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 September 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
<PAGE>
<TABLE>
BALANCE SHEETS
ASSETS
<CAPTION>
September 30, December 31,
1996 1995
<S> <C> <C>
Participating Insured Mortgages ("PIMs") $ 58,900,234 $ 59,289,135
(Note 2)
Mortgage-Backed Securities and insured
mortgage ("MBS") (Note 3) 27,054,259 29,026,838
Total mortgage investments 85,954,493 88,315,973
Cash and cash equivalents 1,870,690 2,394,592
Interest receivable and other assets 842,582 871,942
Prepaid acquisition fees and expenses, net of
accumulated amortization of $4,997,850 and
$4,423,897, respectively 1,122,658 1,696,611
Prepaid participation servicing fees, net of
accumulated amortization of $2,040,007 and
$1,895,084, respectively 359,992 504,915
Total assets $ 90,150,415 $ 93,784,033
LIABILITIES AND PARTNERS' EQUITY
Liabilities $ 12,985 $ 14,454
Partners' equity (deficit):
Limited Partners 89,711,884 92,779,548
(7,500,099 Limited Partner interests
outstanding)
General Partners (195,276) (172,710)
Unrealized gain on MBS 620,822 1,162,741
Total Partners' equity 90,137,430 93,769,579
Total liabilities and Partners' equity $ 90,150,415 $ 93,784,033
</TABLE>
The accompanying notes are an integral
part of the financial statements.
<TABLE>
KRUPP INSURED PLUS LIMITED PARTNERSHIP
STATEMENTS OF INCOME
<CAPTION>
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
1996 1995 1996 1995
Revenues:
<S> <C> <C> <C> <C>
Interest income - PIMs $1,103,611 $1,118,398 $3,318,327 $3,362,494
Interest income - MBS 574,453 612,974 1,748,249 1,868,392
Other interest income 25,282 37,109 83,230 119,330
Total revenues 1,703,346 1,768,481 5,149,806 5,350,216
<PAGE>
Expenses:
Asset management fee to an affiliate 161,989 167,148 485,858 499,089
Expense reimbursements to affiliates 27,753 29,556 78,498 88,665
Amortization of prepaid expenses and
fees 239,625 239,625 718,876 718,876
General and administrative 22,827 28,465 70,260 80,498
Total expenses 452,194 464,794 1,353,492 1,387,128
Net income $1,251,152 $1,303,687 $3,796,314 $3,963,088
Allocation of net income (Note 4):
Limited Partners $1,213,617 $1,264,576 $3,682,425 $3,844,195
Average net income per Limited
Partner interest
(7,500,099 Limited Partner
interests outstanding) $ .16 $ .17 .49 $ .51
General Partners $ 37,535 $ 39,111 $ 113,889 $ 118,893
</TABLE>
The accompanying notes are an integral
part of the financial statements.
KRUPP INSURED PLUS LIMITED PARTNERSHIP
<TABLE>
STATEMENTS OF CASH FLOWS
<CAPTION>
For the Nine Months
Ended September 30,
1996 1995
Operating activities:
<S> <C> <C>
Net income $ 3,796,314 $ 3,963,088
Adjustments to reconcile net income to net cash
provided by operating activities:
Amortization of prepaid expenses and fees 718,876 718,876
Changes in assets and liabilities:
Decrease in interest receivable
and other assets 29,360 110,107
Decrease in liabilities (1,469) (2,711)
Net cash provided by operating activities 4,543,081 4,789,360
Investing activities:
Principal collections on PIMs 388,901 389,135
Principal collections on MBS 1,430,660 1,272,685
Net cash provided by investing activities 1,819,561 1,661,820
Financing activity:
Quarterly distributions (6,886,544) (6,890,947)
Net decrease in cash and cash equivalents (523,902) (439,767)
Cash and cash equivalents, beginning of period 2,394,592 2,931,523
Cash and cash equivalents, end of period $ 1,870,690 $ 2,491,756
<PAGE>
</TABLE>
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 September 30, 1996,
its results of operations for the three and nine months ended September
30, 1996 and 1995 and its cash flows for the nine months ended September
30, 1996 and 1995.
The results of operations for the three and nine months ended September
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 September 30, 1996, the Partnership's PIMs have a fair value of
approximately $58,119,000 and gross unrealized gains and losses of
approximately $304,000 and $1,085,000, respectively. The PIMs have
maturities ranging from 2006 to 2033.
3. MBS
At September 30, 1996, the Partnership's MBS portfolio has an amortized
cost of $26,433,437 and gross unrealized gains of $620,822 with
maturities from 2004 to 2033.
