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 June 30, 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
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
KRUPP INSURED PLUS LIMITED PARTNERSHIP
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
June 30, December 31,
1994 1993
<S> <C> <C>
Participating Insured Mortgages ("PIMs") $ 60,085,379 $ 60,322,532
Mortgage-Backed Securities ("MBS") (Note 2) 30,899,243 34,652,217
Total mortgage investments 90,984,622 94,974,749
Cash and cash equivalents 3,067,124 8,775,797
Interest receivable and other assets 791,433 697,394
Prepaid acquisition fees and expenses, net
of accumulated amortization of $3,275,988
and $2,893,353, respectively 2,844,520 3,227,155
Prepaid participation servicing fees, net
of accumulated amortization of $1,605,240
and $1,508,624, respectively 794,759 891,375
Total assets $ 98,482,458 $108,566,470
LIABILITIES AND PARTNERS' EQUITY
Liabilities $ 8,656 $ 5,376
Partners' equity (Note 3) 98,473,802 108,561,094
Total liabilities and Partners' equity $ 98,482,458 $108,566,470
</TABLE>
The accompanying notes are an integral
part of the financial statements.
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<TABLE>
<PAGE>
KRUPP INSURED PLUS LIMITED PARTNERSHIP
STATEMENTS OF INCOME
<CAPTION>
For the Three Months For the Six Months
Ended June 30, Ended June 30,
1994 1993 1994 1993
Revenues:
<S> <C> <C> <C> <C> <C>
Interest income - PIMs $1,113,151 $ 864,124 $2,331,994 $2,007,911
Interest income - MBS 656,582 821,010 1,348,183 1,630,708
Other interest income 92,313 61,575 169,480 153,763
Total revenues 1,862,046 1,746,709 3,849,657 3,792,382
Expenses:
Asset management fee to an affiliate 171,682 190,320 344,835 382,702
Expense reimbursements to affiliates 61,884 61,885 123,769 120,932
Amortization of prepaid expenses and
fees 239,626 231,349 479,251 462,729
Other 37,163 43,511 63,224 83,545
Total expenses 510,355 527,065 1,011,079 1,049,908
Net income $1,351,691 $1,219,644 $2,838,578 $2,742,474
Allocation of net income (Note 3):
Average net income per Unit
(7,499,999 Units outstanding) $ .18 $ .15 $ .37 $ .35
Corporate Limited Partner $ 18 $ 15 $ 37 $ 35
General Partners $ 40,550 $ 36,589 $ 85,157 $ 82,274
The accompanying notes are an integral
part of the financial statements.
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</TABLE>
<TABLE>
<PAGE>
KRUPP INSURED PLUS LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
<CAPTION>
For the Six Months
Ended June 30,
1994 1993
Operating activities:
<S> <C> <C>
Net income $ 2,838,578 $ 2,742,474
Adjustments to reconcile net income to net cash
provided by operating activities:
Amortization of prepaid expenses and fees 479,251 462,729
Premium amortization Treasury Note - 55,441
Premium amortization MBS 21,076 24,505
Changes in assets and liabilities:
Increase in interest receivable and other assets (94,039) (108,162)
Increase in liabilities 3,280 5,724
Net cash provided by operating activities 3,248,146 3,182,711
Investing activities:
Decrease in other investments - 6,000,000
Proceeds from insurance claims on PIMs - 475,727
Principal collections on PIMs 237,153 205,757
Investment in MBS - (4,895,272)
Principal collections on MBS 3,731,898 4,204,906
Net cash provided by investing
activities 3,969,051 5,991,118
Financing activities:
Quarterly distributions (4,975,764) (5,113,102)
Special distributions (7,950,106) (4,950,065)
Net cash used for financing activities (12,925,870) (10,063,167)
Net decrease in cash and cash equivalents (5,708,673) (889,338)
Cash and cash equivalents, beginning of period 8,775,797 5,395,292
Cash and cash equivalents, end of period $ 3,067,124 $ 4,505,954
</TABLE>
The accompanying notes are an integral
part of the financial statements.
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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 June 30, 1994, its results of operations for the
three and six months ended June 30, 1994 and 1993 and its cash
flows for the six months ended June 30, 1994 and 1993.
The results of operations for the three and six months ended
June 30, 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. MBS
At June 30, 1994, the Partnership's MBS portfolio had a market
value of approximately $30,992,000 with unrealized gains and
losses of approximately $201,000 and $110,000, respectively.
The Partnership does not expect to realize these gains or
losses as it has the intent and ability to hold the MBS until
maturity.
