions. In June 1999, the Trust approved a second workout that runs through
2004. Under its terms, the Trust agreed to reduce the effective interest rate on
the insured first mortgage by 1.25% retroactively for 1999 and each year
thereafter until 2004, and to change the participation terms. The workout
eliminated the preferred return feature, forgave $288,580 of previous accruals
of Additional Loan interest related to the first workout, and changed the
Trust's participation in Surplus Cash generated by the property. The Trust will
receive 75% of the first $130,667 of Surplus Cash and 50% of any remaining
Surplus Cash on an annual basis to pay Additional Loan interest. Unpaid
Additional Loan interest related to the second workout will accrue and be
payable if there are sufficient proceeds from a sale or refinancing of the
property. In addition, the borrower repaid $153,600 of the Additional Loan and
funded approximately $54,000 to a reserve for property improvements. As a result
of the factors described above, the Advisor determined that the Additional Loan
collateralized by the Mountain View asset was impaired and currently maintains a
valuation allowance of $1,032,272.
Whether the operating performance at any of the properties mentioned above
provide sufficient cash flow from operations to pay either the Additional Loan
interest or participation income will depend on factors that the Trust has
little or no control over. Should the properties be unable to generate
sufficient cash flow to pay the Additional Loan interest, it would reduce the
Trust's distributable cash flow and could affect the value of the Additional
Loan collateral.
There are contractual restrictions on the repayment of the PIMs and PIMIs.
During the first five years of the investment, borrowers are prohibited from
repayment. During the second five years, the PIM borrowers can prepay the
insured first mortgage by paying the greater of a prepayment premium or the
participation due at the time of the prepayment. Similarly, the PIMI borrowers
can prepay the insured first mortgage and the Additional Loan by satisfying the
Preferred Return obligation. The participation features and Additional Loans are
neither insured nor guaranteed. If the prepayment of the PIM or PIMI results
from the foreclosure on the underlying property or an insurance claim, the Trust
would probably not receive any participation income or any amounts due under the
Additional Loan.
The Trust has the option to call certain PIMs and all the PIMIs by accelerating
their maturity if the loans are not prepaid by the tenth year after permanent
funding. The Advisor will determine the merits of exercising the call option for
each PIM and PIMI as economic conditions warrant. Such factors as the condition
of the asset, local market conditions, the interest rate environment and
available financing will have an impact on these decisions.
Critical Accounting Policies
The Trust's critical accounting policies relate primarily to revenue recognition
related to the participation features of the Trust's PIM and PIMI investments as
well as the recognition of deferred interest income on the Additional Loans. The
Trust's policies are as follows:
Basic interest is recognized based on the stated rate of the Department of
Housing and Urban Development ("HUD") Insured Mortgage loan (less the servicer's
fee) or the coupon rate of the Government National Mortgage Association ("GNMA")
or Fannie Mae MBS. The Trust recognizes interest related to the participation
features when the amount becomes fixed and the transaction that gives rise to
such amount is consummated. The Trust defers the recognition of Additional Loan
interest payments as income to the extent these interest payments were from
escrows established with the proceeds of the Additional Loan. When the
properties underlying the PIMI's generate sufficient cash flow to make the
required Additional Loan interest payments and the Additional Loan value is
deemed collectible, the Trust recognizes income as earned and commences
amortization of the deferred interest amounts into income over the remaining
estimated term of the Additional Loan. During periods where mortgage loans are
impaired the Trust suspends amortizing deferred interest.
The Trust also fully reserves the portion of any Additional Loan interest
payment satisfied through the issuance of an operating loan and any associated
interest due on such operating loan. The Trust will recognize the income related
to the operating loan when the borrower repays amounts due under the operating
loan.
Results of Operations
Net income of the Trust decreased for the first quarter of 2002 as compared to
the same period in 2001 due to decreases in basic interest income on PIMs and
PIMIs and Additional Loan interest. This decrease is partially offset by an
increase in participation interest and a decrease in asset management fees.
Basic interest income on PIMs and PIMIs decreased due primarily to the payoffs
of the Season's and Red Run PIMIs in 2001 and the Waterford PIM in January 2002.
Additional Loan interest decreased due to the payoffs mentioned above net of the
amortization of deferred revenue from the Windward Lakes PIMI in 2002.
Participation interest increased due to the collection of interest received from
the payoff of the Waterford PIM in January 2002. Asset management fees decreased
due primarily to the payoffs mentioned above.
