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 THEx
SECURITIES 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 0-15815
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
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 INSURED PLUS LIMITED PARTNERSHIP
BALANCE SHEETS
ASSETS
June 30, December 31,
1996 1995
Participating Insured Mortgages ("PIMs") $ 59,037,867 $ 59,289,135
(Note 2)
Mortgage-Backed Securities and insured
mortgage ("MBS") (Note 3) 27,496,073 29,026,838
Total mortgage investments 86,533,940 88,315,973
Cash and cash equivalents 1,988,945 2,394,592
Interest receivable and other assets 931,814 871,942
Prepaid acquisition fees and expenses, net of
accumulated amortization of $4,806,532 and
$4,423,897, respectively 1,313,976 1,696,611
Prepaid participation servicing fees, net of
accumulated amortization of $1,991,700 and
$1,895,084, respectively 408,299 504,915
Total assets $ 91,176,974 $ 93,784,033
LIABILITIES AND PARTNERS' EQUITY
Liabilities $ 7,852 $ 14,454
Partners' equity (deficit):
Limited Partners 90,748,294 92,779,548
(7,500,099 Limited Partner interests
outstanding)
General Partners (187,500) (172,710)
Unrealized gain on MBS 608,328 1,162,741
Total Partners' equity 91,169,122 93,769,579
Total liabilities and Partners' equity $ 91,176,974 $ 93,784,033
The accompanying notes are an integral
part of the financial statements.
KRUPP INSURED PLUS LIMITED PARTNERSHIP
STATEMENTS OF INCOME
For the Three Months For the Six Months
Ended June 30, Ended June 30,
1996 1995 1996 1995
Revenues:
Interest income - PIMs $1,106,158 $1,120,847 $2,214,716 $2,244,096
Interest income - MBS 582,702 623,411 1,173,796 1,255,418
Other interest income 27,017 40,920 57,948 82,221
Total revenues 1,715,877 1,785,178 3,446,460 3,581,735
Expenses:
Asset management fee to an affiliate 161,367 166,397 323,869 331,941
Expense reimbursements to affiliates 22,993 29,554 50,745 59,109
Amortization of prepaid expenses and
fees 239,626 239,626 479,251 479,251
General and administrative 20,328 34,298 47,433 52,033
Total expenses 444,314 469,875 901,298 922,334
Net income $1,271,563 $1,315,303 $2,545,162 $2,659,401
Allocation of net income (Note 4):
Limited Partners $1,233,416 $1,275,844 $2,468,807 $2,579,619
Average net income per Limited
Partner interest
(7,500,099 Limited Partner
interests outstanding) $ .17 $ .17 .33 $ .34
General Partners $ 38,147 $ 39,459 $ 76,355 $ 79,782
The accompanying notes are an integral
part of the financial statements.
KRUPP INSURED PLUS LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
For the Six Months
Ended June 30,
1996 1995
Operating activities:
Net income $ 2,545,162 $ 2,659,401
Adjustments to reconcile net income to net cash
provided by operating activities:
Amortization of prepaid expenses and fees 479,251 479,251
Changes in assets and liabilities:
Decrease (increase) in interest receivable
and other assets (59,872) 104,934
Decrease in liabilities (6,602) (4,191)
Net cash provided by operating activities 2,957,939 3,239,395
Investing activities:
Principal collections on PIMs 251,268 256,878
Principal collections on MBS 976,352 826,101
Net cash provided by investing activities 1,227,620 1,082,979
Financing activity:
Quarterly distributions (4,591,206) (4,594,313)
Net decrease in cash and cash equivalents (405,647) (271,939)
Cash and cash equivalents, beginning of period 2,394,592 2,931,523
Cash and cash equivalents, end of period $ 1,988,945 $ 2,659,584
The accompanying notes are an integral
part of the financial statements.
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, 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.
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. PIMs
At June 30, 1996, the Partnership's PIMs have a fair value of
approximately $57,801,000 and gross unrealized gains and losses of
approximately $82,000 and $1,319,000, respectively. The PIMs have
maturities ranging from 2006 to 2033.
3. MBS
At June 30, 1996, the Partnership's MBS portfolio has an amortized cost
of $26,887,745 and gross unrealized gains of $608,328 with maturities
from 2004 to 2033.
4. Changes in Partners' Equity
A summary of changes in Partners' Equity for the six months ended June
30, 1996 is as follows:
Total
Limited General Unrealized Partners'
Partners Partners Gain Equity
Balance at December 31, 1995 $ 92,779,548 $(172,710) $1,162,741 $ 93,769,579
Net income 2,468,807 76,355 - 2,545,162
Quarterly distributions (4,500,061) (91,145) -
(4,591,206)
Decrease in unrealized gain
on MBS - - (554,413) (554,413)
Balance at June 30, 1996 $ 90,748,294 $(187,500) $ 608,328 $ 91,169,122
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
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 most significant demands on the Partnership's liquidity are regular
quarterly distributions paid to investors of approximately $2.3 million.
