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 SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 1994 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 0-15815 Krupp Insured Plus Limited Partnership Massachusetts 04-2915281 (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 KRUPP INSURED PLUS LIMITED PARTNERSHIP BALANCE SHEETS ASSETS March 31, December 31, 1994 1993 Participating Insured Mortgages ("PIMs") $ 60,204,914 $ 60,322,532 Mortgage Backed Securities and Insured Mortgages ("MBS") 32,319,679 34,652,217 Total mortgage investments 92,524,593 94,974,749 Cash and cash equivalents 10,384,673 8,775,797 Interest receivable and other assets 765,256 697,394 Prepaid acquisition fees and expenses, net of accumulated amortization of $3,084,670 and $2,893,353, respectively 3,035,838 3,227,155 Prepaid participation servicing fees, net of accumulated amortization of $1,556,932 and $1,508,624, respectively 843,067 891,375 Total assets $107,553,427 $108,566,470 LIABILITIES AND PARTNERS' EQUITY Liabilities $ 4,167 $ 5,376 Partners' equity (Note 2) 107,549,260 108,561,094 Total liabilities and Partners' equity $107,553,427 $108,566,470 The accompanying notes are an integral part of the financial statements. -2- KRUPP INSURED PLUS LIMITED PARTNERSHIP STATEMENTS OF INCOME For the Three Months Ended March 31, 1994 1993 Revenues: Interest income - PIMs $1,218,843 $1,143,787 Interest income - MBS 691,601 809,698 Other interest income 77,167 92,188 Total revenues 1,987,611 2,045,673 Expenses: Asset management fee 173,153 192,382 Expense reimbursements to affiliates 61,885 59,047 Amortization of prepaid fees and expenses 239,625 231,380 Other 26,061 40,034 Total expenses 500,724 522,843 Net income $1,486,887 $1,522,830 Allocation of net income (Note 2): Average net income per Unit (7,499,999 Units outstanding) $ .19 $ .20 Corporate Limited Partner $ 19 $ 20 General Partners $ 44,607 $ 45,685 The accompanying notes are an integral part of the financial statements. -3- KRUPP INSURED PLUS LIMITED PARTNERSHIP STATEMENTS OF CASH FLOWS For the Three Months Ended March 31, 1994 1993 Operating activities: Net income $ 1,486,887 $ 1,522,830 Adjustments to reconcile net income to net cash provided by operating activities: Amortization of prepaid fees and expenses 239,625 231,380 Premium amortization Treasury Note - 55,441 Premium amortization MBS 9,584 6,902 Changes in assets and liabilities: Increase in interest receivable and other assets (67,862) (174,421) Decrease in liabilities (1,209) (8,074) Net cash provided by operating activities 1,667,025 1,634,058 Investing activities: Decrease in other investments - 6,000,000 Principal collections on MBS 2,322,954 2,423,726 Principal collections on PIMs 117,618 107,877 Proceeds from insurance claims on PIMs - 475,727 Investment in MBS - (3,297,903) Net cash provided by investing activities 2,440,572 5,709,427 Financing activities: Quarterly distributions (2,498,721) (2,585,067) Special distributions - (450,006) Net cash used for financing activities (2,498,721) (3,035,073) Net increase in cash and cash equivalents 1,608,876 4,308,412 Cash and cash equivalents, beginning of period 8,775,797 5,395,292 Cash and cash equivalents, end of period $10,384,673 $ 9,703,704 The accompanying notes are an integral part of the financial statements. -4- KRUPP INSURED 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. However, in the opinion of the General Partners, The Krupp Corporation and The Krupp Company Limited Partnership-IV (collectively the "General Partners"), of Krupp Insured 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 Form 10-K for the year ended December 31, 1993 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 March 31, 1994 and its results of operations and cash flows for the three months ended March 31, 1994 and 1993. The results of operations for the three months ended March 31, 1994 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. Certain prior period balances have been reclassified to be consistent with current year financial statement presentation. 