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
- -------
Assessment of Credit Risk
The Trust's investments in insured mortgages and MBS are guaranteed or insured
by Fannie Mae, Federal Home Loan Mortgage Corporation ("FHLMC"), the Government
National Mortgage Association ("GNMA") and the Department of Housing and Urban
Development (" HUD") and therefore the certainty of their cash flows and the
risk of material loss of the amounts invested depends on the creditworthiness of
these entities.
Fannie Mae is a federally chartered private corporation that guarantees
obligations originated under its programs. FHLMC is a federally chartered
corporation that guarantees obligations originated under its programs and is
wholly-owned by the twelve Federal Home Loan Banks. These obligations are not
guaranteed by the U.S. Government or the Federal Home Loan Bank Board. GNMA
guarantees the full and timely payment of principal and basic interest on the
securities it issues, which represents interest in pooled mortgages insured by
HUD. Obligations insured by HUD, an agency of the U.S. Government, are backed by
the full faith and credit of the U.S. Government.
The Trust's Additional Loans have similar risks as those associated with higher
risk debt instruments, including: reliance on the owner's operating skills,
ability to maintain occupancy levels, control operating expenses, ability to
maintain the properties and obtain adequate insurance coverage. Operations also
may be effected by adverse changes in general economic conditions, adverse local
conditions, and changes in governmental regulations, real estate zoning laws, or
tax laws, and other circumstances over which the Trust may have little or no
control.
The Trust includes in cash and cash equivalents approximately $5.4 million of
Agency paper, which is issued by Government Sponsored Enterprises with a credit
rating equal to the top rating category of a nationally recognized statistical
rating organization.
Interest Rate Risk
The Trust's primary market risk exposure is to interest rate risk, which can be
defined as the exposure of the Trust's net income, comprehensive income or
financial condition to adverse movements in interest rates. At March 31, 2002,
the Trust's PIMs, PIMIs and MBS comprise the majority of the Trust's assets.
Decreases in interest rates may accelerate the prepayment of the Trust's
investments. The Trust does not utilize any derivatives or other instruments to
manage this risk as the Trust plans to hold all of its investments to expected
maturity.
The Trust monitors prepayments and considers prepayment trends, as well as
distribution requirements of the Trust, when setting regular dividend policy.
For MBS, the fund forecasts prepayments based on trends in similar securities as
reported by statistical reporting entities such as Bloomberg. For PIMs and
PIMIs, the Trust incorporates prepayment assumptions into planning as individual
properties notify the Trust of the intent to prepay or as they mature.
KRUPP GOVERNMENT INCOME TRUST
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
None
Item 3. Defaults upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
None
SIGNATURE
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.
Krupp Government Income Trust
-----------------------------
(Registrant)
BY: / s / Robert A. Barrows
--------------------------------
Robert A. Barrows
Treasurer and Chief Accounting Officer
of Krupp Government Income Trust
Date: May 1, 2002
Unaudited amounts in thousands, except per Share amounts
Inception
Through
3/31/02 3/31/02
------------ -----------
Distributable Cash Flow (a):
---------------------------
Net income $ 2,086 $ 151,277
Items not requiring or providing the
use of operating funds:
Provision for impaired mortgage loan - 1,818
Amortization of prepaid fees and
expenses and organization costs 276 17,486
Additional Loan Interest Deferred (80) 2,256
------------ -----------
Total Distributable Cash Flow ("DCF") 2,282 172,837
------------ -----------
DCF per Share based on Shares
outstanding at March 31, 2002 $ .15 $ 11.48 (d)
============ ===========
Dividends:
Total dividends to Shareholders $ 10,236 (b) $ 339,491 (c)
============ ============
Average dividend per Share based
on Shares outstanding at
March 31, 2002 $ .68 (b) $ 22.55 (c)(d)
============ ============
(a) Distributable Cash Flow consists of income before provision for
impaired mortgage loans, amortization of prepaid fees and
expenses and organization costs and includes deferred interest
on Additional Loans. The Trust believes Distributable Cash Flow
is an appropriate supplemental measure of operating performance,
however, it should not be considered as a substitute for net
income as an indication of operating performance or cash flows
as a measure of liquidity.
(b) Represents all dividends paid through March 2002 except the
February 2002 quarterly dividend and $1.68 special dividend paid
in January 2002 for Red Run. Includes an estimate of the May
2002 quarterly dividend.
(c) Includes as estimate of the May 2002 quarterly dividend.
(d) Shareholders average per Share return of capital on a cash basis
as of March 2002 is $11.07 [$22.55 - $11.48]. Return of capital
represents that portion of the dividends which is not funded
from DCF such as principal collections received from MBS and
PIMs.