4. Changes in Partners' Equity
A summary of changes in Partners' Equity for the nine months ended
September 30, 1996 is as follows:
<TABLE>
<CAPTION>
Limited General Unrealized Total Partners'
Partners Partners Gain Equity
<S> <C> <C> <C> <C>
Balance at December 31, 1995 $ 92,779,548 $(172,710) $1,162,741 $ 93,769,579
<PAGE>
Net income 3,682,425 113,889 - 3,796,314
Quarterly distributions (6,750,089) (136,455) - (6,886,554)
Decrease in unrealized gain
on MBS - - (541,919) (541,919)
Balance at
September 30, 1996 $ 89,711,884 $(195,276) $ 620,822 $ 90,137,430
</TABLE>
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.
The underlying borrower of the Mandalay Apartments PIM should complete a
refinancing of the property in the fourth quarter and prepay the insured
mortgage having an outstanding principal balance of approximately $16.5
million and a portion of the accumulated participation income. The
Partnership will distribute the proceeds to investors through a special
distribution of $2.20 per Unit and adjust the quarterly distribution rate
to $.19 per Unit per quarter beginning with the February 1997 distribution.
The new distribution rate reflects the anticipated cash inflows from the
Partnership s remaining invested assets.
In the event of a sale or refinancing of the remaining PIMs, the
Partnership will 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
<PAGE>
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 nine
months ended September 30, 1996 and the period from inception through
September 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.
<TABLE>
(Amounts in thousands, except per Unit amounts)
<CAPTION>
Nine Months Ended Inception through
September 30, 1996 September 30,1996
Distributable Cash Flow:
<S> <C> <C>
Income for tax purposes $ 4,413 $ 71,509
Items not requiring or (not providing)
the use of operating funds:
Amortization of prepaid expenses
and organization costs 102 4,863
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") $ 4,515 $ 77,640
Limited Partners Share of DCF $ 4,380 $ 75,311
Limited Partners Share of DCF per
<PAGE>
Limited Partner interest ( Unit ) $ .58 $ 10.04
General Partners Share of DCF $ 135 $ 2,329
Net Proceeds from Capital Transactions:
Insurance claim proceeds and
principal collections on PIMs $ 389 $ 46,821
Principal collections on MBS 1,431 40,218
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 $ 1,820 $ 46,378
Cash available for distribution
(DCF plus Net Proceeds from
Capital Transactions) $ 6,335 $124,018
Distributions: (includes special
distributions)
Limited Partners $6,751 (a) $121,588 (a)
Limited Partners Average per Unit $ .90 (a) $ 16.21 (a)(b)
General Partners 135 (a) 2,329 (a)
Total Distributions $6,886 $123,917
</TABLE>
(a) Includes an estimate of the November 1996 distribution.
(b) Limited Partners average per Unit return of capital as of November
1996 is $6.17 [$16.21 - $10.04]. 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 nine months ended September 30, 1996 and 1995:
<TABLE>
(Amounts in thousands)
<CAPTION>
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Interest income on PIMs $1,103 $1,118 $3,318 $3,362
Interest income on MBS 574 613 1,748 1,868
Other interest income 25 37 83 119
Partnership expenses (211) (225) (634) (667)
Distributable Cash Flow 1,491 1,543 4,515 4,682
Amortization of prepaid fees
and expenses (240) (239) (719) (719)
Net income $1,251 $1,304 $3,796 $3,963
</TABLE>
Net income decreased during the three and nine months ended September
<PAGE>
30, 1996 as compared to the three and nine months ended September 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: October 25, 1996
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from the balance
sheet and statement of income and is qualified in its entirety by reference to
such financial statements
</LEGEND>
<CIK> 0000786622
<NAME> KRUPP INSURED PLUS LTD PARTNERSHIP
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 1,870,690
<SECURITIES> 85,954,493<F1>
<RECEIVABLES> 842,582
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,482,650<F2>
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 90,150,415
<CURRENT-LIABILITIES> 12,985
<BONDS> 0
0
0
<COMMON> 89,516,608<F3>
<OTHER-SE> 620,822
<TOTAL-LIABILITY-AND-EQUITY> 90,150,415
<SALES> 0
<TOTAL-REVENUES> 5,149,806<F4>
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,353,492<F5>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 3,796,314
<INCOME-TAX> 0
<INCOME-CONTINUING> 3,796,314
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,796,314
<EPS-PRIMARY> 0<F6>
<EPS-DILUTED> 0<F6>
<FN>
<F1>Includes the following investments: Participating Insured Mortgages ("PIMs")
$58,900,234 & Mortgage-Backed Securities ("MBS") $27,054,259
<F2>Includes the following prepaid acquisition fees & expenses of $1,122,658 net of
accumulated amortization of $4,997,850 and prepaid participating servicing of
$359,992 net of accumulated amortization of $2,040,007
<F3>Represents total equity of General Partners & Limited Partners of $(195,276)
and $89,711,884
<F4>Represents interest income on investments in mortgages & cash
<F5>Includes $718,876 of amortization related to prepaid fees & expenses
<F6>Net income allocated $113,889 to the General Partners & $3,682,425 to the
Limited Partners. Average net income per unit of Limited Partners interest is
$.49 on 4,500,099 units outstanding.
</FN>
</TABLE>