3. Changes in Partners' Equity
A summary of changes in Partners' Equity for the six months
ended June 30, 1994 is as follows:
<TABLE>
<CAPTION>
Corporate Total
Limited General Partners'
Unitholders Partner Partners Equity
<S> <C> <C> <C> <C>
Balance at December 31, 1993 $108,680,479 $1,528 $(120,913) $108,561,094
Net income 2,753,384 37 85,157 2,838,578
Quarterly distributions (4,876,358) (65) (99,341) (4,975,764)
Special distribution (7,950,000) (106) - (7,950,106)
Balance at June 30, 1994 $ 98,607,505 $1,394 $(135,097) $ 98,473,802
</TABLE>
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Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
Over the last year, the Partnership received significant
prepayments on its MBS due to low market interest rates that
facilitated the refinancing of the underlying mortgages. Due to
this, the General Partners reviewed the Partnership's liquidity
needs and determined that a special distribution of $1.06 per Unit
should be paid and that the regular distribution rate should be
adjusted to $1.20 per Unit per year (approximately $9 million per
year and $2.25 million per quarter) commencing with the November
1994 distribution. The General Partners expect to periodically
adjust the distribution rate as mortgage proceeds are received and
subsequently distributed to the Limited Partners while also
maintaining sufficient liquidity to meet the Partnership's
anticipated needs.
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.
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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, 1994 and the period from
inception to June 30, 1994 (amounts in thousands, except per Unit
amounts).
<TABLE>
<CAPTION>
Six Months Ended Inception through
June 30, 1994 June 30, 1994
Distributable Cash Flow:
<S> <C> <C>
Net Income $ 2,839 $ 57,663
Items not requiring or (not providing)
the use of operating funds:
Amortization of prepaid expenses, fees
and organization costs 479 4,931
Amortization of MBS premiums 21 290
Acquisition expenses paid from
offering proceeds charged to operations - 1,098
Gain on sale of MBS - (114)
Total Distributable Cash Flow ("DCF") $ 3,339 $ 63,868
Limited Partners Share of DCF $ 3,239 $ 61,952
Limited Partners Share of DCF per Unit $ .43 $ 8.26
General Partners Share of DCF $ 100 $ 1,916
Net Proceeds from Capital Transactions:
Insurance claim proceeds and
principal collections on PIMs $ 237 $ 45,635
Principal collections on MBS 3,732 35,716
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 $ 3,969 $ 40,690
Cash available for distribution
(DCF plus Net Proceeds from
Capital Transactions) $ 7,308 $104,558
Distributions:
Limited Partners $12,807 (a) $101,338 (a)
Limited Partners Average per Unit $ 1.71 (a) $ 13.51 (a)(b)
General Partners 97 (a) 1,916 (a)
Total Distributions $12,904 $103,254
</TABLE>
(a) This includes an estimate of the August 1994 distribution.
(b) Limited Partners average per Unit return of capital as of August 1994 is
$5.25 [$13.51 - $8.26] 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.
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Operations
The following discussion relates to the operations of the Partnership
during the three and six months ended June 30, 1994 and 1993:
<TABLE>
(Rounded to $1,000)
<CAPTION>
For the Three Months For the Six Months
Ended June 30, Ended June 30,
1994 1993 1994 1993
<S> <C> <C> <C> <C>
Interest income on PIMs $1,113,000 $ 864,000 $2,332,000 $2,008,000
Interest income on MBS 668,000 846,000 1,369,000 1,656,000
Other interest income 92,000 62,000 169,000 209,000
Partnership expenses (270,000) (296,000) (531,000) (588,000)
Distributable Cash Flow $1,603,000 $1,476,000 $3,339,000 $3,285,000
</TABLE>
Distributable Cash Flow did not change materially during the
three and six months ended June 30, 1994 as compared to the
corresponding periods in 1993, even though interest income on PIMs
and MBS did have significant changes during these periods.
During the second quarter of 1993, the Partnership adjusted
interest income on PIMs by approximately $293,000 pursuant to an
agreement reducing the interest rate on the Vista Montana PIM from
8.875% to 7.375% per annum effective as of January 1, 1992. As a
result, interest income on PIMs for the three and six months ended
June 30, 1994 shows a significant increase versus the corresponding
period in 1993.
Interest income on MBS decreased $287,000 and $178,000 during the
second quarter and first half of 1994, respectively, as compared to
the same period in 1993 due primarily to significant prepayments of
the mortgages underlying the MBS. The General Partners believe the
rate of prepayments should decrease as a result of recent increases
in interest rates. With lower prepayments the MBS portfolio will
decrease at a slower rate, thereby reducing the rate at which
interest income on MBS declines.
-8-
<PAGE>
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
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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 ofthe Registrant.
DATE: July 27, 1994
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