UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIESx EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 1996 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 0-14393 Krupp Cash Plus Limited Partnership Massachusetts 04-2865878 (State or other jurisdiction of (IRS employer incorporation or organization) identification no.) 470 Atlantic Avenue, Boston, Massachusetts 02210 (Address of principal executive offices) (Zip Code) (617) 423-2233 (Registrant's telephone number, including area code) 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 PART I. FINANCIAL INFORMATION Item 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 CASH PLUS LIMITED PARTNERSHIP BALANCE SHEETS ASSETS June 30, December 31, 1996 1995 Real estate assets: Retail centers, less accumulated depreciation of $16,304,018 and $15,298,268, respectively $29,497,995 $30,082,471 Mortgage-backed securities ("MBS"), net of accumulated amortization (Note 4) 4,696,820 5,151,696 Total real estate assets 34,194,815 35,234,167 Cash and cash equivalents 3,267,517 2,841,353 Other investment (Note 4) 492,256 - Other assets 770,676 782,000 Total assets $38,725,264 $38,857,520 LIABILITIES AND PARTNERS' EQUITY Accounts payable $ 2,870 $ 6,428 Accrued expenses and other liabilities (Note 2) 1,188,234 963,809 Total liabilities 1,191,104 970,237 Partners' equity (deficit) (Note 3): Unitholders (4,000,000 Units outstanding) 37,682,082 38,032,296 Corporate Limited Partner (100 Units outstanding) 1,172 1,180 General Partners (149,094) (146,193) Total Partners' equity 37,534,160 37,887,283 Total liabilities and Partners' equity $38,725,264 $38,857,520 The accompanying notes are an integral part of the financial statements. KRUPP CASH PLUS LIMITED PARTNERSHIP STATEMENTS OF OPERATIONS For the Three Months For the Six Months Ended June 30, Ended June 30, 1996 1995 1996 1995 Revenue: Rental $1,471,040 $1,480,928 $3,018,076 $2,990,172 Interest income - MBS (Note 4) 100,160 119,089 206,545 239,710 Interest income - other 51,235 61,143 95,734 89,073 Total revenue 1,622,435 1,661,160 3,320,355 3,318,955 Expenses: Operating (Note 5) 332,833 279,815 594,060 518,332 Maintenance 82,361 67,123 158,193 134,174 General and administra- tive (Note 5) 27,264 51,263 71,943 92,693 Real estate taxes 293,355 301,465 588,607 601,937 Management fees (Note 5) 81,585 72,281 144,084 134,372 Depreciation 512,833 488,295 1,005,750 967,087 Total expenses 1,330,231 1,260,242 2,562,637 2,448,595 Net income $ 292,204 $ 400,918 $ 757,718 $ 870,360 Allocation of net income (Note 3): Unitholders (4,000,000 Units outstanding) $ 286,353 $ 392,891 $ 742,545 $ 852,932 Net income per Unit of Depositary Receipt $ .08 $ .09 $ .19 $ .21 Corporate Limited Partner (100 Units outstanding) $ 8 $ 9 $ 19 $ 21 General Partners $ 5,843 $ 8,018 $ 15,154 $ 17,407 The accompanying notes are an integral part of the financial statements. KRUPP CASH PLUS LIMITED PARTNERSHIP STATEMENTS OF CASH FLOWS For the Six Months Ended June 30, 1996 1995 Operating activities: Net income $ 757,718 $ 870,360 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 1,005,750 967,087 Amortization of MBS premium, net 994 227 Decrease in other assets 11,324 90,642 Decrease in accounts payable (3,558) (85,150) Increase in accrued expenses and other liabilities 224,425 273,747 Net cash provided by operating activities 1,996,653 2,116,913 Investing activities: Increase in other investments (492,256) (2,352,726) Additions to fixed assets (421,274) (341,481) Principal collections on MBS 453,882 144,078 Net cash used in investing activities (459,648) (2,550,129) Financing activity: Distributions (1,110,841) (1,110,610) Net increase (decrease) in cash and cash equivalents 426,164 (1,543,826) Cash and cash equivalents, beginning of period 2,841,353 2,319,369 Cash and cash equivalents, end of period $ 3,267,517 $ 775,543 The accompanying notes are an integral part of the financial statements. KRUPP CASH PLUS LIMITED PARTNERSHIP NOTES TO FINANCIAL STATEMENTS (1) Accounting Policies Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted in this Report on Form 10-Q pursuant to the Rules and Regulations of the Securities and Exchange Commission. In the opinion of the General Partners of Krupp Cash Plus Limited Partnership (the "Partnership"), the