Funds used for investor distributions come from (i)interest received on the
PIMs, MBS, cash and cash equivalents, (ii) the principal collections
received on the PIMs and MBS and (iii) cash reserves. The Partnership
funds a portion of the distribution from principal collections causing the
capital resources of the Partnership to continually decrease. As a result
of this decrease, the total cash inflows to the Partnership will also
decrease which will result in periodic downward adjustments to the
quarterly distributions paid to investors.
The General Partners periodically review the distribution rate to
determine whether an adjustment to the distribution rate is necessary based
on projected future cash flows. In general, the General Partners try to
set a distribution rate that provides for level quarterly distributions of
cash available for distribution. To the extent quarterly distributions
differ from cash available for distribution, the General Partners may
adjust the distribution rate or distribute funds through a special
distribution.
In the first quarter of 1996, the borrower of the Mandalay Apartments
PIM approached the Partnership about refinancing the property and prepaying
the PIM including all participation interest due. As of June 30, 1996, the
General Partners have not received any notification from the borrower
concerning a prepayment, but the borrower continues to pursue a refinancing
of the property. The Partnership and the borrower of the Greentree
Apartments PIM are having ongoing discussions about a future sale of the
property. These discussions are preliminary and there is no pending sale
at this time. Based on current projections, the General Partners believe
the Partnership can maintain the current distribution rate through 1996.
In the event of a sale or refinancing of these PIMs or any other PIM, the
Partnership would distribute the proceeds to investors as a special
distribution and adjust the distribution rate as necessary to reflect the
anticipated cash inflows from the remaining mortgage investments.
For the first five years of the PIMs the borrowers are prohibited from
prepaying. For the second five years, the borrower can prepay the loan
incurring a prepayment penalty. The Partnership has the option to call
certain PIMs by accelerating their maturity if the loans are not prepaid by
the tenth year after permanent funding. The Partnership will determine the
merits of exercising the call option for each PIM as economic conditions
warrant. Such factors as the condition of the asset, local market
conditions, interest rates and available financing will have an impact on
this decision.
Assessment of Credit Risk
The Partnership's investments in mortgages are guaranteed or insured by
the Federal National Mortgage Association ( FNMA ), the Government National
Mortgage Association ("GNMA"), the Federal Home Loan Mortgage Corporation
("FHLMC") or the United States 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.
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. 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.
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 the period from 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.
(Amounts in thousands, except per Unit amounts)
Six Months Ended Inception through
June 30, 1996 June 30, 1996
Distributable Cash Flow:
Income for tax purposes $ 2,956 $ 70,052
Items not requiring or (not providing)
the use of operating funds:
Amortization of prepaid expenses
and organization costs 68 4,829
Amortization of MBS premiums - 284
Acquisition expenses paid from
offering proceeds charged to operations - 1,098
Gain on sale of MBS - (114)
Total Distributable Cash Flow ("DCF") $ 3,024 $ 76,149
Limited Partners Share of DCF $ 2,933 $ 73,864
Limited Partners Share of DCF per
Limited Partner interest ( Unit ) $ .39 $ 9.85
General Partners Share of DCF $ 91 $ 2,285
Net Proceeds from Capital Transactions:
Insurance claim proceeds and
principal collections on PIMs $ 251 $ 46,683
Principal collections on MBS 976 39,763
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 $ 1,227 $ 45,785
Cash available for distribution
(DCF plus Net Proceeds from
Capital Transactions) $ 4,251 $121,934
Distributions: (includes special
distributions)
Limited Partners $4,500 (a) $119,337 (a)
Limited Partners Average per Unit $ .60 (a) $ 15.91 (a)(b)
General Partners 91 (a) 2,285 (a)
Total Distributions $4,591 $121,622
(a) Includes an estimate of the August 1996 distribution.
(b) Limited Partners average per Unit return of capital as of August
1996 is $6.06 [$15.91 - $9.85]. Return of capital represents that
portion of distributions which are not funded from DCF such as
proceeds from the sale of assets and substantially all of the
principal collections received from MBS and PIMs.
Operations
The following discussion relates to the operations of the Partnership
during the three and six months ended June 30, 1996 and 1995:
(Amounts in thousands)
For the Three Months For the Six Months
Ended June 30, Ended June 30,
1996 1995 1996 1995
Interest income on PIMs $1,106 $1,121 $2,215 $2,244
Interest income on MBS 582 623 1,174 1,255
Other interest income 27 41 58 82
Partnership expenses (205) (230) (423) (442)
Distributable Cash Flow 1,510 1,555 3,024 3,139
Amortization of prepaid fees
and expenses (239) (240) (479) (480)
Net income $1,271 $1,315 $2,545 $2,659
Net income decreased during the three and six months ended June 30, 1996
as compared to the three and six months ended June 30, 1995 due primarily
to lower interest income on MBS. Interest income on MBS will continue to
decline as principal collections reduce the outstanding balance of the MBS
portfolio. The Partnership funds a portion of distributions with MBS and
PIM principal collections which reduces the invested assets generating
income for the Partnership. As the invested assets decline so will
interest income on MBS, base interest income on PIMs and other interest
income.
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
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/Robert A. Barrows
Robert A. Barrows
Treasurer and Chief Accounting Officer of The Krupp
Corporation, a General Partner of the Registrant.
DATE: July 25, 1996