2. Changes in Partners' Equity A summary of changes in Partners' Equity for the three months ended March 31, 1994 is as follows: Corporate Total Limited General Partners' Unitholders Partner Partners Equity Balance at December 31, 1993 $108,680,479 $1,528 $(120,913) $108,561,094 Net income 1,442,261 19 44,607 1,486,887 Quarterly distributions (2,448,158) (33) (50,530) (2,498,721) Balance at March 31, 1994 $107,674,582 $1,514 $(126,836) $107,549,260 -5- Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Liquidity and Capital Resources The most significant demand on the Partnership's liquidity is regular quarterly distributions paid to investors averaging approximately $10 million per year, and $2.5 million per quarter. Funds used for investor distributions come from interest received on the PIMs, MBS, cash and cash equivalents, and the principal collections received on the PIMs and MBS. The Partnership received cash inflows related to these items totalling approximately $4.4 million during the first quarter of 1994. To the extent the Partnership funds a portion of the distribution from principal collections, the capital resources of the Partnership will decrease. As a result of this decrease, the total cash inflows to the Partnership will also decrease which may result in periodic adjustments to the quarterly distributions paid to investors. At March 31, 1994, the Partnership has significant liquidity consisting of approximately $10.4 million in cash and cash equivalents, and the cash inflows provided by PIMs, MBS and cash equivalents. Assessment of Credit Risk The Partnership's investments in mortgages are guaranteed or insured by the Federal National Mortgage Association ("FNMA"), the Federal Home Loan Mortgage Corporation ("FHLMC") and 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. FNMA 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. The Government National Mortgage Association ("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. -6- 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 three months ended March 31, 1994 and the period from inception to March 31, 1994. The Partnership calculated Distributable Cash Flow and Net Cash Proceeds from Capital Transactions using information prepared according to generally accepted accounting principles ("GAAP"). (Amounts in thousands, except per Unit amounts). Three Months Ended Inception through March 31, 1994 March 31, 1994 Distributable Cash Flow: Net Income $ 1,487 $ 56,311 Items not requiring or (not providing) the use of operating funds: Amortization of prepaid expenses and organization costs 240 4,692 Amortization of MBS premiums 9 278 Acquisition expenses paid from offering proceeds charged to operations - 1,098 Gain on sale of MBS - (114) Total Distributable Cash Flow ("DCF") $ 1,736 $ 62,265 Limited Partners Share of DCF $ 1,684 $ 60,397 Limited Partners Share of DCF per Unit $ .22 $ 8.05 General Partners Share of DCF $ 52 $ 1,868 Net Proceeds from Capital Transactions: Insurance claim proceeds and principal collections on PIMs $ 118 $ 45,516 Principal collections on MBS 2,323 34,307 Insurance claim proceeds and principal collections on PIMs and MBS reinvested in PIMs and MBS - (40,775) Gain on sale of MBS - 114 Total Net Proceeds from Capital Transactions $ 2,441 $ 39,162 Cash available for distribution (DCF plus Net Proceeds from Capital Transactions) $ 4,177 $101,427 Distributions: Limited Partners $ 2,395 (a) $ 90,926 (a) Limited Partners Average per Unit $ .32 (a) $ 12.12 (a)(b) General Partners $ 49 (a) 1,868 (a) Total Distributions $ 2,444 $ 92,794 (a) This includes an estimate of the May 1994 distribution. (b) Limited Partners average per Unit return of capital as of May 1994 is $4.07 {$12.12-$8.05}. Return of capital represents that portion of distributions which is not funded from DCF such as proceeds from the sale of assets and substantially all of the principal collections received from MBS and PIMs. -7- Operations The following discussion relates to the operations of the Partnership during the three months ended March 31, 1994 and 1993. (Amounts in thousands) 1994 1993 Interest income on PIMs $ 1,219 $1,144 Interest income on MBS 701 817 Other interest income 77 92 Partnership expenses (261) (291) Distributable Cash Flow $ 1,736 $1,762 Distributable Cash Flow ("DCF") for the first quarter of 1994 decreased slightly when compared to the first quarter of 1993. This happened since the Partnership had lower average asset balances in the first quarter of 1994. The Partnership will continue to see a decrease in DCF as the Investors receive distributions that represent a return of capital thereby reducing the overall asset balances held by the Partnership. -8- KRUPP INSURED 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 -9- 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 Insured Plus Limited Partnership (Registrant) BY: /s/Marianne Pritchard Marianne Pritchard Treasurer and Chief Accounting Officer of The Krupp Corporation, a General Partner of the Registrant. DATE: April 23, 1994 -10-