disclosures contained in this Report are adequate to make the information presented not misleading. See Notes to Financial Statements included in the Partnership's Report on Form 10-K for the year ended December 31, 1995 for additional information relevant to significant accounting policies followed by the Partnership. In the opinion of the General Partners of the Partnership, the accompanying unaudited financial statements reflect all adjustments (consisting of only normal recurring accruals) necessary to present fairly the Partnership's financial position as of June 30, 1996, its results of operations for the three and six months ended June 30, 1996 and 1995 and its cash flows for the six months ended June 30, 1996 and 1995. Certain prior year balances have been reclassified to conform with current year financial statement presentation. The results of operations for the three and six months ended June 30, 1996 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) Accrued Expenses and Other Liabilities Accrued expenses and other liabilities consist of the following: June 30, December 31, 1996 1995 Accrued real estate taxes $ 892,751 $685,370 Accrued insurance 133,395 114,397 Prepaid rent 84,419 84,065 Tenant security deposits 48,707 48,707 Other accrued expenses 28,962 31,270 $1,188,234 $963,809 (3) Changes in Partners' Equity A summary of changes in Partners' equity (deficit) for the six months ended June 30, 1996 is as follows: Corporate Total Limited General Partners' Unitholders Partner Partners Equity Balance at December 31, 1995 $38,032,296 $1,180 $(146,193) $37,887,283 Net income 742,545 19 15,154 757,718 Distributions (1,092,759) (27) (18,055) (1,110,841) Balance at June 30, 1996 $37,682,082 $1,172 $(149,094) $37,534,160 (4) Mortgage Backed Securities and Other Investment The MBS held by the Partnership are issued by the Federal Home Loan Mortgage Corporation and the Government National Mortgage Association. Additional information on the MBS held is as follows: June 30, December 31, 1996 1995 Face Value $4,681,134 $5,135,017 Amortized Cost $4,696,820 $5,151,696 Estimated Market Value $4,815,000 $5,435,000 Coupon rates of the MBS range from 8.5% to 9.0% per annum and mature in the years 2008 through 2017. The Partnership's MBS portfolio had gross unrealized gains of approximately $118,000 and $284,000 at June 30, 1996 and December 31, 1995, respectively and no unrealized losses. The Partnership does not expect to realize these gains as it currently has the intention and ability to hold the MBS until maturity. At June 30, 1996, the Partnership held an investment in commercial paper maturing within one year. Cost approximates the market value. (5) Related Party Transactions Commencing with the date of acquisition of the Partnership's properties, the Partnership entered into agreements under which property management fees are paid to an affiliate of the General Partners for services as management agent. Such agreements provide for management fees payable monthly at a rate of 5% of the gross receipts from the properties under management. The Partnership also reimburses affiliates of the General Partners for certain expenses incurred in connection with the operation of the Partnership and its properties including accounting, computer, insurance, travel, legal and payroll; and with the preparation and mailing of reports and other communications to the Unitholders. Amounts accrued or paid to the General Partners or their affiliates are as follows: For the Three Months For the Six Months Ended June 30, Ended June 30, 1996 1995 1996 1995 Property management fees $ 81,585 $ 72,281 $144,084 $134,372 Expense reimbursements 65,697 74,275 139,477 118,004 Charged to operations $147,282 $146,556 $283,561 $252,376 KRUPP CASH PLUS LIMITED PARTNERSHIP Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This Management s Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements including those concerning Management s expectations regarding the future financial performance and future events. These forward-looking statements involve significant risk and uncertainties, including those described herein. Actual results may differ materially from those anticipated by such forward-looking statements. Liquidity and Capital Resources The Partnership's ability to generate cash adequate to meet its needs is dependent primarily upon the operations of its real estate investments. Liquidity is also generated by the MBS portfolio. The Partnership holds MBS that are guaranteed by Government National Mortgage Association ("GNMA") and Federal Home Loan Mortgage Corporation ("FHLMC"). The principal risks in respect of MBS are the credit worthiness of GNMA and FHLMC and the risk that the current value of any MBS may decline as a result of changes in market interest rates. The General Partners believe that the risk is minimal due to the fact that the Partnership has the ability to hold these securities to maturity. The Partnership's sources of future liquidity will be used for payment of expenses related to real estate operations, capital expenditures including tenant build-outs to secure quality tenants, and other administrative expenses. Cash Flow, if any, as calculated under Section 17 of the Partnership Agreement, will then be available for distribution to the Partners. The Partnership's retail centers continue to have a relatively consistent level of operating results. However, to attain these results, management has found it necessary to fund a significant portion of tenant build-outs to secure quality tenants in the Partnership's retail centers. The Partnership has ongoing improvements which are necessary at High Point National Furniture Mart to reconfigure space for new tenants and comply with present building code standards. Renovations to an additional floor, which began in the first quarter of 1996, were completed during the second quarter, while renovations to the elevator system began in the second quarter and are anticipated to be completed in the third quarter. The refurbished show-room spaces have enabled the Partnership to command higher rents and achieve 100% occupancy. Management is currently evaluating leasing issues at Tradewinds. One 17,770 square foot tenant's lease will be terminated as of December 31, 1996. Management is working on finding a new tenant for this space and is negotiating with one of the anchor tenants regarding possible expansion in 1996. Improvements to the facade at Tradewinds were completed during the second quarter of 1996 in order to remain competitive against newer centers. In order to continue to fund the capital improvements noted above, the General Partners, on an ongoing basis, assess the current and future liquidity needs in determining the levels of working capital the Partnership should maintain. Adjustments to distributions are made when appropriate to reflect such assessments. The General Partners have determined that retaining the current annualized distribution rate of approximately $0.55 per Unit will allow the Partnership to maintain adequate reserves to fund the necessary capital improvements. Distributable Cash Flow and Net Cash Proceeds from Capital Transactions Shown below is the calculation of Distributable Cash Flow and Net Cash Proceeds from Capital Transactions as defined by Section 17 of the Partnership Agreement, and the source of cash distributions for the six months ended June 30, 1996 and from the Partnership's inception through June 30, 1996. The General Partners provide certain of the information below to meet requirements of the Partnership Agreement and because they believe that it is an appropriate supplemental measure of operating performance. However, Distributable Cash Flow and Net Cash Proceeds from Capital Transactions should not be considered by the reader as a substitute to net income, as an indicator of the Partnership's operating performance or to cash flows as a measure of liquidity. (In $1,000's except per Unit amounts) For the Six Months Inception to Ended June 30, June 30, 1996 1996 Distributable Cash Flow: Net income for tax purposes $ 943 $ 22,883 Items not requiring or (not providing) the use of operating funds: Tax basis depreciation and amortization 840 17,348 Interest income on note receivable - (371) Gain on sale of assets - (1,686) Additions to fixed assets (421) (8,321) Cash from vacancy guarantee on Luria's Plaza - 873 Fixed asset additions funded from cash reserves - 865 Operating reserve for fixed asset additions - (1,070) Total Distributable Cash Flow ("DCF") $1,362 $ 30,521 Unitholders' Share of DCF $1,335 $ 29,911 Unitholders' Share of DCF per Unit $ .33 $ 7.47 (d) General Partners' Share of DCF $ 27 $ 610 Net Proceeds from Capital Transactions: Principal collections on MBS, net $ 455 $ 14,908 Proceeds from sale of MBS - 19,018 Net proceeds from sale of property including interest on mortgage note receivable - 1,208 Mortgage note - 7,150 Reinvestment of MBS principal collections - (16,141) Total Net Proceeds from Capital Transactions $ 455 $ 26,143 Distributions: Unitholders $1,093 (a) $ 54,890 (b)(d) Unitholders' Average per Unit $ .27 (a) $ 13.72 (b)(c)(d) General Partners $ 27 (a) $ 609 (b) Total Distributions $1,120 (a) $ 55,499 (b) (a) Represents distributions paid in 1996, except the February, 1996 distribution, which relates to 1995 cash flows, and includes an estimate of the distribution to be paid in August, 1996. (b) Includes an estimate of the distribution to be paid in August, 1996. (c) Includes a $7,150,000 note which was distributed from the Partnership to the Evergreen Plaza Note-Holding Trust whose beneficiaries were the Partnership's Unitholders on record on May 31, 1990. (d) Unitholders' average per Unit return of capital as of August, 1996 is $6.25 [$13.72-$7.47]. Operations Distributable Cash Flow decreased for the six months ended June 30, 1996, as compared to the six months ended June 30, 1995, due to an increase in capital improvements at the Partnership's properties and a decrease in net income due to an increase in total expenses. For the three and six months ended June 30, 1996, as compared to 1995, the Partnership experienced a slight increase in rental revenue as a result of continued high occupancy rates and higher rents at High Point due to refurbished show-room spaces and increased occupancy at Tradewinds, due to a new tenant lease in late 1995. This increase in rental revenue was partially offset by a decline in occupancy at Luria's Plaza due to the unanticipated non-renewal of a 3,000 square foot tenant's lease in April 1996. MBS interest income decreased during the first and second quarters of 1996, as compared to the same period in 1995, due to large prepayments and repayments of principal. Operating expenses for the three and six months ended June 30, 1996, as compared to 1995, increased due to higher insurance expense resulting from prior years' insurance refunds received in 1995, in addition to a rise in reimbursable expenses incurred in connection with the operation of the Partnership and its properties, including computer, accounting, travel, insurance, legal and payroll costs. Operating and maintenance expenses increased due to adverse weather conditions at the Partnership's properties increasing utility consumption, snow removal and exterior repair expenditures. General and administrative expenses decreased in connection with the preparation and mailing of reports and other investor communications. Depreciation expense increased in conjunction with fixed asset expenditures. General In accordance with Financial Accounting Standard No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of", which is effective for fiscal years beginning after December 15, 1995, the Partnership has implemented policies and practices for assessing impairment of its real estate assets. The investments in properties are carried at cost less accumulated depreciation unless the General Partners believe there is a significant impairment in value, in which case a provision to write down investments in properties to fair value will be charged against income. At this time, the General Partners do not believe that any assets of the Partnership are significantly impaired. KRUPP CASH PLUS LIMITED PARTNERSHIP PART II - OTHER INFORMATION Item 1. Legal Proceedings Response: None Item 2. Changes in Securities Response: None Item 3. Defaults upon Senior Securities Response: None Item 4. Submission of Matters to a Vote of Security Holders Response: None Item 5. Other Information Response: None Item 6. Exhibits and Reports on Form 8-K Response: 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 Cash Plus Limited Partnership (Registrant) By: /s/Robert A. Barrows Robert A. Barrows Treasurer and Chief Accounting Officer of The Krupp Corporation, a General Partner. Date: July , 1996